2022 - (-27.7% YTD)
Portfolio Breakdown vs Last Month
DDOG – 19.9% (20.1%)
BILL - 16.2% (10.4%)
MNDY - 14.8% (13.9%)
ZS – 13.2% (12.6%)
NET – 12.6% (9.7%)
S – 12.4% (12.6%)
SNOW – 10.9% (10.7%)
ZI – SOLD (3.1%)
Watchlist - CRWD, UPST, MDB
YTD Returns
DDOG - (-15%)
MNDY - (-48%)
ZS - (-20%)
S – (-19%)
NET - (-5%)
SNOW – (-31%)
BILL - (-3%)
Summary: March was as volatile as ever but I find some comfort that I’m up significantly from the bottom in Mid-March. The 30%+ jump we saw in 4 days in mid-March was a good reminder that it is generally a fool’s errand to try and time the market. First, as Saul likes to points out, you have to be right twice. Secondly, we know from history that only about 10% of trading days account for the majority of gains. How silly would it have been to sell out or buy oil or some other nonsense and then miss out on a 30% plus jump in 4 trading days? When will this “risk off” environment end? Who knows? I have a job, if I was retired, I’d have 2 or 3 years of living expenses set aside. I’m focused on my companies and their performance. Painful as it is, this downturn is a chance to make myself a better investor. It forces me to double-check my temperament, conviction, and allocation strategy. I did sell my remaining 3% position in ZI. I used most of the proceeds to buy more shares in Bill and Monday.com Both stocks look incredibly cheap and I feel they have more upside than ZI.
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” - Peter Lynch
DDOG (Datadog) - Datadog continues to be my highest conviction stock after it reported another blowout quarter in February.
-Datadog CEO Olivier Pomel presented at the Morgan Stanley Tech conference.
-Some highlights:
Question: “Can you give us the reasons why you’re confident that there’s ample runway, and kind of the core infrastructure monitoring part of the business? And how are you going to make infrastructure monitoring continue to keep it sort of pull position lead in terms of its market status?”
Answer: 1) " . .we’re still super early in digital transformation, as you know. It’s a really transformation dimension of which we haven’t seen since the Industrial Revolution pretty much, so we’re still fairly early in that. And then we’re also early in the cloud migration that enables it and follow it."
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Olivier mentions that with the way infrastructure is evolving, it is become more and more complicated so so it requires more monitoring.
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The third point Olivier makes is that there is a shortage of software engineers (and this trend is likely to continue) and they need more help, more reach to get the job done.
On Security, Oli: “We can deploy security without friction, because we already are deployed in all those environments. We need some – to do data. Everywhere, we listen to logs. We listen to network, we listen to the – we instrument the infrastructure, we instrument the application. We see what the end users are doing on top of that.”
Full Transcript: https://seekingalpha.com/article/4493746-datadog-inc-ddog-ce…
-Datadog announced its status as a Microsoft partner within the Azure Cloud Adoption Framework.
-Backed by the framework - which provides organizations migrating to Azure with recommended tools, best practices and documentation - Azure customers can now leverage DDOG’s monitoring and security capabilities to accelerate their adoption of the cloud.
-DDOG is already available natively within the Azure portal and integrates with all Azure services - over 100 in total - to provide essential capabilities.
Full Press Release: https://investors.datadoghq.com/news-releases/news-release-d…
BILL(Bill.com) -
-Bill said its unit Divvy was named CPA.com’s new exclusive partner for expense management, corporate cards and spend management.
-This replaces the prior expense management solution with a new offering that will unite all bill payments, expense management and card spending in one solution.
-A key strategy in supporting CPA.com’s updated client advisory services 2.0 framework, firms can now have the technology tools to provide more strategic counsel for clients.
-This move expands the partnership between CPA.com and BILL, CPA.com’s exclusive partner for bill management since 2008.
-According to CPA.com’s recent CAS Benchmark Survey, CAS is the fastest growing practice area for accounting firms. To help firms keep pace with demand and realize the full potential of CAS, CPA.com recently introduced CAS 2.0 for business transformation and change management, providing firms with a more holistic vision and approach to drive firmwide adoption of CAS.
Full Press Release:
https://investor.bill.com/news/news-details/2022/Bill.com-an…
-This partnership looks like a great opportunity to cross-sell Divvy and increase transaction volume.
