Bear's Portfolio through Nov 2018

PaulWBryant · December 1, 2018, 3:47pm

My 2018 Portfolio Performance YTD as of


Jan +12.97%
Feb +25.35%
Mar +28.02%
Apr +28.03%
May +40.39%
Jun +53.23%
Jul +46.44%
Aug +78.67%
Sep +82.00%
Oct +63.92%
Nov +71.47%

November was a volatile month, in which at times my portfolio was down another 10% from the end of October (but still up 40-something percent YTD). Luckily, in the last week or so it has rebounded a lot, and I turned in a positive month after all.

One of the worst hits to my portfolio in November was Talend. Obviously I ended up getting rid of it as I had a lot of buying opportunities with other stocks, especially MDB, AYX, NEWR, and PAYC, so I moved my Talend money there. I haven’t yet re-invested the NTNX money, because I just sold a couple days ago. But you can see all that below. So let’s begin.

Previous Month Summaries

My Current Allocations


Ticker	Curr%	Buy/S	Mo Ch	YTD Ch
MDB	10.8%	51%	1.7%	183.4%
WIX	10.7%	0%	-3.3%	63.6%
AYX	10.5%	43%	13.6%	138.1%
NEWR	9.5%	56%	-2.3%	50.9%
TWLO	9.0%	-15%	25.6%	300.4%
PAYC	8.1%	40%	6.0%	65.3%
ZS	5.8%	0%	8.2%	
PSTG	5.3%	NEW	-6.3%	19.2%
ESTC	4.4%	-22%	5.1%	
SHOP	2.7%	-38%	10.5%	51.1%
TDOC	2.2%	0%	-9.9%	79.2%
ARNA	2.1%	0%	15.0%	13.3%
ANET	2.1%	-38%	3.5%	1.2%
SQ	1.2%	-50%	-4.9%	101.4%
options	6.3%			
cash	9.5%

New 2018
January - No adds
February - AYX, NEWR, OKTA
March - MDB
April - No adds
May - NTNX
June - PVTL
July - PAYC (again), MDB (again)
August - NEWR (again), TWLO (again)
September - ZS, ARNA
October - ESTC, TDOC (again)
November - PSTG (again)

Sold 2018
January - TTD
February - TDOC, ALRM
March - NVEE
April - MDB, OKTA, NEWR
May - none
June - PVTL, HDP
July - MU, HUBS
August - none
September - PSTG
October - INST
November - TLND, NTNX

I have 14 positions currently. I’m a little bored with my old format, so I’m going to try something new this month. I’m going to try to cut down on the info that’s repeated here each month, and just say a little below about how I see my portfolio. It has really gotten more concentrated. Despite 14 positions, the bottom 5 make up just 10% combined, so it’s really a small number of companies driving things. Here’s how I see it:

Tier 1: The top-conviction companies:
Mongo Db 10.8%
Wix 10.7%
Alteryx 10.5%
New Relic 9.5%
Twilio 9.0%
Paycom 8.1%

I’ve let Mongo grow bigger than I planned, but I mean, it’s a beast. Still only a ~4B market cap, but growing like just about nothing else (besides Twilio and Alteryx). Also, the short interest has risen the last month or two, so despite the lofty valuation, I feel like there’s potential for a pop if they can turn in another quarter of acceleration. https://www.nasdaq.com/symbol/mdb/short-interest

I can’t move Wix down. They’re so steady, and the profitability engine is accelerating. Alteryx is doing the same, and even more so because they are growing MUCH faster, and Mkt Cap is just under 4B there too. The crazy thing is that Wix, with close to 3 times as much revenue as MDB or AYX, is also at a market cap of only about 4.6B!!! It’s a true bargain.

New Relic has kicked profitability into gear in a huge way, and is really undervalued in my opinion – a story that will go on for years, methinks. Paycom is similar to NEWR – profit as well as 30%+ revenue growth – but more mature.

Twilio is a behemoth, as Saul says.

I can find no fault with these 6. Ironically, MDB might be the only one for which I would give a caveat, and that’s how far they are from profitability. I may trim a bit of that before earnings.

In general, I’m happy with these as 8 or 10 percent positions.

Tier 2: Mid-sized positions – some of which I’m planning to build higher:
Zscaler 5.8%
Pure Storage 5.3%
Elastic 4.4%

Pure Storage is one I just couldn’t resist as they shed 40%. I probably won’t make it a large position, though. Zscaler and Elastic are just so expensive, I can’t make them large positions…yet. I’m adding opportunistically, and learning more about these two companies.

