Harsh truth about investing:
90% of people fail because of their ego.
Don’t:
- Fall in love with a company and “hope for the best” if everything looks terrible.
- Wait for the “best” entry point just to save a few $.
- Sell because the market is down.
We all make mistakes
And it’s okay to be wrong
But it’s not okay to stay wrong.
Wait, what was that?
To keep things fresh, I am starting my upcoming portfolio summaries with a different opener. Please don’t take it too seriously. Hope you like it!
My Results Against Benchmarks
My mission: Outperforming the S&P 500 accumulating ETF.
My strategy: In 2025 I will compare the total performance of my portfolio against the S&P 500 ETF. If I can’t outperform it, I will consider buying an ETF to end my active investing journey.
My method of measuring the performance: “True-Time-Weighted Rate of Return” which eliminates the distorting effects on growth rates created by inflows and outflows of money. Also, my return metric is after buying- and selling-fees (which we still have to pay in the EU) and taxes.
If you want to use my benchmarks as well, here they are:
- iShares Core S&P 500 UCITS ETF (Acc), ISIN IE00B5BMR087
- iShares Nasdaq 100 UCITS ETF (Acc), ISIN IE00B53SZB19
- iShares Core MSCI World UCITS ETF USD (Acc), ISIN IE00B4L5Y983
Nice to know
- Maximum portfolio drawdown: -70.5 %
- Average holding duration: 238 days
- Monthly return heatmap:
My Portfolio
Comments
The fact that 80% of my portfolio consists of only 6 companies makes me think about the rest of my portfolio. Should I sell and redistribute them to my high conviction holdings? Most likely!
What I did last month
- Trimmed DDOG
- Why: DataDog’s management expects headwinds due to the uncertain economic environment impacting enterprise spend. This could get resolved in a few quarters from now. Plus, comps will become easier in 2023. Although I never look at macro, I see better opportunities in the meantime.
- Why: DataDog’s management expects headwinds due to the uncertain economic environment impacting enterprise spend. This could get resolved in a few quarters from now. Plus, comps will become easier in 2023. Although I never look at macro, I see better opportunities in the meantime.
- Added to SNOW
- Why: Q2 results proofed many snowflake bears wrong and showed strong momentum. The management is excellent. I added the cash from DDOG which pushed SNOW to my #1 holding, a place well deserved.
- Why: Q2 results proofed many snowflake bears wrong and showed strong momentum. The management is excellent. I added the cash from DDOG which pushed SNOW to my #1 holding, a place well deserved.
- Added to NET
- Why: Cloudflare seems to be resilient even in this environment. I can’t find much not to like. If, then it’s the revenue growth of “only” 53.8 % – but they deliver at least 50% revenue growth since 8 consequent quarters.
Disclaimer:
- 99% of my assets consist of my stock portfolio, shown above. I don’t hold any cash (just an emergency fund), nor do I have other portfolios or real estate. I feel like this piece of information is important to understand the individual investor’s perspective. A high growth portfolio which is 5% of the total net worth makes it a different story.
- This portfolio summary is for informational purposes only and does not constitute investment advice. Don’t live in the shadows of other people’s judgement. Make your own choices in the light of your own wisdom.
Company Reviews
Absolute numbers relate to last quarters earnings release.
Metrics are adjusted values (Non-GAAP).
SNOWFLAKE
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Confidence tier: Champion
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Type of revenue: Consumption-based
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Trend to profitability: Yes
-
Product revenue [unique metric]: $466.27m
Year-over-Year
3Q22 4Q22 1Q23 2Q23 110.4 % 101.7 % 84.5 % 83.1 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 22.7 % 15.7 % 9.7 % 18.2 % -
Remaining Performance Obligations: $2.72b
Year-over-Year
3Q22 4Q22 1Q23 2Q23 94.4 % 98.5 % 82.3 % 77.6 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 18.0 % 46.7 % -1.4 % 4.1 % -
Free Cash Flow: $58.65m
% Revenues
3Q22 4Q22 1Q23 2Q23 6.4 % 26.6 % 42.9 % 11.8 % -
Customers $1M+: 246
Year-over-Year
3Q22 4Q22 1Q23 2Q23 127.7 % 139.0 % 98.1 % 112.1 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 27.6 % 24.3 % 12.0 % 19.4 % -
Dollar-based net retention rate: 171 %
Last 4 quarters
3Q22 4Q22 1Q23 2Q23 173 % 178 % 174 % 171 %
My thoughts:
Snowflake seems to be on track:
Product revenue growth was 83.1 % Year-over-Year and 18.2 % sequentially.
