I Keep Underestimating Square

The addressable and addressed market for this company is tremendous…how can we possibly accurately value these companies when we have no idea what new products they’re going to deliver?

Square CFO Sarah Friar at Code Commerce talking about some of Square’s new innovations. Some comments about Weebly and Caviar acquisitions as well as Square Cash app.

https://www.youtube.com/watch?v=XkPITg4AiMk

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Square CFO Sarah Friar at Code Commerce talking about some of Square’s new innovations. Some comments about Weebly and Caviar acquisitions as well as Square Cash app.

https://www.youtube.com/watch?v=XkPITg4AiMk

Wow, Austin, what a great interview. That’s the first time I’ve seen Sarah Friar and I see why Bear (I think it was) fell in love with her. After watching that, if Square wasn’t already too large a position (15%), I’d run out and buy some more.
Thanks,
Saul

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She’s brilliant. :heart_eyes:

Bear

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She’s brilliant. :heart_eyes:

Sorry Bear, but I saw she was wearing a wedding ring. You are too late.
Saul

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ROFL y’all are dogs…I mean that in a kind way. I’m impressed with her as well and also a SQ shareholder.

Lucky Dog

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Now if SQ could make a deal with the proposed 3000 convenient stores that AMZN are proposing by 2021 would make me happy as own both…

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Square CFO Sarah Friar at Code Commerce talking about some of Square’s new innovations. Some comments about Weebly and Caviar acquisitions as well as Square Cash app.

Wow, would anybody else not bat an eye if she took over as CEO one day? I get the impression she could run the show tomorrow quite seamlessly!

Matt

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Great interview, discussion of corporate philosophy and explanation of room for growth. If the rest of the C-suite shows as much knowledge and clarity - aware of markets, market potential, importance of understanding the customer experience as connected to ROI - as this CFO, it helps show how they are exploiting the growth potential and fits with the growth numbers they have reported.

Will look again and consider adding more shares.

Bill

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Wished I had bought more SQ rather than buying PVTL not too long ago. I need to sell something if I want to buy more. I’m low on funds in my account right now…a rare occurance.

Lucky Dog

That was a masterful interview. Not only did it increase my confidence in Square, but it also gave me an “ah ha!” moment.

The “ah ha!” part had to do with the concept “I have better places for my money,” and generally becoming more comfortable with selling positions where I have lost that confidence and enthusiasm.

After Pivotal’s earnings-related drop, I came to this board to read opinions. Then I listened to the conference call. My impression was not as negative as many of the views expressed here. It was so-so. I decided to give them another quarter and then reassess. My position was small, about 1% before the drop, so if wouldn’t be a significant risk if the stock dropped again.

After listing to Sarah Friar’s interview, I asked myself why in the world should I continue to hold PVTL when I could put that money into SQ? Why hold something that makes me yawn, when I could hold something that makes me cheer?

My Square position is what I would classify as medium-large, about 6% of account value. (My largest positions are in the 8-9% range.) The interview, plus the one on Mad Money that same day, make me want to grow my Square position to the large range. I have identified three small so-so positions (PVTL, PSTG, SWKS) that I want to sell and put the proceeds into Square.

I have a medium-small, so-so conviction, position (about 2%) in BOFI that I’m also considering selling and putting into one or more of my medium-sized, higher-conviction positions (SQ, AYX, OKTA, TTD, NVDA, ZS). The problem here is capital gains. I’ve held it long enough to have a non-trivial amount of (long-term) capital gains. This year, I also sold out of TSLA, which was almost entirely capital gains, so I’m hesitant to add more realized gains and higher taxes. I am committed to selling by the end of January. It’s just whether I sell earlier, taking the tax hit this year.

-Mark

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After listening to Sarah Friar’s interview, I asked myself why in the world should I continue to hold PVTL when I could put that money into SQ? Why hold something that makes me yawn, when I could hold something that makes me cheer?

Hi Mark, what a great way of expressing it.

On the capital gains question, here’s a hypothetical which will give you a different way of looking at it.

Say you have a $100 position which has grown 50% and is now worth $150. Let’s say it’s long-term. Now remember that you don’t pay taxes on the total, just on the profit, so you only pay taxes on $50 of that $150. If it’s long-term the maximum you will pay is 20%, or $10, so you will have $140 to invest.

You had said you plan to sell it to reinvest it by the end of January. If you were to invest the $140 in the stock of your choice, do you think you would gain more on that $140 by the end of January (4 months) than that $10 tax? (A $10 gain on $140 would be roughly 7%).

The answer, of course, is that you can never be sure what a stock price would do, but if it was me, I’d bet on 7% from any of those stocks you listed (SQ, AYX, OKTA, TTD, NVDA, ZS).

Best,

Saul

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Say you have a $100 position which has grown 50% and is now worth $150. Let’s say it’s long-term. Now remember that you don’t pay taxes on the total, just on the profit, so you only pay taxes on $50 of that $150. If it’s long-term the maximum you will pay is 20%, or $10, so you will have $140 to invest.

You had said you plan to sell it to reinvest it by the end of January. If you were to invest the $140 in the stock of your choice, do you think you would gain more on that $140 by the end of January (4 months) than that $10 tax? (A $10 gain on $140 would be roughly 7%).

And here’s a different way of looking at it with a smaller cost basis. Someone was recently talking about a large NFLX position. They probably bought many years ago.

So now this $350 stock with say, a $50 basis, means a $300 gain. The most you’ll pay in taxes is $60, leaving $290 to invest.

You’ll have to find a stock that goes up about 20% to negate the $60 in taxes and then outperform NFLX.

So if NFLX goes up 15% over the next year the new stock has to go up more than 39%. Not impossible, but not guaranteed.

It seems the smaller the basis the harder it becomes, which is probably why some investors let winners run in taxable accounts.

Chris

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On the capital gains question, here’s a hypothetical which will give you a different way of looking at it.

Thanks, that helped. While I knew that intellectually, it helped to be confronted about it. It turns out that I had just about a 50% gain, right in line with your example.

I sold out of BOFI and put that money into NTNX and ALGN. NTNX because it was dropping some more on an analyst downgrade that I believe is misguided (though now I have as much as I am comfortable with). ALGN because it is growing revenue and earnings at 40%/year, is profitable, and was only a 2% position (now 3.33%).

Another one of the ways I overthink capital gains is that more long-term gains cause short-term gains (and salary, non-qualified dividends, etc.) to “float up” into higher tax brackets. That feels bad, but it’s not that big a deal in the grand scheme of things. I needed to remind myself that significant outperformance and (somewhat) greater taxes is preferable to modest outperformance and (somewhat) less taxes.

Interestingly, I recently sold out of TSLA. It was something like a 10-bagger, so the capital gains hit was larger. I continued to hold while it languished. It took Musk’s increasingly erratic behavior to get me to sell. I figured there was a good chance of a massive drop. Fear of loss finally got me to take action.

Thanks again,

-Mark

CMFAleeb, I waited too long and watched (last night) the video you provided a link for regarding CFO Sarah Friar… I meant to add some today and wow it popped before I got around to it, DOH!!!

Here’s another video
https://www.bloomberg.com/news/videos/2018-09-25/square-cfo-…

And here’s why it popped today
https://finance.yahoo.com/news/why-square-inc-stock-jumped-1…

Apparently I underestimated Square to and should have added much sooner
https://finance.yahoo.com/news/why-square-inc-stock-jumped-1…

1 Like