My portfolio certainly wasn’t spared from the volatility this past month. It essentially led me to cut ties with a couple lower confidence companies (Upstart and Docusign) and spread the proceeds across other existing holdings. This led to my portfolio becoming really concentrated at March 31st, more so than I would recommend to anyone, and probably more so than I will keep myself for very long.
But it was hard to resist adding to positions, even ones that were already pretty large at the prices these stocks fell to in early March.
MongoDB (MDB), one of biggest holdings already, fell more than one hundred dollars per share, all the way below $280/share during the first eight days of March and I couldn’t resist adding to it at those levels right before earnings. Three weeks later, those shares are up more than +60% to $454 now.
Magnite (MGNI), I particularly added to early in the month after Disney+ announced they would be adding a lower priced, ad supported, tier to their streaming service. Although Disney put out their own press release, there hasn’t been any public details so far as to how (or if?) Magnite will be involved with it, but given that Magnite already powers Disney and Hulu’s merged XP ad platform, I’m betting that this could be a pretty big deal that has been flying under the radar for the past few weeks. Granted, the new ad supported Disney+ tier won’t roll out until the end of the year, and I’m sure Disney gets some kind of special preferred pricing from Magnite, but if it is successful, I have to figure it’s going to be a big feather in Magnite’s cap which will help them down the line getting in the door with other streaming platforms, etc.
Year To Date Performance
-29.3% YTD Jan
-21.2% YTD Feb
-29.8% YTD Mar (-24.4% today)
So even despite, MongoDB’s run the past few weeks, it only partially offset some of the declines that hit my holdings from pretty much every other company I owned, leaving me at almost -30% YTD at the end of March. My other really big holding, The Trade Desk (TTD) was down almost -19% this month, on no news and, like with MDB, I couldn’t resist adding to my already large TTD position in the $60’s when I sold off UPST and DOCU.
Friday April 1st was a good start to the new month, picking back up more than five percent.
March 31, 2022 Allocation
MongoDB (MDB) 31.1%
The Trade Desk (TTD) 26.5%
Nutanix (NTNX) 19.9%
Magnite (MGNI) 15.3%
Pubmatic (PUBM) 5.3%
SentinelOne (S) 1.9%
Docusign (DOCU) SOLD
Upstart (UPST) SOLD
So yeah, only six holdings right now, with four of them making up a very large portion of my portfolio. I was tempted to take on a little margin when things got really ugly in March, but decided against it, and just shifted allocations to focus on companies that I felt were really undervalued and where I really believe will have the brightest futures, regardless of many of the uncontrollable macro things going on in the world.
For the fourth month in a row, my two top holdings, MongoDB and The Trade Desk, continue playing leap frog, with MDB now back on top again. Mongo was actually down about -27% during the first week of March before earnings were announced, so although it has gone up 60%+ since March 8th, it was only up about +19% for the full month of March.
My Upstart shares were all sold mostly because I felt there were better, higher confidence options for me at really great prices, although I still like UPST and could see myself buying back in, in the future. Docusign, I cut ties with after their earnings came out last month and the guidance was particularly disappointing. More on that below.
Companies
MongoDB
Mongo’s earnings certainly did not disappoint, and I continue to feel they deserve to be among my top holdings, and likely to stay there for a long time.
The company guided for +42% YOY revenue growth this past quarter and came in at +56% revenue growth
and the new guidance for next quarter is +47%, so probably will come in at least in the mid 50%'s again.
YOY growth for the past few quarters (note that the quarter just announced, ended 1/31/22, was the fiscal fourth quarter of 2022)
Q3 21 +38%
Q4 21 +38%
Q1 22 +39%
Q2 22 +44%
Q3 22 +50%
Q4 22 +56%
and sequentially:
Q3 21 +9%
Q4 21 +13%
Q1 22 +6%
Q2 22 +9%
Q3 22 +14%
Q4 22 +17%
and sequential dollar increases:
Q3 21 +12m
Q4 21 +20m
Q1 22 +10m
Q2 22 +17m
Q3 22 +28m
Q4 22 +39m
It’s definitely one of the most expensive-looking stocks that I own, but if they continue to execute, I’m not too worried. That being said, if I was looking to free up some funds tomorrow to buy into a new company, given Mongo’s large percentage of my portfolio and high-ish valuation, it would probably be one of the first places that I would draw funds down from.
