My biggest take away from Saul, is at the intersection of his posts here: When I am making my investment decisions, I try to accurately assess: how efficiently each company will ride the combining waves of adoption for their various technologies up the hockey-stick (Hypergrowth) toward their becoming behemoths. More now than ever, I believe that due to efficiencies in the business models of the largest companies, they will continue to grow faster longer.
Valuation numbers don’t mean anything without the story around where they come from. It’s the story that gives them meaning.
Another mentor for me:
Aswath Damodaran, NYU Stern School of Business.
Aswath Damodaran – Laws of Valuation: Revealing the Myths and Misconceptions - Nordic Business Forum
Said another way, in my own words: Past numbers can tell us where the company has been, the narrative around the numbers informs us in where the business may go.
When I look at my portfolio, as though looking at a best friends’ (knowing his history in detail, despite my knowing his aim to be as much like Saul as possible), I’d say that the largest positions in my portfolio are in those in which there is conviction (% in a position), that looking furthest out into the foreseeable future, there will be the largest positive surprises to the market. I very much believe that, despite some viewing ‘valuations’ as high for most of the companies in which I’m invested, people over estimate the short term (6-18 mos) and under estimate the long term (1-3 years, much less 5-10 years).
My understanding of the business model?
Without hyperbole and with as little conjecture as I can muster, given I am attempting to predict the ‘future’ value of the companies in my portfolio. Knowing full well past numbers, I’m predicting future value based on my understanding of each company’s projected value add for there customers. At what level is there going to be disruption.
I believe the leaders inside each company use Return on Investment as the bases for making purchasing decisions. These leaders are making purchasing decisions based on their prediction of the future. At the point in the adoption curve where we want to invest, where new customers adds and highest revenue growth occurs is based on a critical mass of information being reached (proof of concept trials, analysis of what the logical amount of ROI is expected, etc). My investments are not just based on my understanding of a business model or past numbers, it’s largely based on the current (still a) story, as presented by the sales reps to their customers.
For examples:
Tesla: I believe most Auto-customers make decisions based on their monthly cashflow. I invest in Tesla because: MegaPacks, Dojo/FSD, and Robotics are all neglected by Mr Market due to the apparently ‘unbelievable’ fact that, mostly due to the innovators dilemma, the big three and most of the current auto makers in The World are not going to get the subsidies they’ll need to stay out of bankruptcy .. Hopefully, bankruptcies will quickly enable the restructuring they’ll need, to grow the EV market to where it needs to go.
Current Tesla Negatives:
Snowflake: The customers of Snowflake are begging to understand the pull of Data Gravity and the safe Sharing of Data. I’m investing in Snowflake because IMO it’s being valued as a nice to have and not the “90% of the value in the predictive insights market” and Mr. Market may also be neglecting Snowflakes Strong Network Effect. The proof of which may not show up for 1-3 years.
PeterO, June this year- “This network of data sharing relationships elevates Snowflake’s value proposition for customers onto a higher plane beyond focusing on tooling for analytics and ML/AI workloads within a single company.”.
Cloudflare, I believe this company is valued as merely the puzzle pieces sold individually, as the customers sees it presently. I invest in Cloudflare due to the fact that Cloudflare will effectively replace the internet as we know it, yes with security and programable customization of each Application (with GPU’s in every Point of Presence). Where will the Apps be best supported in the next 1-3 years. I can’t predict when the customers will see it as I do. But, I believe they will soon.
Pure Storage - As long as recognition of their value add is given (50% fewer GPU’s needed for the same level compute performance). I believe that the build-out of Pure Storage will be as large or larger than with Nvidia GPU’s, given apparent lag in current market penetration. I believe will see this company being re-rated in the next few quarters.
I’m getting lazier explaining going forward. But, I’ll include it to complete those in my portfolio.
Samsara is a leader in, as the ticker states, implementation of the Internet of Things.
![IMG_1070.png]()
Well the nice graph didn’t show up🥴 It was showing Adoption of IOT at a 70% Growth rate each year, for the next 5 years🤩.
Only recently has Institutional Investors recognized Samsara’s dominance in this nascent Greenfield.
What I believe to be undersold about Nvidia is that this build-out of the modern Data Center is going to take 3-4 years at current rates of ramping. I don’t have a nice chart for this one.
This one is pure conjecture based on years of my listening to Conferences by leadership, Crowdstrike will succeed in M&A, more so than will MS or Palo Alto Networks, and will therefore grow revenues faster than would otherwise be expected IMO.
Zscaler has an enormous Greenfield Opportunity (Zscaler stating that they currently are only in 1-2% of their TAM) and will remain in hypergrowth in Billings recognition ( and will continue to be consistent and transparent in the movement of their Billings to Revenue, as they have been for years now).
Some hyperbole now:
I would tell my best friend, “Watch out for legislation against these future du(mon)opolies.”.
Thanks,
Jason