My portfolio at the end of Apr 2018

My portfolio at the end of Apr 2018

Here’s the summary of my positions at the end of April. As usual, I figure as of the last weekend of the month. This month it came out to be four full weeks, and next Monday gets added to May. Any PE’s that I give are always based on adjusted earnings, which very rarely may have small modifications of my own.

This has been a wild couple of months. When I closed my books on February I was up 21%, which was wild in itself. Then on the 20th of March I hit a high for the year of up 41%, which I told you I thought was really crazy. I was correct since I finished March up just 29%, and I continued on down in April until a week later I was up just 24%. Then in two weeks I bounced back up to 33%, then back down again, to finish the month yesterday at up 24.8% for the year, down from that 29.1% at the end of March. Meanwhile, the market averages are still hovering around zero for the year (as you’ll see a little further down).

My results were especially hit the last day of the quarter (yesterday), when my two largest positions dropped a little over 5% each. This was first because Tableau, a competitor of Alteryx, had announced a partially competing product a day or two earlier, and then because Nutanix announced a delay in a product release. Alteryx’s loss for the entire week was a rather excessive 15%, and it was down just under 20% from it’s high daily close of $38.10 just the week before, while Nutanix was down almost 11% from its high close the week before. And, as I mentioned, since these were my two largest positions in a concentrated portfolio, I feel I did well to lose just a few percent on the month, and to still be up about 25% for the year in only four months.

The three indexes that I’ve been tracking against closed Friday as follows. The results are given from Jan 1st to date:

The S&P 500 (Large Cap)
Closed down 0.5% for the year. (It started the year at 2684 and is now at 2670).

The Russell 2000 (Small and Mid Cap)
Closed up 0.9% for the year. (It started the year at 1542 and is now at 1556).

The IJS Small Cap Value ETF
Closed up 0.8% for the year. (It started the year at 153.6 and is now at 154.9).

These three indexes
Averaged up 0.4% for the year so far. (Clearly a Bull Market that accounts for our gains.)

(The averages would be very slightly higher if you use the S&P with dividends added, but I’m continuing to use the straight values for consistency with past results. I consider the roughly 0.1% per month that the average of the indexes would be changed by including S&P dividends to be irrelevant considering the magnitude of the differences between our results and the results of the indexes.)

You may ask, “Why these three indexes?” When I started this board I started comparing my results to the S&P 500, because that’s what the MF uses. Then I considered that the S&P is all large caps, and smaller caps tend to do better over the long term, so to be fair I added the Russell 2000, a small and mid-cap standard. Then in 2016, it was claimed that the IJS, which tracks the S&P 600 Small Cap Value Index, has the best long term results. So I added the IJS. This gives me 500 large caps (the S&P), 2000 small and mid caps (the Russell), and 600 small cap value stocks (the IJS), which combined ought to give me a very representative set of standards to compare against. I’m sure some people will say “Why not drop this index and add that one?” but these are the three indexes I compare against currently, and I will probably continue to do so. I think they give me a pretty good approximation of how the market overall is doing.

When people say our gains are all due to being in a Bull Market, I have to laugh: “What Bull Market?” The indexes I follow are up an average of 0.4% so far this year. Last year the three indexes averaged up 14.4% while many of us were up 60% to 85%. If we look at the last 16 months since Jan 1st of last year, the indexes are up all of 15% while many of us are up well over 120%, and anyone with a hand calculator can calculate that I am up 130% in these last 16 months (1.842 times 1.248 = 2.30). It’s hard to explain a 130% gain as due to the market being up 15%.

I think the explanation is that we are in a special situation. We seem to have caught a secular wave, in which our companies are exploding in function and importance as well as in revenue, which is mostly recurrent. It’s the wave of big data, the cloud, artificial intelligence, and all the rest. I had some big winners outside of that area, like LGIH, and Kite Pharma, etc, but it’s been that big wave that has carried us.

