JabbokRiver November 2023 Portfolio Update

I made a couple of changes very early in November and in my last update, posted on Nov. 6, my portfolio looked like this:

Nu Holdings (NU) 14.9%
Samsara (IOT) 12.61%
The Trade Desk (TTD) 12.08%
Pure Storage (PSTG) 11.7%
Remitly (RELY) 11.25%
CrowdStrike (CRWD) 10.37%
Global-e Online (GLBE) 9.97%
Palo Alto Networks (PANW) 7.88%
Aehr Testing (AEHR) 7.8%

During the rest of November I exited one additional position, leaving Global-e after earnings. I explained that exit here.

That leaves me with just eight companies. Ideally, I like to have more, but there’s nothing else that interests me right now. Since all but one of my companies took a dive right after earnings, I had good opportunities to add across the month.

My portfolio now looks like this:

Samsara (IOT) 16.41%
Palo Alto Networks (PANW) 15.07%
Nu Holdings (NU) 14.42%
CrowdStrike (CRWD) 11.99%
The Trade Desk (TTD) 11.66%
PureStorage (PSTG) 11.18%
Remitly (RELY) 10.64%
Aehr Testing (AEHR) 7.38%


A shoutout to Samsara.
I’m having a hard time remembering an earnings call when analysts have sounded this exuberant. Every single one of them. As I’m writing this, the stock is up over 24.5%; it’s the lone company of my holdings that didn’t at least dip when earnings dropped. I decided to wait to post my November results until this afternoon, since all my percentages were clearly going to be thrown out of whack once the open market could gobble up shares today.

They deserved all that praise. They became profitable for the first time and are FCF positive. They surpassed $1B in ARR, a new record. 40% YoY growth. A 49% YoY increase in customers with over $100k in ARR and a 54% increase in customers with over $1m in ARR. They handily beat their guide and increased guidance for both Q4 and the full year.

Extra credit points for a call that answered every question in only about 45 minutes and did so with a crispness and clarity that I rarely hear. Sanjit Biswas is a top-notch CEO. He has a whopping 98% approval rating on Glassdoor and 92% would recommend working there.

Also extra credit points for actually using the webinar format to, you know, show us things. Very, very few companies that I’ve followed show the presentation deck while they are making the presentation. That seems especially egregious for tech companies. Use. The. Technology! Samsara does, and it sets them apart. Ditto for having good music and an interesting image while waiting for the call to start. Great companies pay attention to the little things.

I put a good bit of the money I got from my sale of Global-e last month to increase my IOT position. Today I’m very, very glad I did!

Love for Palo Alto

Getting into PANW was the first significant move I made, right as I was posting my last update. I didn’t feel like I had enough in it, so when it was unfairly beaten up after earnings, I took that opportunity to beef it up. The market then realized they screwed up and it’s now up 23.5% from when I bought it early this month.

I’ll start with the extra credit for using video in their video format earnings call. And they get the gold star for a mix of both the presentation deck AND the rest of the time being able to watch both the executives and the analysts on Zoom. It is so much easier to get a sense of both the person and what they’re presenting when you can actually watch them speak.

That call also contained my favorite CEO lines from all the earnings calls this season. I’ll share it because it is also emblematic of the problems several of my companies faced this quarter: analysts focused on the wrong metrics. In the case of PANW, it was billings.

The reason I could beef up my new PANW position after earnings was because the market had an “OMG, they missed on billings!” moment when the release dropped, despite a great quarter.

The questions about billings came up over and over on the call, with CEO Nikesh Arora trying again and again to explain that with customers being cautious in an uncertain macro environment, they work with their customers on the billing cycle.

Where customers in a better macro would pay a multi-year contract upfront, they now want more flexibility on their own bottom lines and opt instead to pay annually or have shorter contracts. It’s the same deal; same cost over time. Their customer retention rate is not suffering. All that’s different is the billing cycle, which affects billing metrics in a given quarter, but not the company’s bottom line. It’s like the corporate version of BNPL.

The message wasn’t getting through, so when the Goldman Sachs analyst asked the same question again, Arora, rather bemusedly (clearly evident in his body language, since we could actually see him on the call) responded this way:

Look, the firewall business actually is a one-shot business. You sell a piece of hardware and you get paid for it. It’s not a ratable business. The ratability comes from our subscriptions and services part. It’s usually there. We have to look at it from an NGS perspective. Our duration this quarter was on the lower end of duration. It’s reduced. It went down because we took more annual billing deals or we took shorter duration contracts with our customers.

So from that perspective, I think we feel comfortable given the visibility to our pipeline for the rest of the year that we’ve created flexibility for ourselves on billings. And I know we’re going to keep having this debate where you keep calling it guiding down on billings and I want to keep calling it flexibility. You’re going to keep calling it guiding down on billings. And I keep telling you it doesn’t change my numbers. So we should just agree that we’re going to be saying that because nothing has changed the prospects of Palo Alto from three months ago.

