Does anyone remember Nutanix?

Does anyone remember Nutanix? A company that many of us were invested in but most have gotten out of long ago. I see that it is currently down to $18 (its high in 2018 was $56 so its down to less than one-third of its high, in a market where the rest of our stocks have been going up, up, up. But we got out for a bunch of good reasons at the time. Even if it ever comes back, think of the years of opportunity cost that comes of not being willing to acknowledge to yourself that you may have made a mistake, and just getting out and moving on.

The reason I’m exiting today is that I read today that Nutanix is (desperately?) furloughing its employees for two weeks at a time to try to save costs… while the rest of our companies are (desperately?) trying to hire to keep up with business demand. And if you still are a Nutanix holder I’m sorry, but this is why, over and over again, I’ve urged to sell out of problem companies and not hold on to them hoping that they will return back up to your purchase price some years later.

Best,

Saul

A link to the Knowledgebase for this board is in the Announcements panel that is on the right side of every page on this board.

For some additions to the Knowledgebase, bringing it up to date, I’d advise reading several other posts linked to on the panel, especially “How I Pick a Company to Invest In,” and “Why My Investing Criteria Have Changed,” and “Why It Really is Different.”

57 Likes

Funny I was writing in my investment journal about my biggest mistake in April and the Opportunity Cost associated with this.

This is slowly sinking into my thinking thanks in large to your posts such as this one, Saul. Thanks.

For what it’s worth, this is what I wrote:

Turns out my biggest mistake in April was also what Saul said his was, selling Coupa. What can I learn from this? My selling Coupa and buying NET specifically ended like this: COUP now at $184 and NET is steady at $33.50. Thats 2.5% of my entire port in the difference, I could be investing that money today. Instead I ended up selling (all) my ENPH after it rose 30% being added to S&P Midcap 400. And waiting for their earnings pull back (after Putnid discussed effects of lockdown in India and consumer spend decline globally effects on ENPH at this time) or adding to ESTC if NET jumps showing growth market for Usage Based Pricing models. I believe those are reasonable (Saul-like reasons) for changes in portfolio allocation? I added 1% to Rubi believing it will have benefited from move to streaming (more evident in their bottom line than TTD when Rubicon reports tomorrow. That leaves my 1.5% cash

Thanks,

Jason

3 Likes

Good afternoon, Saul.

It does strike me as rather odd that: 2 Fool services actively recommend NTNX; 10k Motley Fool members have favorited NTNX (although 10K does seem low…); and 98% think NTNX will outperform the market. Seems like NTNX is still fairly highly thought-of around here… yet there isn’t an NTNX discussion board.

I confess to never having heard of Nutanix prior to reading your post today. Since then I have read several articles from TMF and elsewhere, a few as recently-dated as March of this year, universally praising Nutanix as the kind of company long-term-focused investors will want to invest in.

I know that you and your opinions are also highly thought-of around here. So what are you seeing that all those others are missing? I get it that furloughing employees ain’t good, but it’s also generally a short-term thing otherwise they’d be laying them off altogether.

1 Like

https://discussion.fool.com/4056/-nutanix-ntnx-122352.aspx

there’s a board, fwiw.

1 Like

Saul exited Nutanix in March of 2019. He had a bit to say about it i his end-of-month summary:

https://discussion.fool.com/my-portfolio-at-the-end-of-mar-2019-…

A quote from there: In March, Nutanix announced that their sales were falling off a cliff and I exited at $34.60, and am not looking back. On this one I will say “Never again!”.

Saul owned Nutanix from 2017/09 to 2019/02 (minus 2018/11). Links to earlier months’ summaries from that period can be found here:

https://docs.google.com/document/d/1yF_lLGs3pI4SPcYOfIvpO5FY…

3 Likes

Here’s an invaluable gift from Saul in the Knowledge Base regarding selling. Thank you Saul. We are grateful for your willingness to share your words of wisdom:

“…Sometimes you have to sell. You can adopt the MF mantra that if you just hold on it will come back in time, and maybe it will. But I hope to employ that money in much more profitable ways than watching a stock go down and then hoping it will start to come back. It you sell it five years later because it never came back (as they occasionally do), you not only suffered the loss, but you suffered the opportunity loss as well. That money could have been making a profit for you in another company’s stock during those five years. ?

?Not accepting that an investment could be a mistake as it continues to go down is a dangerous error, and could be very expensive. A big problem investors have is getting attached to their previous decisions and not being willing to consider that they may have made a mistake. Some of the most angry I’ve seen people get on these boards is if you criticize a stock that they’ve fallen in love with.

I try to always pay attention to criticism of a stock, to reevaluate my investments, and to get out if it turns out that I’ve made a mistake, or if the situation has changed. Which is why I rarely end up holding stocks for 5 or 10 years.

