Hello Saul and all board members,
I am a 20+ year investor but a new reader of the board and this is my first post, appologies for the long post. I will try to keep it to your high standards.
First, I am greatly appreciative of the work and sharing involved here and enjoy and benefit from the Knowledgebase and numerous of the other posts. I have not yet gone back at all beyond the past 2 years of posts. about 2/3rds of your positions made it into my growth portfolio, in advance of coming across the board, but sadly in much smaller allocations than you have utilized. I tend to run a much more diversified portfolio with 3% max investment per position and 10%-15% max position size at any time (due to growth). I am considering modifying my portfolio construction rules, and have cut about 20% of my names in the past 2 months to get toward a more concentrated “best-ideas” portfolio (my words for one element of your methodology which seems to help you significantly with success. I don’t know that I will get there in totality as I like some of the rules-based algorithmic processes that I use, and those get harder to utilize effectively as portofolio size shrinks.
I also currently run my growth stock portfolio almost entirely in taxable accounts and do take risks for tax reasons that you may not such as 1) 20% losers in under 1 year are almost always sold as short term gains, even if they remain high conviction and 2) significant winners with 10+ months aging are generally held to 1 year.
Second, after studying the guidance for new companies, there is one SAAS company that appears a shoe in for the strategy and I would greatly benefit from any community engagement in analyzing it and/or pointing out flaws in my thinking.
The company is Schrodinger Inc, Ticker: SDGR
It is a recent IPO (potentially a knock against it)
To use their description: “Schrodinger, Inc. provides computational software solutions for drug discovery to the biopharmaceutical industry. The Company operates through two segments: Software and Drug Discovery. The Software segment is focused on licensing the Company’s software for molecular discovery. The Drug Discovery segment is focused on building a portfolio of preclinical and clinical drug programs, internally and through collaborations.”
Founders who collectively own 50% of the company are Bill Gates and D.E. Shaw (the individual, not the hedge fund).
Market cap is $5.9 Billion.
Adressable market is some subset of the $180 billion spent on drug research annually. It appears that this adressable market size is expanding, but I have not yet done work on that.
The company benefits from both work-at-home and Covid-19, and could be a significant beneficiary of goal-oriented increases in healthcare R&D (likely).
They have contracts with 100% of the top 20 Pharma companies (mostly still small with significant potential expansion per customer).
In 2018 96% customer retention, I can’t find more recent data on this or what the increase in spend per customer is. Any help here could be extremely helpful.
TTM Sales growth is 37.5% up from revenue growth 2019 over 2018 of 29%(I know these are on the low side for Group positions), but appears set to accelerate furter with the deployment of IPO proceeds into R&D and Sales as new top-tier employees continue to be added.
The company currently has losses, managable, but still expanding with the scaling of the business. I take this as a slight negative, but appropriate to the early stage expansion of the company.
If anyone picks this up and deems it worth a thoughtful response, I will write up another recent buy that is non-SAAS but otherwise seems to fit the Group’s rules/guidelines.
Thanks for your consideration of looking into this to help me understand the risk and opportunity. I currently have a position of under 3% on this one, have been consistently adding and at odds with the Group’s thinking, did enter and exit a call position on this earlier in the year with significant benefit but perhaps with undue risk.