Let me remind you that I’m no good on timing the market, and I don’t try. If I did, I would probably have exited all my positions at the end of April 2017, when I was up 26% in four months and was “aware” that it couldn’t continue like that. It’s hard to remember now, and it sounds odd in light of the yearly results we actually had, but…back at the end of April 2017, up 26% seemed like a ridiculously ENORMOUS amount to be up in just four months, and way “over-bought.”

But if you or I had sold out then, because we thought the market was overpriced and we decided that we could wait for a pullback to buy back in, we never would have bought back, because the market kept going up and our stocks never came back even close to where they had been, much less given us a pullback, and we would have thus missed all the rest of this enormous rise. And that’s the problem with trying to time the market!!!

This January, someone was telling us that all the best economists predicted that the market was due to average up just 4% per year going forward, by their calculations. They may be correct about “the market” but I’m up many times that in four months. Don’t listen to that stuff!

In February the market took a 10% nose-dive and everywhere I looked people were analyzing the reasons that the market was tanking, discussing how relations between long term and short term yields, and other technical indicators, were the reason the market was tanking, and warning about previous corrections that took months or years to recover from. A lot of people were “building cash,” “protecting myself with options,” and all the rest of it. Look, you should always have enough cash to live on for as many months as you feel you could need (more if you are retired than if you are working obviously), but trying to guess what the market will do (“market timing”) is a losing proposition.

I continue to believe that intelligent stock picking with a modified buy-and-hold strategy can beat any index or average? How could it not? When an “average” is just that: an average of good, mediocre, and poor companies?

Here’s a little table of the monthly progress of my results so far this year:

**End of Jan 		+16.9%**
**End of Feb		+21.4%**
**End of Mar		+29.1%**
**End of Apr 		+24.8%**

At the end of last year I wrote PLEASE don’t expect me to be up another 84% next year. It ain’t goin’ to happen!. Please remember that!

The stocks I’m still in since the beginning of the 2018 are Shopify, Arista, Alteryx, Nvidia, Nutanix, and Square. They include my five largest positions and they make up 68% of my current portfolio. Last month they were 70%. You can see that all the little buys and sells I recount are mostly just nibbling around the edges.

Positions I’ve added since the beginning of 2018 have been:
January - Pure Storage, Twilio, and Okta.
February – None
March – Nektar (which I had sold in February)

Here’s a last four months review:

January: I didn’t sell out of any positions, but added Pure Storage, Twilio, Mimecast and Okta.

February: I sold back Mimecast to raise cash to add to my Pure Storage. Selling Mime may have been a mistake, but that’s life. I also finished selling out of LGIH, which I had been in the process of doing for several months. During the February mini-crash I sold out of Nektar for money to add to my Nvidia, which had just announced wonderful results. I had felt that Nektar was just a little speculation for me, and that it had shot way up on acquisition rumors. (The acquisition didn’t come through, but a nice partnership did). Finally, I sold out of Wix, which has always been a low conviction company for me, although people whose opinions I respect like it a lot.

March: I decided to take a full position back in Nektar as I learned more about it, and also took a much smaller position in MongoDB. To raise money to buy them I trimmed some Hubspot, and some Talend, and I trimmed some of the Nvidia I had added in February. (Remember that I have no new money coming in and when I want to buy something I have to sell something). Then when the market collapsed (and especially Nvidia collapsed after a great investor conference, and Shopify collapsed after another short attack), I sold the rest of my Hubspot, and the rest of my Talend, and about half of the Mongo that I had bought, and added especially to Nvidia, and also to Shopify, Nutanix, Twilio, and Nektar. I thus bought back a lot of the Nvidia that I had reduced earlier in the month. (Nvidia was trading in a narrow range all this time)…

April: I’ve had a lot of back and forth on MongoDB. During April I sold out of the other half of my small position for cash for things I liked better, but I then bought it back when it fell because of lockup expiration worries, and finally I sold out again to buy more Twilio, Okta, Pure, and a little Nektar. I also net trimmed my Nvidia and Shopify to buy more Twilio and Okta. (I like Twilio and Okta)

Here’s how my current stocks have done in the first four months of the year. I’ve arranged them in order of percentage gain. I’ve used the start of the year price for stocks I’ve been in all year, and my initial buy price for stocks I’ve added during the year.

