Jason’s March Portfolio Review

This investment portfolio is now more than 95% of what my wife and I will live on during retirement. I’m 53 and she’s 51 years old. We plan to retire in 4 years.

Some days we lend a hand and some days we need a hand.
I do realize that the fact that such companies, as those discussed here, exist at all is cause for humility. I didn’t build them. Nor did I originally bring them to this great Board. I feel profound gratitude to both the CEO/Founders of these companies and those here that help me in discovering/re-discovering each of them, everyday.

When reading the following keep in mind that I chose years ago not to add money. So to buy something I have to sell something else.

In February I felt like my investing was a little scattered https://discussion.fool.com/jason8217s-feb-portfolio-summary-347… . In March I tried to simplify some things. My attempt to simplify led me to paraphrase a few Principles I learned here.
To help make investing more simple, I tried to focus on 2 ideas.

  1. Buy Category Crushing companies (see explanation of this in my January Portfolio Summary here https://discussion.fool.com/jason8217s-jan-port-summary-34738748…)
  2. Category Crushing Companies will always be expensive. Buy on the way up, on the dips if possible (Looking at you Snowflake). Sell only if the story and/or the numbers change for the worse. Or, I have more confidence on another companies performance going forward.
    To help make portfolio allocation simpler, I tried to focus on one idea.
  3. My confidence in owning more or less of a company is determined more now than ever by: What level of confidence do I have in the CEO/Founders of each company and their ability to manage my money for me.
    My faith/confidence in the CEO is determined by their ability to communicate their vision (my being able to understand how the growth of the company will be exponential from here and then how well do they execute as measured by top and bottom line numbers.

Total Portfolio +/-%: (-)11% Year to date; (-)13% month of March

Current Portfolio.
Crowdstrike 24.51%
Cloudflare 23.82%
Snowflake 18.01%
Datadog 17.85%
Docusign 7.74%
Okta 4.89%
Pinterest 3.18%

What I did in March to get here and Why:

3/5/21-Holding a 7% position in OKTA.
The more I look at the OKTA Quarterly Announcements the more I believe buying Auth0 is going make OKTA the much reported Identity Cloud McKinnon says it will be. Eucinio Pace, CEO/Founder of Auth0 says together now with OKTA it’ll only take two years to achieve becoming The Identity Cloud. Becoming the Identity Cloud is going to lead to a lot of domination/consolidation in the next two years. Does that mean stock price goes up? I believe it does.

3/8/21- Adding to an 8% position in Snowflake.
After re-reading the Snowflake Earnings report and thinking about the Call I heard, I want to give more money to Frank Slootman their CEO, to manage for me. (see my post on the Snowflake Premium Board at TMF here https://discussion.fool.com/4056/my-notes-from-the-conference-ca… ). SNOW share price was $225 today when I sold Sea (Sea is too hard to follow and some more reasons for selling 1/2 of it last month here https://discussion.fool.com/jason8217s-feb-portfolio-summary-347…) and brought my position in Snowflake up to 10%.

3/9/21-Holding Docusign at 9%
I sometimes think I’d like to sell some Docu to add to OKTA because of what CEO of OKTA, Todd McKinnon said at a recent conference about their executing well on a massive vision for the future of his company that I also believe is happening, beyond the vision Of AuthO CEO Pace https://discussion.fool.com/hi-greg-loved-this-last-post-of-your… but all the numbers are still accelerating for Docu https://discussion.fool.com/i-just-have-to-thank-you-for-a-prior…. Thanks again for this presentation of Docusign numbers, Stocknovice.

Crowdstrike 25.85%
Cloudflare 23.78%
Datadog 17.37%
Snowflake 10.25%
Docusign 9.36%
OKTA 8.03%
Asana 5.36%

Being down more than 24% in the last two weeks (was my lowest point for the entire month of March) , from ATH on 2/19/21, IMO was due entirely to market rotation to previously negatively impacted sectors when bond rates went up and indicated to many investors/algorithms that the end of the Pandemic is near. Despite of or because of my being down so much, on 3/9/21 I experienced my largest one day gain ever, nominally. Thanks Saul, for reminding us to stay invested.

I sold a little OKTA and Asana to buy a 2% trial position in Bandwidth, @$131.20,. Bear presented the numbers WSM posted here: https://discussion.fool.com/to-be-consistent-with-what-i-just-th… and in summary
Beth Kindig, last August wrote and has been recently republished at Seeking Alpha stating-
Major customers for Bandwidth include Zoom, Google, Cisco, Microsoft, Skype, RingCentral and Square. In this case, we do not need to predict or speculate who will take market share from the telecom hardware systems as all of the bigger players use Bandwidth. With that said, I’m an early Zoom bull and eager to capitalize further on this trend.
So, they have accelerating top and bottom lines and market domination, what’s not to like.
3/16/21Selling a little OKTA, Docusign and Asana to buy a 3% position in Pinterest, again.
After reading WSM’s DD into PInterest here https://discussion.fool.com/pinterest-pins-analysis-and-q4-2020-… and loving all the details on Pinterest finally monetizing their massive growth (I was in and out around $25/share a year ago). I now choose Pinterest to be my Didgital Advertising play. I expect Pinterest’s Signal to Noise ratio, regarding their knowing when and how to deliver relevant and wanted advertising, being greater than anyone else due to their being Search within the customer journey from Inception.
I expect their revenue growth to increase not just due to Q1,Q2 comps being easy; but, by virtue of how they focus on developing the advertising tools throughout the customer journey, from inception.Their integration with Shopify is genius and why wouldn’t Pinterest be a storefront for Amazon, even more so than for Shopify. I love what they’re doing with Shopping, leaving out the low margin logistics part of it.
If your interested in Pinterest, everyone should read and rec the above post by WSM-
EBITDA% has shown increasing operating leverage, increasing by more than 20%pts in Q3 and Q4 of last year vs the same quarter in 2019. If that theme persists in Q1 of 2021, then EBITDA% could be positive for Q1, which is seasonally their weakest, which would be a big inflection point. Pinterest 2020 revenue run was $500M and they were nonGAAP profitable this Q4.
I’m in for 3% today @ 73.11 for the numbers and the story, despite not being strictly a Saas or perhaps not having the exponential potential of the others in my portfolio. Pinterest being up 5x in the last year has not deterred me. I’ll likely keep this one under 5%, due only mostly to poor ARR (I’ll explain a little on this later).

