HorsePlayAndrew Update Feb 2022

HorsePlayAndrew · February 28, 2022, 5:52pm

Summary

We don’t do quiet months do we? Wow. Pandemics, wars, interest rates and hyper growers… why do we put ourselves through it?! Well we know the answer, this board provides the guidance and knowledge to significantly beat the market over the long term.

You just have to learn patience and how to deal with extreme volatility!

I’ve had a mixed bag of earnings in February. Either huge pops or drops.

My background

Entrepreneur, ex-founder of SaaS & marketplace business, exited, now founder of horseplay.ventures, angel investing & building other startups.Tweeting here:
https://twitter.com/andrewwebster11

Performance

2022 > -18%
2021 >21%
2020 > 209%
2019 > 41%

January > -18%

Feb 2022 Portfolio

DDOG - 20%
MNDY - 15%
UPST - 15%
SNOW - 13%
BILL - 11%
NET - 9%
S - 9%
ZS - 6%

SOLD

Zoominfo This came as a real shock to me. They have been putting up decent numbers, new products coming on and excellent cashflow/profitability. But then they served up a stinker of an earnings to kick 2022 off with. Q4 didn’t meet my expectations and the guidance was weak. This is a stock that I felt like was misunderstood by the market and if they could just keep delivering strong QOQ growth the market would finally wake up. Now it looks like it’s slowing down, I think there is even less chance their multiple catches up with our other hyper growers. Through my line of work, I am also seeing a lot of competition, they are still small, but it does concern me that the durability of their lead and moat may come under attack in the future so I decided to allocate the funds elsewhere.

AMPL I’m kicking myself for not selling it earlier. I mentioned in my last update that I was close to selling it but I decided to hang on and see what earnings looked like, as I wrongly thought it’s been smashed enough, it surely can’t go much lower… ouch. It definitely didn’t deserve a 50%+ drop but I’m not willing to ride this one until they can show consistency or serious acceleration in their numbers. Clearly the product is a harder sell into enterprises, a longer sales cycle and not deemed as a core service (yet).

BUYS

Bill.com This was an earnings play that I was fortunate to be a part of. I decided to take a starter position pre earnings and I was rewarded with a knock out earnings. I then increased the position with the cash raised above as earnings convinced me they are a serious hyper grower.

I also made opportunistic top ups of Cloudflare, Snowfake and Upstart during the month.

My companies

Datadog I was looking for $310m+ in Q4 revenue and they gave us $327m. It was a brilliant earnings, across the board there was good news and positivity from management. The CEO was suggesting it isn’t just one thing that is really driving things forward which is what you want to see for predictability. Like Snowflake, they are in prime position for the growth of the cloud, because they capture customers from all the big players, Azure, AWS and GCP, so you couldn’t ask for a better market or tailwinds to maintain the hyper growth.
My conviction hasn’t changed and it’s worthy of a 20% position. Being such a large position I will be super sensitive to any red flags in future earnings because the minute they slow down QOQ, they are going to get punished with such a high valuation, as we saw with CRWD.

Monday.com I’m glad to see such strong advocates for MNDY on the board after their earnings. The guidance definitely isn’t a good look for this super sensitive market right now, but I am confident that they will be delivering 80%+ growth this year. The workOS market should continue to offer up significant enterprise customers, this is the key for them to continue the killer 200%+ growth with the large customers. I don’t have a problem with the high sales and marketing spend. This market is still nascent so they are doing the right thing and allows for potential reacceleration in the latter half of the year. It will be very interesting to see what Asana serves up.

Upstart I don’t think I’ve ever been more nervous with an earnings release. I said that Dave was going to need to combine a strong earnings with a masterful investor briefing, and he did just that. He needed to restore the faith, build the story of how Upstart will be a durable hypergrowth player. The guidance shows this but we also got detail on how the product suite is starting to kick in and should be able to top up the personal loans revenue in a significant way in the back half of this year. I loved the recent news of Paul Gu receiving a punchy stock compensation plan, management is bullish, and these founders are world class talents with a lot of skin in the game. I am comfortable with Upstart representing my non-Saas part of my portfolio, I don’t want it to get much bigger from here as we now this is a volatile business and stock, but I can’t see how I wouldn’t want exposure to this profitable, hyper grower that is disrupting a massive loans market. I see them doing close to 1.8b in revenue this year so we should be in for significant share price acceleration.

Snowflake My conviction continues to grow so I topped up a little. The management, the market, the opportunity, they are world class, it comes with a hefty price tag but they are brilliantly positioned for the explosion of data across enterprises. My respect for Frank Slootman continues to grow, a great interview here: https://www.youtube.com/watch?v=UsscSJf2GJg

Bill.com What a great earnings. The organic revenue growth of 85%, QOQ of 22% with a great guide as well. Divvy, their acquisition is adding to the revenue growth in a big way, so the management team knows how to execute and acquire in the right way. I am buying into their vision of a financial operations platform, they are in the early innings of their TAM so we should be confident the hyper growth can continue for a while yet. With a recession around the corner, the large transaction revenue is a concern and an extra layer of complexity we as a board are trying to avoid so I will need to monitor this.

Cloudflare I really liked their earnings. They deliver up their steady and predictable growth, revenue keeps edging up, my expectation is that we should be seeing 60%+ growth towards the end of this year or early next as their products continue to land and expand. I couldn’t resist topping up in the $90’s, so I am now happy with this position size for the year ahead.

SentinelOne No major news but one could make a case to take cover before earnings considering what happened with AMPL/ZS and MDNY!

Zscaler Revenue and guidance came in a littler lighter than I wanted, and there is concern around the billings. But I am not selling out as I think with their market position, the dominant leader and with FED spend hopefully to land in a big way this year, I am confident we have a 60%+ grower, with a very strong moat, in a market with significant tailwinds for the foreseeable future.

Watch List

MDB, CRWD - I may look to open up a pre earnings play like I did with bill.com, I have feeling both may surprise which could open the door to new positions.

NVDA/AMD - I like the balance these semiconductor monsters could add to the portfolio.

Grateful as ever for all the fantastic contributions to the board. Thoughts are with the people of Ukraine as they go through something unimaginable for most of us.

Andrew

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