Twilio from 25.70 to 41.65		up  	62.1%
Nutanix from 35.28 to 49.59  	        up 	40.6%
Okta from 29.95 to 41.74		up  	39.4%
Square from 34.67 to 47.57		up  	37.2% 
Shopify from 101.0 to 126.6  	        up 	25.3%
Alteryx from 25.27 to 30.62		up  	21.2%
Pure  from 16.72 to 20.26		up 	21.2%
Nvidia from 193.5 to 226.3		up  	17.0%  
Arista from 235.60 to 262.75,   	up 	11.5%
Nektar from 103.0 to 83.66            down 	18.8%

By the way, my big star has been Nutanix, up 130.7% from when I bought into it just over six months ago at $21.50, now at $49.59.

With regards to Nektar, this was my second purchase as I had sold out in February for a 27% gain. My initial purchase price this time was $98, but my average purchase price was $103, so I used that, as I bought most of it during a single week. I have a considerable loss on my position at present, but there hasn’t been any company specific bad news and there is no news yet from the key study which has just begun.

Exited positions this year showing my gain or loss from the beginning of this year, or from when I first bought if it was during the year, and my average exit price.

Nektar from 59.7.0 to 76.0        up  	        27.3%  
Talend from 37.48 to 47.50        up  	        26.7% 
Hubspot from 88.4 to 108.0        up  	        22.2% 
MongoDB from 38.00 to 43.50	  up 	        14.2%
Mime from $32.34 to 30.85	down		 4.6%   
LGIH from 75.0 to 71.0 		down 	         5.3% 
MongoDB from 41.00 to 38.65	down 	         5.7%  2nd time
Wix from 69.2 to 61.8    	down		10.7%

MongoDB I bought in mid-February at about $38.00, and I sold out of what I had bought at a price of about $43.40 near the end of March, to raise cash to buy more Nvidia. I bought a small position back in April at about $41.00 but then sold out completely later in April at about $38.65 for cash to buy more Twilio, Okta, a little Pure, and a little Nektar, all of which I felt better about long term.

I’d like to note that since 2010 (with fears of a double dip recession), well-intentioned people have been warning us constantly that another bear market and/or recession is coming. “The bull market is too old.” or “The market is too high.” or “This technical indicator proves the the market is in a bubble.” All of their charts and indicators proved it in 2010, 2011, 2012, 2013, 2014, 2015, 2016, and again last year in 2017. I’m hearing convincing stories about bond yields now fortelling a crash, and interest rates rising, but I’ve heard other similar convincing stories about other technical indicators every year. And so have you! Eventually they’ll be right, and they will think “See! I was right all along!”

Of course a marked correction/bear market/recession will come eventually. Look, it could start next week for all I know! But we never really know when. And what a price those people have paid in “keeping their powder dry” and staying out of this market for the past eight years, waiting for the big correction that never came.

I realized last month that I’ve been writing the above in my monthly summary every month and those people have continued to be wrong, and wrong, and wrong. And wrong by a huge magnitude of missed gains. Picking good stocks makes much more sense than trying to pick good stocks AND trying to time the market too.

Large caps (S&P) were up much more than small caps (Russell and IJS) last year, which doesn’t sound like people are wildly casting aside caution. But what do I know?

Now let’s look at my position sizes. I’m still trying to keep my portfolio concentrated and streamlined. After selling out of MongoDB, I’m down to 10 positions, which is pretty ideal for me, but gives me room to add one or two if something magical comes along. Here are the 10 positions in order of position size.

