mekong22 Dec 2021 portfolio update

[mekong22]

Happy New Year!

2021, at least when it comes to my portfolio came in like a lion and went out like a lamb.

Going into 2020, I was hoping to gain +25%, and ended the year up +140%

Going into 2021, I was again hoping to gain +25%. In early February, my biggest holding (Magnite) had already more than doubled from $30/share to more than $60, while other big positions in my portfolio, shot out of the gate hot, and my portfolio was up more than +40% only five weeks into the year and I was quickly re-thinking my goal of gaining 25% this year.

Well that seems like a lifetime away now. Magnite came back to earth, I made a bad decision to let go of my Datadog shares when I thought their revenue growth was going to trend downward, and then I started a position in Teladoc that has not fared well at all. That leaves me with a portfolio that finished the year down double digits.

While I haven’t read the tea leaves so great recently, I still feel like I own great businesses that have increasingly bright futures ahead and, especially with the wonderful groupthink and knowledge sharing of this board, I am really optimistic for the future of my portfolio.

Year To Date Performance

 +5.0%  YTD Jan 
+14.6%  YTD Feb 
 -9.2%  YTD Mar
 -8.2%  YTD Apr
-19.7%  YTD May
 +7.9%  YTD Jun
 +3.8%  YTD Jul
 +5.6%  YTD Aug
 +7.2%  YTD Sep
+10.5%  YTD Oct
 -7.8%  YTD Nov
-16.8%  YTD Dec

My portfolio was off to a rough start in December when Docusign dropped by -40% early in the month after earnings, despite a good quarter, due to pessimistic new billings and guidance. On top of that, Upstart moved down a lot, we had general weakness in tech companies at the end of the year, not to mention likely some tax loss selling by shareholders driving down the prices of some of the companies I own, particularly Magnite, Teladoc, Docusign, Upstart, etc.

And for the last three years:

 +57.1% Full Year 2019
+140.6% Full Year 2020
 -16.8% Full Year 2021

So even with the losses in 2021, my portfolio is still worth more than 3x times where it stood at the beginning of 2019. The porfolio is today worth much less than where it was at the peak in February when I was up 40%+, which is a little painful to think about. But if you told me three years ago, I would more than triple my portfolio, I would have been thrilled. Hopefully 2022 is more of a 2019/2020 than a 2021 year for me.

December 31, 2021 Allocation

The Trade Desk (TTD)  23.5%
MongoDB (MDB)         23.0%

Magnite (MGNI)        13.9%
Nutanix (NTNX)	      12.8%

Upstart (UPST)	       6.8%
Docusign (DOCU)        5.2%
Teladoc (TDOC)         4.9%
Pubmatic (PUBM)        4.7%

[Monday.com](http://Monday.com) (MNDY)      3.0%
SentinelOne (S)        2.2%

For better or worse, my top holdings haven’t changed too significantly over the past year or two. Almost a year ago, at January 31, 2021, my four biggest holdings were the same four companies, TTD, MDB, MGNI, and NTNX. Going back another year, to the beginning of 2020, TTD and MDB were two of my top three (along with Amazon, which had been an incredible +1,000% investment for me over the previous few years).

Even going all the way back to the end of 2018, MongoDB was one of my top holdings. Unfortunately, I sold off slices of MDB over the past few years, yet it has stayed near the top of my portfolio allocation as it has gained 500%+ over that stretch, much more than offsetting the portions that I sold off.

I have two new positions this month, Pubmatic, and Sentinel One.

Pubmatic PUBM

Thanks to wsm007’s writeup here:

https://discussion.fool.com/pubmatic-positive-analysis-34985342…

I gave Pubmatic a bigger look and started to challenge my own preconception that Magnite will be the runaway winner on the sell side platform of ad tech. While I still have high confidence in Magnite (especially from the valuation right now), I can see Pubmatic also being really successful in this space, maybe even potentially overtaking MGNI.