Customers $1M+ increased by 112.1 % Year-over-Year and 19.4 % sequentially.
Although product revenue growth is slowing, I can’t complain about 83.1 % at this run-rate.
Remaining Performance Obligations (RPO) is strong at $2.72b.
RPO is an important metric to look at since because of Snowflake’s type of revenue: Consumption-based. It’s not as reliable as subscription-based – in theory. So, RPO offers visibility into Snowflake’s future revenue, since RPO is the amount which Snowflake’s customers have committed to pay.
Last earnings call, one analyst asked “(…) should we expect a healthy end to the year given that renewal pool?”
Mike Scarpelli, CFO replied:
“Yes. We expect we will have a big increase in RPO. (…)”
Additionally, they are leading the industry with an incredible high Net Promoter Score of 72. Customers love them!
Noteworthy: Snowflake announced a few days ago that they achieved New HITRUST Risk-based. Not sure what that means, but it sounds good.
On the flipside: Amazon and Microsoft recently reported slower cloud growth as expected (Google Cloud growth accelerated a bit), which could have an impact on the upcoming earnings, since the majority of Snowflakes customers, 80-plus percent run in AWS, about 18% is Azure and 2% is GCP. I am not too concerned though, since this is most likely due to macro, not cloud saturation.
I am following Frank Slootman for 3 years now, and he continues to amaze me. Watched videos, interviews and read his book Amp it up! It’s like he is Saul, but with his hands on the actual steering wheel of a battleship.
One of his “secrets” of success is his relentless focus on customer centricity.
Here are a few notes I took while reading Amp it up!:
- Prioritize! If you have 10 priorities, you have none.
- Raise your standards. Everyone should be top of their game.
- Fight competitors. Get their best talent to make us stronger and weaken them.
- Fight incrementalism. Don’t aim for (sales/pipeline/other) targets such as 15%, aim for an ambitious number (like 100%+). Don’t work on something which has small outputs, focus on something which moves the needle.
- Execution over Strategy, Don’t hire consultants & strategists.
- Culture matters. People will thrive.
- Drivers wanted, getting the wrong people off the bus: When he joined Snowflake, he assessed the strengths and weaknesses of the existing team and made significant changes early to get the wrong people off the bus and the right people in the bus and on the right seats. He says that he usually doesn’t need to check whether a person is performing well or not, because he can tell whether that person’s team was performing. And that within two weeks he knows whether a new hire was right or not.
- Go direct: Everybody should have permission to speak to anybody inside the company for any reason regardless of role, rank or function - run organization influence, not rank and title.
- Slootman also mentions that when he hears that marketing or sales isn’t doing a good job, his first instinct is that the product isn’t right for the market that’s being targeted. Part of leadership’s job is to be “intellectually honest” about the product/service you’re providing.
- Snowflake doesn’t have a customer success department. Slootman says, a CS department takes the responsibility off everyone else to please the customer. But everyone across the organization should have only purpose: To serve the customer.
With a $2b ARR run-rate, this data cloud company has such an immense runway in front of them. They expect to hit $10b by 2029. I believe, they will blow that number off the roof. It’s the question of execution.
But we have a strong gladiator in the arena: Frank Slootman.
