Bear's Portfolio at the end of August 2017

“I guarantee nothing but hard work.” - Bear Bryant, Alabama Football Coach, 1958 - 1982

“exponential compounded growth does not fit the analytical backward looking skill sets of most Wall street analysts” - mauser96

“I presume the thing is to ride the momentum for the short squeeze and exit fast with enough money for a few months supply of whisky before everyone realises it’s a value trap.” - Strelna

Previous Month Summaries

Dec 2016 (contains links to all 2016 monthly posts):…
Jan 2017:…
Feb 2017:…
Mar 2017:…
Apr 2017:…
May 2017:…
June 2017:…
July 2017:…

Portfolio Performance

note that I use tickers .INX, .IXIC, and IWM to benchmark. These do not include dividends, I don’t think. If anyone can suggest tickers that do, I will switch over.

Also I have added a monthly metric called MyPort_EWNT (equal weight no tinker) that shows the monthly average gain/loss percentage for all positions I held at the end of last month. The idea is that if:

  1. I hadn’t bought or sold anything, and
  2. I just had an equal weighted portfolio, say 14 stocks that were ~7% each

…then this would be the return. It’s a rough estimate, but comparing it to my actual return each month tells me if all my buying and selling is worth a damn.

**This Month**
My Portfolio             +7.32%
MyPort_EWNT              +4.71%
S&P                      +0.05%
Nasdaq                   +1.27%
Russell 2000             -1.26%
My Portfolio             +46.38%
S&P                      +10.40%
Nasdaq                   +19.42%
Russell 2000             + 3.62%

My Current Allocations

Ticker	Curr%	Buy/S	Mo Ch	YTD Ch
SHOP	18.7%	38%	20.1%	158.7%
HUBS	10.4%	24%	1.4%	56.1%
WIX	10.1%	27%	5.5%	44.8%
SQ	9.8%	22%	-0.9%	91.6%
TWLO	7.7%	-4%	0.4%	1.5%
ANET	6.0%	NEW	18.0%	81.5%
MELI	6.0%	127%	-10.4%	65.5%
FB	5.9%	NEW	1.6%	49.5%
TTD	3.9%	14%	-0.6%	91.4%
TDOC	3.6%	NEW	2.3%	103.3%
HDP	3.5%	-56%	26.8%	104.5%
TLND	3.4%	-46%	4.2%	77.5%
ALRM	3.1%	NEW	18.1%	61.4%
MULE	2.2%	-63%	0.3%	-6.8%
MOMO	1.8%	NEW	-12.3%	109.6%
cash	3.9%			

I added 5 new stocks this month, and got rid of 3. So I’m up from 13 positions to 15. I’ll go over the stocks I sold, and then the ones I own in order of descending allocation.

Stocks I sold

NEW RELIC (NEWR) - I sold out of New Relic largely because it seems to be slowing down a bit when it comes to customer growth. Plus, almost everything else seemed to be undervalued after the 8/10 sell-off, but New Relic was just about fairly valued. Jury’s out on this one until I see what the growth will do in future quarters.

LGI HOMES - LGIH - As I said last month when I had a large position, this is not a stock that I feel very comfortable with just holding indefinitely, since housing is cyclical, and there’s a lot about it I don’t know. It’s lower margin, no revenue is recurring, and it’s hard to tell what LGI’s advantage is. All that said, it’s a pretty simple business, and they certainly seem to be killing it. …I don’t plan to hold this forever, and certainly not at this level, but for now I feel like it’s a low risk holding.

Well they did indeed kill it on their Q2 results. Yet somehow most of the gains were already priced in. There was a slight bump after earnings and I took that as an opportunity to take profits. I guess I have to admit that what I’ve done with LGIH is trading. It’s worked out well, but I’ll note that I have missed some big gains along the way. But as always, opportunity cost is the key.

SPLUNK - SPLK - Splunk announced a great quarter (beat and raise, as usual) on 8/24. Revenue growth accelerated from 30% last quarter to 32%. But their valuation gets to me. They are farther from real profitability than many other companies, and also growing revenue slower, and yet their PS is just as high as WIX, HUBS, TWLO, and others. Here’s a LOT more about why I sold:

Stocks I own

SHOPIFY - SHOP (18.7%) - To slightly modify what they say about themselves, Shopify is “the only platform you need to build your [small or medium sized business] empire [online].” They provide a website, a way to take payments, SEO optimization, etc, etc, etc. They’re innovating and growing…and boy are they growing. They make money when businesses sign up with them, and then they make more when those business grow and sell more stuff.