Pubmatic’s focus is less concentrated in CTV than Magnite, which I don’t think is necessarily a good thing, but it’s hardly a negative either. Pubmatic’s organic growth has been growing at a much higher clip than Magnite in recent quarters. Tho keep in mind Magnite has had to focus on a lot more than just core expansion, as they have integrated three significant acquisitions over the past year, which I still believe will position them to really benefit as CTV becomes the lion share of television advertising in coming years.

That being said, you can’t ignore PUBM’s success. And Pubmatic is founder led (ala Jeff Green at TTD) and it gives me further confidence that they deserve at least some space in my portfolio today.

Given that TTD and MGNI already make up a large position of my portfolio, I didn’t want to increase my exposure to ad tech much more, so I initially sold off 1% each of TTD and MGNI and started with a small 2% starter position in PUBM. As the month went on, and I did a little tax loss selling later in December, I couldn’t resist adding a little more to Pubmatic, and I’m happy with it being close to 5% right now, as I follow the story over coming quarters.

I didn’t otherwise make a lot of other big moves this month. I sold off some of my Upstart, largely for the tax losses (Selling off the last of my appreciated AMZN shares in early January, plus big gains on CRWD and DDOG early in the year, I had a lot of realized capital gains this year and a high tax bill, despite my less than stellar overall performance since 1/1/21). Thanks to the great discussion on Sentinel One on the board, I felt confident making a small starter investment, and used some of UPST proceeds to add to the PUBM, and I also added some DOCU after the severe post-earnings negative reaction that Docusign had early in the month.

2021 Hits and Misses

Given that there weren’t any earnings releases for my companies this month, other than those I already commented on in my November writeup last month, I’m going to do this month’s commentary a little differently, to look back at some of my good and bad moves during the year of 2021.

The Bad

Let’s start with the poor moves, given that they drove my portfolio’s underperformance overall this year:

Bad #1 Not locking in some early Magnite gains in February

In early February, after Magnite announced the SpotX acquisition, MGNI shares shot up to $60+, more than 5x times what I had bought many of my MGNI shares for around $10 in November, about four months earlier. Magnite quickly became more than 40% of my portfolio. I still thought it was cheap. I thought it could pull back to $40-50, but that would be ok, I would be better off holding on to my shares believing they would be worth much more in 3-5 years.

Well, here we are at the end of the year, and stock is below $20. I did not see MGNI shares falling back into the teens. I do think the pullback is overdone. A company like MGNI that is digesting major acquisitions right now, is going to lead investors to focus on organic growth, which hasn’t been that strong the past couple of quarters, so I get why the stock is low, probably further pushed down in recent weeks by tax loss selling.

I do still believe 2-3 years or more from now, if they are successful, they could be a much bigger company. There are going to be several catalysts that should be a boon to, not only Magnite, but also The Trade Desk, Pubmatic, Roku, Digital Turbine, and all ad tech companies in 2022 and beyond:

• Overall economic reopening and growth once the pandemic is in the rearview mirror…however the timing of the pandemic is still a big question mark as most of us didn’t expect we’d still be dealing with the impact today, two years in, so this could be a second half of 2022 catalyst, or it may even happen later than that. One thing is for sure, eventually the pandemic’s impact on the economy will largely come to an end, and that will be a positive for all types of advertising.

• Microchips, particularly relating to auto manufacturing. Again, this will probably be a later in 2022 thing, but at some point, the microchip shortages will be resolved, auto manufacturing can return to normal, and those big car companies are going to need to start advertising for cars again. This is a big advertising industry and will have a real impact on all ad companies

• Travel – similar story to the microchip/auto item, eventually travel will get back to normal, people will be going overseas and on many types of vacations that they haven’t even considered these past two years…that’s going to drive some real advertising dollars to all platforms.

