YTD return - 40.8%
2020 - 140% (found Saul’s board in the summer of 2020)
2019 - 51%
Portfolio Breakdown vs Last Month
DDOG - 18.8% (14.9%)
UPST - 15.0% (24.9%)
MNDY - 13.2% (8.2%)
NET - 10.8% (6.2%)
ZS - 10.1% (7.5%)
CRWD - 7.8% (7.8%)
ZI - 6.7% (5.1%)
AMPL - 5.4% (NEW)
SE - 5.2% (9.6%)
DOCN - 2.0% (NEW)
CASH - 5.0% CASH
LSPD - Sold (12.7%)
DCBO - Sold (2.2%) (NEW)
Watchlist - Bill.com, Asana, Affirm
UPST - 366%
DDOG - 95%
CRWD - 8%
SE - 47%
NET - 152%
ZS - 77%
ZI - 35%
MNDY - 101%
DOCN - 137%
AMPL - 19%
Summary: It was a very rough month, as my Portfolio was up mid-Oct over 70% and now ended November up 41%. I got some kicks in the mouth that will hopefully make me a better investor in the long-run. Besides some lessons, we also got the bi-yearly algorithmic sell-off in growth stocks. Never a big concern, just the usual haircut with some opportunities to perhaps buy on the “cheap.” This is my first full year doing a Saul style concentrated Portfolio so I’m still learning to really gauge my conviction in this style of stock picking. I sold out of LSPD completely due to the obvious slow down in growth and anemic customer uptick. Docebo earnings were lackluster as well so it had to go in the trash.
UPST (Upstart) - Here was my first kick in the mouth and why I cut from 22% after earnings to a more reasonable 15% position. I’m thinking about cutting it further to about 12% given all the risks. I wrote a post about why I trimmed Upstart instead of selling out.
Upstart has TONS of risk and don’t let anyone tell you different
Macro - if the economy tanks, what happens to upstarts loans in a bad economy?
Concentration Risk - If Credit Karma or Cross River bank cut ties, Upstart is in big trouble.
Regulatory Risk - Sure, there’s a no action letter but who knows how AI could be regulated in the future?
AI tweaks - sometimes they work real great and they give you a great Q2 and sometimes they don’t help much.
Revenue is lumpy and hard to predict. It’s not SaaS so we don’t have many predictable indicators of next quarters revenue other than guidance and guesses.
Fraud - Q3 had a lot of that and it took a lot of bandwidth. It looks to be under control but who knows if it might rear its ugly head again?
Execution Risk - Yes, the new loan products for small business and pay day type loans looks nice, how much revenue will they ad? How easy will they be to execute? How much revenue will Auto bring in for 2022. No one knows. They are getting dealers on board but how much will COVID and continuing supply chain issues affect the Auto Loan market.
That sounds like a lot of unpredictability. I should take my own advice and cut to 12%. Overall, I believe in the leadership and the long term vision of the company.
My personal lesson from Upstart is - Don’t ever allocate more than 15% of your Portfolio to non-SaaS, ever. In most cases, 10% should be the upper limit. There’s just not enough information available to predict the short to medium term performance of the company. Lightspeed helped to teach me this lesson as well. In my earlier write-ups I told myself, I won’t ever go big on this one, there’s too much covid/aquisition risk here. With all the uncertainty, I should have been more conservative. I held 12% heading into earnings and took the ~30% hit like several others around here.
DDOG (Datadog)- This dog is leading the pack as they reported outstanding earnings on 11/4.
-Revenue was $270.5m, up 16% qoq and 75% yoy.
-Gross margins were up to 78% from 76% last Q. Management noted the expect them to improve even more next quarter so we could see 80% margins next time around.
- Billings were up 98% yoy and 14% qoq (69% yoy in Q2)
- RPO was up 127% yoy and 23% yoy (103% yoy and 26% qoq in Q2)
- Current RPO was up 100% yoy (80% yoy in Q2)
-+130% DBNRR for 30th consecutive quarter
-Strong Customer Growth - 1,800 customers with ARR of $100,000 or more, an increase of 66% from 1,082 the year before
-Today, 31% of customers use four or more products, up from 20% the same quarter last year.
-Highly optimistic about the future
-4th qtr expect 64% y/y revenue growth at the mid-point
-$993-$995M revenue growth which is 65% y/y
At its DASH user and developer conference in late October they announced a lot of upgrades and tools which should continue to provide value to its customers.
Datadog’s upsell advantage is largely a result of its pricing strategy. Datadog’s tremendous growth is partly a result of a predominantly usage-based pricing model. Datadog, Snowflake, and big public cloud providers, are demonstrating that usage-based models can generate more revenue than subscriptions by capturing price increases commensurate with the underlying customer’s growth.
SE (Sea Limited) - Solid earnings but the losses are really starting to add up. I ended up cutting my position from 10% to 5%. With a 160B market cap, Negative EBITDA for Shopee continue to widen, as do net losses for Sea. FY21 net loss is expected to widen by ~30% to $2.1 billion, with more losses seen in the upcoming years from aggressive spending.