I first bought SHOP in June of 2016. In Q4 2016, I accumulated shares until SHOP became a 25% position for me. When it started to spike in 2017, I took profits (maybe too quickly). In May, I started to add back to my Shopify position. In July I trimmed a bit to add to other things, but in August after fantastic earnings I added a little. Then on 8/10 it ridiculously dropped below $90, and I backed up the truck. My position was again over 20%. I’ve trimmed a little since it got over $100 again, but it remains an oversized position. There’s just nothing else like it. Accept no substitutes.

Shopify continues to grow revenue at a 75% clip. Of course there’s a lot more to the story when you look at how they’re running the company, all the innovations they’re adding, etc…but I’m not really sure how much more you need. As Saul is fond of saying, companies in the real world don’t grow like this. Yes, it’s expensive at a PS ratio usually near 20, but suck it up, buy Shopify, and ride this train for years to come. This is not a $10B company. Not for long.

HUBSPOT - HUBS (10.4%) - Hubspot helps companies manage their brand online. This is much more than just buying ads. This is SEO, website, blog, social media, etc, etc. Hubspot is such a powerful and value-adding tool for marketing departments (a CMO’s dream) that I can’t see why any company of a certain size wouldn’t want to use it, and use it increasingly. Of course with a product that’s this much of a value add, there are certainly competitors. It sure seems to me like Hubspot is becoming a leader, if not THE leader, in the space, and the results it continues to acheive seem to confirm this.

In the June quarter, they grew revenue 37% (and almost all of it is recurring), raised guidance (again), and announced some other great trends. Customer growth actually accelerated! You can read a little more about why I like Hubspot here:

I had increased my position in June and July, but I couldn’t resist adding a bit more after this earnings report. Hubspot is really getting it done, and has a lot of room to grow.

WIX.COM - WIX (10.1%) - Wix is a company that helps users create websites, and then hosts them. It makes most of its money by charging subscription fees for premium content. It has over 100M users, and almost 3M of them pay for premium accounts.

Wix reported an impressive quarter on July 27th. Revenue growth accelerated to 51%, FCF and collections were up…the only down spot was that Avg Coll per New Sub (which I lazily call ARPU) was flat. They had a reason (Easter discounts), so I’m not worried too much. Analysts were concerned growth is slowing, but management didn’t see any signs of that. I think it’s a lot of worry about nothing. Wix shares have dropped and look really attractive. With revenue growing at over 50% Wix is currently one of the cheapest companies I own by PS ratio. I added in July and couldn’t resist adding more in August.

SQUARE - SQ (9.8%) - You might know Square if you’ve ever paid with a credit card at a local vendor – there’s a good chance they used a Square device to take the payment. Square also provides many other services available to their customers. One of the most profitable is Square Capital, which really leverages their data advantages to offer extremely profitable and low-risk loans to their customers.

Square reported their June quarter on 8/2, and it was pretty much aces. Part of me wished they hadn’t increased spending so much, but that’s probably just me being short sighted. They have a big TAM to go after! And just their Services segment would be a decent company on its own:…

I first bought Square in November at 12.24 per share. It’s been an incredible ride, and in July it turned into a double for me. I had trimmed 10% in July, mostly based on valuation, but when they turned in such a great quarter and the price went nowhere, I added it back and more.

TWILIO - TWLO (7.7%) - Twilio makes web service APIs for phone calls and texting. Software developers who subscribe to Twilio’s platform can use these services in their products, and this works out great on both sides: from customers’ perspective they only have to pay when these services get used, and from Twilio’s perspective, the more the services get used, the more Twilio gets paid.

When they announced their March quarter, they disclosed the Uber situation, about which I still feel this way, basically:…

On 8/7, they announced another great quarter. Revenue growth accelerated to 49%, and base revenue (recurring) sans Uber grew an insane 65%. And they added 2,735 customers in the quarter, which handily beats the 2,132 they added in Q2 2016. Demand looks strong.

I added in early August before earnings, and trimmed after earnings at just over $33. My position was growing very large, and I suspected volatility for the stock, but mainly I needed to raise funds for other stuff. I still have a large position and I have been considering adding. I think Twilio is VERY compelling in the $30 range.

ARISTA NETWORKS - ANET (6.0%) - Arista sells network switches, just like Cisco, except Arista’s switches use SDN (Software Defined Networking), which I understand makes for better control, performance, and security. Oh, they’re also pretty hard to make, because Cisco is sucking wind trying to catch Arista, but to no avail.

Arista is a new position for me this month. Their June quarter was an absolute thing of beauty. 51% revenue growth (accelerating quite a bit), while OpEx was up only 21%. That’s a way to drop a LOT OF MONEY to the bottom line. Not only that, but Arista is pretty dang reasonably priced at a PE of 43. I’ll be considering adding more. I need to learn more about their customer diversity and what the chances are these customers could pump the brakes at some point. But I get the idea that ANET’s products are pretty crucial to their customers and that demand is high. I’m really sorry I didn’t start paying attention to this company a long time ago.