• Midterm election political spend. After an expected slow political advertising year in 2021, this is going to pick up a lot in the second half of 2022

• Supply chain – at the end of 2021, particularly during the key holiday shopping season, many products simply couldn’t get onto the shelves. What little product certain companies had, essentially sold themselves out and didn’t need any advertising support. A year from now, I don’t expect that situation to repeat

• Continued shift from linear TV to CTV. Most ad industry executives seem to believe that, in a few years, 100% of TV advertising will be on CTV. That’s going to have a big impact on many ad tech companies, particularly Magnite that has put much of their emphasis on CTV going forward.

And all of that doesn’t even consider any synergies that may come from the ingestion of the various companies they’ve acquired since combining Rubicon with Telaria, SpotX and SpringServe

Bad #2 Selling out of Datadog early in the year

Yeah, this was a bad one. It wasn’t that long ago, in Q4 2020 that Datadog was my biggest holding. After a quarter or two of declining revenue growth, especially with my expectation that the pandemic would end earlier in 2021, I anticipated DDOG’s revenue growth rate to continue to slow during 2021. I sold off the last of my Datadog shares pretty early in ’21, and since then the stock has doubled. I got this one wrong and was probably too stubborn to buy back in when things started to turn. Part of that might have been due to other companies that I liked becoming cheaper during 2021.

I did have some nice gains on the shares of Datadog while I did own it, but there’s not much more to say here except that I blew it with DDOG by selling them when I did.

Bad #3 Buying into Teladoc

Although I didn’t own any TDOC at the beginning of 2021, it was firmly on my watch list coming into the year. The stock was close to $300/share in February, and then it started to come down sharply.

I initially bought in when the stock was around $180. I thought the valuation had gotten too cheap as I expected Livongo to continue to perform strongly and the rest of the core telehealth business to still be positioned well for what was likely to be a growing industry for the next few years, even coming out of the pandemic.

Well, the stock fell further to $120-130, when I built up my position further, and then in late November, the shares feel below $100 where they remain today. The whole combined company now sells for less than what Teladoc paid for Livongo alone.

While I wouldn’t make TDOC a major percentage of my portfolio right now, I do think the risk reward is pretty good for my keeping it as a medium size position. I think there is a lot of uncertainty regarding what the future growth rate will be once they lap the Livongo purchase. Competition will of course be fierce here and it’s a big unknown just how well they will compete with established healthcare players that are getting more and more into telehealth going forward.

Come summer 2022, I think I’m going to have a much better idea of where this company is headed. I could see myself selling some or all of my Teladoc shares midway through ’22 regardless of how things go. Right now, I think the odds are better that the outlook becomes a lot more optimistic than what is currently baked into the stock price and that the stock will be quite a bit higher by then. But I could be wrong and come to regret not selling the rest of it now and adding more to my other higher confidence holdings.

Bad #4 Selling Smartsheets to add to MNDY and UPST

It’s still early days for this move, but at least in the short term, this one has gone really poorly for me. I sold the last of my Smartsheets in Q4 to buy more Monday.com and Upstart. Since then Smartsheets has gone up about +20% while Upstart and Monday are down quite a bit. These investing dollars are worth about half of what they would be today had I held on the Smartsheets.

That being said, a year from now, I would be much better off having made these trades, we’ll see. This was however a bit of a cherry on top of the weak end to my 2021 investing year.

The Good

Good #1 Selling Crowdstrike in February 2021

When I sold CRWD in February, I went through some soul searching. I got more emails from people on this board that I really respect, urging me to reconsider selling out of Crowdstrike, that it really had me thinking about whether I made a big mistake.

Here we are at year end, and CRWD’s stock price is slightly below where it was when I sold out early this year, so at least that decision has proven to not be so bad. Granted some of the ways I redeployed those funds haven’t performed well either, but at least I’m not looking back at a situation that I completely blew here.

Good #2 Holding Tight with Trade Desk and MongoDB

My biggest positions in TTD and MDB, which I still own, I purchased at $11.40 (TTD in Jan ’19) and $57.39 (MDB in July ’18). Today those are at $91.64 (TTD) and $529 (MDB).

TTD was up about +20% in 2021, and MDB was up about +50% this year.

