HorsePlayAndrew Update Jan 2022

HorsePlayAndrew · February 2, 2022, 3:38am

Summary

Well January 2022 is a month that will go down in the history books for me. From my ATH in November, I experienced a 51% drop in my portfolio value. That beat the other big drops in 2018, 2020 and 2021. It hasn’t been a fun ride at all. Lots of soul searching and questioning of my strategy. Although I wasn’t driven by fear to sell out when I was 50% odd down, because of experiencing big drops like this before, what I was mainly frustrated about was the risk management side, to allow those gains to evaporate. That’s the billion dollar question I guess for all of us but I will be looking at ways to try and at least reduce the impact of these big drops in the future.

WSM mentioned this in their update a book I have read a few times and recently in January which has really helped shape some thoughts around the psychology of investing in growth stocks. He helps frame the volatility but also has a lot of good examples on how to manage your money when things are going well and how the greed may well take over…

I highly recommend reading this:

https://www.amazon.com/Psychology-Money-Timeless-lessons-hap…

The end of January showed a little glimmer of light, and with the recent earnings from the likes of Apple and Alphabet, it feels like the market might be realising that Cloud/SaaS, once again, is powering on, will not slow down just because of a couple of interest rate rises… lets see, I think this year is going to be very, very choppy, I don’t think we’ll get a clean cut bounce back like other years. But what helps me sleep well at night is the predictable, hyper revenue growth that our companies boast. Even with the valuation multiple massacre, in 12 months time, I’m confident that my companies will on average have grown 70%+ in revenue, so even at these re-rated valuations, the share price should follow the path of revenue appreciation.

Also an interesting observation… it appears that board member portfolios are probably the most aligned they have been for a long while… is that a reflection of the quality of the top 8-10 picks or a warning sign of groupthink? Who knows but I really do appreciate the forensic level of analysis and debate everyone is bringing to the table here.

My background

Entrepreneur, ex-founder of SaaS & marketplace business, exited, now founder of horseplay.ventures, angel investing & building other startups. Normally live & work in London but currently residing in Bali, Indonesia.
Tweeting here:
https://twitter.com/andrewwebster11

See further details here. https://discussion.fool.com/horseplayandrew-update-nov-2020-from…

Performance

2022 > -23%
2021 >21%
2020 > 209%
2019 > 41%

January > -23%

Jan 2022 Portfolio

MNDY > 19%
DDOG > 19%
SNOW > 11%
ZI > 11%
S > 10%
UPST > 10%
ZS > 8%
NET > 6%
AMPL > 5%

SOLD

DigitalOcean It was a shame to let this one go. It wasn’t that any negative news came out, I just needed more cash to load up on my higher conviction plays when they were bleeding in the gutter. I’ll be watching very closely when they release earnings. Customer growth, NRR and revenue growth all need to continually to meaningfully accelerate ie revenue needs to get in the 40%+ range this year if they are to enter the big league.

BUYS

Cloudflare Thankfully I had some cash to play with and I pulled the trigger on Cloudflare around the $84 mark. We all know about this company. I’ve watched on the sidelines as Matthew Prince and team make outstanding product innovation moves to position themselves behind the cloud titans but the price escaped me. This sell off gave me the opportunity to get back in, I think this is a decent entry point and it could be the year that all the new products and modules start to nudge that 50% revenue growth northwards. After reading the Q3 earnings, I liked how they described Q3 revenue being back loaded which could spill over to Q4. Could be a candidate to increase my position size in the future.

I also played around with some buys and sells, topping up SNOW and ZI.

My companies

Monday.com A quiet month again with the business, but a freefall in the share price. It wasn’t a stock I wanted to dip into as my conviction is very high here. The workOS TAM is massive, this is a new trend, a new product category, and all the key numbers show they are killing it. I’m expecting them to do $98-100m in Q4 revenue.

Datadog Stellar earnings from Microsoft and Alphabets cloud divisions really bodes well that DDOG will continue to put up strong numbers. Top conviction. I’m looking for $310m+ in Q4 revenue.

Snowflake This was another company where I was wary of the valation. I topped up along the way in January to allow me to open up a sizeable position. The valuation still prevents me from making it a tier 1 allocation but the more I read about the data cloud opportunity, the more I want to be a part of. Q3 numbers were the best around so I’m glad I own a little piece of them. I’m expecting revenue around the $400m mark.

Zoominfo Like a few board members, this is a stock I am increasingly confident on. It was also a safer haven in the big sell off which is something I am tracking to track during these big drops, which stocks hold up better than others. I’m excited about what Chorus can do to the revenue numbers, everything that Henry Shuck and management are discussing right now is positive, so we may finally see a valuation rerating if they can continue to accelerate the organic revenue. I would like them to hit $230m in revenue in Q4.

SentinelOne Top level revenue and customer growth, an industry with significant tailwinds. I’m a little nervous on the high S&M spend but I am impressed with their performance since their IPO and think they can keep posting large numbers in quarters to come. I am expecting revenue of $68m for Q4.

Upstart Wow. If ever there was a stock to test your conviction. I must admit I came close to selling when the board raised the delinquency rates. Bert helped put this into context for me but it is another data point that needs to be carefully examined when they release earnings. As I posted earlier in the month, I think the Q4 guidance and management language has been underappreciated although this is the earnings I will be most worried about this month, squeaky bum time. (UK soccer reference, look it up)
https://discussion.fool.com/a-refresher-on-upstart-in-prep-for-q…,

ZscalerThey had knock out earnings in Q3 which prompted me to buy ZS for the first time. I like how they have shown durability and accelerated their business. They also stand alone in their endpoint space so they are primed to capitalise on security spend, which CIO/CTO’s continue to prioritise in budgets. I’d like them to do $258m+.

Cloudflare Discussed above

Amplitude I came VERY close to selling this position. It was on the chopping block but somehow survived. It’s a new IPO so it has been slaughtered. I still really like the look of the founders, product and market, but we need to see how the next few quarters are going to play out considering their varied guidance. Any future big pullbacks in the market and I might let this one go until we see earnings. I’d like them to post north of $51m.

Watch List

NVDA, Bill, Affirm, Sofi

Good luck for earnings season!

Ps on a personal level, I’ve had a very exciting week. We just announced the news of our new startup: https://www.sendtrumpet.com/ maybe one for any sales or founder board members! Hopefully you’ll all be investing in it when we IPO in 5 years : )

Andrew

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