MERCADOLIBRE - MELI (6.0%) - Most Fools have heard of Mercado. It’s been called the South American Ebay/Amazon. They have been growing like a weed, expanding offerings, taking payments, etc, etc. Mad growth. But they’ve added free shipping, and especially since this is South America, the market is taking a wait-and-see approach as Mercado spends a lot of money getting it going. In fact, this translated into an almost 20% discount to recent highs, so I added some Mercado during August.

FACEBOOK - FB (5.9%) - I sold Facebook back in May because I thought their ad business had to be getting close to a saturation point, and that they probably didn’t have a lot of levers left to pull for growth and profit. But then I started using “Marketplace” to sell some items around the house. They should absolutely put eBay and Craigslist and who knows who else out of business! This is just a small example, but to me it was a totally new line of business for them. Then they added a video section. I don’t know how that will work out, but my point is simply that FB is far from done growing. When you have 2B users (ponder than number for a moment) you can do almost anything you want.

THE TRADE DESK - TTD (3.9%) - The Trade Desk plays in the somewhat crowded world of advertising tech, but it seems the way they’ve positioned themselves to work with ad agencies (instead of companies placing ads) has really made them a preferred tool for the buy side. They also don’t buy inventory but just facilitate, so that streamlines their process and enables them to serve their customers without conflict. Their growth is phenomenal: revenue grew by 78% for the year in 2016. And they’re profitable with a PE around 50, which given their growth, seems insanely low.

On 8/10 , TTD reported another sensational quarter. Revenue was up 54% and EPS grew to 52 cents from just 22 cents in the June quarter of 2016.

Despite pretty much perfect performance by this company, I still have jitters about the ad tech space in general, and specifically whether or not they can maintain both their incredible growth and their profitability. I’ve decided to keep my position on the smaller side for now.

TELADOC - TDOC (3.6%) - Teladoc is a rapidly growing (though partly by acquisition) telehealth company. What’s a telehealth company? Well, you can actually meet with a doctor via a Skype-like visit online, rather than going into the doctor’s office. Sounds like the future, huh? I’ve been tracking them for a year or so – the company I work for actually got Teladoc coverage a couple years ago. I wrote them up in June:

There’s been a lot of news, including the Best Doctors merger, which was large. A recent big win for them was Blue Cross selecting them. Seems like a lot is happening with this company, which makes it fun to follow.

Teladoc is far from profitability and it’s a wild idea and I still have my questions about their finances, and their prospects in general (not to mention possible competition, competitive advantages, etc). It’s the wild west, so I’m keeping my position small for now.

HORTONWORKS - HDP (3.5%) - Hortonworks helps companies manage big data with Hadoop. Customers subscribe to the HDP software platform, and Hortonworks stores, processes, and analyzes their data.

On July 18th, Hortonworks announced that the COO was leaving the company. We’ve had lots of discussion on the board about what this might mean for their pipeline, and this led me to decrease my position substantially. However, no bombs were dropped in the June quarter conference call, and results were right in line with what I’d hoped, so I added a little back. Still, I know about as much about Hadoop as rocket science, so I’m gonna keep this one relatively small.

TALEND - TLND (3.4%) - Talend has carved out a niche within big data integrations by specializing in Hadoop, an expertise that will not be easily disrupted. Saul has called them a “category crusher,” a leader with no viable competition in its niche. I tend to agree, though others will not ignore this space forever. Hopefully Talend will continue to build up years of subscription revenues while they occupy the catbird seat.

I first invested in Talend in February, and added in March, April, and May. In June and July I trimmed it, and in August I sold quite a lot to invest in other things. Also, as I mentioned to Chris yesterday, I don’t have as good of a grasp of their market and products as I do with my top positions.

ALARM.COM - ALRM (3.1%) - As stenlis, who brought Alarm to Saul’s board, puts it: Holdings, Inc. provides cloud-based software platform solutions for the smart homes and businesses in the United States and internationally. The company provides interactive security solutions to control and monitor their security systems, as well as connected security devices, including door locks, garage doors, and video cameras.

I wrote them up here:…

This is a profitable company that’s growing nicely with a cloud subscription component. I’m fairly new to them, but intrigued! Keeping my position small for now, but tell me more!

MULESOFT - MULE (2.2%) - MuleSoft integrates applications. Wikipedia actually calls their directory of API’s a “social network for developers.” When Saul originally described MuleSoft, some thought it sounded a lot like Talend. It actually does a type of integration so different from what Talend is doing, that I think it has more in common with Twilio. It facilitates communications – not between apps and their user’s phones (like Twilio does), but rather between apps and other apps.

