I never cease to amaze myself. At 51 years old, you would think that I would have learned something in 30 years of investing. But, sometimes, I regress to my 21 year old self. I wouldn’t mind that if it involved more hair and less weight, but for investing that is not so good.
FEYE is a great example of when I make mistakes. As a chemical engineer, I LOVE technology. While I am not a software dude, I do appreciate a network effect and first mover advantage. I thought FEYE meets the bill, but plummeting billings, rapidly decelerating growth: 184% followed by 69% followed by 56% to 48% this quarter leads me to think this is more likely a dumpster fire. I thought FEYE might become a legal requirement for companies who want to manage their liability for insurance reasons. Although it was only a 3.5% initial investment, it was 3.5% poorly spent. It does not take many investments loosing 48% in a quarter to seriously impact one’s portfolio. I actually like drops when the thesis appears to remain in order (e.g. SKX).
One of the things that I like about Saul’s 1 year trailing PEG is that it requires ACTUAL EARNINGS! Following the 1 year trailing PEG discipline does cause you to loose out on the early earnings pop for early stage companies. However, because prices tend to go up more slowly than they drop, a great company has a good chance to end up in the Saul zone. What we actually get is most of the fat part of the middle growth with MUCH reduced risk.
FEYE and ISIS were my only two stocks without steady profits. FEYE is finis.
ISIS is a bit of a different stock because it has a LARGE drug pipeline, a steady stream of positive results, and large, proven pharmaceutical companies that will partner in the marketing of that drug so it is a much different situation. I am still a 5% believer in them, though they are not doing great this year. One could make the argument that I should wait, but the biotech pop is so fast that it you would likely completely miss out if you are not in early.
Will FEYE eventually enter the Saul zone? Maybe. If it does, I will be happy to pick it up. Today, it is slowing while its market is growing and competition is heating up.
We’d all be way better off placing our bets on something like SWKS (my favorite stock), INFN, or SKX which has probably dropped for no reason as Saul has pointed out.
PS I hold Saul personally responsible for not saving me from myself ;o)