HorsePlayAndrew Update November 2021

HorsePlayAndrew · December 1, 2021, 3:56am

Summary

We’ve been here before, everyone starts to get a little ahead of themselves and the market has a great way of reminding you who is boss. I hit 85% for the portfolio just before the devastation train arrived. Upstart was my biggest position and wreaked havoc with the YTD performance. My portfolio has undergone quite a few changes this month to reflect a very busy earnings season.

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

YTD >42%
2020 > 209%

January > 29%
February > 23%
March > 1.7%
April > -6%
May > 11%
June >21%
July >15%
August >51%
September >61%
October >75%
November >42%

Nov 2021 Portfolio

Datadog - 19.31%
Monday - 17.37%
Upstart - 15.44%
Affirm - 9.85%
Zoominfo - 10.04%
DigitalOcean - 9.65%
Crypto - 7.72%
Amplitude - 5.79%
Cash - 4.83%

SOLD

Fubo Frustratingly Fubo delivered a strong Q3 earnings but the market decided to play with it, taking it all the way from $33 a share down to $20. The opposite of what my position size expected. Half way through this process I felt like I’d had enough. This is a young company, and with its margins will be fighting an uphill battle to convince its the real deal. Simply, I have got in too early with this company. I have learnt an important lesson that moonshot investments are volatile and take time. I shouldn’t have waited around for so long this year as the betting revenue, which is what the market is waiting for, is still a long way from showing up in a serious way to move the margin profile. So I will sit on the sidelines for now and see if Fubo can execute the betting product. And judging from this recent podcast with CEO David Gardner, he states they see only 2 more states coming on for licence approval in 2022 which is far less than I expected, we have no idea what each state will bring but it feels like only a few states will struggle to move the needle here.

https://podtail.com/da/podcast/sportspro-podcast/fubotv-ceo-…

Upstart A real surprise for us all, everything suggested another strong earnings. I sold all my upstart shares the next day with the view that I’ll regroup and see where we are a few weeks after. As I said on the board, I think the very strong Q4 estimates are being missed, and is the reason why I have got back in because I still believe the founders are building a generational company here. The Q1 guide is what it’s all about now, another lumpy, slowdown and the majority are going to lose patience.

Sea This was a very tough sell for me but I actually sold before earnings. I didn’t like the noise coming out about supply chains and the general headwinds for e-commerce stocks so I decided to wait it out. The earnings had a lot of positive elements but the slowdown in Garena is a serious red flag for me. I needed the cash elsewhere and my conviction wasn’t high enough to get back in so with a heavy heart I’ve let them go.

BUYS

Amplitude Essentially this was my swap out of Fubo. This is an interesting you company that has been brought to the board by several posters. I spent some time looking at them in November and saw enough to open up a position. Product analytics is still in its infancy but with 26% of the Fortune 100 signed on, it’s clearly resonating. As we all know digital transformation has been sped up due to Covid, so companies are now realising that their wealth of data needs to drive product decisions, something that is currently very disconnected, something they want to change through their Digital Opitmization System. I was initially concerned that this was just a tool sold into Digital Product Officers but their investor presentation did a nice job of showing how it really is a cross-functional offering, touching engineering, product, customer service and marketing.

Q3 was a strong report. Growth accelerated to 72% but as discussed on the board, the cautious guidance should result in a fairly big beat in Q4 as they have less visibility compared to Q3 when they had their IPO. I also like the event-based data business model, so they will benefit from the growth of their customers’ data and activity. The snowflake partnership in particular could really help larger customer sign ups, as the biggest hurdle is migrating the data.

A potential red flag is product necessity, like we’ve seen with Alteryx in the past. This is more of an insights led offering versus operational dependence ala DDOG, CRWD, DOCN etc so could experience higher levels of churn. For now the story is young and the growth is there but one to watch. The investor presentation is worth a watch, I like the look of the CEO, Spencer Skates.

https://info.amplitude.com/amplitude-investor-day-video

I have topped up MNDY, DDOG,and ZI. I also have moved a significant amount from my Upstart sell into some crypto positions that I won’t discuss here.