**Nutanix			15.2%**
**Alteryx 		14.3%**
**Shopify   		12.1%**
**Arista		 	11.5%**
**Twilio			10.8%**
**Square			10.6%**
**Nektar			 8.0%**
**Okta		         7.4%**
**Pure Storage		 5.4%**
**Nvidia	 		 4.4%** 

It’s a very concentrated portfolio. With 14 positions, an “average position” is about 7%, but with just 10 positions, an average position is a 10% position. The big changes from a month ago is that MongoDB is no longer there, I have considerably more Twilio and Okta, and Nvidia has dropped a few percent. Nutanix and Alteryx changed places, but that’s insignificant, and due to price action.

Eye-balling the list you can see that Alteryx and Nutanix are neck and neck in the lead, then stepping down to Arista, Shopify, Twilio and Square, all between roughly 12.0% and 10.5%. Then Nektar and Okta at 8.0% to 7.4%, and Pure and Nvidia from 5.4% to 4.4%. There are no small try-out positions.

Nutanix and Alteryx, my two largest positions, are very close to each other in size. They have exchanged places back and forth a few times during the month due to market action.

Nutanix is in first place at 15.2% of my portfolio. It was a new position in September, which I entered when Bert praised it very highly. It was discussed at great length on the board at the time, and like Alteryx, with a lot of skepticism. I entered at about $21.70 with a fairly good sized position. I added a small amount in February at about $31.25 and some more at $33.00. I wasn’t going to add in March as it was already a large position, but I couldn’t help myself and added some during the sell-off. I didn’t add or subtract in April. It closed last Friday at $49.60. Note that please. I bought it and praised it a lot when it was in the low $20’s. Now seven month later, it’s at almost $50, up almost 130% in seven months.

Sure, stock picking doesn’t work. We’ll all return to the mean some day. Statistics prove it! Hah!

Nutanix reported awesome January quarter results in March. This included revenue up 44%, billings up 57%, software billings up 60%, deferred revenue up 57%, cash flow from operations up 135%, free cash flow up over 300%, million dollar deals up 104%, and Net Promoter Score of 90 !!! (For those who aren’t familiar with it, NO ONE gets a Net Promoter Score of 90 !!! It means just about all your customers absolutely love you.)

Nutanix’s area is “hyper-converged infrastructure” in data storage. Gartner rated Nutanix first on completeness of vision, and first on the ability to execute. Like Arista in a way, it sells hardware, but what counts is its software and operating system. In fact, it is doing away with the pass-through zero-margin hardware that it was selling, and pivoting to be a pure software company (also moving towards a SaaS model). This makes their revenue growth look deceptively slow because of hardware sales no longer being counted, and because of subscription revenue being counted only month by month, even if all paid in advance. (Pretty odd to talk about revenue growth of 44% looking deceptively slower than reality, isn’t it?)

Alteryx is now at 14.3%, and in 2nd place. It was a new position in December. It finished April at $30.62 after starting the year at $25.27, so it’s up 21% for the year so far. Some people have been very skeptical about Alteryx, but I think very highly of it. During February I added to my already large position at $27 to $28, and some more at $24.95 when the market melted down. I didn’t add any in March as it was already a very large position, but I added a tiny bit early in April when the price dropped to $33.15 after having been as high as $38.50 a couple of weeks before, and I added a little yesterday at $31.00 when it fell because Tableau introduced a Prep product. I am no techie but I know that Bert doesn’t feel that Tableau’s product is much of a threat to Alteryx.