And both companies, I continue to believe are positioned incredibly to grow for years to come at high enough rates, to reward shareholders very handsomely from here.

Good #3 Got in and out of Applovin at the right time

This was a small one, but after reading a great writeup by Bert late in 2021, I put a couple percent into it when the stock was around $80/share. There didn’t seem to be much enthusiasm for the company on this board, and I decided there were better places for my month with companies that I would better be able to follow with like minded investors interested, so I sold off my Applovin shares just a few weeks later at an almost +40% gain. Since I sold, the stock has given back more than half of the gains I realized, so I lucked out a bit with the timing on this one.

Wrapping Up

I’ll leave it at that for now. It’s been a year of lots of ups and downs. At the end of the day, I continue be so thankful for Saul and many of the others on this board for being such an amazing group of people. Even when I don’t have the kind of gains and success that I hope for, I am learning and growing, and having a great time enjoying the process.

I look forward to another great year of discussions and successes in 2022. Thanks everyone!

-mekong

[ethan1234]

“My portfolio was off to a rough start in December when Docusign dropped by -40% early in the month after earnings, despite a good quarter, due to pessimistic new billings and guidance”

Thanks for the update mekong. I always enjoy reading your posts.

I wanted to challenge you on the above statement. I thought docusign’s 3rd quarter was atrocious and showed surprising weakness.

I was expecting an inline beat of around 5%, which would have been 558 million or 46% growth. Instead they came in at 545.5 million which was a 2.5% beat. The lowest beat that I have since keeping track. On top of that they were weak across the board.

This was obviously a surprise to management because they had told us to expect lower than covid growth but better than precovid which would put them as a low 40% grower, except they guided for a 29.3% quarter next quarter. Assuming they beat that by 3 % that puts them at 33% growth.

Customer adds are trending down rather rapidly, 96k → 65k - 59k.
DBNR is trending down 125 → 124 → 121 and since that is a rolling average the fact they reported a rather large drop is concerning.

Their call was not good, with talks of, “we would sort of take our eye off the ball there. I kind of own that aspect of it, where we realized we were not doing all the other motions we’ve done in the past.”

“part of the reason why we’re restructuring ourselves a little bit to make sure we can get back to the mode that has always been a successful part in driving that growth”

I don’t think DOCU is a broken company, but I get very worried when a SaaS company barely beats its own guidance and then on top of that has a terrible guide for the next quarter AND every growth number that I follow showed surprising weakness this quarter. Nobody expected DOCU to accelerate, but nobody expected them to slow as much as they did.

The good is they took responsibility for the quarter, the bad is that I don’t think they saw this coming, they continue to talk about CLM as if it won’t affect the numbers anytime soon, and e-sig slowed significantly. DOCU is long gone from my portfolio.

-e

[mekong22]

Hey ethan

I definitely understand your view, and certainly a lot of the market shared your reaction, hence the big stock drop after earnings. While last Q was by no means a “great” quarter, I still feel like it was a good one overall and keeps their trajectory where I’m hoping it will head in the long term. I guess it’s all relative to expectations and I do tend to try to look 2-3 years out.

I still have my notes with my expectations from a year ago, after DOCU announced the 1/31/21 quarter at the beginning of last year. They were coming off a pandemic tailwind year where their revenue grew at +49%, which was a major tick up from the +39% they grew a year earlier. At the time, I was optimistically projecting a +42% growth for 2021 (technically the fiscal year that ends in January 2022) which was well above the FY guidance at the time, which only implied a little over 35% for this year at the top end.

I thought I was being aggressive with 42% given that they were coming off such a uniquely strong year, driven by the remote working environement. The first couple of quarters of this year were a lot stronger than even I expected them to maintain, especially given the tough comps. But even with the less-strong Q3 they reported last month, and even assuming the “only” hit their Q4 guidance with no beat at all, they’l come in at +43% this year. Most likely it will be more like +44% with a small Q4 beat. That’s a fair bit higher growth than they had two years ago, when they were a much smaller company, and weren’t coming off such a one-time event impacting the comparison period.

