• December was another great month full of buying opportunities to lower my cost basis. I don’t think there is any surprise to the draw down through December— In fact, some things might be lining up nicely for a very strong Q1 in 2022—notably:
Record cash hoarding in 2021 with record high savings account balances
Record CEO selling
-CEOs and corporate insiders have sold a record $69 billion in stock in 2021, as looming tax hikes
and lofty share prices encourage many to take profits.
-Sales by insiders are up 30% from 2020 to $69 billion, and up 79% versus a 10-year average
-The selling is likely to increase even more as December is often an active month for sales due
to tax planning.
I believe once the 30 day wash-sale rule has been satisfied, we could see some of that record cash hoarding finding its home back in the market—With even the threat of unrealized capital gains tax, perhaps selling in 2021 and “resetting” the clock in 2022 was the prudent move. Time will tell, but one thing is for sure, valuations on our growth stocks are more appetizing now than anytime over the past several months.
• Recent Portfolio additions: S, FUBO.
• Watchlist AI, PUBM, PW, GLOB, PD
• Options Positions: FUBO, KLR, SMRT
Portfolio Performance
End of Year Summary: Well, it’s humbling to post my “return” for the year of -21.17%, especially when I started off the year with a significant gain in my REITs. I transitioned into our growth stocks after reading for a couple months and bought in August / September without the patience to taper into my positions over time. UPST was my largest holding around 27% and I did not have to sell any shares for it to find a more appropriately placed 14% position in my portfolio—I also fell victim to LSPD and NVEI for some material losses along the way. A lot of lessons learned just how the stick the best for me.
My December performance was -11.19% and my YTD was -21.17%. I’m excited for this year and to continue this investing journey. I plan to work in my current capacity at least another 10 years and continue investing for another 50 or so.
November EOM Allocations
MNDY 17.8%
BILL 16.9%
UPST 15.7%
PATH 12.5%
VERI 9.7%
SMAR 9.5%
DOCN 9.4%
NVEI 8.5%
Here’s where my allocations ended at the end of December:
MNDY 20.2%
BILL 14.9%
PATH 14.2%
UPST 13.9%
PLTR 13.5%
VERI 12.4%
DOCN 11.1%
Thoughts on Holdings:
MNDY:
I actually made a fairly significant change to my portfolio just after the first of the year-- Monday was my largest position which I closed entirely. Monday has had some of the best growth metrics of my companies but ultimately I decided to close my position for a couple reasons. These might not be popular amongst the readership here but they are my reasons and I have to live with the decision shrug
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I don’t know much about Israeli companies or the Israeli market, but their GDP is $400B compared to the US $21T. Monday has the fifth highest market cap of public Israeli companies at $11B. The highest market cap is NICE at just under $18B. Very low trading volume, and my lack of understanding about what may influence a company’s growth outside of the U.S had me thinking about MNDY more than I wanted to for my highest position.
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I believe the work share / management space is crowded, and if I’m going to maintain a very concentrated portfolio I have the luxury to be picky and my first inclination is to invest in U.S. based companies as well as sectors I believe in or like a little more than this space.
Ultimately I closed MNDY out and opened positions in S and FUBO.
https://docs.google.com/spreadsheets/d/1GWZ0IP7VsPvh2W9fPw1z…
https://seekingalpha.com/article/4474232-sentinelone-s-earni…
BILL:
“Our mission is to make it simple to connect and do business. We are champions of small and midsize businesses (SMBs). We are a leading provider of cloud-based software that simplifies, digitizes, and automates complex back-office financial operations for SMBs. By transforming how SMBs manage their cash inflows and outflows, we create efficiencies and free our customers to run their businesses.”
BILL is another one of those companies with incredible metrics—they have massive growth both organically, and through acquisitions, but I especially like their improving margins along with the acquisitions. I’m not concerned short term with the share-price cooldown as the business is executing exceptionally. The B2B space makes sense to me and I believe the natural progression of digitalization supports BILL’s future continued growth.