Sometimes changing your mind in the face of new evidence, and selling when necessary, is the most important thing you can do. If you are wrong, you can always buy back in. I think that being willing to change my mind in the face of new evidence is one of the most important skills I have. And learning that it’s okay to change your mind when appropriate is one of the most important things I try to teach on this board. Let me remind you that I sometimes make mistakes getting into a company (big mistakes, on occasion), but that I am willing to consider the possibility that I was wrong, and change my mind when I see that I actually was wrong. And that that is very important. Although I realize that I make mistakes, I don’t regret my decisions. I figure I did the best I could at the time. And sometimes I make mistakes getting out too. So what! I can’t be right all the time.

You don’t have to be right about the stocks you sell, just the ones you hold in your portfolio. It simply doesn’t matter what happens to a stock after you sell it. The only thing that matters is what happens to the stocks that you are holding. Think about that!

If you sell 10 stocks over time because you have legitimate questions about them, and you were “wrong” about some of them (they eventually do all right and move up), so what? As long as you put the money in stocks that you are happy with, that’s what counts!

There’s no such thing as “I was so far down I couldn’t sell”. The stock price has no memory of the price you bought it at. It’s at the price it’s at. That’s the reality of now. The question about any stock is “What decision should I make about it now, at its current price and its current prospects?” Not, “What price did I pay for it?” unless you are planning for tax losses or gains. Price anchoring is a big mistake.

Forget the price you bought something at. It’s at the price it’s at now. If you think you should sell it, say to yourself “I’m fed up with this stock and I no longer like its prospects. Where else can I put the same money where it will do better?” That takes a lot of the emotion out of the decision.

In making a decision to sell, it doesn’t matter now what price you bought it at. What matters is what you think it will do from here! If you suspect that it may be down for several years, or even down for good, don’t focus on what you paid for it. You can’t make it go back in time to where you bought it. I’d suggest you put the money into something better.

It’s not logic, it’s common sense. For example: I originally bought some ABC as high as $21 and $22 (as well as some around $17 and $18), but when I decided to get out and put my money elsewhere because it wasn’t panning out, it never even occurred to me, and I mean that honestly, it never even occurred to me, to wait until it got back to $22 so I could break even on those shares. I sold at an average price of about $17.50 by the way. (It was at $14.48 when I wrote this entry to the Knowledgebase).

Another example that I’ve used before: Early in the 3D printing craze I bought some DEF at about $15.30 I think. That was the price it was selling at. I never considered trying to wait to get it 25 cents cheaper or even a dollar cheaper. Later that same year it got to $190 for about a 12-bagger in less than a year. Do you think I remembered, or cared, whether I spent $15.10 or $15.40 per share?

I added to my GHI even though it had run up considerably from my initial purchases. I had initially bought at $27, but I added a lot more at $47. Should I have hesitated because it had been cheaper a few months ago? Should I have berated myself because I didn’t buy more then? And maybe decided to wait and see if it would sell off so I could get some cheap? No way! I bought it at the price it was available at. I eventually sold out two years later at $144.

When I first bought JKL at $38 and $40, it had been as low as $25 just seven months before. So what could I do about that??? I wasn’t even aware the company existed seven months before! I bought it when I found out about it because I thought it was a buy then. Now, none of that is “logic.” It’s just common sense as I see it.

The MF has a lot of propaganda about how you should almost never sell. However, if you make a well thought-out decision to sell several stocks for what you perceive to be good reasons, and then make an equally well thought-out decision to buy several replacement stocks for what you also perceive to be good reasons, it’s simply not plausible, and it’s even silly, to assert that you will not end up better off. It would imply that your judgment in picking stocks is just terrible. If you look at two stocks and say to yourself “This one is a Sell and that one is a Buy,” don’t you think that on average the ones you think are buys will do better? I’d bet a bundle that, on average, the ones you figure are buys will do better than the ones you figure are sells! If not, why are you bothering to evaluate stocks at all?

Why hold on to your failed positions? They have little going for them except that you are already in them. I doubt you would dream of buying most of them now if you didn’t already have a position in them. I just don’t think you should hold on to a poorly functioning company on the basis that it might transform itself into something successful some years from now.

I’m not saying my replacement stocks always do better than the stocks that I’ve sold. What I’m saying is that I do my best and use my judgment, and over time I expect that companies I think are going to do well will, on average, do better than companies I think will do poorly. (If not, I should just put it all in an index fund.) If I sell a particular stock and it then outperforms my replacement stock over the next quarter, so what? I’m not perfect. I’m just trying to do a good job. That’s how I think about it anyway.