When I bought much of my Docusign stake in 2019,they were growing in the high +30%'s, close to 40% and that’s all I really expected them to ever grow in the future. But…I could see them growing at a similar rate for several years and the valuation was reasonable…and I felt (and still do) that they have a lot of potential with new products especailly agreement cloud which is still at least a couple years away from significantly contributing. Even with the stock price collapse in the past month, those shares are still more than triple what I paid for them at the time.

So what I’m getting at, is that the higher growth 50%+ stretch over the past year was soomething I wasn’t banking on when I bought in, and yes the strock price probably got ahead of itself for a while, but if they keep growing in the mid 30%'s for a few years (they still believe there is lots of untapped TAM in esignature, not to mention international, as well as the potential for new products), then I expect shareholders will be rewarded nicely over the next few years.

My latest projectsions for Docusign that I prepared after their earnings release last month, which I feel are pretty conservative, are that they grow over the next three years at just 30%,30%, and 25%. Without even crediting them for likely continued margin expansion, that puts them generating gross margin dollars of more than $3.2 billion two years from now. For comparison, I project Datadog to generate only about $1.8 billion of margin dollars three years from now. Even Snowflake, if they can grow revenue at 75% over the next year, and then 65% in year 2, and 60% in year 3, they will only be around $2.8 billion of gross margin dollars three years from now.

So at the end of the day, I expected Docusign’s growth to slow down even sooner than it did. Obviously the market was more optimistic. But even despite those lower expectations, I still believe as a shareholder I’ll do great with DOCU over the next few years, and probably beyond.

and here’s a copy paste of my initial comments from last months’ portfolio update that I posted shortly after DOCU’s earnings release:

Docusign (DOCU)

My Docusign position is a lot smaller now than it was a week ago at November 30th, simply due to the drop on Friday. I listened to the earnings call yesterday and management seemed to almost intentionally be using lots of terminology that painted a negative picture. I mean the beginning of the call with the prepared remarks was really dark. It almost made me wonder if their lawyers made them sound really conservative and pessimistic or something.

But then when management was answering analyst questions, and got to speak off the cuff, it was a totally different vibe. The CEO has subsequently said that he plans to buy $5 million of stock if the price stays close to where it is now next week.

Revenue came in at +42%, which is definitely a slowdown from the 50%+ they’ve had during the pandemic recently, but I don’t think any of us expected that to persist forever. Their guidance for next quarter implies a +31% at the top end, which I’m sure they will beat and probably end up in the high 30%’s.

But I think what really spooked the analysts is that billings are projected to only grow +23% next quarter. Again, I’m sure they will beat that by at least a bit and I’m hardly surprised that there was a negative reaction, but I do think the -42% stock price drop yesterday was overdone. That being said, given the timing right before year end, it could easily fall further from tax loss selling. If you asked me a month ago, which of my stocks was least likely to fall -40%+ in one day, I probably would have said Docusign.

For some good news, their international business grew +68% last quarter and now represents 23% of total revenue. Net retention rate is still +121% (so this really shows they need to work on growing customers faster). They did add 59,000 new customers last quarter (now 1.1 million+ total customers) but they do have lots of small customers so those numbers have to be taken for what they’re worth.

They emphasized that existing customers are not leaving Docusign as the pandemic situation gets better. They said “nothing close to that” is happening, but they did emphasize they aren’t seeing quite as much cross selling or upselling recently.

The CEO says they think the signature business alone has a TAM of $25 billion, and DOCU’s total revenue is still only $2 billion, so he emphasized that they still think even the core e-sig business is “largely untapped” even before we start to think about how much contribution and growth might be generated in the future from other products such as agreement cloud.

Their new notary business has been enhanced and they now signed on Fidelity using it. M&T bank too, and they say M&T has expanded from 50 use cases where their staff used DOCU previously, to more than 200 today.

Margins increased to 82% this quarter, from 79% in the prior year, and subscription margins are now 84%, up from 82%.