It was plain on the call why Nikesh Arora has a 90% approval rating on Glassdoor with almost a thousand ratings. The market finally got the message and the stock went up consistently for the rest of November.

It was a good month for Cybersecurity

Once upon a time I held CRWD, ZS, and S. Quite some time ago I decided I would just pick the one I felt most likely to stay in a strong, leadership role in the category and kept only CrowdStrike, which I still hold. Palo Alto kept popping up as such a strong and steady performer, so I added a second cybersecurity company as another anchor in a sector whose very strong tailwinds are only increasing.

CrowdStrike had a great quarter as well. And while I could do with a few less press releases about how they have been named a leader in the number of bathroom breaks they give to employees or whatever, I am fond of George Kurtz, and can’t find fault with their performance.

Since I was beefing up another cybersecurity company in Palo Alto, and since CRWD was up significantly for me, I trimmed more CRWD in November to get that money, giving me currently ~27% of my portfolio in cybersecurity. I posted Brad Freeman’s review of CrowdStrike’s earnings here.

I still do like Fintech

Looking at my portfolio by sector also shows up ~25% in two fintech companies, Remitly (RELY) and Nu Holdings (NU). Remitly has no dearth of coverage on this board, so I’ll just say that I’m still holding a significant position.

Nubank (NU), which is a digital bank based in Brazil, gets very little attention here and I think it deserves more.

Years ago, when my mother was asked on Thanksgiving why she served store-bought Mrs. Smith’s pies rather than making her own, she always answered, “Why would I try to make something that Mrs. Smith does better?” I feel about Brad Freeman’s earnings dives the way my mother did about Mrs. Smith’s pies. Brad gives his analysis of NU’s earnings, along with PANW and other companies reporting at the time, here.

Here is the first slide in their deck. (Again, props for actually using the deck on the call!)

Another stellar CEO in David Vélez, with a 93% Glassdoor rating, and fabulous business ethics. Doesn’t hurt that NU is in the Berkshire Hathaway portfolio.

Here’s a bit more from the CEO’s opening remarks this quarter (emphasis mine),

Over the past 12 months, our customer base growth in Brazil has outpaced that of the 5 largest incumbent banks combined. Additionally, we welcomed over 700,000 new customers from Mexico during the quarter, driven by the rollout and continued expansion of Cuenta Nu and the unlocking of our member can [sic] member referral programs potential. Our business model continues to demonstrate its ability to drive both growth and profitability. In the third quarter, our revenue surged to $2.1 million, marking a 53% year-over-year increase. Our gross profit reached $915 million doubling year-over-year, while our gross margin expanded once more, reaching 43% this quarter, solidifying the upward trajectory initiated last year. Sequential gross margin expansion, coupled with further efficiency improvements significantly boosted our net income, which reached $303 million and adjusted net income stood at $356 million, reflecting a 34% quarter-over-quarter increase on an FX neutral basis for both.

Also at the end of the call, I thought this response from CFO Guilherme Lago was notable as they look to the big picture for Nubank:

So if you were a customer of the bank back in 2017, you had only one product, credit card. Arguably, it was very hard for you to gear our primary banking relationship customers with credit card only. But as we launch bank account, peaks, investments, insurance, marketplace, DuCoin, we have a much more compelling value proposition, a much more complete set of products and that foster primary banking relationship that foster engagement. We do not see this trend stopping or declining. On the contrary, we think that we will continue to launch best-in-class products, disruptive solutions. And with that, we will not only sustain high levels of activity, but we will also foster the continuous expansion of those activities. So I’ll pause here. I will pass the floor to Youssef to address your second question related to credit underwriting.

I bolded “marketplace” in the comments above because it sounded like their intention in expanding their TAM and diversifying offerings includes a move to compete with MELI. Those more familiar with MELI can weigh in here, but it seems like MELI started in the marketplace and then moved into fintech, and that NU is starting in Fintech and is planning a move into the marketplace.

I don’t own MELI, but I think there’s room for both in the region; and Vélez is a very smart and savvy CEO. I added to my NU position in November and the stock has been a steady performer, up double digits for me.

Pure Storage–ouch!

