Ethan's 2018 in Review

I’m posting this a little early because I probably won’t have a chance to do this until well into 2019 unless I do it now. So here is my 2018 review 2 weeks early! Some of this is a little OT but helpful for me to have it all in one place.

2018 has been a pretty incredible year for me and my family. I have so many people that have had positive impacts in our lives that I don’t want to call out specific people just in case I forget anyone. I’ve really enjoyed the community, mentorship, and friendship that I have found here. We have a very diverse group of people from all over the world which has made our community stronger. I appreciate all of you.

General Overview:
Our SaaS stocks have seen incredible returns driven by a combination of downright amazing revenue growth in combination with EV/S expansion. I’m going to use AYX as an example but this is the same story for MDB, TWLO, SQ, OKTA, but with slightly different numbers and slightly different timing. AYX started the year with an EV/S around 10 which expanded to 20 by the end of the year. Its revenue growth during that time is right around 53%. Without multiple expansion our ceiling for returns is functionally going to be the revenue growth for these SaaS companies. We can drill down on that a little bit further and take into account share dilution. AYX just happens to have had very little dilution. They started the year with about 62 million shares and ended the year with the same, 0% dilution. OKTA has a similar story, starting the year with 103 million shares and now have around 110 million, 7% dilution. MDB 53.6 million now, started at 41.7, 28% dilution.

The question I’m asking is what kind of return can we expect with no multiple expansion? I’d say a good gross approximation is revenue growth - share dilution. For most of our companies that probably means we are looking at stock price growth in the 30% range, i.e. mdb up to the 50% range, i.e. AYX.

The second question is are we in unsustainable valuation territory? I.E can we expect multiples to dramatically decrease or are we way undervalued and should expect multiple expansion? Here is a post where i layed out a middle of the road scenario for one of our more highly valued companied, ZS.… . mekong just posted what should be required reading for all of us. He makes a good case from a different perspective that should give us all a bit of a range on how to think of valuation.…

My takeaway is that we are in a time of high valuations that our companies for the most part can justify. If we get into a situation where we have the same growth but much higher multiples such as EV/S of above 30 then I would be an aggressive seller. Conversely if our multiples dropped by 30% I would be (and have been) an aggressive buyer. Of course this is assuming growth rates, dilution, margins and such continue to be good.

Investing Style
One of my constant internal struggles is what kind of investor I am. Basically my two competing sides are, Numbers vs Business case. What I mean by this is the numbers side of me wants to calculate EV/S, look at cash flow, margins, valuation multiples and the other million and one ways one can value a company. The other side of me wants to be wooed by a companies prospects, the industry they are in, TAM, CAP, where they are on the S curve, trade magazines and such. I have mentors that have been successful from the numbers side and ones that mostly look at the business case. I’ve been most successful when I use the numbers to inform the business case. I think Gary Alexander on seeking alpha is a pretty good example of someone that focuses too much on the numbers and misses the forest for the trees. I’ve been impressed with Bert’s ability to bring it all together, numbers and business case for a much more holistic view on a company and its suitability as an investment.

----My Finances----
Saved approximately 50-60% of our income, up from ~40% last year. Driven by increased income and decreased costs .

All our debt is at very low rates, 1.99% to 3.65%. This consists of only a mortgage and student loans.

Our debt level is 32% of our assets down from 43% last year . This was driven by increased net worth and minor debt payoff.

Reduced our debt by 2.3%

Net worth
Net worth + 55%

60% of the networth gain came from portfolio gains
25% from savings
15% from house

My Portfolio

AYX 10.4%
ABMD 9.8%
MDB 9.4%
TWLO 8.3%
OKTA 8.1%
VCEL 7.3%
SQ 5.8%
PAYC 4.9%
MA 4.8%
ZS 4.3%
NTNX 4.1%
GH 2.7%
UBNT 1.7%

Options 1.6%
Cash 16.4%

This is probably the most pleased with my portfolio and its prospects I’ve been in a while. I have more cash right now for a number of reasons. I took the money out at a time of higher valuations in a tax advantaged way for possible use in this next year. If we decide we aren’t going to use it then I’ll invest it again. UBNT is the one outlier. I bought them when a bunch of silliness was happening and they got really really cheap. I’m almost to the year mark and then I’ll sell them.