Even after last week’s drop, DOCU shares are still about triple where I initially bought most of my holdings in 2019. While the next few quarters may not be blowouts, it’s a great company that is only going to be needed more and more in the future, and I do believe their complementary products will prove to be good investments over the coming years. I have no plans to sell any DOCU right now and may even add to it if it falls further over the next week or two. That being said, it’s not going to be a 50-75% grower like other companies discussed here, so I certainly get why it won’t be for everyone.

Anyway, I won’t go on any longer than I already have, especially since DOCU is not really as high growth as we typically focus on here. But I’m totally fine with Dcousign as a mid 30%'s grower. If it drops much further into the 20%'s, it would change my perspective. But while I don’t expect DOCU will ever be one of my biggest holdings, if they can continue to execute, they don’t need revenue growth of 50% from this valuation, and it may to be a nice contributor to my returns for years to come.

-mekong

[PaulWBryant]

So what I’m getting at, is that the higher growth 50%+ stretch over the past year was soomething I wasn’t banking on when I bought in, and yes the strock price probably got ahead of itself for a while, but if they keep growing in the mid 30%'s for a few years (they still believe there is lots of untapped TAM in esignature, not to mention international, as well as the potential for new products), then I expect shareholders will be rewarded nicely over the next few years.

Let’s dig into that a bit. I don’t think your logic is wrong…but I actually think you might be expecting too much. Expecting Docusign to grow at 30%+ doesn’t sound like such a big ask, right? But businesses either grow or die, and I’m not sure there’s much in the middle. Why is growth slowing? Where will it stop? What else might cause it to slow more? Or what else could go wrong?

A few ideas:

• maybe they are able to do 30%+, but EPS drops (at least sequentially) as they spend more to grow (that’s what happened to Zoom this last quarter)
• churn increases (why would this happen? maybe slow growth is due to competition)
• customer adds plummet (why would this happen? maybe slow growth is due to mkt saturation)

Those are just the first ones that come to mind. The point is, it’s all about expectations. I think it’s more likely that Datadog continues to grow at 70% for the next several quarters, than it is that Docusign will grow at 30%+ for the next several years. Both could certainly happen, but I think the value play is actually the more dangerous one based on what we can know.

You did say I’m totally fine with Dcousign as a mid 30%'s grower. If it drops much further into the 20%'s, it would change my perspective. But while I don’t expect DOCU will ever be one of my biggest holdings, if they can continue to execute, they don’t need revenue growth of 50% from this valuation, and it may to be a nice contributor to my returns for years to come.

I agree they could do well if they can continue to grow at 40% for a while. But if they drop into the 20% range, I think:

1. It could happen fast
2. It would cause another share crash

…but maybe most importantly, I believe the opportunity cost of being invested in the likes of DOCU instead of real hypergrowth companies is what will cost you the most. We’ve seen that time and again. Companies can disappoint even when expectations aren’t very high.

Do you have any examples of long term 30% growers besides maybe VEEV and TEAM? What I’ve seen from them is more like Cloudflare – slower but VERY steady and maybe even occasionally accelerating growth. Hoping DOCU can do that doesn’t seem like a great bet. It’s absolutely possible; I just don’t see a reason to believe it’s likely. With this semi-value investing, you have to:

1. make the call about how much growth is enough, and
2. be correct that growth is above that level.

It just seems obvious that this is more difficult than we might intuitively think. Because I don’t think you were expecting hypergrowth from Magnite or Nutanix or Teladoc, but they’ve still underperformed. So maybe the market’s expectations are just really tough to calibrate. Or maybe these slower growers tend to achieve even less than what’s expected.

Bear

[PaulWBryant]

With this semi-value investing, you have to:
1. make the call about how much growth is enough, and
2. be correct that growth is above that level.