Here are some excerpts from Bear’s post about their latest earnings report :

“It just sounds like they are growing as fast as they can. This is some incredible stuff!
Revenue: up 55%. …wow.
Adj. EPS: 2 cents, a 5 cent beat
Gross Profit: up 56%
Operating Expenses: only up 31%. Gross Profit is growing much faster than expenses.
Operating Loss: $1.9 million, improved from a loss of $5.6 million
Operating Cash Flow: Positive $12.5 million! And $18.9 million for the year!
Dollar based revenue retention rate: 131% !!!
Customers: 3,392 (up 46% from a year ago).
New Customers this quarter: 338 (up 11% sequentially!)
Deferred Revenue: $114 million
Increase in Deferred Rev this quarter: $32 million. Nice.
Wow. This was an incredible quarter. Everything was accelerating, better than expected, and planning for an even bigger 2018. I couldn’t be more impressed.

And Bert said It’s hard to value something quite as unique and game changing as that which Alteryx offers.

In March they announced Alteryx Promote, a new part of the Alteryx Analytics Platform. I don’t have a clue what it does, but I just watch the numbers. Earnings are due out on Weds, May 9th after market closing.

Shopify is in third place at 12.1% which is not much changed from the 12.8% it was last month. It had been my largest position for a long time. It grew very fast and got to be a much larger position than I was comfortable with (22% at one point), and well above what I recommend, and I eventually trimmed it down and redeployed the cash, but at the end of February it remained my largest position. It was displaced in March when it fell past Alteryx after a second short attack, and Nutanix just grew right past it.

Revenue growth is slowing slightly with size but it remains an incredible success story. After four years of compounding 100% revenue growth, they “slowed down” in 2017 to grow revenue just 73% over the previous year.

They announced an enormous December quarter in February and I couldn’t resist. I bought back a little of what I had been trimming. I did add a little also at the end of March after the short attack. I trimmed a little more in April though. Here’s a little excerpt of what they reported for their December quarter:
Total revenue was up 71%.
Subscription revenue was up 67%.
Monthly Recurring Revenue was up 62%.
Shopify Plus revenue (big companies) was 21% of MRR, up from 17% a year ago.
Merchant Solutions revenue was up 74%.
Gross Merchandise Volume was up 65%
Gross profit was up 78%
Adj operating income was 5% of revenue, up from a loss of 1% of revenue.

As you see, the rates of growth are enormous. In the “real world” companies just don’t grow that fast.

I bought Shopify in 2016 at about $27 as I remember. It closed Friday at $126.6, so in spite of the short attacks, it’s at about 470% of what I first bought it maybe a year and two-thirds ago (almost a 5-bagger, for those who count that kind of thing).

In February, Tim Cook from Apple visited Shopify to see how they were integrating enhanced reality into their platform to help their merchants sell products. It seemed to indicate some potential alliance between the two companies, which would certainly be more good news for Shopify.

In March Shopify announced frictionless checkout with Google Pay, and that Shopify merchants can now enable Google Pay with a single click.

They also announced expanded integration with Instagram. The “shopping on Instagram” feature that allows businesses to tag products in Instagram posts is now enabled for merchants in eight additional foreign markets:… “This strategic expansion unlocks potential for our merchants to sell to Instagram users all over the world”.

I still love investing in this company. They are still a 12% position, but I am being a little more cautious. In looking over my charts I see that I have I have net trimmed quite a bit from my position in Shopify over the last six or seven months, at prices from $106 to $136, and I trimmed this month too, but as I said, they are still a 12% position and still my third largest.

Shopify will report before the market on Tues, May 1st. They are the only one of my companies reporting before the market and my guess is that this predicts a very strong earnings report, but we will just have to wait and see.

Arista was in fourth place in March after Nutanix just blew past them. They are still in fourth place at 11.5%.

Arista was founded by a small group of very smart people who used to work at Cisco. They developed a better way of doing something (using SDN), but Cisco didn’t want to deploy it (the legacy dinosaur’s dilemma) because it would undermine their legacy products. So the Arista guys (and gal) left, started their own company, and got sued by Cisco because they are taking market share left and right. They have been moving up steadily as the threat from Cisco’s law suits diminishes. In January they were up an enormous $48 to $283.50, and in February they rose another $25 to a high close of $308, before settling back to close the month at $246. In March they bounced around a bit but ended $9 higher, at $255. I added small amounts in several accounts near the end of March in the $240’s. In April they kept bouncing in the same trading range and finished the month at $263. In April I trimmed a little at about $255 for cash to add to Twilio and Okta.