After CRWD’s Q4,
I think a few words for why I’m keeping CRWD at a 25% position in my portfolio are needed given the decline in Current Q Rev Growth number.
Most impressive CRWD numbers, IMO
Beyond the stellar 37% FCF which shows amazing efficiency, Total Rev to Op ex,
The company’s increase in deferred revenue grew from $89 million in fiscal 2020 Q4 to $148 million this quarter-that brings the growth in the calculated billings metric to $413 million for the quarter, up by 71% year on year. The company’s RPO balance increased by an extraordinary 27% sequentially and by 78% year on year.
Why were these number the most impressive of the many great advances by Crowdstrike?
The jump in RPO balances is going to be strongly correlated with the sequential increase in revenue next quarter (Looking at you Snowflake). And with the current 20% off ATH, IMO CRWD is a buy here. And I did top up after earnings just a little despite my high relative position.

After meeting with some like minded Friends and some seriously lengthy thinking including how best to lower my stress levels (see top for simplifying the investing process), I decided to concentrate more around core holdings. For me, following companies for which I have smaller allocations and correspondingly less confidence takes more time/stress than keeping higher allocations in positions with greater confidence.

I sold my 5% in Asana and 2% in BAND and added 98% of it to SNOW @$221 elevating SNOW to a 16% (I took the little left and added to Pinterest).
I am one of those, now, who love the predictability of Snowflakes Story and that of the numbers. While currently great, I believe they are only getting started. Snowflake will enable Enterprises to use the world’s data as a single source. A place to ask questions that is easily seamlessly and frictionlessly traversed as if it was one giant database, where AI/ML is sifting out meaningful answers.
As I wrote on Saul’s Board on 3/4/21 here https://discussion.fool.com/alphalites-questioning-the-value-of-…
Half the RPO gained from new customers will be recognized in the second half of the year, because there is six months to migration eg the 19 Fortune 500 added this quarter added no revenue this quarter; but will have used half of what they purchased in the second half of the year. With second year renewals, this is where customers ‘typically going to multi-year contracts’ after recognizing the value proposition.
With the ‘decades’ of data Enterprises have to process, this appears to me like they’re going to see a perpetually larger RPO backlog (and continued +100% Revenue Growth for the foreseeable future). That makes The current quarter rev growth a lagging Indicator, right.
It was listening to interviews with the CEO of Snowflake, Frank Slootman, and specifically the Earnings Conference Call that raised my confidence that he could better manage my money than either of the CEO’s at Asana or Bandwidth. I felt better able to understand how the growth of the company will be exponential from here and then also more confident in how well they are and will execute as measured by top and bottom line numbers.
Frank Slootman on the CC,
We have long sold almost exclusively on architectural distinction, which has served us well and we will continue to do so in situations that warranted. But our large enterprise focus has informed an evolution to go-to-market motion that is industry specific and outcome oriented. They’re learning best use cases of the environment they’re providing to Large Enterprises and using those as proof of concept to sell to other large Enterprises.
For all my notes on the Snowflake Q4 see this link to the Snowflake Premium Board at TMF https://discussion.fool.com/4056/a-correction-to-my-last-post-if…

Why did I choose to sell Asana and not Pinterest for the money to buy more Snowflake? Or said another way, the reason I had to keep Pinterest, despite my belief that Asana (and Bandwidth) will do very well is because I more easily enjoy hearing and reading the quarterly reports of Pinterest. I believe the value of revenue is greater for Saas with ARR and RPO (Pinterest has repeat business (eg from Ad agencies); but, this is seasonal and they don’t put up any RPO numbers). But when the numbers on top and especially bottom line are this much better… and as I noted above I think this is just getting started for Pinterest…well that’s why I sold Asana and not Pinterest.

Why I sold Bandwidth and not Pinterest has more to do with my not understanding the moat around Bandwidth being a tier one network provider? As far as I can tell this is a designation that Bandwidth obtained that is an artifact that has more to do with old telecom monopolies of the past and may not hold up well in the future.

My choosing to further concentrate my portfolio this month has, so far, delivered on my goal of lowering my stress level. The stress I had associated with following so many companies so closely. The rules of this board allow for my following my personal comfort level in this and many many other ways.

I’ve yet to bring any type of Deep Dive in a new company to this Board. I’m most grateful to those who have.

Thanks to all those that follow the rules of Saul’s Investing Discussions.

Happy Hunting,