? Q1 Core Revenue Increased 164% Year-Over-Year
? Q1 Organic Core Revenue Increased 78% Year-Over-Year
? Q1 Transaction Fees Increased 319% Year-Over-Year
? Q1 Organic Transaction Fees Increased 127% Year-Over-Year
UPST:
I added to my position materially near the end of December for the first time since it dropped. I think finance and fintech could be as strong a sector as cybersecurity over the next 2-10 years. UPST has still only demonstrated positive business news and development—outside of its terrible share price performance (234% TTM), there is nothing negative here. It may not have ARR in the traditional sense—but I consider customer acquisitions and partnerships as a form of currency or recurring revenue. Essentially 1 customer = “1 recurring revenue stream”—when they add 2 more customers in a quarter their “ARR” =3. Of course actual loan volume isn’t guaranteed, and it will be cyclical to some extent—but their expansion into automotive and eventually mortgage will diversify them enough to have more stability—coupled with their industry FICO threatening potential and superior gross margins, I see UPST reaching a market cap easily over $100B. I’m interested to see how the automotive lending sector reacts to the expansion of EV—As infrastructure supports it more and more, I think there will be a swath of automotive buyers outside the regular 3-7 year new car buyers—I say this because I have never purchased a new car for myself and am actually looking forward to purchasing a new EV pickup truck … eventually.
Lending Volumes Q4 ’20 Q1’21 Q2’21 Q3’21
123,396 169,750 286,864 362,780
PATH: Market Cap $25.5B Revenue Growth 40%YoY Gross margins 83% DBNRR 144%
UiPath is the leading RPA provider in the world—What is RPA? I’m glad you asked—
“Robotic process automation (RPA) is a software technology that makes it easy to build, deploy, and manage software robots that emulate humans actions interacting with digital systems and software. Just like people, software robots can do things like understand what’s on a screen, complete the right keystrokes, navigate systems, identify and extract data, and perform a wide range of defined actions. But software robots can do it faster and more consistently than people, without the need to get up and stretch or take a coffee break.”
PATH had very positive earnings last month—ARR grew 12.5% QoQ and revenue grew 12.9% QoQ. Guidance was even more impressive with Revenue guidance for 28% Sequential growth. PATH has announced recent partnerships with SNOW and CRWD, and continues to dominate the RPA space. With nearly $2.0B in cash and no debt, this founder-led company is the market leader in the space. The conference call was very bullish and guidance, even at 28% is almost guaranteed to be soft as they repeatedly emphasize they only “guide” for contracts they already have in front of them. I’m looking for sequential growth of 33+%, but wouldn’t be surprised to see 35% and $300M in revenue. PATH has grown ARR by 10-14% sequentially for the past 8 quarters. I like the RPA space and think with the R&D in AI and ML there could be yet another runway for growth over the coming years.
VERI: Founder led Market cap $900M YoY Rev Growth 44% Gross Margins 82%
“Veritone is a leading provider of artificial intelligence technology and solutions. The company’s proprietary operating system, AIware, orchestrates an expanding ecosystem of machine learning models to transform audio, video and other data sources into actionable intelligence."
Veritone continues to build partnerships and gain more analysts’ attention in the growing AI / ML space. There are some interesting opportunities here in the metaverse space (speculation), as well as the entertainment / movie / tv industry as producers pursue the opportunity to produce a movie and through the use of speech / language technology translate that technology to multiple languages. Veritone’s technology will even translate using the actor’s voice, essentially removing the need for voice over actors and maintaining the authentic tone and speech patterns of the original actors.
https://seekingalpha.com/article/4477376-veritone-underappre…
https://seekingalpha.com/news/3783949-digital-turbine-fathom…
https://www.businesswire.com/news/home/20211214005004/en/Ver…
https://podcasts.apple.com/us/podcast/predictions-pod-2022/i…
Q1’20 Q2’20 Q3’20 Q4’20 Q1’21 Q2’21 Q3’21
REV. $M 11.9 13.27 15.72 16.82 18.3 19.21 22.6
QOQ -4.2% 11.51% 18.46% 7.0% 8.8% 4.97% 17.96%
YOY -1.82% 8.13% 22.75% 35.11% 53.96% 44.75% 44.13%
Veritone, Inc. - Home
DOCN: marketcap $11B Rev. Growth 36% YoY Gross Margin 69% DBNRR 116%
“DigitalOcean simplifies cloud computing so developers and businesses can spend more time building software that changes the world. With its mission-critical infrastructure and fully managed offerings, DigitalOcean helps developers, startups and small and medium-sized businesses (SMBs) rapidly build, deploy and scale applications to accelerate innovation and increase productivity and agility. DigitalOcean combines the power of simplicity, community, open source, and customer support so customers can spend less time managing their infrastructure and more time building innovative applications that drive business growth.”