Their December quarter was another excellent one. Revenue was up 43%, and up 7% sequentially, and EPS up 64% year over year. What seems to have spooked people is that they forecast the March quarter flat with the December quarter, and they only forecast 25% growth for the year. However the first quarter was forecast flat with the previous fourth quarter in 2016, and again in 2017. It’s seasonal. And Arista always beats their estimates. The CEO was also very, very, clear that they were not seeing any competitive pressure at present.

They have always said that they see an eventual longterm growth rate at about 25%. They explained that they don’t have much vision past two quarters so they are falling back on that 25% growth estimate for the full year, but they also pointed out that they didn’t see 2017’s huge 50% growth in advance either. I think the stock is down because a lot of people had had a huge run-up and were looking for an excuse to sell (or they got scared). They report earnings on Thurs, May 3rd, after the market close.

Twilio has moved up to 5th place at 10.8% of my portfolio, and a price of $41.65. I added a lot to my position this month. I had been in and out of Twilio, selling out because of all the pessimism about it becoming commoditized in the future. This current position was a new small position I took in early January. It’s grown as my conviction has grown. I first bought between roughly $24 and $27. The next month the price shot up and I bought an equivalent amount mostly between $30 and $32. Then, this month and last I added another bunch between $40 and $42. I came back to it in January because the numbers talk, and their non-Uber/non-FB revenue is growing at 60% and will hopefully soon make the Uber situation fall into the rear-view mirror. Several board members made convincing cases for it, as did Bert. Based on the December earnings, it looks like they were right. Their non-Uber revenue was up 62% and their non-Uber dollar-based retention rate was 136%. That doesn’t sound to me as if it’s being commoditized. They announced two new important products in March and April, Flex and Programmable Wireless, which I recently wrote about.

Here’s the key! This is disguised, or camouflaged, growth! Let me give you a concrete description, because it will make more sense to you that way (but approximate, as I’m not using exact numbers).

For simple calculating and visualizing, let’s say that they had $100 million of revenue last year, of which Uber made up 20%. Now we know that the non-Uber growth rate was 62%. Okay, so the $80 million that was non-Uber grew at 62%. In dollars, that comes to growth of $49.6 million. We’ll round down to $49 million. So this year, the non-Uber revenue comes to $80 million plus $49 million, which equals $129 million.

Now let’s say Uber revenue has decreased 75%, from $20 million to $5 million. Adding the $5 million to the non-Uber $129 million, and we get total revenue of $134 million, and it looks like Twilio was only growing at 34% from the $100 million they started with. (Actually they managed somehow to grow at 41%, but we won’t worry about that).

Let’s look at next year: If that non-Uber $129 million keeps growing by 60%, we are looking at about $206 million of non-Uber revenue, and no one will care if that last $5 million from Uber drops off completely. It simply won’t be relevant.

Now let’s look at margins. They do land-and-expand, and start off new customers with relatively low gross margins to make the sale, but then have a 136% non-Uber dollar based expansion rate, as they have lots more great programs to sell their customers. What kind of revenue did they lose when Uber went in-house. They lost high margin revenue that was already installed and just repeating. So, obviously, gross profit growth didn’t keep up with sales growth for now. Next year will be a completley different picture.

Twilio reports on May 8th, after the market close.

Square is in sixth place, at 10.6% of my portfolio, and up to $47.60 from $34.70 at the end of the year. I started my position a year ago March at an average price of about $17.50, and have added several times along the way, but then trimming a little in December, January, and February. In March I added some early in the month, but sold back roughly the same amount in April. These little adjustments around the edges don’t mean anything significant, but just reflect momentary needs for cash to buy something, or something like that.