The surface results from Pure sent the stock tumbling and many sold out. I was confused. It seemed like the wind should be at their backs, and the release highlighted these numbers, which didn’t sound shabby:

  • Subscription services revenue $309.6 million, up 26% year-over-year
  • Subscription annual recurring revenue (ARR) $1.3 billion, up 26% year-over-year
  • Remaining performance obligations (RPO) $2.0 billion, up 30% year-over-year
  • GAAP gross margin 72.5%; non-GAAP gross margin 74.0%
  • GAAP operating income $74.2 million; non-GAAP operating income $169.1 million
  • GAAP operating margin 9.7%; non-GAAP operating margin 22.2%
  • Operating cash flow $158.4 million; free cash flow $113.4 million
  • Total cash, cash equivalents, and marketable securities $1.35 billion

Listening to the call gave me a headache, largely because the discussion was filled with the names of their specific product line, which is large and the names aren’t particularly descriptive to someone not well-versed in the details.

But the true head-spinning part was them talking through point after point about record sales and things like their over $2B RPO, a growth of 30% YoY; yet, with every such mention of record-breaking, the CFO was explaining why that new record added another point of headwind to their quarter and reduced Q4 guide. Are they really saying “good news is really bad news for revenue?”

I really like Charlie Giancarlo, but I think he could have benefitted from the clarity of Nikesh Arora at PANW here, because PSTG appears to have a related problem. The reason total revenue took such a hit is because Pure is in the process of switching from a capex business model to a combination of SaaS and consumption model. It’s a different kind of billings problem.

As their newest offering completed a full storage solution for enterprise customers, companies can now take advantage of a full platform instead of just pieces and save enormous amounts of money by switching from buying hardware to the SaaS/Consumption model. While admitting that competition remained fierce, companies are signing up for their (now) complete offering at a pace well-above what they had predicted at the start of the year and even last quarter. More SaaS/Consumption means a whole lot more ARR, but a whole lot less initial capex revenue. So the more new sales ramp, the more of a headwind that becomes to revenue, until the capex component becomes the vastly smaller contribution to their bottom line.

The best analogy I can find for what Pure is experiencing in the latter half of this year is when a hurricane undergoes an eyewall replacement cycle. A big storm weakens for a bit as it re-organizes and replaces the eyewall to become a much, much stronger storm. With their full suite of offerings now available and shipping, the old capex eyewall is being replaced with the new SaaS/Consumption eyewall. There is every sign that a much stronger company is building outside the focal point of a single quarter’s bottom line.

While everyone was focused on weak revenue in the quarter, nobody was paying attention to $2B in RPO coming down the pike. And there was also a $41million non-cancellable order from a Telco building out 5G infrastructure. The build-out has been delayed, and they can’t take shipment of their order until it’s finished. Pure can’t book until it ships, so the money didn’t show up in the quarter and will now be next year. This is exactly the kind of problem that the new, stronger eye is attempting to fix–or at least make much smaller.

How long that replacement cycle takes is unknown. That it will affect the current quarter is a given and was the reason for the guide down. They have not yet been willing to give clues about the next year, but since the RPO indicates an accelerating replacement cycle, I’m willing to wait it out with my shares to see if there’s a re-accelerated guide for next year. In fact, I bought a bit more.


Aehr is still rattling around at the bottom of my portfolio, but not because I’ve sold any–just because of the share drop after earnings. The stock also drops every time an OEM for EVs comes up short in EV sales, which has been pretty much all of them. Last quarter the world was going to be all EVs by Christmas and now it’s all doom and gloom. No one is listening to Aehr saying they have a growing business in other kinds of chips, so I expect the shares to sleep where they are for at least another quarter, or until the general sentiment about EVs picks up.

But I can report that Aehr has a new website! I had a lovely chat with Jim at their IR department a month or so ago. He alerted me to the fact that they had a new marketing person and that a new site would be coming. I also shared our disappointment in not getting the earnings release for this quarter in our email until 24 hours after it dropped.

All that’s left is The Trade Desk. I had trimmed some early in October when the stock had run up to fund other things, and I added some of those shares back when it was beat up after earnings. They will grow steadily with spurts of hypergrowth, imo, but as long as streaming is still a tailwind, I’m happy to accept a slower pace of growth for something that doesn’t keep me up at night. I can devote my sleepless nights to the other riskier companies I own.

Overall, November was a very good month. I’ll be better with overall portfolio performance reporting once we get into the new year. When my TDAmeritrade became Schwab on May 31, it erased all the prior metrics. But from May 31 through today, I’m up 13.67%. Low in that time was July, when I was down -25.26%. Been crawling out of that hole ever since.

*I have very little in cash and a 1.24% position in C3.ai (AI) that I hold for my brother.


I’ve been looking more into Company Guidance, lately. This was a great example of how careful listening to company guidance and why it is what it is can deliver, given everything else is firing well.

Bert Hochfeld at Tickertarget.com said as much and this was my take away also.

I held all my shares. By the way, each of my portfolio summaries contain every trade I’ve done each month, FYI.

I’ll look to add if PSTG share price drops another 10%. I have to sell something to buy more so usually it’s a 20% drop that’ll get me to do that.