Ben’s Portfolio update end of October 2023
Returns and portfolio holdings:
Time stamp: October 31, after market close.
Portfolio Notes 2020 63.6% Since May 12, 2020, where I started this portfolio with over 40 companies, mostly holding large cap tech & FAANG, but also some high-growth SaaS. 2021 13.1% Discovered Saul’s board in February 2021 and started concentrating to 16 companies through December 2021. 2022 -60.7% Concentrated a bit more through July 2022 from which point I started posting my monthly updates on Saul’s board, holding about 12 or fewer positions. 2023 YTD Month Jan 8.3% 8.3% Feb 16.3% 7.3% Mar 17.9% 1.4% Apr 5.2% -10.8% May 40.5% 33.5% Jun 38.6% -1.3% Jul 50.7% 8.7% Aug 41.2% -6.3% Sep 35.3% -4.2% Oct 27.5% -5.8%
These are my current positions:
Oct 2023 Sep 2023 First buy* Snowflake 17.1% 17.0% 2/8/2021 Datadog 16.0% 16.8% 5/13/2020 Crowdstrike 15.8% 14.1% 5/13/2020 Nvidia 14.2% 14.2% 5/13/2020 Cloudflare 14.1% 14.8% 11/2/2020 Zscaler 14.0% 12.9% 3/4/2021 Monday 5.7% 6.6% 9/13/2021 TradeDesk 2.3% 2.4% 5/13/2020 Enphase 0.8% 1.1% 5/15/2020
Time stamp: October 31, after market close.
*held through today
A word on Enphase:
I’ll stop covering this company on Saul’s for now. With deep revenue declines it is no longer a Saul stock. I haven’t made up my mind yet what to do with my tiny position, but I’ll probably keep it for now. I still believe that the revenue decline is macro/interest rate driven and wouldn’t be surprised if this one is going to swing around and explode again once macro headwinds abate. While waiting for this to happen I wouldn’t want to have a significant portion of my portfolio invested in Enphase though, since this is so unpredictable and it might take a couple of quarters with potentially more pain ahead.
Expectations for upcoming earnings
In the following I summarize my expectations for the companies that are still due to report this earnings season. The goal of this exercise is to come up with reasonable earnings expectations. The goal here is not to be absolutely accurate, but to be able to identify when a company surprises in either a good or a bad way. That way it will be easier for me to identify if a change in conviction level is warranted. Also, just because a company exceeds or performs below my expectation with a single metric, that doesn’t necessarily mean my conviction has to change. Really, what this exercise does is it helps me to think about my companies holistically. Therefore, I think it is valuable to come up with these expectations before they report as it will help me to keep the companies (and myself) accountable and minimize any cognitive bias once the results are out.
Snowflake:
- Reporting Fiscal Q3 2024 around 12/01/23.
- Product revenue expectation: $692M (8.2% QoQ, 32% YoY), assuming a 3.0% beat.
- Q4 new product revenue guide: $727M (5% QoQ, 31% YoY) which I would interpret as $747M (8% QoQ, 35% YoY) and expecting constant QoQ growth.
- I would like to see a NRR around 135%.
- I would like to see RPO around $3.7b.
- I would like to see total customer growth greater or equal to 4% QoQ and $1M+ customer growth greater than 7.5% QoQ.
- I would like to see market place listings growth around 10%.
- I would like to see greater than one stable edge customer growth greater or equal to 9%.
- I would like to see an operating income margin around 10%, a net margin around 14% and a free cash flow margin around 15%.
- Detailed thoughts: Ben’s Portfolio update end of August 2023
Datadog:
- Reporting Fiscal Q3 2023 on 11/7/23 before the market opens.
- Revenue expectation: $533M (4.7% QoQ, 22% YoY), assuming a 2% beat.
- Q4 new revenue guide: $562M (5.5% QoQ, 20% YoY) which I would interpret as $573M (7.5% QoQ, 22% YoY) assuming a QoQ re-acceleration to reach more than $60M net new revenue in 2H23.
- My Q2 revenue expectation implies about $24M raw sequential revenue increase.
- I would like to see QoQ customer growth stabilize in both cohorts while continued multi-product adoption progress.
- I would like to see NRR >120%.
- I would like to see stable profitability margins.
- I would like to see high single-digit RPO QoQ percentage growth.
- Detailed thoughts: Ben’s Portfolio update end of August 2023
Zscaler:
- Reporting Fiscal Q1 2024 around 11/30/23.
- Revenue expectation: $501M (10% QoQ, 41% YoY), expectation from billings model and 5.8% beat.