Square is growing revenue like mad. For the last four quarters it grew revenue at 39%, 41%, 45% 47%. It’s been accelerating! Subscription and Service revenue, the good stuff, was up 95% for the year (and obviously becoming a larger part of adjusted revenue). Square also has a lot of recurring revenue. It has been profitable for the past six quarters, but not a huge amount.

Its original mission was to allow any merchant with a mobile device to be able to accept card payments. Since then, it has evolved into a robust payments solutions business, and it also provides more sophisticated services such as:

Instant Deposit, which allows retailers to receive money instantly in their bank accounts upon swiping a customer’s credit card, instead of waiting up to four days. For each instant deposit, Square charges 1%. This is incredibly lucrative for Square, as it’s a three-to-four day loan at 1% (which is a huge compound rate, at little risk).

Square Capital is a service that facilitates loans to Square’s merchants, who pay the loan back gradually, as a percent of transactions. These loans especially appeal to small businesses that don’t normally have access to capital. And, because Square is so familiar with its customers’ businesses, it can decide whom to offer loans to with a high degree of safety.

Caviar – a restaurant delivery might seem an odd service for a payments company. However, Caviar has quickly grown since coming aboard. The most important thing is that restaurants that use it often sign up for all the rest of Square’s services. Square just bought another small company called Weebly that will allow Square to go into fancy catering for enterprises and meetings. This gives more restaurants more motivation to sign up with them. Square will report on Weds May 2nd after the market close.

Nektar. I bought back into Nektar at the beginning of March. It’s in 7th place at 8.0%. It has fallen to $83.70 due to what seems to be irrelevant negative results by other companies spilling over and causing lack of enthusiasm for biotechs in general. There has been no negative company-specific news from Nektar, or about Nektar. There is no news yet from the key study that has just begun.

I really like this company, and most recently added a little at $92.65, but I didn’t add any more as it fell into the 80’s as my position is big enough and will have to sink or swim as it is. I probably won’t let the position get any bigger except by stock price appreciation. For more information I would direct you to Heart MD’s great write-ups. Nectar hasn’t yet announced when it will give its quarterly report.

Okta was another new position in January, a small cyber-security firm, and was my smallest position at the end of last month, but is now in 8th place and a 7.4% position. They IPO’ed in April, about a year ago. What they do is called Identity and Access Management, or IAM. They are a SaaS company, and are still racking up big losses in net income and even in cash flow. Their TTM revenue is $260 million, which is up 62% from TTM revenue of $160 million a year ago. I added quite a bunch this month. Here are some of the reasons from the January quarter results. It’s hard to even imagine a better quarterly report than this one:

• Total revenue was $78 million, up 59%.
• Subscription revenue was $72 million, Up 64%, and was 93% of total revenue, with the remainder being Professional Services.
• International Revenue was only 15% of total revenue, but was up 85%.
• Billings were $105 million, up 67%. What’s even better is that they were 135% of Total Revenue, so book-to-bill ratio was an enormous 1.35
• Customers with revenue over $100,000 were up 56%. Similar to last quarter, the majority of these customers were new customers, demonstrating the ongoing success we’re having with the enterprise market.
• Over 400 net new customers was also the largest number of additions we’ve ever seen. We ended with over 4,350 customers, up 40%.
• Our strong TTM dollar-based retention rate was 121%. This demonstrates the ongoing success we are having expanding within our existing customer base.
• Subscription gross margin was 81.1%, up 1.7%.
• Total gross margin continues to trend higher and reached a new high of 74.1%, up over 4%.
• Gross profit was $58 million, up 69% year-over-year. Our gross margin has been steadily increasing.
• Adj Operating Loss was $11 million, improved from a loss of $13 million.
• Adj Operating Margin was a loss of 14% of revenue, up from a loss of 26% of revenue last year.
• Adj net loss was $10 million, improved from $13 million a year ago.
• Adj net loss per share was 10 cents, improved from 14 cents a year ago.
• Operating cash flow was $0.2 million or 0.2% of revenue, compared to a loss of of $6.7 million or 13.7% of revenue, a year ago…
• Free cash flow was minus $2.2 million, or 2.8% of revenue, improved from minus $9.8 million, or 20.1% of revenue, a year ago.