-I’m a bit uncomfortable holding such a large position in Bill as I don’t know the company that well, however, the numbers are so out of this world, it is hard to ignore the opportunity. Also, they are often competing against excel, pencil & paper, so the business problem it solves is quite clear.
MNDY (Monday.com) -
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-Monday announced a new strategic alliance with the global audit firm KPMG that can only be viewed as positive.
??-“We’re thrilled to sign an Alliance with KPMG, which marks a significant milestone for us as we expand our enterprise network globally to empower more businesses to accelerate their technological transformation and innovation process to be more efficient," ?said Oren Stern, VP Partnerships at monday.com. ??"KPMG’s extensive industry knowledge and expertise with the monday.com low-code/no-code platform will help deliver substantial value to customers as they digitally innovate their businesses, and we’re happy to expand our collaboration worldwide.” ?
-KPMG currently operates in 145 countries, and serves more than 82% of the FORTUNE Global 500 and more than 80% of the Forbes Global 1000.
Full Press Release: https://ir.monday.com/news-releases/news-release-details/mon…
-There’s always something to worry about. Monday’s lack of insight into it’s business could be a problem. As WSM pointed out, Monday doesn’t publish billings, RPO, or ARR like most of our SaaS companies. They also have a short history as a public company and a lot of competition.
-I’m considering reducing my allocation a bit. What does give me solace is that Monday continues to improve it’s operating metrics (+37 pts), NRR was 135% for 10+ seat customers, and Enterprise customer growth was up 200%, making it the 8th straight quarter they’ve grown at 200% or greater. Despite poor yearly guidance (probably major sandbagging, the guide for next quarter looks strong and they could come in at 80%+ revenue growth.
Bert also wrote a nice article on Monday
“As mentioned above, workflow management is estimated to be a $55 billion market. Any market of that size is going to have multiple competitors. The reality is that the most significant competitor in the space has been and still is spread sheets of various kinds and other manual processes. It will be decades before workflow management software is universally deployed, even in the largest enterprises.”
“At this point the company is seeing rapid growth in its calculated billings metric, but as I have said in other articles, I do not regard calculated billings as existentially useful in providing a proxy for forward sales. The company is not yet providing RPO and cRPO balances which I would find more useful; perhaps it will start to provide these metrics as it matures”.
“The company has, and continues to introduce features/products at a dizzying rate, necessary to remain competitive in this rapidly evolving and expanding market, but also a substantial barrier to potential competitors.”
Full Article: https://seekingalpha.com/article/4493144-monday-share-price-…
ZS (Zscaler) -
-Zscaler CEO Jay Chaudhry Presented at the JMP Securities Technology Conference
"I think it’s wonderful to see that market is realizing that castle and moat security is no longer going to work. We need Zero Trust, which is the opposite of network security. And last year, when we saw attacks like SolarWinds and like, the market – the customer realized that they need to change. Unfortunately, as legacy companies realize that it’s going to disrupt them, they’re trying to confuse the market, and they all try to claim Zero Trust. In fact, I saw a recent event where a company said we are the best Zero Trust network security. So come on, either you’re Zero Trust or you’re network security, you can’t be both. It’s like trying to build Zero Trust with firewalls, it just doesn’t work.
Full Transcript: https://seekingalpha.com/article/4493566-zscaler-inc-zs-ceo-…
They also announced some innovations to it’s Zero Trust Network Access (ZTNA): https://ir.zscaler.com/news-releases/news-release-details/zs…
-Zscaler continues to be a high confidence position for me. It’s growth has accelerated from 55% to 62% to 63%. Billings (the best indicator)up 59% (a little low due to Fed $$), deferred revenue up 70%, FCF was 29.4M or 12% of revenue, FCF margin 23%, customers with 100K or more up 135 to 1,751. I think with the cyber tailwinds combined with more spending by the Fed, we could see further acceleration.
NET(Cloudflare) - The dizzying list of innovations continued for Cloudflare. See Stocknovice for details.
-CFO Thomas Seifert also presented at the Morgan Stanley Tech Conference.
Some highlights:
“When we went public two years ago, we – the elevator speech was we described ourselves as a Cisco as a service. Every time you go to a Cisco or a Cisco-like competitor and you buy a load balancer, or firewall, or router, we offer this as a service from our network.”
