Jason’s August Investing Decisions

I’m just a working husband and father that was lucky enough to find Saul’s Board and be that guy able to take full advantage of his generosity in sharing his method for investing, in Companies experiencing Hypergrowth. I apparently have a risk profile and a conviction in Saul’s reasoning that many just do not have.

When I started reading Saul’s Board, like a lot of you, I had been a member of the Motley Fool for a few years and other than that I’d read a few books on investing. I had a portfolio of 45 different stocks that I only kinda understood that they were in a growth market of some sort and their financials weren’t that bad. The results I got weren’t that bad. They weren’t that great either.

If you have read Saul’s Portfolio Summaries, his Knowledge Base and His Selected Posts in the right side panel here…and your still not convinced how his method of investing will work…keep reading to see how following only Saul’s method and reading the posts here has worked for me (short version: I now only collect a paycheck because I want to be able to donate more than our living expenses every year, starting when I retire in less than three years. I just turned 55 today).

2018 > +38.9%.
2019 > +32.9%
2020 > +203% 
2021 > +46.8% 
2021>.     MTD.          YTD
Sept>      +2.9%          +65.22%
Oct>     . +16%.          +91.7%
Nov>.     (-)14%.         +54.38%(given in error).  Actual YTD 64.8%
Dec>      (-)11%          +46.8%

2022>.     MTD         YTD
January: (-)22.3%        (-)22.3%
February:   6.4%.        (-)17.3%
March:   (-)1.77%.       (-)18.8%
April.   (-)21.76%.      (-)36.5%
May.     (-)25.8%.       (-)52.9% 
June.       8.17%.       (-)49%
July.       1.51%.       (-)48.3% 
Aug.       12%.          (-)25.3%   
            Aug31 July31 Jun27  May31. Aprl30 Mar31  Feb28  Jan31  Dec 31 Nov 30   Oct 31. Sept 30
Upstart     **0.0%**   0.0%   0.0%   0.0%   0.0%   3.30%  3.76% 14.25% 10.47% 11.28%   11.73%. 25.27%
Datadog.   **16.88%** 20.22% 19.23% 18.87% 17.72% 17.39% 14.53% 17.54% 16.60% 16.28%.  11.91%  16.39%
Cloudflare **24.90%** 18.13% 18.00  15.51% 13.90% 19.24% 18.38% 15.22% 13.48% 14.06%.  13.23%.  9.33%
[Monday.com](http://Monday.com)  **1.83%**  3.50%  3.32%  0.0%  15.19% 14.52% 13.44%.15.08% 14.39% 17.92%.  10.37%.  8.72%
Lightspeed  **0.0%**   0.0    0.0%.  0.0%.  0.0%.  0.0%.  0.0%.  0.0%.  0.0%.  0.0%.    9.75%.  8.78%
Zscaler.    **0.0%%**  0.0%   0.0%  12.11% 14.87% 13.85% 10.79%. 9.26%  8.99%. 8.64%.   7.06%.  6.51%
Snowflake  **23.28%** 21.61% 21.67% 22.73% 20.13% 21.04% 11.98% 13.25%.12.69% 11.35%.   8.84%.  7.51%
ZoomInfo.   **0%**     0.0%   0.0%   0.0%.  0.0%.  0.0%   9.87% 12.69% 11.11%. 9.22%.   6.72%.  7.09%
Crowdstrike**11.01%**  9.92%  9.98% 12.66%  8.75%  3.91%  6.6%   6.51% 11.45%. 10.81%.  6.84%.  8.14%
Docusign.  **0.0%**.   0.0%   0.0%   0.0%   0.0%.  0.0%   0.0%.  0.0%.  0.0%.   0.0%.   0.0%.   6.32%
[Bill.com](http://Bill.com)   **11.71%** 11.41% 14.03%  5.01%  5.21%  0.0%
MongoDB    **10.38%** 16.89% 16.39%  4.08%

Watch List:
Zscaler is the most likely among those I’ll be adding back, given Zscaler being likely to benefit the most from Federal Government switching over to a Zero Trust and thus a SASE architecture, during the next couple years. Because of the stickiness once initiated, the winners from the Federal Zero Trust spend will be known over the next few quarters, IMO. I don’t currently own it because I just can’t get over Zscaler management every quarter calling out Billings as the number to watch and then them presenting Billings with significantly declining growth rates the last three quarters😒.

Also, I can’t help thinking about the fact that Cloudflare’s Zero Trust services are already being used across the Federal gov, including the FBI, State Dept, and Library of Congress. That was done without FedRAMP certification. That’s not to say Cloudflare won’t get FedRAMP, Moderate, soon. But, even without FedRAMP, Cloudflare won these high profile wins. This and Zscalers’ well known elongated implementation time, Cloudflare might possibly in the end take the majority of the spend by the Federal Government, over the next couple years, at least for the SASE elements in their ZeroTrust implementation.

This portfolio is what is in our non-taxable Roth and Rollover IRAs only. We have not added any money to these accounts for many years. To buy something I’ve sold something else. I don’t trade options or use any leverage. I stay fully invested at all times and keep less than 1% in cash.

I keep an investing journal in order to focus/simplify my reasoning for the decisions I make around investing. Included in my monthly summaries are what I see as the most relevant newish information effecting my investment thesis, and therefore my investing decisions.

3 Decisions this month (These following three trades somewhat reversed the 1 trade I made last month, when last month I sold 20% of my Bill.com position to buy more Datadog at $90/share prior to DDOG earnings report.). Sometimes even one trade a month is too many and at the time I wrote: As a rule I try not to add before earnings reports. Saul says to add on share price increases (as long as the newish information confirms or enhances the investment thesis).

The challenge I set for myself is to accurately assess how each company I own will: efficiently ride the combining waves of adoption for their various proprietary technologies up the hockey-stick (Hypergrowth) toward becoming behemoths.(This is the over simplified iteration of why I should be invested, based on what I’ve learned from reading Saul’s Board (fully explained, to the best of my ability, in my 7/30/21)

Often what I’ve written below has been said before; but, it was like the first time for me because either I re-read it or more likely it was just written out differently compared to the first time I read it.

What I did:
Sold 9% of ~18% position in Datadog to purchase 39% more of my 4.6% position in Monday.com after listening to Mondays Conference Call and going through their Slide Deck.

Why I did it:
I heard more color on Mondays method for company performance, Management is obviously has the levers needed to steer this companies operational performance. I don’t know what initiatives were cut to decrease opex (Hiring last quarter being +75% YoY doesn’t explain). But I like it.

That’s not to say I have less confidence in Datadog. I had to get this money from another position. I still have a ~17% position in Datadog.
After DDOG Q2/22 Earnings Report:
Peter Offringa at Softwarestackinvesting.com wrote:
“Datadog retains several advantages. I think these position Datadog for durable growth and even re-acceleration once the macro headwinds subside.”
Bert Hochfeld at Tickertarget.com-
“free cash flow margin this quarter was 15%-that is a significant decline basically driven by the fall in deferred revenue balances (Me here: Management explained that some customers have gone to pay-as-you-go). The fall in deferred revenue balances had more to do with timing of invoices and contract duration than anything existential”

(Me here:From the CC reguarding low guidance and perhaps Deffered revenue resulting in drop in FCF.)
David Obstler
… we did say that in the level of conservatism that was introduced to some clients that they may have stayed more into their previous commit plus on demand. Because of that, that doesn’t for that situation affect the (future)revenues because they’re still consuming the same, but they may want to retain more optionality.
This is really sort of in looking at financial management with level of uncertainty. You generally would pay a higher price if you stayed that way, but you’d be trading off the higher unit price, the marginally higher unit price for the more optionality.
And we did see some of that. We don’t know what’s going to happen next, but we would think that if we continue to have macro uncertainty, there will be some customers that will opt for that type of pattern relative to the commitments.

Me again:
As revenue growth rates were catching up after the marked albeit brief COVID slowdown, we saw acceleration in revenue growth for just about a year. Despite that acceleration the compares this year were relatively easy. But, this last quarter and over the next couple quarters, there may be some difficult YoY compares (IMO, there’s going to be another ‘perceived’ drop in company performance, as measured by YoY Rev growth rates). That should only last at most a few or more quarters, so just a small trim in Datadog.

What I did:
I sold ~30% of my 6% Monday position to add the money to increase what had become (due to others share price gains) only about an 8% position in Crowdstrike.

Why I did it:
No new revelation here; although, thanks everyone for the discussions on Crowdstrike. I also re-read what I wrote about the winners in Federal spend in ZeroTrust, over the next couple years, being determined in the next couple quarters (I got this insight from Muji at Hhhypergrowth.com). Although I’ve vacillated in my conviction in Crowdstrike over the three years since taking the position, I believe my increasing to a 10% position better represents my conviction regarding the potential that Crowstrike is going to absolutely crush their Cloud Category, over the next 2-3 years from now. I took the money from Monday because I didn’t want to take it from anywhere else and Monday having my least conviction among those in my portfolio, for achieving behemothdom🤔

What I did:
I sold 1/2 of my 4% position in Monday.com to add some to both Bill.com and Crowdstrike.

Why I did it:
I bought 10% more Crowdstrike making up for my prior selling, because of my decrease in confidence due to my acknowledging that I was getting a little confused about all the layers of Security, as mentioned on my post on 6/14/22. My current view, thanks to Muji at Hhhpergrowth.com and Mathew Prince CEO/Founder of Cloudflare here https://zerotrustroadmap.org, I’m much more confident.
Muji’ Premium service is just the best and getting better. Here’s just a little.
Crowstrike is:
Scaling Customers Muji- They (as well as SentinelOne) do not count the clients of managed service providers (MSPs) that they are overseeing as individual customers. So there is a huge hidden bubble of customers of MSSPs (log mgmt-as-a-service) and IRs (incident response & remediation) that adopt these platforms. We heard last Q that partner revenue grew ARR +83%, with MSSP alone growing +200%!).
Scaling Operations This is observed by there FCF margins of 32.3% and Mgmt mentioned during IR day that they could 4x ARR from here ($1.7B FY23 ARR could be $7.0B).
Scaling their Platform Customers using 5+ modules went from 50% → 59% over past year, while 6+ went from 27% → 35%…dropping the 4+ products KPI and replacing with 7+.
growing their Moat and TAM (1st Threat Graph, then the Intel Graph. And now the Asset Graph- Muji, This new Asset Graph allows CrowdStrike to take posture management (vulnerability, identity and permission management) to the next level by offering a centralized dashboard that automates and contextualizes the tracking of changes to configurations…of assets).

Crowdstrike (+2.9pp)and MS (+3.2pp)are the only companies taking more Market Share than Palo Alto’s +0.3pp . ). I can not recommend enough Muji’s Premium Service at Hhhypergrowth.com.

I added 12.5% more to my Bill position before todays release, I did this in part due to their strong share price gains and to correct a bad decision to sell some Bill.com in the past. After reading this recent thread here, https://discussion.fool.com/billcom-expectations-and-macro-impac…, I reviewed my notes regarding how well Bill stood up in those first couple COVID quarters. I don’t factor macro; but, I do love resiliency. IMO, Bill’s company performance held up well primarily due to 80% of their business being recurring. Add this to the fact that once Bill takes over the financial activities of the SMB, Bill.com is very sticky (got this from a personal conversation I had with Bills last VP of International Sales). Combine that with the mushrooming customer count, due in part to the network effect between their more than 380,000 customers (as of Q3),augmenting Bills ability to scale their GTM, at a faster pace than overall market adoption of the Cloud, and this all gives me great confidence that Bill will continue to crush it.
Q4: Bill.com now has more than 400,000 paying customers. There are more than 30 million small businesses in the U.S. and 70 million globally. Rene Lacerte, CEO/Founder, Q4CC , “We managed more than $225 billion in payments and our network grew to 4.7 million members that have originated or received an electronic payment through our platform.”:flushed:.
I’m looking to add here🧐.

Each company above is executing well on achieving their grand vision. Given the expected adoption rates for the technologies these companies are selling https://www.gartner.com/en/information-technology/insights/t… and each company’s proven ability to Scale their customer count, Scale their Operations, Scale their Platform, and keep on Expanding their Market, IMO, these companies are destined to become Cloud Category Crushing behemoths. The allocations they have in my portfolio reflect my confidence level in each company’s likelyhood of advancing toward this, while their revenue growth continues at or near present levels and while they continue show the ability to be extremely profitable, at their discretion.

8/31/22 (after hours before CC)
What I did: Imsold 30% of my 16% position in MongoDB (average price of $300/share) and bought more Cloudflare @$63.

Why I did it:
I believe it won’t be long until Mongo is re-accelerating revenue growth, which was this quarter adversely effected by the mid-market’s customer usage trends. Atlas is now 64% of Revenues. I’ll just be waiting with 10.3% of my portfolio in MongoDB.
With the sale, I bought more Cloudflare because I just love the fact that Cloudflare Management has so many levers to pull to adjust for an often changing sales environment.

When I make investing decisions for all but Bill.com and Monday.com, I’m increasingly thinking out 3-5 years out compared to my usual 1-3 year time frame. I’ve been in Monday a year now and although I have some confidence in their growing as fast or faster than the high rate of adoption for their technology, outlined by the above mentioned Gartner report, I’m not so confident in their relative dominance with their competitors. The others in my portfolio have little to no competition, IMO. I wish I’d had more in Bill and Crowdstrike prior to their respective earnings and am looking to add to both, likely by selling the little bit of Monday, despite Mondays faster revenue growth.

When I do make a short term decision, it’s almost alway based on an obvious market disconnect between how the companies are performing and a share price over reaction based on something outside of what the companies are doing.

Heartfelt thanks to those following the rules of this great Board! I’m grateful to be one in a group of individuals who’ve come together with these rules as an agreed upon standard.

Special thanks to Saul and all the Board Managers for insisting on these now absolutely necessary standards of conduct. https://discussion.fool.com/monday-morning-rules-of-the-board-34…

2020 Portfolio Summaries here: https://discussion.fool.com/jason8217s-2020-port-review-34708368…
2021: Porfolio Summaries here: https://discussion.fool.com/jason8217s-december-portfolio-decisi…
1/31/22 Monthly Portfolio Summary here: https://discussion.fool.com/jason8217s-january-investing-decisio…
2/28/22 Monthly Portfolio Summary here: https://discussion.fool.com/jason8217s-feb-investing-decisions-3…
3/31/22 Monthly Portfolio Summary here: https://discussion.fool.com/jason8217s-march-portfolio-summary-p…
4/30/22 Monthly Portfolio Summary here: https://discussion.fool.com/jason8217s-april-monthly-summary-351…
5/31/22 Monthly Portfolio Summary here: https://discussion.fool.com/jason8217s-investing-decisions-for-m…
6/27/22 Monthly Portfolio Summary Here: https://discussion.fool.com/jason8217s-june-investing-decisions-…
7/31/23 Montly Portfolio Summary here: https://discussion.fool.com/jason8217s-july-investing-decisions-…