Gaming arm Garena is slowing down - Bookings slowed from up 65% in Q2 to only up 29%. Adjusted EBITA also slowed from up 70% to only up 22%
Shopee looked solid as it expands into Brazil, Europe, and India. Revenue was up 134% and GMV was up 81%
Despite being just seven years old, SeaMoney already has 39 million quarterly paying users, with over $4.6 billion in payment volume.
MNDY (Monday.com) - I hate Mondays and I hate the name of this stock but I love this company. On 11/10 they reported outstanding earnings.
Third quarter revenue growth accelerated to 95% year over year
Net-dollar-retention rate for customers with 10+ users was over 130%
Number of Customers with $50k ARR growth accelerated to 231% year over year
-Revenue was up 17.5% QoQ sequentially or 90% annualized.
-Large Customer growth was outstanding - Customer > 50k is up 30.4% sequentially or 190% annualized!
For Q4 they guided for $88M which represents a +75% growth Y/Y.
I will likely be adding some more to this position very soon. I think the upside is incredible. Look at the run Asana has made and Monday’s numbers are clearly better on every metric.
CRWD (Crowdstrike) - Crowdstrike has been a bummer this year as the growth slowdown was too fast for Mr. Market. With expectations so low, I’m hoping for a large beat and raise tomorrow. Otherwise, I’ll be forced to trim further.
ZS (Zscaler)- Excellent earnings report today, 11/30.
Revenue grows 62% year-over-year to $230.5 million
Calculated billings grows 71% year-over-year to $247.7 million
Deferred revenue grows 74% year-over-year to $647.8 million
GAAP net loss of $90.8 million compared to GAAP net loss of $55.0 million on a year-over-year basis
Non-GAAP net income of $21.0 million compared to non-GAAP net income of $20.0 million on a year-over-year basis
This was a huge beat. QoQ revenue was up 17%, which annualizes to around 85%
DBNRR is over 125%
$240-242M w/ y/y revenue growth of over 54%
FY 22 y/y revenue growth to 49-50%
NET (Cloudflare) - The valuation still scares me but I guess I drank the cool-aide. Cloud’s innovation is driving a massive TAM expansion and that should allow it to stay in hypergrowth mode for many years to come. Cloudflare has invested over the years to develop their Cloudflare Network, which now spans over 250 cities globally, thus enabling 99% of the world’s population of Internet users to be within immediate reach for their customers through Cloudflare’s PoPs. This network will keep expanding with ongoing partnerships with other cloud providers like AWS, Azure, Tencent Cloud, and more, building more PoPs globally, and even their plan of Cloudflare for Office, a strategic partnership that extends Cloudflare Network into over 1,000 of the world’s largest and most connected office buildings.
Bottom line, their decentralized cloud is a globe spanning programmable network where innovation happens very quickly and relies more on software than old school infrastructure. It is on its way to becoming the 4th public cloud. If you believe in the growth of the Internet, it’s easy to believe in Cloudflare.
Cloudflare reported a solid quarter on 11/4
-Revenue of $172.3 million, representing an increase of 51% year-over-year
-Strong large customer growth, with a record addition of roughly 170 large customers in the quarter, bringing the total number of large customers to 1,260
-Delivered GAAP net loss of $107.3 million and non-GAAP net income of $1.4 million
Gross margin: 78%
Customers: 126,735 (up 32% sequentially last quarter)
Large (>100k spend) customers: 1088 (up 18% sequentially last quarter)
Free cash flow: -$9.8M
For the fourth quarter of fiscal 2021, we expect:
Total revenue of $184.0 to $185.0 million
ZI (ZoomInfo) - They reported a very good quarter on 11/1.
-Revenue was up 60% yoy (54% on an organic basis) and 14% qoq for the second quarter in a row (which annualizes to 69% yoy).
-1,250 customers have greater than $100,000 in ACV up 70% year-over-year. This represents 40% of subscription revenue and that cohort’s revenue grew 85% yoy
-International growth was strong, up 80% and now 11% of the business.
-Valuation is only around 27x next year’s sales last time I checked, so very reasonable.
Organic growth of 50% yoy for the full year, vs 42% last year. So that’s an 8%pts acceleration from last year in the guide. Incl acquisitions the guide is for 54% growth yoy.
Q4 revenue of $207m which is 48% yoy for Q4.
This is a new position. Amplitude is a product analytics company that enables businesses to understand user behavior, generate data-driven insights, and drive better product experiences. They reported on 11/9 a good quarter. I’m just getting to know the company but the numbers look solid.
Revenue of $45.5M, up 72% year-over-year
Current Remaining Performance Obligations of $125.9M, up 66% year over year
Remaining Performance Obligations up 79%
Non-GAAP GM 71.3%
Number of paying customers grew 54% year-over-year to 1,417.
Guidance for Q4 - 46-47 million
DOCN (Digital Ocean)
This is a try out position. I like the expanding TAM and accelerating revenue. Not sure if I’ll keep it but Bert got me intrigued with it a few months back.
No update in March (I had the COVID)
No update in June (I was moving)