I seldom post these days as I try to make sure I have something value added to say. I’ve read all 21 posts in this thread. Maybe this is reiteration rather than new information. But here’s the way I see it.
If you look back over my posts on MDB you will see that I have been a huge fan. My confidence in that position was born of my 30 years experience in IT at a Fortune 50 company. There’s almost no software more sticky than a DBMS. Once a particular product has a significant presence in a company (and especially if it has become an internal standard), it takes an enormous improvement in functionality and cost (yes, both) in order to displace it. IMO, MongoDB is already the defacto standard if not the named standard for NoSQL DBMS throughout the industry.
Nevertheless, I currently have no position in MDB. How do I reconcile my strong opinion about the product and the fact that I don’t currently see it as a good investment?
Actually, Saul has already summed it up. Despite the fact that I believe long-term MDB will rule the world (allow a little hyperbole please), the numbers just don’t add up. It’s not that MDB is a bad investment, it’s just that there are other much better opportunities.
The question that I wrestle with is whether or not I invest for the “long-term”? And more fundamentally, what does “long-term” mean with respect to an investment context?
Unlike a lot of folks who follow this board, I am a fairly recent investor. The first year for which I have maintained records was 2016, so I’ve been a serious investor for something less than five years. My attitude at the time I became an attentive investor was that I was in it for the long-term and I would invest in companies that I felt had long-term potential. Admittedly, “long-term” was ill defined. I had no specific notion of what it meant, but if you had pushed up against a wall and forced me to define it, I probably would have responded, “ten years or more”.
In July of 2016 I held fifteen positions. Not a single one of those companies appear in my current portfolio which consists of six positions. In fact, of those positions I held a mere four years ago, SHOP is the only name we even see mentioned here any longer. So, whatever I may have thought was long-term, in practical terms has turned out to be considerably less than four years.
Earlier this year with what I perceived would be the impact of the pandemic on the economy, I sold every position I held and went completely to cash. Ouch! Yes, I am paying quite a penalty in capital gains tax for that. And though I am back in the market, I am holding a much larger cash position than I did previously which I consider insurance against the vagaries of the market. But my point is that I discovered that my long-term horizon was, in fact, not much more than a year or two at the most.
That brings me back to MDB. We have witnessed and taken advantage of a unique confluence of forces as the internet, cloud, big data, edge, IoT, AI/ML and a few other heretofore non-existent information phenomena coalesce to provide the unique related technologies offered by the companies in which we have invested and profited. Eventually we will see these SaaS, s/w subscription investment opportunities dry up. I think we are already seeing fewer companies offering the phenomenal growth we have seen even a couple of years ago. The law of large numbers will shrink the percentage growth rates of our existing favorites. And the needs of the enterprise will soon be pretty close to fully addressed. As there remain fewer and fewer stones to turn over there will be less new niches to fill. I anticipate that we have but five to ten more years before these fantastic investments become more mundane. We’ll be back to investments that look more like sneakers and other manufactured goods with respect to returns.
My point is not just make hay while the sun shines, but keep an eye out on the future. What will we turn to? My guess is that MDB might look pretty good when compared to other investments a few years down the road. Yes, we will have missed most of the S-curve spurt, but that “lost” opportunity is relative to the ones we’ve exploited.
Of course, I could be wrong. I don’t have a crystal ball. Even though I was in IT for 30 years and spent the last six or seven years of my career as an enterprise architect; a big picture guy with a focus on designing the IT environment of the future, I did not anticipate where we are today. What doors will quantum computing, nano technologies, advanced bio-sciences and other emerging technologies open? I don’t know. I don’t think even guys like Ray Kurzweil and other brilliant futurists who are much smarter than I know. They are just able to make a better guess. So maybe there will be new companies that addressed “needs” we aren’t even aware of today after the bleeding edge of current information age dulls. Maybe I’ll still be alive to invest in the next paradigm whatever it is. But for now, while I’m not as fickle as a day trader, I refuse to invest in a great future potential. I prefer to keep my investment dollars in great present day investments. And I watch them closely. Every quarter around earnings reports I ask myself if I have my money working as hard as it can. Every day I try to stay aware of some unforeseen event that might disrupt my investment thesis.
I forget who said it, but a quote that I think well applies to investing is: “Plan as if you will live forever, and live as if you will die tomorrow”. My implementation of that is, as I said before, I am not a day trader, I try to avoid momentum investing. I want to invest in premier companies that provide real products/services that address vital needs. And those companies have the performance numbers that demonstrate that they are the best of breed in what they do. But it’s not a marriage. I don’t plan on being there through thick and thin. In fact, I’m pretty intolerant of “thin” when it comes to investing.
Long: AYX, CRWD, DDOG, FSLY, LVGO, ZM