Hi @wpr101,
Thanks for the question, as it is questions like this that challenge my thoughts and allow me to further reflect on it; so sincerely thank you for raising it.
From a bigger picture view, I like to invest in excellent companies with the goal to stay invested indefinitely until either the thesis changes materially (in which case I’ll reassess) or breaks completely (in which case I’ll sell out) OR until I find a place for the invested capital that I think gives me a significantly better long-term opportunity (in which case I might trim or sell out). And I like to allocate position sizes purely by confidence level (which has the net benefit that the market tends to do the adding and trimming of allocation percentages for me and all by itself, unless such a material change in the thesis happens; take SentinelOne as a recent example where I sold out completely). By materially, I mean that in a quarterly report, more has to be bad than just a single metric. Because companies are a little bit like breathing organisms they just can’t perform 100% every single quarter. There’ll typically always be something to nitpick. So I am looking for trends that go into the right direction over multiple quarters. By long-term opportunity I mean multiple years. By significantly better opportunity I mean that the alternative investment has to have an obviously better thesis of long-lasting growth and improving profitability trends that are backed up with a supporting narrative. You can read my expanded view on this topic here: Ben’s Portfolio update end of March 2024
Now coming back to the question for Samsara: Samsara is a really unique / special company that has recently delivered perfection quarter after quarter. This Q1 was the first I’d call less than perfect. First, their new numbers led me to change my thesis from revenue growth acceleration to revenue growth durability. Comparing this updated theses to my other companies I find that it is pretty much the same for the others as well; durability. And as I have said in above linked post, I believe durability is king, so I am happy to hold Samsara, even if it will “just" have durable revenue growth from here on out. Second, the low large customer growth number caught me by surprise and is definitely something to worry about. I see two possible outcomes here: the first is that for whatever reason (increased competition, or AI competition, or something else) the trend of large customer growth slows down significantly and as a result Samsara’s revenue growth might not even be durable, but decelerate significantly from here on out. That would be a scenario where I would absolutely want to sell. The second possible outcome is that this large customer growth number this Q1 was just a blip - again for whatever reason, be it because of tough QoQ comps from the extended previous quarter, because customers where somewhat shell-shocked from the uncertainty that the new AI wave brings which made them temporarily hesitant to extend or go into new contracts or simply because, as I said above, companies are a bit like breathing organisms that just can’t perform 100% all of the time; or a combination of all of the above. I think both scenarios are possible and I want to wait at least another quarter to reassess. Will large customer growth be strong again in Q2? And if not will management have a better answer as to why this time around, or not? Now, I have just recently started this position, so the company is relatively new to me and I am still building confidence in it. This is reflected in my allocation of a few percent. Before this Q1 report my plan was to build it to a ~5% position in the midterm until I learn more about the company and continue to grow confidence. If it turns out that the large customer growth drop in Q1 was just a blip, I’ll likely continue to build the position, even if revenue growth “just” stays durable. If it turns out that there is a bigger issue I’ll very likely sell. Until then I’ll likely hold onto my small position and do nothing.
I hope this answers your question. And thanks again for posing it, it definitely allowed me to think more about the investment thesis and structure my thoughts around it!
Best wishes,
Ben