Bear's Portfolio through 08/2023

Investment Analysis Clubs Saul’s Investing Discussions
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Important context for my portfolio reviews: I run a concentrated portfolio and WARNING the swings can be huge. From the 2021 high to the 2022 low, my portfolio fell more than 60%. For every $100 I had at the top I had just $40 left! Staggering. So, before trying this style, even with a small portion of your total net worth, please understand the downside – it’s much steeper than if you own an index, or a bunch of megacaps. Also, don’t follow or copy me, Saul, or anyone. We may sell a position or buy a new one at any time, so it’s impossible to follow anyway. Also, to succeed with a concentrated portfolio, you must rely on your own decisions.

The portfolio ended up getting completely overhauled this month. Okta, Nvidia, and Monday are new positions. More on those below.

I bought and sold Confluent during the month. I just couldn’t get over the revenue slow down plus FCF losses. I’ll keep an eye on them, but I just want to see some numbers moving in the right direction before I buy back in.

I also sold:

BILL - BILL Q4 results - #2 by PaulWBryant

Datadog - Growth has slowed a LOT. I just see this one going sideways for several quarters.

Crowdstrike and Zscaler - These might do ok, but I don’t see a ton of upside. I’d been reducing so I just decided to get out as a matter of portfolio streamlining.

Hashicorp - Growth is just slowing too fast.

A lot of these exits happened the last few days, leaving me with 44.9% cash. Cash actually got below 18% a couple weeks ago. My portfolio is up almost 10% since then…quite a run…so I think it’s a decent time to have a little cash. I would build up some of my smaller positions if the price was right. Or better yet, maybe something new will come along.

A word about the positions I own:

Axon - This one is growing better than most and the multiple is lower than most and profitability is increasing. What’s not to love?

Samsara - Our fastest growing SaaS company right now. It’s not cheap, but they sure do keep putting up the numbers. Profitable for the first time in Q2, and I expect much more will come soon.

Okta - Left for dead when they had a really tough calendar 2022, and hasn’t bounced back (yet) although the numbers have been good in 2023. If they can keep growth in the 20’s, I think there’s tons of upside. If they grow in the teens next year, it’s still a bargain as long as EPS keeps climbing. They just raised this year’s guide from 0.93 to 1.20 and there’s still time to raise again in Q3 and then beat that. And net margin is only about 10%, so I could see them greatly expanding EPS next year too.

Aehr Test Systems - They did $65m revenue last year and hope to best $100m this year. Nice ~30%ish profit margin. Things are looking promising for them this coming year and beyond, but man are they a tiny company.

Procore - Niche SaaS (construction), and I think they’re still a little underappreciated by the market. Like Samsara, expanding profits are imminent.

Nvidia - NVDA Q2 Earnings - #5 by PaulWBryant

Celsius - How long can this torrid growth last? I really don’t know, but there seems to be a big market for energy drinks, and they seem like the “it” brand right now, taking massive share.

Monday - I looked at BILL and CRWD and DDOG and ZS and I just think Monday is putting up better numbers right now, with no signs of stopping. They’ve gone from -16% FCF to +26% FCF margin in 4 quarters. That’s impressive. I don’t expect them to take over the world, but they appear to be executing really well.

Wrapping up:

The indexes actually ended August down a bit, so I’m thrilled with the way the portfolio performed. Axon did a lot of the heavy lifting, and just adding and trimming opportunistically helped a lot too.

Who knows what the rest of the year will bring? I’m optimistic as always, but I’m also aware that anything can happen. We have to enjoy the wins when we can get them, and August was a good one to me. I hope to you too.

I heard someone mention a thought experiment recently. What if you had to live your life over again? Maybe once…maybe more. But every time, you have to live it the exact same way you lived it this time!

The point of course: Live it this time in a way that would make that a treat and not a sisyphean struggle! That’s gonna be the thought I try to focus on and live out in September! May it be a kind month to us all!

Bear

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” - Attributed to Albert Einstein

Previous Month Summaries

Dec 2016 (contains links to all 2016 monthly posts): Bear's Portfolio at the end of 2016 - Saul’s Investing Discussions - Motley Fool Community

Dec 2017 (contains links to all 2017 monthly posts): Bear's Portfolio through Dec 2017 - Saul’s Investing Discussions - Motley Fool Community

Dec 2018 (contains links to all 2018 monthly posts): Bear's Portfolio through Dec 2018 - Saul’s Investing Discussions - Motley Fool Community

Dec 2019 (contains links to all 2019 monthly posts): Bear's Portfolio through Dec 2019 - Saul’s Investing Discussions - Motley Fool Community

Dec 2020 (contains links to all 2020 monthly posts): Bear's Portfolio through Dec 2020 - Saul’s Investing Discussions - Motley Fool Community

Dec 2021 (contains links to all 2021 monthly posts): Bear's Portfolio through 12/2021 - Saul’s Investing Discussions - Motley Fool Community

Dec 2022 (contains links to all 2022 monthly posts): Bear's Portfolio through 12/2022

Jan 2023: Bear's Portfolio through 01/2023

Feb 2023: Bear's Portfolio through 02/2023

mid-Mar 2023: Bear's Mid-March Update

Mar 2023: Bear's Portfolio through 03/2023

Apr 2023: Bear's Portfolio through 04/2023

May 2023: Bear's Portfolio through 05/2023

June 2023: Bear's Portfolio through 06/2023

July 2023: Bear's Portfolio through 07/2023 (and Aug 3)

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Bear, I am curious if you saw the Reuters story yesterday about the toxic workplace culture at Axon? I’m also investing in this one but the story gives me some pause, despite loving the numbers they are putting up.