I’m most excited about AYX, ABMD, OKTA, VCEL and NTNX for the upcoming year.

AYX has proven to be good stewards of our money. They have minimal dilution, are growing incredibly quickly and so far have no competition. They provide incredible ROI to their customers and their product has quickly become a platform that other companies are using to provide products. No debt

ABMD’s clinical data was downright impressive this year showing completely mind blowing improvements in mortality and morbidity. They have no competition, are expanding internationally and are making money hand over fist. No debt

OKTA. Another good steward of our money, not quite as excited about them as AYX just because OKTA has more competition. I do like how they have gone from single sign on to being a full on zero trust organization.

VCEL - My little biotech company that grows cartilage from patients own sales and then surgeons implant the cartilage in peoples knees. Been a banner year for VCEL from 3 dollars to 18 dollars a share. I think the best is yet to come. They projected ~60 million revenue for 2018, now they are saying 90 million and they will probably beat that. They have tons of money in the bank (for their size), are accelerating their revenue growth. Their only competitor with a product close to market, HSGX is on life support after their phase 3 trial did not meet its primary endpoint. The FDA just requested additional data from the company which doesn’t look good for them. Meanwhile VCEL’s surgical volume is exploding, TAM is much larger than they thought, and they are expanding their salesforce as quickly as they can. Some debt but very serviceable. They are small and in a niche market with only one real product, but no competition. Size appropriately.

NTNX - We have easy easy comps this year, should finally see multiples expansion based on that alone when the headlines start saying “accelerating growth”. If some of their new products do well…then we should do really really well. Fingers cross for a double in 2019!

I can see all my companies doing well for the foreseeable future. All of them either drive ROI for their customers or make people’s lives better. All of them are integral in the functioning of their customers businesses or patients lives. I like their moats, I like their financial positions and I like their “stickyness”.

A very heartfelt thank you to all of you and of course thank you to Saul for putting together a great community. I’ve learned a lot in 2018 and I look forward to more in 2019.

Happy Holidays to you and yours!




Congrats on a spectacular 2018! I really enjoyed your post. I think about my investments similarly. The one question that I have is in relation to this:

I’m most excited about AYX, ABMD, OKTA, VCEL and NTNX for the upcoming year.

Your allocations don’t exactly reflect your excitement for the above companies. TWLO and MDB have higher allocations in your portfolio than VCEL and NTNX. I understand your reason for keeping VCEL smaller, but I need to ask why are OKTA and MDB high allocation stocks and why isn’t NTNX higher?



thanks Chris!

This might be a case of me getting to clever but here it goes.

I sold a bunch of MDB in a tax advantaged account when it hit 85 or so, then it promptly dropped down to 67 or something so I bought it all back. I ended up with a lot of MDB in a regular account and it is all short term gains at this point. I figured it wasn’t too big of a deal because I have lots of cash and I could build up my other positions around it.

AYX and OKTA I trimmed at their recent highs. I wanted some cash and I got pretty close to their 52 weeks highs.

NTNX - Every which way I can figure NTNX is going to do great, but so far I’ve only lost money on it and a bunch of people who I think are smart sold. I guess I’m a little gun shy.

feel free to destroy my logic :wink:



Man I really wish i could edit my posts.

To should have been too

Sales should have been cells.

Those of you that care will know what I’m correcting.

Now i feel better!


Hi Ethan,

Congratulations! It was an excellent 2018 portfolio performance.

VCEL - My little biotech company that grows cartilage from patients own sales and then surgeons implant the cartilage in peoples knees. Been a banner year for VCEL from 3 dollars to 18 dollars a share. I think the best is yet to come.

VCEL looks interesting. Thanks for bringing it to our attention.

Happy Holidays from Denmark


Thank you Ethan. I could use some of that VCEL cartilage for my knee.
Sports Surgeon and I decided I was not ready for knee replacement. I can dance, hike, and surf without much pain. It’s the 500 mile trek across Spain that has me worried.

Not sure you should worry about NTNX. Bert H. just had a very interesting blog about PVTL and NTNX.


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Do u have reference to that blog?


Rizz actually first brought the company to the board.…
SO thanks Rizz!… here is my q1 review

q2 review…

q3 review–34054972.aspx

that should bring you up to date,

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