Cloudflare
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Confidence tier: Champion
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Type of revenue: Subscription-based
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Trend to profitability: Yes
-
Revenue: $234.52m
Year-over-Year
3Q22 4Q22 1Q23 2Q23 51.0 % 53.7 % 53.7 % 53.9 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 13.1 % 12.3 % 9.6 % 10.5 % -
Free Cash Flow: -$4.41m
% Revenues
3Q22 4Q22 1Q23 2Q23 -23.1% 4.5 % -30.4 % -1.9 % -
Customers: 151,803
Year-over-Year
3Q22 4Q22 1Q23 2Q23 31.1 % 26.0 % 24.3 % 19.8 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 4.5 % 5.8 % 5.8 % 2.4 % -
Dollar-based net retention rate: 126 %
Last 4 quarters
3Q22 4Q22 1Q23 2Q23 124 % 125 % 127 % 126 %
My thoughts:
I don’t like to see the sequentially slowing growth of total customers in the past 4 quarters. But customers over $100k grew by 13.8 % sequentially from 8.5 % the quarter before. These large enterprises now represent 60% of revenue, which keeps growing. That’s great!
Their Dollar-based Net Retention Rate keeps gobbling around a strong 126 % but they mentioned to push it to 130 %+ in the long-term.
Slightly negative Free Cash Flow of -$4.4m is fine for me. If they invest into their future to grow long-term, this is what I am looking for. Yes – in the current environment – the market is looking at Cash Flow. But the “current environment” might be over sooner or later, and I am not good at timing that. Still, they mentioned that FCF will be positive in the second half of the year.
They mentioned in Q1 they experienced slower pipeline generation and longer durations until customers paid their bills. This stabilized in Q2. Cloudflare seems to be very resilient, which is an incredible strong sign.
I love that they keep pumping out new innovations while accelerating their release cycles. A company I want to be part of as long as they keep doing that.
Datadog
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Confidence tier: Contender
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Type of revenue: Consumption-based
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Trend to profitability: Yes
-
Revenue: $406.14m
Year-over-Year
3Q22 4Q22 1Q23 2Q23 74.9 % 83.7 % 82.8 % 73.9 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 15.8 % 20.6 % 11.3 % 11.9 % -
Free Cash Flow: $60.2m
% Revenues
3Q22 4Q22 1Q23 2Q23 21.1 % 32.7 % 35.8 % 14.8 % -
Customers: 21,200
Year-over-Year
3Q22 4Q22 1Q23 2Q23 33.6 % 32.4 % 30.3 % 29.3 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 6.7 % 7.4 % 5.3 % 7.1 % -
Dollar-based net retention rate: 130 %
Last 4 quarters
3Q22 4Q22 1Q23 2Q23 130 % 130 % 130 % 130 %
My thoughts:
DataDog is a very healthy, profitable and fast growing company which keeps innovating (see their latest recap): Cloud Cost Management, CoScreen, Data Streams Monitoring, Cloud Security Management, Application Security Management protection, Event Management, Workflow Management to name a few.
I have no idea what all this does, but DataDog’s consistent Dollar-based Net Retention Rate of 130 % indicates that customers love what they are doing.
DataDog’s management expects headwinds due to the uncertain economic environment impacting enterprise spend. We should expect slowing Quarter-over-Quarter growth in the next earnings release on 11/3/2022 pre-market and not be too surprised about it. They recognize the macro environment is uncertain when looking into the back half of 2022. Amongst their industries, they saw relative deceleration in consumer discretionary customers, which represents low teens percent of our ARR.
I expect this to get resolved in 2023 while comps will become easier as well. Plus, they also see no change to the long-term trends towards cloud-based services and modern DevOps environments, and observability remains critical to that journey.
I own DataDog since 2019, lived through its slowing growth during COVID because customers became more conservative with consumption (Remember: DataDog’s revenue model is consumption-based). But this was temporary, and I expect it to be the case now as well.
Still, it carries a bit of uncertainty, and that’s why DataDog moved down from being a Champion to Contender for now.
