Better late than never. A very busy month with many reports and calls to work through. Special thanks to dawsdaws’ expectation posts. I love the formatting and I love to be able to check all my numbers and projections just before earnings releases.
Year-to-Date performance (as of 2/28/2022)
2022 YTD -12.8%
2022 Feb +15.1%
2022 Jan -24.2%
Last Year: 2021 +38.8%
February Overview
Despite still being down 13 percent for the year I am very, very pleased with my portfolio. The sell-off due to sector rotations, rising interest rates, and/or geopolitical concerns has caused what appears to be irrationality or mistakes in pricing for many growth companies. The companies that reported earnings this past month (e.g. UPST, DDOG, MNDY) had terrific reports (in a way everything else is noise). Yet, the stock prices do not reflect the continued reported success. If I can withstand the painful red avalanche days where the entire portfolio is down 4%, 5%, 6% or more; there are great opportunities to accumulate substantial numbers of shares at steep discounts. I acquired additional shares in MNDY and ZS this past month while trimming UPST which I had been adding to heavily in January.
My overarching sentiment is that all the companies that I have now are more valuable than they were 5-6 months ago. The goal for me is to own the most shares I can in valuable companies, the stock price should follow (kicking and screaming sometimes). The conflict in Ukraine viscerally highlights the criticality of cyber security on a macro level. I can’t imagine cybersecurity spending doing anything but increasing for many many years. It’s probably always been critical but now it is going to be at the forefront of everyone’s mind. I think the actions of Russia in Ukraine are the first thing to displace COVID as the frontline news. Currently I can’t think of any large company or government agency that can justifiably neglect cybersecurity right now, everyone needs it, and everyone needs it to be good. I am content having a basket of 3 very good companies in CRWD, ZS, and NET that are growing fast in this market.
Current Allocations
Percent weight in the portfolio as of 2/28/2022.
UPST 36.8%
DDOG 17.2%
MNDY 19.4%
CRWD 10.2%
ZS 10.2%
NET 6.2%
Last month I ended with over 40% allocation in UPST. That was too high so I trimmed it and bought ZI before either companies earnings. Then post earnings I again trimmed UPST and sold ZI to buy maintain a ~20% position in MNDY and to build a ~10% position in ZS (~5% before earnings and another ~5% post earnings). I expect to continue trimming Upstart potentially moving money to DDOG, MNDY, SNOW or BILL. I don’t think I am generally comfortable with more than 30% of my portfolio in one company. *Note I have since added a 6% position in SNOW prior to their earnings report. I am still mulling that report over: low Q4 Rev and lower guidance for this year balanced by large RPO growth and some very positive explanations in the call.
Upstart (UPST)
Redacted 
I did type something up but I agree that this company has been contentiously over-covered to a potentially detrimental degree. Also, the value of this board is enhanced and sustained by us collectively following the rules that got us here.
Datadog (DDOG)
Earnings Report 2021 Q4 2/10/2022
Huge earnings result. The present looks stellar and the future looks stellar. The company has now continued their acceleration into 84% YoY and 20.6% QoQ (which would be 111% if done for 4 quarters). With another solid beat next quarter this company would see 90% YoY growth. This company is doing as well as any company I know of and I would be happy to have 20% or more of my portfolio in it.
Some may be concerned by the 2022 guide to $1.53bil for 53% yearly growth. It’s only concerning if you don’t factor in the unspoken plan to beat each quarterly guide by a handful of percent. A good conservative projection would have 5-6% beats for each quarter which could easily add ~25% to that full year number. In that case you could easily see 2022 revenue come in at $1.9Bil and 85% growth. That scenario is far far more likely than actually seeing 53% growth in 2022.
Monday.com (MNDY)
Earnings Report 2021 Q4 2/23/2022 and My analysis of Q4 results.
Basically, Monday.com is SaaS company that has been growing in above 90% YoY for the past few quarters and appears likely to grow above 80% range for much of 2022. Sounds promising. It’s hard to find any company sustaining growth that high (See Datadog above for a rare exception!). I have no idea what other investors in the market are expecting but apparently a large number of them see the decelerating revenue growth from nosebleed levels to exceptionally high growth as a negative. This was apparent by a confusing collapse in share price from $350ish for much of 2021 to ~$150 range now. While Datadog may be doing even better the fact that Monday.com stock is now basically on clearance sale while still growing >80% YoY means I am thrilled to keep adding shares to maintain it at ~20% of my portfolio. If market sentiment can cause a SaaS company growing this fast to drop 60% the companies rapidly growing revenue base will eventually (inevitably) swing that sentiment back and the stock is a great candidate to double/triple or more in the near future.
Crowdstrike (CRWD)
A SaaS cloud security company that is growing in the mid 60% YoY. It has fallen out of favor with some investors as it has decelerated from consistent 80% growth. I think that there is plenty of runway (years) for this company to continue growing in the 55-65% range. A big reason is the guarantee of expanding growth in TAM and the mission critical nature of cyber security. Every year a larger share of global economic activity and value is digital. This is a big wave and requires a corresponding wave in security to protect it. Growth dropping into the 50%s for next quarter would be a concern that would cause me to consider selling some or all of this company.
Zscaler (ZS)
Earnings Report 2022 Q2 2/24/2022
I’m not tech savvy enough to explain the major differences that I’m sure exist between Zscaler and Crowdstrike. But as companies go Zscaler benefits from the same Macro reasons that I like Crowdstrike above. Zscaler is growing at almost the same rate as Crowdstrike but accelerating from growth in the 50% range to over 60%.
Cloudfare (NET)
Earnings Report 2021 Q4 2/10/2022
Another cloud security company. Same rough global and market tailwinds as ZS and CRWD. Cloudfare is growing slower but very very steady. Cloudfare is more expensive than ZS and CRWD despite the slower growth. Again, I am not a techie but Cloudfare is making claims about being the 4th major cloud service provider. This would appear to give them a significant boost to TAM and makes their potential runway very very long.
ZoomInfo (ZI)
Earnings Report 2021 Q4 2/15/2022
A nice company that I like but they are guiding to slowing growth for 2022. Even factoring in four quarterly beats they are likely going to be in the 50%s for revenue growth. Its fine, and I would be happy to have it in my portfolio if I didn’t like the other companies more. The company appears to be excellent in their field, that field is just narrower than most of the others in my portfolio.
Conclusion
A nice bounce back after a rough January. Mostly led by my overweight position in Upstart. However, I must reiterate that all of these companies are in better shape than they were 5-6 months ago and their futures all look increasingly bright. In these times I like to reflect back to my own state of mind when companies are going up, up, up and my thoughts were “Uuhhgg I should have bought more of ABC back when it was $XYZ!!” Well, here is our chance: These companies are all back to price $XYZ and below WITHOUT narrative shifting bad news! In fact the overwhelming majority of the news and info is positive in the quarterly reports. Sometimes we miss something and the market knows or see something we don’t. Sometimes the market is irrational. The lock step drops in ALL growth stocks with almost no regard for quality of business combined with exceptional results being rewarded with additional instant 20% drops tells me that it is likely that these hypergrowth stocks continue to be misunderstood. That misunderstanding is an opportunity that I am grateful to have.
Thanks,
Crammarc
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