The Trade Desk
Not much to say here. They didn’t have any significant news this month. The Disney+ announcement that they will add a cheaper ad-supported subscription tier just further reinforces what TTD CEO Jeff Green has been saying for years…that all streaming services (including Netflix) will someday have a ad support, and he’s probably going to be right, and that’s just going to keep making the environment better and better for a company like The Trade Desk. I was happy to add some shares to my, already large, position in the $60’s this month.
Nutanix
Their earnings last month were good, the stock essentially finished the month right where it started, so this was another stock that, at least held up, and didn’t drop during March. I continue to think the stock price is really disconnected with their business performance the past year or so, as the actual business is growing much faster than most people realize by looking at the top line GAAP revenue, due to their evolution in recent years from a hardware to a software sales, and then to subscription recurring revenue, and I continue to think that eventually the market will see this company more like how I do. It may not be until later in the year when we start to see the impact of the subscription renewals finally coming in to play (same timing that was always expected), but things still look really good to me, and I did add some NTNX as well this month when they were in the lower $20’s as I sold off my UPST And DOCU.
Magnite
Magnite has continued to be a challenging company to follow, as they ingested their big acquisitions, and yes, their proforma revenue growth wasn’t what I was expecting this past quarter, but they are getting closer to lapping the last big SpotX acquisition, which should make things a bit easier to follow the story going forward. And I still feel they are in a great position to be really successful in coming years, as programmatic digital advertising continues to grow, CTV streaming continues to expand, companies like Google are in the crosshairs of regulators around their advertising practices, so this all ads up to potential for a company like MGNI (and their competitor Pubmatic (PUBM)…if they can execute.
The Disney+ news about their ad supported tier is potentially the biggest news for Magnite this month although it hasn’t been specifically linked to MGNI thus far in anything official, since it was announced after Magnite’s last earnings call so the company hasn’t been asked about it yet. I’m sure it will come up one way or another in their next call, but that’s still more than a month away, and even longer until the service actually goes live and rolls out. Here is some of what I posted on the Magnite premium board when Disney first put the news out:
Disney announced that Disney+ will introduce an ad-supported, lower priced tier in late 2022
https://thewaltdisneycompany.com/disney-to-introduce-an-ad-s…
https://www.thestreet.com/investing/disney-cheaper-streaming…
They say it will roll out in the U.S. in late '22 and then internationally in 2023.
The ad-supported offering is viewed as a building block in the Company’s path to achieving its long-term target of 230-260 million Disney+ subscribers by FY24.
Currently, they are at 130 million subscribers, so that’s a goal to essentially double, and add 100 million+ new subscribers over the next couple of years, potentially largely from ad supported new customers.
Disney and Hulu’s merged XP ad platform is already powered by Magnite.
https://www.beet.tv/2020/09/disney-hulus-merged-xp-ad-platfo…
and the relationship was expanded last year, as they touched on during the Q4 2020 earnings call in February 2021
I wanted to provide a contract update for a very strategic CTV and market-leading client, Disney. It is well-known that we’ve been serving as their SSP partner and that we’ve had a strong CTV relationship through Hulu dating back several years. We are pleased to announce that we have renewed our contract for an additional 18 months.
In addition, we are excited to announce we’ll be expanding our relationship by powering programmatic transactions across the wider umbrella of premium Disney, such as ESPN, ABC, among others, as part of their Disney DX HP or cross-platform offerings. As we continue to expand on opportunities within Hulu’s platform and their many content partners, we will now also work across and directly with these additional Disney properties. This is a true omnichannel partnership, and our relationship is stronger than it has ever been. We look forward to continued innovation and growth as we work closely with our partners at Disney.