Saul has pointed out several times that they’re not only growing by winning tons of contracts, but also by a drastically increased contract value. Another incredible revenue force multiplier like so many of today’s great young companies have (e.g. SHOP, WIX, SQ, TWLO, MELI, etc). Chris breaks it down here:…

Chris also lists customer count, though, and growth there seems to be slowing. Recurring revenue growth may be slowing as well. We’ll see how things play out over the next few quarters, but I’ve reduced this one quite a bit, some for the same reasons as TLND and HDP, but also because it’s quite expensive, and I want to see where growth rates are the next couple quarters.

MOMO INC - MOMO (1.8%) - Call it FOMO, but I finally bit the bullet on a China stock. I don’t plan to make it a habit. From what I understand, Momo is like a cross between Whatsapp and Tinder. I really have no idea, though, and I understand the numbers a lot better than the company. Also, it’s China. I took a position because the numbers are just re-diculous. I will NOT be adding. This is merely a dalliance. Please ignore.

Random Thoughts and Conclusions

I believe in holding winners and not selling, but I admit, there are some companies that I – let’s call it what it is – trade. LGIH is a good example. I think they will go through ebbs and flows, and I definitely don’t want to just sit on a large position, because I feel like I can buy when the upside is great (like I did in July) and sell when the upside is limited (like I did in early August). I might not maximize my return this way, but it allows me to temporarily redistribute funds where I see more opportunity.

I bring it up, because I would never do this with SHOP or HUBS or SQ, because I’d likely miss out on a big move, or one of them would get acquired or something. I would never sell out of the whole position. I do trade a little on the margins, but it’s important to me to remember to keep a large position at all times – I don’t want to sell SHOP down to 6% like I did earlier this year, much to my chagrin. I don’t plan to ever again let my SHOP position get under 10%. But above 10% (or 15%, or whatever I want to make sure to keep), I trade a bit.

Just trying to call it what it is. Judging by my results this month vs the hypothetical Equal Weight No Tinker return I could have had, trading a little can work – probably provided that you know the companies well.

My best to all,


Hi Bear,
Another great, great summary. Thanks!

A few thoughts if I may:

  1. I note that both you and I increased our Shopify positions to ungodly 20% positions after earnings. I should know better but I couldn’t help myself. Since it was up another $7 this week, what the heck!

  2. You have 38% of your portfolio in three related stocks (Shopify, Square, Wix). That’s a lot and you might want to keep an eye on that. (I have 31.5% myself in Shoify and Square, so I shouldn’t talk, but still…)

  3. Well, you can actually meet with a doctor via a Skype-like visit online, rather than going into the doctor’s office. Sounds like the future, huh? Not really. It works when you want to ask the doctor some questions, or you want to tell him something you forget earlier, but most doctor visits require and examination (you know…touching, getting undressed, feeling your stomach, listening to your lungs or heart). You’ve got to be in the doctor’s office for that. That doesn’t mean there isn’t a place for Teladoc’s services, but it’s not ready to replace live docs yet.

  4. Talend is one of my favorites. You might want to consider it for a bigger position again.

Best, and thanks again,



Hi Bear

I came across this interesting reference on Wix in a blog discussing Palo Alto and cyber security. Thought you might appreciate it…

We really like WIX, the leading do-it-yourself website builder for small and medium sized businesses. The Company has extraordinary returns on marketing dollars, making it one of the best economic engines we have ever seen. The Company invests a dollar of free cash flow to acquire a customer, gets its investment back in a year and a day, and owns that customer for next eight+ years. We think the market is ascribing limited value beyond the in place book of business, which is odd, considering that the company grew 51% in the first half of 2017.

It’s right at the end of the article.…



Thanks, Ant.

We think the market is ascribing limited value beyond the in place book of business, which is odd, considering that the company grew 51% in the first half of 2017.

That’s an interesting way to put it. In other words, if they suddenly started growing at 0% instead of 50%, they would be roughly fairly valued? I guess I could believe that, because they have a gross margin of well over 80%. In other words, the expenses they have are largely due to marketing to new customers and R&D to grow the business. Cut down on that and you drive a lot of $$ to the bottom line. Maybe enough to be profitable at an amount that makes them fairly valued.

But of course, you wouldn’t want to do that. Growth is the key, because if they can do that at current levels, and be worth 3B, think what they can be worth if they 10x revenue a couple times over the next several years. I think that’s his point, and obviously I agree. Wix is now my #2 position at 10.1% of my portfolio. Speaking of which, I know Saul and others have cautioned me that Shopify, Wix and Square all play in similar circles, so that’s almost 40% of my portfolio concentrated in one area. I respectfully reply, “but how risky is that area?” Are people going to stop using the internet? Stop creating businesses? Stop paying for things? Maybe I’m an idiot, but I’m not concerned.


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Bear, you are clearly not an idiot… :slight_smile: