Jason’s January Investing Decisions

Performance for each of the last four years, since I started trying to follow the rules/principles in Sauls’ Knowledge Base and his chosen posts in the Right Side Panel, here.

2021 > +46.8%
2020 > +203% 
2019 > +32.9%
2018 > +38.9%
2021>.     Month.          YTD
January >  +3.6%.         +3.6%
February> (-)0.87%.       +2.7%
March >.  (-)13%.        (-)11%
April >.   +13.56%        +1.37%
May >.     +5.35%.        +6.8%
June >.    +15.2%.        +23%
July >.    +5%.           +29%
August >.  +24.3%.        +60.5%
Sept>      +2.9%          +65.22%
Oct>     . +16%.          +91.7%
Nov>.     (-)14%.         +54.38%(given in error).  Actual YTD 64.8%
Dec>      (-)11%MTD.      +46.8%YTD

2022>.     Month         YTD
January: (-)22.3%        (-)22.3%

         Jan 31  Dec 31 Nov 30  Oct 31. Sept 30.  Aug 31. July 31. June 30.  May 31  April30.
Upstart   10.47% 11.28% 11.73%.  25.27%  27.52%.  22.47%.  14.76%.   0%.      0%.     0%.
Datadog.  17.54% 16.60% 16.28%.  11.91%  16.39%.  16.43%.  16.42%.  16.21%.  16.63%. 16.83%
Cloudflare15.22% 13.48% 14.06%.  13.23%.  9.33%.  14.45%   17.60%.  16.48%.  18.92%. 25.12%
Monday.   15.08% 14.39% 17.92%.  10.37%.  8.72%.   0%.      0%.      0%.      0%.     0%
Lightspeed.0%.    0%.    0%.      9.75%.  8.78%.   4.40%.   0%.      0%.      0%.     0%
Zscaler.   9.26%  8.99%. 8.64%.   7.06%.  6.51%.   0%.      2.75%.   0%.      0%.     0%
Snowflake 13.25% 12.69% 11.35%.   8.84%.  7.51%.  10.32%.  12.67%.  12.10%.  12.20%. 15.68%
ZoomInfo. 12.69% 11.11%. 9.22%.   6.72%.  7.09%.   7.75%.   7.98%.   8.12%.  10.50%.  6.32%
Crowdstrike6.51% 11.45%.10.81%.   6.84%.  8.14%.  19.12%   21.50%.  22.36%.  24.19%. 24.05%
Docusign.  0%     0%.    0%.      0%.     0%.      0%.      6.32%.  10.88%    6.46%.  7.75%
Pinterest  0%.    0%.    0%.      0%.     0%.      0%.      0%.      0%.      0%.     4.46%
OKTA.      0%.    0%.    0%.      0%.     0%.      0%.      0%.      0%.      0%

Last month, when I wrote my portfolio summary, I was in a Covid induced mental fog of sorts. In that summary, I referred to RMTZPs post regarding understanding P/S as being essentially the Markets’ expectation of the size and type of an earnings ‘surprise’. I added a link to his post and I do recommend reading it in its entirety. Nonetheless, I neglected to make my main point entirely clearly. It is this…
I believe our advantage we have on this Board lies in our combined ability to see upcoming surprises in company performance before the wider Market does😁 (as RMTZP wrote, Not market timing, not momentum investing, no hypothetical gambles – just a relentless focus on execution. of the company, not the stock price.
Today I’m suggesting that the Numbers in Quarterly reports are a kin to the individual trees in as much as multiple other factors are the forests’ ecosystem. When evaluating future growth in Enterprise Sales we should not be lookimg at quarterly numbers in isolation. They are lagging indicators at best. When early prediction of upcoming surprises in execution for our companies is the goal, the ability to see the entire ecosystem of the forest is necessary. To maximize this ability requires this type of crowdsourcing.

Saul has warned of going too far into the weeds of the technologies used and I agree. Without going too far out into macro factors either, I’m suggesting we focus more closely on forward looking indicators of market adoption of the technologies our companies are selling into (eg/This month I used: Benedict Evan’s latest state of technology report; The State of SaaS Sprawl report,-Security, Engineering, IT, and Product Mgmt; Gartner: New Digital Experience Trends, and Gartners’: hype-cycles for SASE Convergence and for Security, etc, etc). Please tell me your go to publications and why you recommend them so highly, via email at JasonEmery.PT@gmail.com. :pray: I’d like to put together a referrence catalog of sorts, if possible.

