JabbokRiver's September Portfolio Update

Investment Analysis Clubs Saul’s Investing Discussions
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September was not a good month. My portfolio has had worse, but it wasn’t good. I did make some significant changes, mostly at the very beginning of the month.

Here’s where I was at the end of August:
Aehr Testing (AEHR) 12.14%
Samsara (IOT) 11.55%
Global-e Online (GLBE) 10.65%
The Trade Desk (TTD) 10.64%
CrowdStrike (CRWD) 9.3%
Cloudflare (NET) 8.52%
Braze (BRZE) 8.34%
PureCycle Technologies (PCT) 8.1%
Pure Storage (PSTG) 7.18%
Nu Holdings (NU) 6.4%
Procore Technologies (PCOR) 6.04%

C3.ai (AI) 1.1% (Held on behalf of my brother)

CHANGES

NET: When @BroadwayDan did his august roundup on 9/3, he again raised the issue of believing that Matthew Prince lied in his fight with Fastly. I wasn’t entirely convinced that “lying” was the right term, but it did make me go back to run Prince through my own management screen.

To my surprise, he only has a 67% rating on Glassdoor. That’s very low for me. Not sure if I hadn’t looked before or if it has dropped, but it gave me pause. I went hunting for videos. I couldn’t find one from my gold-star interviewer, Jon Fortt, although I found a few others that didn’t inspire me.

I was just deciding that I was making too much of it when I saw the late August announcement that Cloudflare was partnering with SpaceX and Starlink. I had actually trimmed some NET on the price-pop from that announcement in August, without realizing why it had spiked.

That news is probably great news for many of you and may well be a boon to both companies. But Musk crosses a multitude of red lines that I have for my companies and it appeared to be more than just SpaceX becoming a Cloudflare customer. It sounded like Musk and Prince would be working together. My NET position, one of my two oldest, was liquidated within minutes of seeing that news on 9/5.

With a lot of that cash I gave a sizeable boost to my position in NU. They were scheduled for a keynote at the Goldman Sachs conference the next day so I wanted to get in on that. Glad I did.

RELY (Remitly): @Pavlos21 brought Remitly to the board in Sept. 2021. It was brought [back to the board in late August] of this year (Remitly Global (RELY)) by @wpr101, and with my NET cash sitting idle, I decided to take a look. Glassdoor? 99% approval. Jon Fortt? Not yet, but an interviewer who asks a lot of similar questions made me very comfortable with CEO Matt Oppenheimer in the Traction Podcast here.

Am I okay with their mission? “Remitly is on a mission to transform the lives of immigrants and their families by providing the most trusted financial products and services on the planet.” Yup. And they, too, were presenting at the Goldman conference. I used the remainder of my cash from selling Cloudflare to enter RELY on 9/6.

BRZE: My Braze position had done very well since I bought it in May. It was up 60%. But a direct competitor, Klaviyo (KVYO), was going to be smashing through the IPO doors the next week, so I sold out on 9/7. I really like the Braze CEO, but customer engagement was already a crowded space, and I figured Klaviyo might keep the stock down for awhile if not outright take share. Too much work and worry.

I sat on that cash for awhile and, as the market started giving me more down days, I took the opportunity to add to PureStorage, Procore, and a bit more to Nubank. I trimmed a very small amount of CRWD (now the position I’ve held the longest–since Feb. 2021) and pulled some money permanently out of the portfolio. Other changes in the weighting below are just from stock price action.

So my portfolio now looks like this:

Aehr Testing (AEHR) 12.19%
Global-e Online (GLBE) 12%
The Trade Desk (TTD) 11.8%
Nu Holdings (NU) 11.68%
Samsara (IOT) 10.68%
CrowdStrike (CRWD) 10.11%
Pure Storage (PSTG) 8.96%
Procore Technologies (PCOR) 8.22%
Remitly (RELY) 7.62%
PureCycle Technologies (PCT) 5.65%

C3.ai (AI) 1.03% (Held on behalf of my brother)

May October bring us better things.

JabbokRiver

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Might be good to note that this is speculation. The Information published an article (behind paywall) with an attention-grabbing headline, claiming that SpaceX is working with Cloudflare “according to a person with direct knowledge of the project”.