Sorry for the extra post but this section was really lazy and I can do better. With what I called semi-value (or GARP – Growth at a Reasonable Price) investing, you have to be right about several other things. Two of the main ones are:

1. that the valuation of the 30% grower is so attractive that it will get re-rated up
2. that the 70% grower or 100% grower you could own instead is overvalued and that valuation won’t hold up

I hope that point came through, but it’s worth spelling out. Thanks.

Bear

[mekong22]

Hey Bear

All very good points things to think about. Here’s a bit more of my thinking

first, when I say I think they can grow at 30’s percent for the next few years, I’m really focusing on the next 3 years (for now).

In a nutshell, I think they get there as follows:

Year 1 - primarily core, largely US and some foreign, e-signature
Year 2 - largely driven by foreign e-signature growth and a little bit from new products like agreement cloud
Year 3 - largely driven by agreement cloud and other new products

There’s also going to be some impact from price increases, cross selling to existing customers, etc

I could definitely see the growth going from high 30’s in Yr1 to mid/low 30’s in Yr2, and then accelerate to 40% in Yr 3 if they get the new products right. I’m not betting on that outcome but I won’t be surprised at all if that’s how it plays out.

And I don’t worry that EPS will drop because of the costs to grow. I don’t expect that the costs to expand e-sig domestically and internationally over the next couple of years are going to be so significant that incremental income won’t fall to the bottom line. And I think they’ve been consistently building up the agreement cloud tech so, while it will continue and probably ramp up a bit as they start to focus on that more, I don’t think it’s going to be such a massive jump in annual capex and expense from today. I could be wrong, but that’s the impression I’ve got today.

A couple of years ago DOCU was widely held on this board (2018? 2019?). That’s how I first got into following them and bought in many of the shares i still hold today. I need to go back and check how the sentiment changed, but I think most people bailed out because they expected that growth was going to slow. Well here we are a couple years later, they’re still growing at a nice clip, the value of the company is a lot higher today even after the recent pullback. Docusign’s CEO just bought $5 million of shares on the open market after the stock dropped. I guess it’s just a story that I think I should continue to be a part of while I watch it unfold, it’s not making me run for the exit, at least not yet.

Do you have any examples of long term 30% growers besides maybe VEEV and TEAM?

Again I’m only looking at three years ahead most of the time, so if we exclude the pandemic impact, I would actually say Docusign is an example of a company that’s grown in the 30%'s for the past three straight years. MongoDB’s been in the high 30%'s / low 40%'s since the end of 2019 and their revenue is now accelerating back to the 50%'s.

Because I don’t think you were expecting hypergrowth from Magnite or Nutanix or Teladoc,

I would say that while their stock prices have underperformed, I (generally) haven’t been dissappointed with how their businesses have performed in 2021 and where I think they’re headed in coming years.

So maybe the market’s expectations are just really tough to calibrate.

Ain’t that the truth!

At the end of the day, the pessimistic growth outlook for Docusign may prove to be the more accruate one and I may very well suffer from opportunity cost of not moving those investing dollars to something else. But I see them as a strong company, whose name is a verb, in an industry that (I feel) still has quite a bit of potential growth in their core business, good management, potential future catalysts if they get new products right, and a value today that I think makes it really attractive. I could also see them making some really complementary tuck in acquisitions that contribute to profitability in future years as they’re in a business that could cross sell in a lot of ways without much friction.

So for now, I still like their prospects as a smallish allocation in my portfolio

-mekong

[Smorgasbord1]

Do you have any examples of long term 30% growers besides maybe VEEV and TEAM?

I assume you’re talking revenue growth, not EPS and not stock price.

A recent article (https://groww.in/blog/faang-stocks-performance-over-the-last… ), points out that FB has a revenue CAGR of over 40% over the last 10 years. AAPL at 26% over a decade, AMZN at 25%.