- Q2 new revenue guide: $526M (5% QoQ, 36% YoY) which I would interpret as $551M (10% QoQ, 42% YoY) as my expectation from billings model, assuming Q1 QoQ billings decline of 25% (seasonal!).
- I would like to see Q1 billings of at least $470M, but a number closer to $540M would be fantastic.
- I would like to see RPO QoQ percentage growth in mid-single digits.
- I would like to see >100k ARR customer growth around 3.5% QoQ.
- I would like to see >1M ARR customer growth around 6% QoQ.
- I would like to see an operating income greater or equal to $85M.
- Detailed thoughts: Ben’s Portfolio update end of September 2023
Crowdstrike:
- Reporting Fiscal Q3 2024 around 12/1/23.
- Revenue expectation: $790M (8% QoQ, 36% YoY), assuming a 1.7% beat this Q.
- Q4 new revenue guide: $837M (6% QoQ, 31% YoY) which I would interpret as $853M (8% QoQ, 34% YoY), assuming QoQ growth will stay around 8%.
- I would like to see about $180M operating income.
- I would like to see about $218M net income.
- I would like to see continued multi-product adoption success.
- Detailed thoughts: Ben’s Portfolio update end of September 2023
Monday:
- Reporting Fiscal Q3 2023 on 11/13/23 before the market open.
- Revenue expectation: $189M (7.7% QoQ, 38% YoY), assuming same 4% beat as last Q.
- Q4 new revenue guide: $197M (4% QoQ, 31% YoY) which I would interpret as $205M (8% QoQ, 36% YoY), assuming QoQ growth will stay around 8%.
- I would like to see continued improvement of profitability margins.
- I would like to see no further customer growth QoQ deceleration.
- I would like to see NRRs stabilizing.
- Detailed thoughts: Ben’s Portfolio update end of August 2023
Cloudflare expectations and results:
- Reporting Fiscal Q3 2023 on 11/2/23.
- Revenue expectation: $330M (7.2% QoQ, 30% YoY), assuming no beat.
—> They managed $335.6M, a 1.5% beat!
- Q4 new revenue guide: $353M (7% QoQ, 28% YoY) which I would interpret as $353M (7% QoQ, 28% YoY) expecting QoQ growth will stay around 7%.
—> They guided for $353M, exactly what I was hoping for! Given their beat this quarter I think we can even expect them to beat that again by around 1.5%.
- I would like to see NRR around 115%.
—> NRR re-accelerated to 116%, up from 115%. This reversal is great to see since this is a lagging metric, which tells me that they likely not only reached a bottom here, but might continue to increase from here!
- I would like to see total customer growth greater or equal to 3.5% QoQ.
—> They grew 4.5% - amazing!
- I would like to see large customer growth greater or equal to 7.5% QoQ.
—> They grew 8.8% - amazing!
- I would like to see RPO QoQ percentage growth in high single digits.
—> They grew 5% QoQ - a little lighter than I had hoped for.
- I would like to see operating income around $28M.
—> They managed to get $42.5M, more than doubling last Q’s operating income, beating their guide by an amazing 108% instead of my expected beat of 37%. With that they more than doubled their operating income margin, reaching 12.7%, which is up from 6.6% last Q and 5.8% last Q3. Net margin also more than doubled from last year, reaching 16.5% and FCF margin grew 75% QoQ! What an amazing development!
- Detailed thoughts: Ben’s Portfolio update end of August 2023
—> Exceeding my expectations with 6 out of 7 metrics above, this was a great quarter for Cloudflare!
Wrapping it up
Aside from a great start with Cloudflare’s amazing ER, there is not much to wrap up this month as we are eagerly awaiting the majority of our portfolio holdings to report in November. Stay tuned for that!
Thanks for reading and I wish you all a great November!
Ben
Past recaps
July 2022: Ben’s Portfolio end of July 2022 - Saul’s Investing Discussions - Motley Fool Community
August 2022: Ben’s Portfolio end of August 2022 - Saul’s Investing Discussions - Motley Fool Community
September 2022: Ben’s Portfolio update end of September 2022
October 2022: Ben’s Portfolio update end of October 2022
November 2022: Ben’s Portfolio update end of November 2022
December 2022: Ben’s Portfolio update end of December 2022
January 2023: Ben’s Portfolio update end of January 2023
February 2023: Ben’s Portfolio update end of February 2023
March 2023: Ben’s Portfolio update end of March 2023
April 2023: Ben’s Portfolio update end of April 2023
May 2023: Ben’s Portfolio update end of May 2023
June 2023: Ben’s Portfolio update end of June 2023
July 2023: Ben’s Portfolio update end of July 2023
August 2023: Ben’s Portfolio update end of August 2023
September 2023: Ben’s Portfolio update end of September 2023