Just thought I’d try to provide a little confidence boost for a tough day. I’ve added to a few positions already in October.
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Nutanix NTNX has been completely beaten down over the last month or two. I believe the low PS ratio is the market saying that management is wrong and will not achieve $3B in billings by 2020. However, I see no evidence of this in the numbers. Now, the market could of course see something I don’t, and I will not rule out this possibility. However, given the veiled growth NTNX is producing (growth not apparent in the revenue trend because of the elimination of pass-through hardware sales) and the way I’ve seen the market react to veiled growth in the past, I believe the market is underestimating Nutanix. I increased my position by 26% on Monday.
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Twilio TWLO has been a rocketship in 2018, and is still up over 200% this year. However, the PS ratio is still lower than most. I believe they’ll keep growing fast, and that the shares are a bargain at this price. I increased my position by 25% today.
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Zscaler ZS is now under $40, and the PS ratio is around 23 today. That’s still extremely high, but it’s an extremely impressive company with extremely impressive growth and leverage. I’m buying on the way down – not sure where the bottom will be, but confident that there will be plenty of upside for many quarters hereafter. I increased my position by 56% Tuesday, but it’s still only a 2.9% postition. No reason to make it a large position when the price is still so steep.
I have no ability to ever call a bottom of any kind. But I am seeing a lot of stocks I was perfectly happy to own a week or two ago, which are much cheaper now. No reason to go crazy about it, but I’m definitely putting some of my latent cash back in play.
Bear
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I did the same.
There has been no recorded decline in business for any of these companies, just stock movement.
I work at a consulting firm that does a lot of work in the tech/cloud industry with a lot of the types of companies we discuss here.
Our business is stronger than ever and appears to be gaining momentum.
This is a very small sample size, so take it for what it’s worth.
I think this is one of those times that defines whether or not investors will be successful or not. Also a great opportunity to learn about ourselves and our emotional control.
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New here, though I’ve lurked for a while. I think the main issue is that “perception is often reality”. If rising interest rates or a deepening China trade war (or both) cause investors to believe a slowdown in the economy is imminent, then I think all stocks get taken down regardless.
As for the real-world impact on the SaaS plays frequently discussed here, their software is often crucial if not critical to the operation/growth of their customers’ businesses. That said, generically-speaking, while existing sales to customers that the SaaS companies have already “landed” should not be effected, it is the “expand” side where the effects will be seen. Customers who become cautious on the economic outlook won’t be as quick to purchase more seats, invest to deploy more services, or buy adjacent offerings. The key metric to watch would be the net expansion rates for signs of this. Of course, this is all conjecture, but something to think about in an economic slowdown scenario.
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Exactly the three companies I considered. However, not having sufficient cash to spread around and not wanting to sell anything at present, I took the cash I had to invest and bought ZS. Yeah, it’s still “expensive” but for all practical terms, they are without any real competition. They have what I believe to be and indispensable offering for every enterprise of appreciable size. I used a limit order (I rarely place anything but market orders) that executed at $36.75. About a month ago they were a hair under $47. Might they go lower still? I don’t know. If they do, will I kick myself for pulling the trigger too soon? No.
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