Magnite’s stock actually spiked up early on the morning of Disney’s press release, possibly related to the Disney news, but then drifted down and closed lower that day, and now weeks later, still doesn’t appear that it picked up any sustained gain related to optimism around Disney+ expectations.
In 2019, Hulu said that 70% of their 82 million viewers were on the cheaper, ad-supported subscription, rather than paying the extra $5 for ad-free. And it’s been reported in the past that streaming services typically make more money per subscriber from the ones that pay lower monthly fees and watch the ads. That’s why Trade Desk CEO Jeff Green has always said that all major streaming services, including Netflix, would eventually have an ad-supported tier. Netflix has always denied it, but with Disney, we now have another indication that Jeff might have been right about where the market is heading.
So just a wait and see here, but I like the story and the potential, and today’s valuation/price.
Pubmatic
Not much news from PUBM this month. They should benefit from man of the big picture trends that make me like the future of programmatic digital advertising and CTV and TTD/MGNI and in many ways, Pubmatic has executed better than Magnite in recent quarters…granted they haven’t been distracted by a couple of major acquisition ingestions. And I think there is room for both companies to see success and strong growth for the foreseeable future.
SentinelOne
SentinelOne’s earnings got good coverage here, so not much for me to add. It’s still a fairly small, “try out” type position. I love the potential in the security space but have never been able to bring myself to put much of my portfolio into them, as I’m simply more confident in other companies. But S, and CRWD, are still on my watchlist and, in the right circumstance, I could see myself moving more funds into them. Especially as I de-concentrate my portfolio at least a little bit from where it is today over time, these would be high on the list of possible candidates in coming periods.
Upstart
Upstart still gets good coverage on this board, so I won’t say much, except that my decision to sell was more just a shift to higher confidence companies, that don’t have some of the types of risk that UPST will need to overcome to branch into new industries etc to be successful. That being said, I won’t be surprised if UPST is the best performing stock out of any in this post over the next year or two, but I also could see them being the worst performing one too. And I can’t say that about most of the other companies I follow, so at least for now, I’m good to be on the sidelines with Upstart.
Docusign
I’ve been a longtime DOCU owner, since well before the pandemic, and, despite the big drop in the share price in recent months, most of my shares still had significant gains vs my cost basis when I sold it off in March.
I certainly didn’t expect their growth rates to stay in the 50%’s like they were during the pandemic, but I did feel that they weren’t going to lose customers, and that there was still a lot of opportunity to grow the core e-signature business internationally and then make progress with the agreement cloud to keep growth at 30% or so for a couple more years. Well, several of you that posted your doubts that this would be possible look like you were right, and I held on too long.
I’m still a bit perplexed by management’s guidance, of only about +17% revenue growth for FY 2022. They had a solid performance in Q4’21 growing +35%, their guidance for Q1 is +24% which they will probably beat and be closer to 30%, and although one worrisome stat has been their subscription billings growth has been lower than revenue growth in recent quarters (which would be an indicator that future revenue growth will slow), billing growth has still been +25% in recent periods. So they would have to really feel like billings in particular are going to fall off a cliff in early 2022 (to single digits?) for their full year revenue to only grow 17% in 2022 despite the expectations baked into Q1’22 guidance and their billings growth in Q3 & Q4 2021. Something just doesn’t jive here, at least in my mind. Maybe management is just being very very conservative with full year guidance and they’ll grow closer to 30% next year and I’ll have made a bad move selling my shares when I did. But with other companies that I really like so cheap at the same time, and a big difference in the guide vs what I would have expected, I am more comfortable parting ways with DOCU this month.
Never say never I could be a Docusign owner again in the future, but I like where I have my investments right now.
First Quarter Quick Turn Around
So that’s it, April should be a pretty quiet month before earnings season starting again in May. The good news, and what I love about this time of year, is that because most companies get extra time to put out their Q4 earnings, the Q1 results come out pretty quickly afterwards relative to other quarters, so it will only be a few more weeks. The we go back to a normal three month break between earnings during Q1-Q3, before that extra long wait for Q4 results again at the beginning of next year.
I hope everyone has a great April and look forward to continued great discussion!
-mekong