My companies

Datadog A stellar earnings from DDOG. I loved the positivity and growth levers that CEO Olivier Powel shared on the earnings call. Through the rapid product expansion (more products have launched this year than 2020) their TAM keeps expanding, I think I am seeing Datadog as far more than a cloud monitoring offering, they are attaching themselves across the spectrum of Cloud operations with all their new products so it gives me confidence that they can keep up the hyper revenue growth. Billings, total RPO and current RPO growth rates were all higher than revenue so the future looks good for the next few quarters. I did note that the CEO warned about the slowdown they see through the Christmas period so the QOQ could take a bit of a bump in Q4.

If you ever wanted to invest solely into AWS, GPS or Azure, then you should be looking at DDOG. This is a brilliant product analysis and general update from Software Stack Investing
https://softwarestackinvesting.com/datadog-q3-2021-land-and-…

So it made a lot of sense to make Datadog my biggest position.

Monday.com A fantastic earnings, just what I was looking for. They kept up the torrid revenue growth, 95%, and all other key metrics were humming. If you listen to their Q3 earnings, it’s awash with positivity and opportunity, no real signs of the hyper growth slowing down. NDR was up to 130% from 125% for customers with more than users and $50k+ ARR customers grew a massive 231%. WorkOS is a very long runaway, as I said before, this isn’t project management, this is an operational platform for employees to do their daily work on, so there is a plausible view for them to keep up the 90%+ growth for a fair few quarters to come. MNDY received a big chunk of my Upstart sell.

Upstart Discussed above

Affirm Lots to like in the Q1 earnings. Revenue came in at 55%, so it is slowing down from previous quarters but the story has changed and we await the impact of the Amazon, Walmart and Shopify partnerships. GMV without Peloton revenue is up 138% which is very encouraging, they are weaning themselves off the Peloton reliance which is nice to see. The active merchants is up 3.5x, this is the key, will these merchants bring the GMV and revenue growth. Guidance doesn’t include any impact from Amazon and Debit+ card, this is the potential for serious alpha. AFRM is on a tight leash as its risky and there are still quite a few question marks around the model and what these mega partnerships will actually mean in terms of revenue.

DigitalOcean I am still keeping fairly quiet about this position despite it growing into a fairly large position for me since I bought it in the $60’s. Q3 earnings continued the upward trend without any fireworks. I suspect they will quietly make their way to becoming a hyper growth company, increasingly modestly month on month. Revenue, NDR, ARPU all accelerated QOQ which is what I wanted and the guidance was good. Remember they have the Nimbella acquisition to tap into and an insane amount of customers (600k) to grow into revenue wise and they are planning to up their S&M spend to grow quicker in 2022. This isn’t a Saul stock (yet) but I’m liking what I am seeing so far.

Zoominfo No real news to share as I discussed their earnings last month but they still stood out as one of the best SaaS earnings reports. Conviction bounced a little higher so I decided to increase my position here. Interestingly, it seems some VC’s have been unloading shares which has been holding the stock back. Whilst this may appear negative, I came across this useful tweet a few weeks back that shows ZI (As well as ASAN) showing significant fund ownership increases which is exactly what you want to see for future big moves. https://twitter.com/cperruna/status/1460424839781662726

Amplitude see above

Watch List

Zscaler - with tonight’s earnings report I think it’s time to have a serious look

Bill.com - How do we explain its nosebleed valuation? If only 30% of revenue is SaaS, why does the market give it a NET like valuation? I suspect it’s the TAM and the fact that even 70% of revenue is non SaaS, its essentially repeatable because the client is signed in via their subscription, unlike UPST who have to go out and start from scratch every year. Would love to hear more thoughts on this as its definitely got a lot going for it.

Global-e - there is a lot to like but its certainly not a home run (yet)

NVDA - kicking myself for not buying last year. An absolute powerhouse and strong tailwinds to sustain its growth off an extremely large base. I may look to buy in a significant pull back and use it as a portfolio bedrock.

Previous updates

Thank you for getting this far, as always, very grateful to the amazing work and research that is shared on Sauls board.

Andrew