Sentinel One
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Confidence tier: Contender
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Type of revenue: Subscription-based
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Trend to profitability: Yes
-
Revenue: $102.51m
Year-over-Year
3Q22 4Q22 1Q23 2Q23 128.1 % 119.8 % 109.3 % 124.1 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 22.4 % 17.2 % 19.2 % 31.0 % -
Free Cash Flow: -$66.87m
% Revenues
3Q22 4Q22 1Q23 2Q23 -36.9 % -10.8 % -69.9 % -65.2 % -
Customers: 8,600
Year-over-Year
3Q22 4Q22 1Q23 2Q23 79.1 % 67.5 % 58.5 % 59.3 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 11.1 % 11.7 % 11.2 % 15.4 % -
Dollar-based net retention rate: 130 %
Last 4 quarters
3Q22 4Q22 1Q23 2Q23 130 % 129 % 131 % 137 %
My thoughts:
Sentinel One announced strong Q2 numbers:
124 % revenue growth ($102.51m) Year-over-Year, coupled with a strong re-acceleration of Qurter-over-Quarter growth of 31 % and their highest Dollar-based Net Retention Rate to date at 137 %.
Total customers grew to 8,600 with a nice Quarter-over-Quarter re-acceleration (to 15.4% from 11.2 % in the previous quarter). Their numbers now include the acquisition of Attivo, but I take what I can get. Ben had delightful thoughts about their organic revenue growth. I recommend reading his summary.
Looking at profitability, Sentinel One is the worst company of my portfolio. They delivered -$67m Free Cash Flow, which is -65 % of revenues but improved from -98 % in the previous year.
Non-GAAP operating income (-$58m) shows a similar picture. Looking at it isolated to this quarter, it doesn’t look good. But since the trend is our friend, I see them improving (also backed up by their guidance).
They admit that macro might be a slight headwind, still they remain to be very confident:
Demand is strong, and we remain extremely well positioned. At the same time, enterprises across all sectors of the economy are being impacted in different ways by evolving macro conditions. Like other software companies, we’ve seen some signs of cost consciousness and prudence around IT budgets. This has resulted in marginally longer sales cycle and more budgetary approvals.
And look at their confidence. They are “conservatively” guiding at $111m which, if we include their usual beat will be at $117+m (109 % Year-over-Year growth):
(…) I think the vast majority of the impact that we’ve seen and why we still believe security is relatively a safe harbor in this environment. (…) We took the year up, we guided up, but we did it conservatively. I think that in any other environment, you would have seen us do things differently. But better safe than sorry. And hopefully, we can surprise everybody for the rest.
I am comfortable with the current allocation. I am watching profitability, but I am pretty confident about them showing further improved leverage in their upcoming Q3 earnings. Once that is confirmed, I will most likely add to the position.
Crowdstrike
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Confidence tier: Contender
-
Type of revenue: Subscription-based
-
Trend to profitability: Yes
-
Revenue: $535.15m
Year-over-Year
3Q22 4Q22 1Q23 2Q23 63.5 % 62.7 % 61.1 % 58.5 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 12.5 % 13.4 % 13.2 % 9.7 % -
Free Cash Flow: $135.76m
% Revenues
3Q22 4Q22 1Q23 2Q23 32.5 % 29.5 % 32.3 % 25.4 % -
Customers: 19,686
Year-over-Year
3Q22 4Q22 1Q23 2Q23 74.5 % 65.0 % 57.1 % 50.5 % Quarter-over-Quarter
3Q22 4Q22 1Q23 2Q23 12.3 % 11.2 % 9.9 % 9.7 % -
Dollar-based net retention rate: 120 %+
Last 4 quarters
3Q22 4Q22 1Q23 2Q23 122 % 124 % 120 %+ 120 %+
My thoughts:
While still growing at 58.5 % Year-over-Year ($535m), the decelerating Quarter-over-Quarter growth ~13% is due to seasonality.
They raised guidance for the year and I expect them to land at $596m in Q3, which would be a slight acceleration of Quater-over-Quarter growth to over 11 %, which is in line when factoring in seasonality.