To simplify, the Gardners’ point of view is that if you buy the same amount of 19 stocks and 18 do terribly but one is a 20-bagger, the one that is a 20-bagger will make up for all the losses. Therefore you should never sell your losers. That works in theory, and on paper, but in the real world, if it’s a portfolio with your money in it, it doesn’t work at all. That’s a pretty radical thing to say, so I’ll make clear why it is so.

First of all, if you don’t sell any of the successful stock on its way to becoming a 20-bagger, it soon becomes 70% or 80% or 90% of your entire portfolio, as the losers shrink. Now you have a portfolio with 19 stocks but one is 70% or more of the entire portfolio. You are not going to sleep nights with one stock at 70% or more of your portfolio. Not with your real money in the portfolio. Remember, this stock doesn’t have a sign on it saying it will end up as a 20-bagger. It’s just a stock and all you know about it is that it’s 70% of your portfolio and bouncing up and down. You will probably sell some of it at varying points all the way up, keeping it at a maximum of 20% or 25% of your portfolio, or maybe less. And the rising stock will thus never balance all the losers.

Add this to the fact that the ones that go down keep sopping up more and more percent of the total investment as you “double down,” “reduce my average cost,” “buy at better value points,” and generally put in more and more money in at lower and lower prices. For example, on the WPRT board, which used to be a MF favorite, when the price dropped from $32 to $25 lots of people felt it was a bargain, and bought more, and at $20 “doubled down”, and “doubled down” a second time at $15, etc. It’s hard for people to see a stock they believe in go down to what they think are ridiculous levels without buying more (it’s at $2.60 as I write in Jan 2020), especially if it’s misleadingly still labeled a “Buy.” People see this “Buy” that is down to half what they paid for it. Of course they will sell some of a winner that is making them nervous to buy more of the “bargain” stock.

Unfortunately, if you had 18 stocks that went to zero and one that was a 20-bagger, you probably would have ended up putting much more into each of the ones going down than into the one that went up, AND you would have sold a lot of the one going up on the way. It’s natural. I’ve done it myself but try hard not to do it any more. Which is why the MF hypothesis doesn’t work in real life. It’s the difference between a series of recommendations and a real-life, real-money portfolio.

If the market was efficient no stock would ever go up or down 30% in a week (it would have been already accounted for), and you’d never be able to make a 10-bagger. Fortunately for us, the market is often very wrong about a stock (either too high or too low at times)…”

Once again, I think I speak for all of who participate in your board, and for our families when saying thank you. We are very grateful for your words of wisdom, Saul.

sjo

34 Likes

there’s a board, fwiw.

OK, thanks. I did a search all the ways I could find to do it and found nothing.

There’s a trick to searching Premium Boards. You have to use the search at the bottom of a board post on a Premium Commons Board. Or you can use the Premium Ticker page for a stock, which links the board if one exists.

While the search exists at the bottom of every post, and at the bottom of the board, the search only finds premium commons boards when you are in a post (or comment) inside the premium commons boards.

Very annoying, not transparent…

4 Likes

Some of the most angry I’ve seen people get on these boards is if you criticize a stock that they’ve fallen in love with.

hmmmm

4 Likes

“It does strike me as rather odd that: 2 Fool services actively recommend NTNX; “

It’s also easy to cherry pick and make yourself look right and other wrong.

For instance MF could just pick out AMZN, NFLX, AAPL, all stocks I’m still in after decades now thanks to MF, the three names that gave me the ability if I wanted to retire at 48.

Or we could also point to other more recent MF picks like SHOP and TTD that many on this board exited at much lower levels.

Like in baseball, you swing and either miss, get a base hit, sometimes walk, and now and then hit one over the fence. But it’s important to get all the stats before making a judgment on the batting average and having a more complete picture of how a hitters doing.

Holding AMZN, AAPL and NFLX for two decades now has allowed me to strike out a heck of a lot more and still receive that multi million dollar contract. A few amazing all stars like that and you can afford to be a shlub for stretches at a time.

TMB

39 Likes

“Like in baseball, you swing and either miss, get a base hit, sometimes walk, and now and then hit one over the fence.”

We all miss at times while swinging for the fence; certainly, strike out and do the walk of shame back to the dugout. But, I’m also okay with taking a walk every now and then, as well as hitting my share of singles and doubles and moving players around the bases and manufacturing runs…playing small ball. While its more fun to hit grand slams and home runs and do the slow jog around the bases and soak it all in; the object is to score runs. I like to have a high on-base percentage and be on top of the scoreboard at the end of the day.

Harley

7 Likes

Here’s an invaluable gift from Saul in the Knowledge Base regarding selling.

Thanks for your kind words, sjo. You should mention you also included thoughts about buying as well in those selections from the Knowledgebase.
Best,
Saul

5 Likes