Reuters article: At Taser maker Axon, ex-staff say loyalty meant being tased, tattooed
Hacker news discussion: At Taser maker Axon, ex-staffers say loyalty meant being tased or tattooed | Hacker News

I’m also remembering back some 10+ years ago when the symbol was TASR, and the company was investing in huge impressive office spaces but not delivering on their numbers. It seems the company has definitely turned a corner since that time period but I still have these concerns about the management there.

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For me, as an investor, this is a total non-issue. If anything I’d consider it a positive. Obviously any abuse, discrimination issues should be taken seriously and cut out immediately. But this looks like an intense, driven, passionate - if at times over the top - culture. Not the least bit surprised that it’s macho, tough-guy with tattoos and ritual tasings. The fact is - tasing is a million times better for cops, society-at-large than bullets. And bodycams to bring conduct into the light noble as well. The most probable reality here as I see it is a raucous culture pushes the envelope and needs to rein the frat-house nonsense in. But that the passion, intensity, commitment, competitiveness are great things. If this creates worry that hits the price in any meaningful way I’d buy that dip all day. At worst a few former employees win a relatively meaningless settlement. And management dials this stuff back. For investors in a company like this, within reason, this is exactly what I want. Of note, I just watched the documentary on Tim Tebow’s two-time national championship Florida Gators and it seems reasonable to me that in today’s hyper-competitive world some abject lunacy is needed to win big.

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My reaction to the article? “I guess in sensationalist journalism, some months are slower than others.” It just wasn’t a great read. The author’s accusations where underwhelming (people “felt” pressured???), and the evidence he provided was more underwhelming. He found a handful of ex-employees who badmouthed the company, and I believe only two are named. And the videos throughout of employees being tased are supposed to be shocking (no pun intended) and appalling? I mean it’s weird, but like, there are hundreds of witnesses, and many safety precautions are taken.

I am the wrong person to ask about management and company culture. I usually tolerate them rather than idolize them. If you find a company (or CEO or manager) that you believe is 100% good, you’re asking to get disappointed. But is this odd culture a disaster? Maybe some change is needed, but if so, I think there are enough smart people at Axon, like Andrea James (CCO) and Brittany Bagley (COO, CFO), that any wild card executives/founders are being and checked and balanced.

Just my thoughts, since you asked.

Bear

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My nephew worked a summer at the former TASR. He confirms that new employees would voluntarily be tased. When he told me about it, it seemed to him like a right of passage. He did not feel undue pressure to participate. He said it was kind of fun.

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@PaulWBryant As a Celsius shareholder, do you know how to access the Nielsen Consumer Suervey’s? I’d like to access the hard data.

According to seeking alpha on 8/22, “Celsius once again ripped a huge gain in the energy drink market, with its 12-week sales growth of 162% helping to push its market share to over 8%. Monster Beverage saw a 12-week increase in sales of 12.4% to outpace Red Bull’s 9.4% increase.” GauchoRico also referenced the Nielsen Survey in his Portfolio update from today.

Thanks

FoolishJeff

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I don’t. I assume you need to subscribe to Nielsen, and it’s probably designed for institutional buyers and isn’t cheap. But I’m just guessing. That said, I agree with @GauchoRico that Nielsen numbers confirm the wild growth is ongoing. So I’ll be watching whatever people post about the data.

Bear

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@GauchoRico posted about his source of information here:

GauchoRico on EDI numbers from CELH

Hope, that helps?!

Best
Nick

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Just want to point out that consumer is just one channel for CELH, Nielsen growth numbers for Q2 averaged in the 140% range iirc, but total revenue growth was 112% (due to wholesale, catering etc), so not a total one to one proxy

It has grown to my largest position so I’m very bullish, but wanted to put that out there

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Yeah for CELH, as someone pointed out to me recently, the Nielsen survey estimates growth for the retail channel. So retail has been growing at about 165% in recent weeks. Other channels are currently growing more slowly so the overall growth for Q3 will be lower than 165%. Average analysts projection for Q3 revenue is $352M which would be 88% growth. Q3 should be higher than that. 120% growth for the quarter would be $411M which would be a 17% beat over analyst estimates.

GauchoRico

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I have been with Axon for many years now - they have expanded from the one-trick pony - selling Tasers - to a more complete offering for law enforcement, including storing body cam footage, which is a high margin business. Their moat seems wide and their mission - to reduce unnecessary killing - has appeal.

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I remember my huge mistake years ago, thinking AAPL was too expensive at $30, $60, $90 - then they split and I finally bought in. I’ve hesitated on CELH, thinking consumer preferences are such a fleeting thing. I am questioning my decision and thinking a starter position is worth considering.

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I had the same hesitancy on CELH. My thinking was (still is) just another sweetened, flavored fizzy water. How long will the fickle consumers think this is something different?

But then I remind myself that I bought Monster years ago, made a profit in a few months and bailed out because it was (is) just another sweetened, flavored fizzy water. Selling when I did left a great deal of money on the table. It seems the the imagination of those fickle consumers has been captured by CELH’s claim of a “healthy energy drink.” Monster is still very popular vying with Red Bull for the top spot in the energy drink segment. CELH is apparently taking share from both of them. I now have 9% position in CELH with no regrets as it’s a relatively new holding and already up 9+%. I will probably buy more. Just trying to determine what I want to sell in order to make the cash available.

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