According to this article, Lowe’s grew its EPS at 30% for 5 years: https://www.yahoo.com/now/lowes-companies-nyse-low-30-133604…

This older article (Apr 2020), https://www.forbes.com/sites/johndorfman/2020/04/06/3-attrac… , lists $2B or larger companies which have had not only 30% CAGR for EPS, but 30% CAGR for stock price. The winners then:

ADBE, TS ,VM, AMAT, LRCX, EA ,CDNS, ANET, DAL, BIO, PAYC, BURL, VNO, AZPN, BWXT, TREX, LPLA, TPL, ALSN, AWI, & TNET.

But, the author of that article specifically calls out ADBE as being overvalued. In Apr 2020, ADBE was about $353, today’s it’s $564 - or up almost 60% in 20 months. Unfortunately, it doesn’t look at smaller companies, which we would definitely look at.

Note ANET is on the list, which many of us held and sold. Well, ANET has recovered well recently, up 173% since Sep 2020. MDB has recovered very nicely as well.

Looking at those companies (all them TMF-recommended at some point in time), it’s clear that i’s not unlikely, as Bear asserted, to make money finding and investing in them. Of course, it’s only in retrospect that you know a company will have had 5-year or 10-year CAGR revenue growth, and even then the ones that did it didn’t do it reliably consistently year over year. Which is why The Motley Fool services almost universally talks about investing with a minimum 5+ year outlook.

While many of this board abandon companies like ANET or MDB that stumbled, it turns out holding those (and others) would have been a good thing. On the counter side, there have been companies like Nutanix or PSTG that have only gone from bad to worse. TMF often talks about how to distinguish between them in advance. And, yes, they don’t always, or even mostly, get it right - but the winners do so well that they more than just compensate.

Which I guess is my long-winded way of saying that there are many ways to make money in the stock market. And not all ways are suitable for all people given their circumstances and their personal tolerances.

But, importantly, that doesn’t make what we do here - finding and investing in high growth companies - any less valid! Just as it doesn’t matter what a company we sell does after we sell it, it doesn’t matter that there are other investing strategies that are profitable. What matters is how well we are able to find companies meeting our criteria and how well those companies (and their stock prices) do. We don’t need to have “5+ year LTBH on moderately growing companies” to be “unlikely” to achieve, or to have poor results to make our stellar results here satisfying.

[anthonyms]

Do you have any examples of long term 30% growers besides maybe VEEV and TEAM?

Actually there are plenty from the SaaS world and beyond. Some where the share price has continued to do very well and some that has led to stagnation. Not that the board usually is interested in trying to take the risk in delineating between the two and instead stick to hyper growth but I think there could be merit to try and understand those 30% growers better; once SaaS matures we might be having to fish in that pond.

Some examples (including some former holdings on this board):
Hubspot
PayCom
Service Now
Zen Desk
RingCentral
Workday

…even SalesForce did for many years and still performs well off a 25% growth track.
Ant

[addedupon]

“Do you have any examples of long term 30% growers besides maybe VEEV and TEAM?”

One of my best investments ever is little known RingCentral RNG. I first bought after Dan Niles pumped the stock on CNBC in 2014. I bought a big stake at $16, eventually trimmed down by half, which i held through February of last year, was lucky to sell at $400+, and recently bought back a middle size position at $215.

Anyway RNG was the first i heard of cloud stocks, though MSFT was my largest position 2010-2020.

But in direct reply to your question, RNG has reported 40 straight quarters of 30% revenue growth! remarkably with very little variation, i.e 29%±33% every Q over 10 years. Amazing!

I began diversifying on Christmas Eve, 2018, when i traded out of 1/4 RNG for equal shares of Twilio, and then into other hyper growth stocks after hitting upon Ticker Target and then Saul’s Discussion.

But your point is well taken and i have trouble shaking a value bent, though certainly with well modified metrics from a few years ago. I finally let go of MSFT and BRKA a year ago (not looking so smart at the moment).

Nevertheless, i continue to believe in most of the knowledge base herein. Long before the cloud, i had lost half of my amount invested twice, and then fully recovered more quickly than expected. It’s happened again now and it might yet get worse. Like most others here but unlike most others elsewhere, i plan to remain invested in companies i think have the most promising futures.