Now I got that… and Covid out of my system, on to what I believe was my biggest lesson this month: I couldn’t help feel the pull of confirmation bias when explaining why I had made my trades this month. There were just two. Writing down my reasons, more fully, prior to making each trade has been extremely helpful in my struggle to avoid this bias (believe it or not I wrote this prior to Mizzmonika’s post titled ‘General Learnings (and applied to Upstart) https://discussion.fool.com/general-learnings-and-applied-to-ups….
I’m noting this post above in appreciation of how well crafted it was; but also as, an explaination for why I never let Upstart get below 10%. I couldn’t have written my reasoning any better. In addition to the reasoning in that post, I believe that the moat created by first mover advantage afforded by AI/ML is enough for me to be more forgiving of the retroactive indicators of seemingly lumpy Company execution. Meanwhile, Upstart is Crushing their Cloud Category.
Bert also said it well at Tickertarget.com, IMO, where he wrote in some detail, on 1/25/22, about Upstarts increased delinquencies. More Simply, it’s this bit of it that also conveys why I’ve held at least a 10% position in Upstart since last June.
Bert Hochfeld,… I> AI is just a piece of software that allows users to plug in parameters to achieve certain pre-determined levels of risks and returns. It can be used to minimize defaults, it can be used to maximize yields, or more likely to maximize risk-adjusted yields. It is almost certainly going to improve on the results of FICO scores in terms of its predictive capabilities, and when used repetitively, or “trained” as it is called, it will become increasingly accurate. Absent some exogenous event, some kind of colored swan, it will simply allow users of the technology to map their requirements more closely onto a body of loan applications. But to repeat, it will not eliminate default/delinquencies unless it is tasked with solving for that, to the exclusion of yields.

When reading the following keep in mind that this portfolio has dropped ~50% recently; but, it remains ~85% of what we will live on in retirement. 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.

2 trades this month:
What I did:
I sold 17% of My 12% position in Crowdstrike to buy back 70% of the Monday shares I sold last month. I had sold those Monday shares to get Cloudflare back up to equal weight.

Why I did it:
Last month, I had sold Monday shares to bring Cloudflare back to equal weight stating that I’d done this because I hadn’t known Monday management very long. Well, after a week of isolation due to my getting COVID while in Hawaii, I spent a lot of time reading about Monday and watching perhaps most of their YouTube videos. I didn’t make this trade because I have less conviction In Crowstrike than Monday.

I believe Crowstrike is making all the right moves, has a better than a Zscalers chance of reaccelerating sales, as Zscaler did last year, given the tailwinds and therefore IMO Crowdstrike is likely to surprise this quarter. (Remember…per the Crowstrike Website, Powered by the proprietary CrowdStrike Threat Graph®, CrowdStrike Falcon is correlating approximately 1 trillion endpoint-related events per day in real time from across the globe, fueling one of the world’s most advanced data platforms for security, as of Sep 8, 2021. I quote them here regarding this because my thesis is: Crowdstrike will continue to Crush their a Cloud Category fueled by Crowdstrikes AI further differentiating them from their competition. It’s my understanding that the powerful First Mover Moat that AI creates is constructed by the perpetually increasing massive amount of data collected by the first mover. IMO, it’s primarily this moat that will sustain Crowdstrike through periods of changing market conditions (eg competition, Pandemic, macro-economic uncertainty etc).

I can’t say that I believe Monday will surprise Mr Market due to any one thing about Monday; besides any reason that I have not already said before. Monday is scaling into a truly massive TAM. I don’t think Mr Market is considering Monday to be The No Code Automation tool that is truly a Work OS. And if so, I don’t believe the market yet appreciates the efficiency with which Monday Management will scale their business. I believe Monday will easily scale at the current rate of adoption by and within the enterprises which are increasingly desperate in their need of this OS in order to stay competitive. This is observed in retrospect by the accumulating ARR and growing NRR and prospectively in Surveys of decision makers. By 2025, 70% of new applications developed by organizations will use low-code or no-code technologies, up from less than 25% in 2020, per Gartner- New Digital Experience Trends. So I expect growth-durability to continue at ~100% for at least another 1-3 years. I expect that the market will be surprised in the near future by this predicted level of growth-durability and this will show up in rising share price soon.

I’ve become more confident in my belief that Monday is more likely to surprise than Crowdstrike. But, If Crowstrike beats their guide by more than 8 or 9% I’m likely to be reversing this trade.

What I did:
I sold 40% of my 10% position in Crowdstrike to buy some Cloudflare at around $103 and to top up Monday and ZoomInfo again.

Why I did it:
Despite Cloudflare needing to build things on which they provide their services(POPs), In their new digital experience trends in Nov-21 Gartner (as discussed by Muji in Automating the Workflows), predicts that 85% of orgs will be cloud-first by 2025, and 95% of workloads (vs 30% in 2021). One of the key emerging trends they are focused on for 2022 is SASE Networks. Gartner estimates that in 2022, end-user spending on SASE will total $6.8 billion, up from $4.8 billion in 2021. In addition, by 2025, more than 50% of organizations will have explicit strategies to adopt SASE, up from less than 5% in 2020. Based on this and other similar observations, I also believe Web3.0 will have a meaningful impact on Cloudflare’s revenue growth in the next 1-3 years.
In last months portfolio review, I stated that I held each of the companies in my portfolio with equal conviction. I realize now, my conviction level is less for those companies focusing on Security. The reason I’ve been holding less Zscaler thus far has been due to their lessor advantages in being able to provide a programmable network, when compared to Cloudflare for example.Security alone is a cost without direct ROI. Recognizing my own past reasoning helped make it easier to take advantage of what I consider unreasonable price action in the market again today, making it easier for me to sell Crowdstrike to buy more of these other companies when their share price dropped more than Crowdstrike. Is that confirmation bias at work? Dunno. If I reverse it for a lessor reason then perhaps it was.

Heartfelt thanks to those following the rules of this great Board! I’m proud 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 rules and the work they do to keeping this Forum going.

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…