Tier 3: Positions I’m not interested in adding to right now, or possibly ever.
Shopify 2.7%
Teladoc 2.2%
Arena 2.1%
Arista 2.1%
Square 1.2%

I suppose I should say a little about 2 former top positions, Shopify and Square. I believe SHOP and SQ will do fine, but their mega-return days are behind them. They’ve grown so much, it’s impossible to sustain the growth rate. SQ’s revenue acceleration can’t continue, and SHOP’s revenue has already started to decelerate. SHOP is cheaper right now, but both are unlikely to double in the near future.

Teladoc and Arena are fliers. I won’t be adding any to Arena, and not much to Teladoc.

Arista is unique. It’s a true growth company, but more mature than most of mine. And a lot of their product is hardware.

Wrapping Up

Please let me know what you think about this new format. One thing I may add is a link to a post describing each company. I don’t really have those posts yet, so for now please refer to my old monthly write-ups (links above).

My best to all!

Bear

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

“A man’s gotta know his limitations.” - Dirty Harry

“If you must tell me your opinions, tell me what you believe in. I have plenty of doubts of my own.” attributed to Goethe (but not sourced)

“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

“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

tchalla · December 1, 2018, 6:43pm

Hi Bear

Thanks for the summary.

A quick question on Wix - do you adjust your perspective of fair valuation given that the company is based in Israel? If so, how much by?

I ask because I do this to companies I follow that are based in Brazil / China, and I know that an Israel based mobile and programmatic advertising company that I follow on the London Stock Exchange has always traded much lower than the metrics would suggest. (Rev growth YoY 68% accelerating to 119% at a run rate of $144M for the first 6 months of the year, gross margins circa 41%, but EV/Rev below 1

https://www.taptica.com/wp-content/uploads/2018/09/Taptica-I…

https://www.marketscreener.com/TAPTICA-INTERNATIONAL-LTD-165…

What is your take on valuation with Wix?

PaulWBryant · December 1, 2018, 7:26pm

A quick question on Wix - do you adjust your perspective of fair valuation given that the company is based in Israel? If so, how much by?

Not with a SaaS company. And even if you want to adjust 10%, I think Wix is worth about $8 or $9 billion. It’s cutrently at a market cap of 4.6 billion, so you do the math.

Bear

tchalla · December 1, 2018, 9:29pm

A 10 to 15% discount feels like the right ballpark.

A better comparable might be CYBR - Cyberark

also an Israeli company, similar industry and metrics to MIME which has British origins, but
usually trades at a discount.

Foolingyou1 · December 2, 2018, 10:10am

Bear: thanks for sharing.

Just wondering why you are not on the TTD bandwagon yet?

Have you considered adding it to your portfolio, or replacing one of your lower tier conviction stocks (TDOC?) that you won’t be adding to anyway?

Foolingyou1

jgxoxo · December 2, 2018, 11:19am

Thanks so much, Bear. The format is good. I also want to thank you for the mid-November “shopping list” post which I found very comforting during a tough period. jackie

nilvest · December 2, 2018, 1:17pm

Bear,

Great results. Congrats, thanks for sharing.

You have been holding Wix for a while. I like the business but few months back with dollar strengthnign, I realized that market is less likely to give the same multiple to a non US company. So I did get out of most of my non US domiciled companies other than MELI on which I have a sizable gain and it still has decade long growth ahead of it.

This situation however seems to be changing now. And on top of that Wix has started aggressively expanding product portfolio. It seems they are learning a bit from SQ and SHOP and starting deliver innovative portfolio around their user base needs. Not sure if those still show up in revenue but looks quite promising. And with valuation based on current business itself being so low, I started buying back again in small position now. Let’s see how this ride goes.

Question on PSTG : any clue on why / if / when will something change in street perception of this company? I am very tempted to buy because of great value (have a small call option position already) but concerned that street perception of commodity business not going to change soon.

PaulWBryant · December 2, 2018, 4:53pm

Question on PSTG : any clue on why / if / when will something change in street perception of this company? I am very tempted to buy because of great value (have a small call option position already) but concerned that street perception of commodity business not going to change soon.

My guess is that sentiment will be more tied to EPS than simply revenue growth. Unlike with software companies, some people may question Pure’s margins. But surprise, like Arista, Pure has great gross margins! Pure spends more on OpEx than I would like, but it is growing slower than revenue (and gross profit), so I don’t see an issue. The steady march of increasing profitability is underway.

Maybe the market just needs to see EPS growing another quarter or two. But don’t try to time it! The market could change it’s tune on PSTG tomorrow. Remember a couple months ago when PSTG was over $28 and the PS was over 6?

Bear

tchalla · December 4, 2018, 3:04am

As if on cue regarding the caution with overseas based tech companies, the Ceo of Taptica has resigned yesterday after issues witb false statements with his previous company.

https://www.stockopedia.com/content/small-cap-value-report-t…

Obviously these issues can happen in any country, but may be part of the caution

It obviously has nothing to do with Wix.