CrowdStrike is one of the healthiest companies looking at profitability. 25 % Free Cash Flow margin ($135.76m), 13 % Net Profit margin ($87.35m) and a nice Dollar-based Net Retention Rate of 120 %+. In two quarters we should learn about the real DBNRR since they disclose the exact number only once per year.
Crowdstrike seems to be on track, but not as strong as I like them to be. Sure, I can’t complain about their strong 59 % Year-over-Year growth rate while delivering $535m revenue. But revenue growth is still slowing down. Therefore, I am hesistant to add more since Cyber Security tailwinds should prevent them from slowing down further when looking at revenue and customers.
Perhaps I am not realistic enough about the law of large numbers, but I am becoming impatient about them to speed up due to the government business they should have in front of them. Other very hungry dogs, such as Sentinel One, are eager to catch up as well.
I bought my first tranche in 2019, although I reduced the position over time from once 25 % to now 11 %, which am comfortable with and I have no plans to change that as of now.
ZSCALER
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Confidence tier: Contender
-
Type of revenue: Subscription-based
-
Trend to profitability: Yes
-
Revenue: $318.1m
Year-over-Year
1Q22 2Q22 3Q22 4Q22 61.7% 62.7 % 62.6 % 61.4 % Quarter-over-Quarter
1Q22 2Q22 3Q22 4Q22 17.0 % 10.9 % 12.2 % 10.9 % -
Calculated billings: $520.4m
Year-over-Year
1Q22 2Q22 3Q22 4Q22 71.2 % 58.5 % 53.6 % 56.6 % Quarter-over-Quarter
1Q22 2Q22 3Q22 4Q22 -25.4 % 48.4 % -6.0 % 50.6 % -
Free Cash Flow: $74.8m
% Revenues
1Q22 2Q22 3Q22 4Q22 36.2 % 11.5 % 15.3 % 23.5 % -
Customers $100k+: 2,089
Year-over-Year
1Q22 2Q22 3Q22 4Q22 52.9 % 48.1 % 43.9 % 41.1 % Quarter-over-Quarter
1Q22 2Q22 3Q22 4Q22 9.2 % 8.4 % 8.0 % 10.5 % -
Dollar-based net retention rate: 125 %+
Last 4 quarters
1Q22 2Q22 3Q22 4Q22 125 %+ 125 %+ 125 %+ 125 %+
My thoughts:
Zscaler’s long term Free-Cash-Flow margin target is 25%, which they almost hit last Quarter with 23.5 %. Sitting on $1.73B cash, there is not much to be afraid of in this environment.
Revenue came in at $318m, which translates to 61% Year-over-Year and 10.9 % sequentially. Looking at the past three years, Zscaler’s seasonality is a very visible influecing factor.
Seasonality also influences calculated billings which jumped back to 50.6 % sequentially from -6.0 % in the previous quarter. Zscaler made it clear that billings is the most important metric for them and the development here is great to see.
They also grew customers with $100k ARR to 2,089 (10.5 % Quarter-over-Quarter), which is stronger than the past 3 quarters. Still, looking at seasonality from the past few years, this is rather the usual development.
Noteworthy: President Amit Sinha resigned as he “accepted a CEO position at a privately-held technology company” called DigiCert, but will remain on the Board of Directors.
Bottom line: Zscaler keeps delivering as usual, and I feel comfortable with the current allocation. I don’t see any reason to sell right now, but I also need proof of consistent execution to maintain or increase it.
I will outline the smaller positions which make the other 20% (Bill, ZoomInfo, Monday.com, The Trade Desk, Upstart) in my next portfolio summary.
About tiers:
I put my companies in 3 mental tiers:
- Tier 1: Champions enjoy my highest conviction due to excellent company performance and execution. They usually have a 15+% allocation.
- Tier 2: Contenders are either rising stars due to good performance, but they lack full confidence or past champions due to declining performance. They are sized between 5 % and 15 %.