I haven’t read the full article, but it wouldn’t surprise me if there’s some truth to it, since working with internet service providers all over the world is part of what Cloudflare does. Here’s one example of working a large Brazilian ISP to expand Cloudflare’s presence to 25 more cities: https://blog.cloudflare.com/expanding-to-25-plus-cities-in-brazil/.

So the question is whether there’s anything of significance here, other than the word “SpaceX”.

While I’m at it. This thing with Fastly. The narrative is that Prince claimed that Cloudflare is faster than Fastly in every country in the world. This is not what was claimed, and the context is missing - giving the impression that it came out of nowhere.

Fastly’s investor day coincided with Cloudflare’s “speed week”. As part of speed week Cloudflare published an update on network performance (here), something they’ve been doing for two years. While the blog posts might be “for fun”, the reason for why they do these measurements isn’t. They built their own tests because they wanted to drill down to every single ISP on the planet to make sure they optimize everywhere, and couldn’t get that granularity from third-party tests. In other worlds, this is something they use internally.

In any case, the publicly shared updates are a few (less useful) high-level aggregates. Among those a map:

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This is the context for Prince’s tweet, where he wrote “Love that the only country where Fastly is fastest is now Liberia […] And there is literally no country left where Akamai is the fastest […]”. A blog post published the same day. While it’s possible to interpret this a some kind of coordinated perfectly timed attack against Fastly, it’s equally possible to interpret it as a spontaneous reaction to a blog post.

Regardless, both Cloudflare and Fastly could claim they’re the fastest without anyone lying, since it would depend on the definition and the scope. I watched and parsed Fastly’s investor day, and in my view there was no outright dispute, but rather this statement: “The data on my slide is […] of third-party metrics that are available to everyone […]. It’s trivial to confirm that data, and I urge you to.”

So the question is, has anyone tried to look at that data as suggested? Well, I have and there’s a problem with trying to do that:

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A quick glance shows Fastly far up to the right and Cloudflare (and Google) at the bottom. This is because Fastly has chosen to show investors a comparison from a third party on a metric where there’s no data available for Cloudflare and Google. (Third party data available here, but it’s not trivial to navigate and understand.)

Sorry for filling up your portfolio update. :slight_smile:

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I wish I never used the overheated word “liar” - my bad. The only issue really here is that many on this board believe that Prince/NET’s massive innovation - birthday week, speed week, security week, people-wearing-shoes week plus their endless PR on deals and innovations aren’t translating to the bottom line to a degree that justifies a 20+ billion-dollar valuation. The narrative around here is clearly that Prince et al talk more than they deliver in terms of hypergrowth. This is not to say he’s a liar, or even really doing anything wrong from a business perspective. Glancing at Bear, Saul, Novice, Willem’s ports to name a few - it’s not even given a small allocation in any of them. At the end of the day Prince’s Tweet was 100% no doubt trolling Fastly, was at best questionable, and is emblematic of the issue at hand, that the steak’s not living up to the sizzle.

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Really? That’s the narrative? Let’s take a look at Prince company’s revenue history:

2016: $0.085B
2017: $0.135B (+59%)
2018: $0.193B (+43%)
2019: $0.287B (+49%)
2020: $0.431B (+50%)
2021: $0.656B (+52%)
2022: $0.975B (+49%)
2023 (est.): $1.290B (+32%)

7yr rev CAGR: ~47.5%

If you don’t consider this hypergrowth, not really sure what is. Cloudflare still has expected growth at the high end of any stock in the sector. There is an ongoing almost 2yr recession happening in the Cloud infrastructure/SaaS sector due to optimizations, etc. explaining the sharp drop this year. Besides that it seems like there is a lot of “steak” with Prince’s sizzle.

There’s no secret high valuations ($20B for NET) come with high growth durability over long periods of time. There’s no indication NET’s will slow down significantly.

Bnh

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@bnh91 I tend to agree with you, yet I hold not NET stock. Cloudflare has been very good to me. I’ve made a considerable amount of money with this stock and even more with NET options. I’m not currently invested due to what is sort of a dirty word on this board - timing. For right now, I just think there’s better opportunities out there for my limited resources.

I don’t post my monthly positions. I’m not hiding anything. Every company I own is frequently discussed on this board. I just don’t have anything to add to the monthly summaries provided by others. Usually written up much better than I would post. When I have something that I think is worth saying, I say it irrespective of where we are in the month.

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