“And we sized the TAM at that time at around $38 billion. And then, we added Cloudflare for Teams protecting infrastructure, VPN replacement, gateway, browser isolation, e-mail. Now that added probably another $20 billion of TAM. And then we launched a suite of projects called Magic Transit, Magic WAN, Magic Firewall, where you take that protection that we offered on an application layer down to Layer 3. That added another $30 billion. And then there’s Workers.”
“I would say we think there is a huge amount of runway still left in the segment for two reasons. First of all, the market itself is still growing. And then, you have a gigantic amount of installed on-premise infrastructure that can be replaced and disrupted. So, a typical customer journey could be that a large retail platform comes to us in front of a holiday business. And since we put Cloudflare load balancing in front of our infrastructure or in front of our on-premise infrastructure, in order to protect ourselves against the spikes that we see are coming. And then, over time, dollar spend moves towards – to us, budget-wise because on-premise infrastructure doesn’t get upgraded anymore, capacity expansion happens in our product portfolio.”
On R2: “The traction so far is overwhelming. We are in what we call still private beta, and we had more than 9,000 customers signing up and really large logos. And we are already moving hundreds of petabytes through our network or store through our network.”
Full Transcript: https://seekingalpha.com/article/4494259-cloudflare-inc-net-…
SNOW - Snow reported mixed earnings on 3/2. They missed on product revenue in my book and the FY forecast looked a bit light, even with the expected sandbagging (67%). This was explained by an upgrade to their system. In the long run, the optimization should increase workloads. However, in the short term, DBNRR will fall and revenue could be softer due to tough comps. My feelings are a bit mixed, there could be some short to medium term challenges. However, the forward looking numbers we have to work with do look quite strong.
-Product revenue up 102%
-NRR 178%
-RPO grew $796 million in a single quarter which was a 44% sequential increase and 99% YoY!
-Total number of customers with TTM revenue > $1 million grew 24% sequentially to 184 and grew 139% YoY
-Snowflake added 14 new Fortune 500 customers and 21 Global 2000 customers in the last quarter
Bert wrote a nice article on Snowflake:
On the optimization: “Demand elasticity is not really knowable in advance. Snowflake’s assumption is that the price cut will actually cause its bookings to decrease by $160 million, but that it will get back $63 million as users increase their consumption of these services in this current year. I have no specific idea as to whether or not that estimate is valid; my own guess is that it is likely highly conservative based on past experience.”
“The company’s backlog of $2.6 billion is 34% greater than the company’s product revenue guidance. 52% of that backlog is current which will be recognized in fiscal year 2023. Given just how much users wind up increasing their commitments to Snowflake applications, I think the logic of expecting growth at higher rates than the company’s current forecast is difficult to dispute.”
https://seekingalpha.com/article/4493871-snowflake-the-only-…
S(Sentinel One) - They reported a good quarter on 3/15 and continue to stay on the triple digit track.
-Revenue up 119%, up 17% sequentially
-GM 63%
-Op Margin up 4pts to -66%
-FCF Margin improved from -38% to -11%
-ARR up 123%, up 23% sequentially
-Strong Guidance of 101% for Q1 and 81% for FY23
-S1 also acquired Attivo Networks for $616 million
-Expands SentinelOne’s total addressable market by $4 billion in the fast-growing, critical identity security category
-Extends Singularity XDR capabilities to identity-based threats across endpoint, cloud workloads, IoT devices, mobile, and data wherever it resides
-Highly differentiated identity security platform with a rapidly growing business of over 300 global enterprises including Fortune 500 organizations
-Additive to SentinelOne’s hypergrowth; accretive to GAAP and non-GAAP gross margin
“The acquisition of Attivo Networks continues our commitment to defining and delivering autonomous XDR,” said Tomer Weingarten, CEO, SentinelOne. “Identity fuses together all enterprise assets, and I see identity threat detection and response as an integral part of our XDR vision. Attivo Networks is the right technology and team to advance our portfolio, complementing our hypergrowth and accelerating enterprise zero trust adoption.”
Full Press Release: https://investors.sentinelone.com/press-releases/news-detail…
Previous Posts in 2022
https://discussion.fool.com/foolishjeff-february-portfolio-updat…
https://discussion.fool.com/foolishjeff-january-portfolio-update…