- Tier 3: Bench – These positions are either new ones which I want to keep on my radar/get to know or fallen angels which I want to keep for some (bad) reason.
Long Story Short
October was a quiet month. Down just -2.1% and low amount of significant company news.
I own 2 Champions i feel great about, 4 Contenders which I feeld good about and have 5 companies on the bench. I will try to reduce the bench positions which most likely will affect ZoomInfo and Monday.com depending on their Earnings Results. Why not Upstart? Let me explain in my next summary. November will be interesting: Earnings season, see below.
Appendix
Earnings Calendar
| Company | Earnings release | Time |
|---|---|---|
| SNOWFLAKE | to be announced | |
| Cloudflare | 11/3/2022 | Post-Market |
| Datadog | 11/3/2022 | Pre-Market |
| Sentinel One | to be announced | |
| Crowdstrike | to be announced | |
| ZSCALER | to be announced | |
| Bill | 11/3/2022 | Post-Market |
| Zoominfo | 11/1/2022 | Post-Market |
| Monday.com | to be announced | |
| The Trade Desk | to be announced | |
| Upstart | 11/8/2022 | Post-Market |
My Investing Style
I call it “Growth Momentum Investing”, which Saul teaches and masters so well.
As long as the fundamental metrics have momentum and fit my criteria, I am on the bus. I invest in companies, not stocks. I never hold Cash, since a) I don’t try to time the market and b) I am still earning money which I use for my living expenses. I look at my money in the market as “non-existent”.
Growth investing is not only about making money or outperforming the market.
To me, it also means:
- Being on the cutting edge of time as I am the person who is aware of tomorrow’s innovations, technology, and solutions.
- Growing general knowledge by learning about exciting companies and their strategies and challenges.
- Becoming an entrepreneur myself by understanding the numbers and decisions behind the business and act accordingly. This will also help in other areas of (professional) life.
My investing criteria:
- High revenue growth (about >40%).
- High gross margin (about >70%).
- Trend to profitability (i.e., Free Cash Flow, net income).
- Strong and consistent customer growth.
- Metrics which or show satisfied customers (i.e., Dollar-based Net Retention Rate).
- Predictable type of revenue (i.e., subscription based).
My “anti” criteria:
- ADRs.
- Chinese companies due to lack of transparency.
- Complicated stories (I am breaking this rule with Upstart).
- Companies with a persistent negative news situation.
- Turnarounds.
- Speculative or otherwise dubious investments.
- And, of course, no weapons of mass destruction such as derivatives.
My selling criteria:
I neither sell based on strict binary rules (i.e., if growth dips 1 percentage point below 40%) nor do I sell if metrics don’t meet “gold standard”.
My selling decision is usually based on:
- A combination of several metrics.
- The development of fundamentals relative to other and potentially new positions.
About Me
I am Moritz, in my 30s, working in digital marketing for a B2B SaaS company. I started investing in late 2018. Loving it.
I discovered Saul’s investing discussions in early 2019 and studied Sauls knowledgebase, which is a true gem. I have built meaningful relationships with some of you. @SaulR80683 , @stocknovice , @PaulWBryant , @GauchoRico , @fish13 , @CMF_muji , @ethan1234 , @wsm007 , @captainccs , XMFBreakerTinker, brittlerock to name a few of the ones which had immense impact on my journey. 
In 2020 Ben aka @SlowAndFast approached me to start his investing journey. I was able to share my fresh knowledge with him. Now he is even better than me at looking at companies and is writing one of the greatest portfolio summaries on this board. Thank you for being my best friend since we met at the age of 0 in a toddler group.
I consider myself still an apprentice and always will be. Investing is such a humbling experience. I firmly believe that it makes me a better human being as well. It took me about 4 years to write my first portfolio summary here. I always thought I am not good enough. Yet again, investing has taught me another valuable lesson:
You don’t have to be good to start,
but you have to start to be good.
Happy Investing, everyone!