I am in good mood with TTD, and so I posted a goofier version of this on NPI and wanted to share the meat of it here. This does mirror my current allocations and how I am viewing those stocks as of today. What they did today, last week, last month, or last year is sort of irrelevant except as a data point to inform me on modeling what I think they “could” do the rest of this year and beyond.
Don’t know how often I will update, but as I can’t seem to get in a habit of posting Monthly updates like many do, perhaps I will treat my port like a Corp and try to “report” quarterly to spot trends etc…
Today I am excited to announce a Reorganization of Dreamer Corp!
First, let’s take a look at our current Asset Allocations, after some rebalancing today:
Assets we are continually considering for acquisition at the appropriate price: MDB, ESTC, ACRGF
Definitions of new Dreamer Corp Divisions:
- Market-beating (MBs) = will outperform Nasdaq and S&P and the rest of our acquisition watchlist.
- World-beating (WBs) = 100%+ gain in next 12 months.
- Tweeners - have more “potential” Multiple Expansion than most MBs, but less than WBs.
In 2018 we saw a number of WBs, notably TTD, TWLO, AYX, MDB and others.
Current status of Dreamer Corp:
Jan and Feb-to-date have seen significant out-performance, and likely unsustainable pace if I rely on the same WBs from 2018 to continue providing WB-type performance from March-Dec 2019.
Example: Company A grows 50% y/y in 2018 and 2019, but their stock grows 200%+ in 2018 and over 100%+ in 2019. Rationally, at some point the market should expect more parallel movement between a stocks revenue and/or earnings growth relative to their stock price growth. My opinion only. You can also call this Multiple Expansion, and I think rational minds can wonder what the limits are to Multiple Expansion for a stock already at 25 or 30 P/S?
As a result, I have identified “Potential WBs” that I have added more allocation to.
MBs I currently own, imo:
TTD, TWLO, NOW, PLAN, PS, AYX, ZS
Tweeners I currently own, imo:
EVBG, SMAR, ZEN
WBs I potentially own, imo:
BZUN, SAIL, NTNX
What we intend to do with our cash:
Watching the WBs, for either pre-ER dips or will add post-ER based on confirmation of WB-esque investment thesis.
Thoughts on WBs:
I still completely question NTNX, and always seem to lose when I go against my gut, but also factoring in that I am “too close to the business” to appreciate the stock oppty fully. On a purely hidden growth basis and strength of HCI basis, I agree that it is a candidate for Multiple Expansion more than the others. Could still be a dud, but at least you can make the valuation argument.
I like SAIL for Multiple Expansion…I am looking at their 4 straight Qs of 50% y/y in Subscription Revenue, and they compete against stodgy old guard companies like ORCL and RSA, which I think favors them.
BZUN is totally risky China ADR play, but if the numbers can be believed, they are a profitable well-positioned e-commerce play in largest middle class in world, and a Chinese consumer that loves/values “luxury goods” of the type that Baozun helps American Brands sell into China. They are partnered with the big players, and their SHOP-like “Services” segment has that 45-55% y/y type growth for multiple Qs now, so they are a bit of Hidden Growth as well. Up from Dec lows, but was so dramatically beaten down due to Trade War that is over 50% off 12-month highs.
EVBG isn’t cheap by reality standards, but in the SaaS space it has more room to run and announced good numbers. Same with PS.
ZEN had recent great results and solid forecast. Feel they are in same stock upside boat as EVBG. SMAR is expensive, but a higher-growth rate and seeing/hearing a lot of buzz, so slotting them as a Tweener for now.
Thoughts on MBs
TTD, TWLO, ZS, AYX, PLAN, and to an extent NOW and PS are all aggressively-valued but excellent companies in great markets. I don’t expect world-beating returns from this point…but Market-Beating returns, yes. So holding all.
Current Business Segment mix, by Revenues:
MBs = 53%
Tweeners = 11%
WBs = 24%
Cash = 12%
I look forward to tracking the progress of these business segments, their contributions to the overall growth of Dreamer Corp (aka my port), and it will be interesting to see which Segment grows the most from this point thru the end of 2019.