DOCN is demonstrating acceleration in growth and improved DBNRR. Customer growth is a little slower than I would like to see (7%YoY), and so are the gross margins, below 70%-- But again, revenue is accelerating and existing customers are spending more money.
DOCN-Q3-2021-Earnings-Presentation-vF.pdf (q4cdn.com)
One I will keep an eye on going forward.
PLTR market cap: $37.9B Rev Growth: 36% YoY Gross Margin 78% Home | Palantir
“Palantir Technologies Inc. builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations. The company provides Palantir Gotham, a software platform for government operatives in the defense and intelligence sectors, which enables users to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants, as well as facilitates the handoff between analysts and operational users, helping operators plan and execute real-world responses to threats that have been identified within the platform. It also offers Palantir Foundry, a platform that transforms the ways organizations operate by creating a central operating system for their data; and allows individual users to integrate and analyze the data they need in one place. Palantir Technologies Inc. was founded in 2003 and is headquartered in Denver, Colorado.”
PLTR is a software / AI company with heavy government exposure—They recently went public and are expanding into the commercial / enterprise world— I look at PLTR as a leading AI and software company trusted by the most powerful entity in the world (U.S Government) with nearly two decades of R&D and Innovation to create the leading technology funded by the U.S government, which is now available to the commercial market. I believe there is a massive runway for growth as highlighted by the recent commercial expansion listed below. PLTR is founder-led with nearly $2.5B in cash and zero debt.
Q3 2021 Highlights
Total revenue grew 36% year-over-year to $392 million
Added 34 net new customers in Q3
Commercial customer count grew 46% quarter-over-quarter
US commercial revenue grew 103% year-over-year
Cash flow from operations of $101 million, representing a 26% margin
Adjusted free cash flow of $119 million, representing a 30% margin
Closed 54 deals of $1 million or more, of which:
33 deals are $5 million or more
18 deals are $10 million or more
Total remaining deal value grew 50% year-over-year to $3.6 billion
GAAP net loss per share, diluted of $(0.05)
Adjusted earnings per share, diluted of $0.04
Q1-Q3 2021 Highlights
Total revenue grew 44% year-over-year to $1.1 billion
Commercial customer count increased 135% since December 31, 2020
Cash flow from operations of $240 million, representing a 22% margin
Adjusted free cash flow of $320 million, representing a 29% margin
Will be watching PLTR’s dilution very closely as this is a major concern at over 100% TTM-
PLTR guides for “30% or better” revenue growth through 2025 at least. I’ll be watching customer acquisitions and execution closely-- PLTR has a knack for nabbing massive contracts (over $1M / yr) and with a recent partnership in South Korea, consistent with PLTR’s mission to partner with the U.S gov’t and its allies-- PLTR and the space it operates in is intriguing to me.
Some risks–
share dilution.
Massive contracts (losing one big contract is costly)
Growing competition in the space.
Revenues of over $1.5B already-- I’m not sure how long they will be able to grow or accelerate that as the law of large numbers comes into play.
I don’t work in the AI / ML space, or any of the areas where my companies operate honestly, so please feel free to reach out directly and provide any insite you can offer. I asked an IT guy recently “How do you make a motherboard?” and he told me “I just tell her about my job”………
I’m learning a lot and continue to be grateful (SO GRATEFUL) for the board and all participants. This will be an interesting year with midterm elections, covid continuation, and market rotations, but I’m encouraged to be facing it with this fellowship.
Best of luck, health, happiness, and prosperity to you in 2022.
MillennialFalcon