I added considerably to Okta this month with the largest buy at about $40.60, and the second largest at about $41.80. I think that it’s great that there is still so much skepticism about it on the board. If everyone was gung-ho, I’d be worried.

Pure Storage was another new position in January, and it’s now in ninth place at 5.4% of my portfolio. I was encouraged to enter it by reading Bert’s articles and Bear’s and Ant’s posts. It’s busy right now replacing spinning disc storage for enterprises with flash arrays, as I understand it. And once that’s through they will replace first generation flash arrays with NVMeoF-enabled flash storage. And then the next advance, and the next. And meanwhile the demand for data storage will be expanding exponentially. At least that’s the investment thesis. And Pure is the leader in the leader’s quadrant on Gartner. But keep in mind that I am a tech illiterate. I don’t really understand much of all that above, and I am relying on other people’s advice. Here’s the kind of thing I do understand: It’s a little from the Jan quarter results, and it’s pretty “Wow!” kind of stuff.

Key quarterly highlights:
• Record quarterly revenue: $338 million, up 48%
• Record full year revenue: $1023 million, up 41%
• Record GAAP operating margin: -4.7%, up 14%
• Record Adj operating margin: 8.3%, up 10%
• Record Adj income per share of positive 13 cents, up from a loss of 2 cents a year ago.
• Record operating cash flow of $59 million and free cash flow of $38 million, and record full-year operating cash flow of $73 million and free cash flow of $7.7 million.

Nvidia has been going up and down in a trading range between $215 and $250 for 15 weeks now. That’s a long time for a company that’s supposed to be revolutionizing the world. I’ve bought some and sold some in the range, net selling it looks like, and it’s now a 4.4% position and in 10th and last place. Most recently I’ve sold some to buy Twilio. Nvidia had a great December quarter report. Here are a couple of items:

Revenue up 34%, and up 10% sequentially (note that sequential rise).
Adj earnings of $1.72, up 52% from $1.13 and up 29% sequentially from $1.33 (and THAT sequential rise)
Adj gross margin of 62.1%, up from 59.7% sequentially and from 60.2% a year ago (Certainly not being commoditized, and they guided to 63% next quarter).
Data center revenue was up 105% yoy.

Virtually every internet and cloud service provider has embraced our Volta GPUs. Hundreds of transportation companies are using our NVIDIA DRIVE platform.

Here’s Chris’ take on the recent conference:
All I can say is WOW, HOLY MOLY!! There were so many product introductions and announcements that it left my head spinning. Nvidia is innovating so fast that I can hardly believe it. Here are a few highlights that I can recall:

Introduced the next version of Volta 6 MONTHS AFTER VOLTA WAS INTRODUCED. This new version is twice as powerful.

Demonstrated real-time ray tracing technology that can make photorealistic images at 60 frames per second compared to the current one frame per 10 hours that the industry currently can do. Hwang said that this has been the holy grail for 40 years and is now possible. There are many applications that will use it.

They now have 370 partners in the automotive sector that are developing on NVDA’s chips for autonomous vehicles. This is up from 220 last year and 320 recently!!! They also announced the next 2 versions of chips that will be used in autonomous vehicles. This is just amazing progress.

They demonstrated video from autonomous vehicles drive around which is pretty amazing.

They introduced Constellation which is how they will test billions of miles of AVs in a virtual world. Twenty cars can only test a million miles in a year in the real world so virtual testing will be required to test safety….I have little doubt that NVDA will enable very fast development and introduction of level 5 vehicles in a few years. With 370 partners who is left to use other hardware/software? Intel has little chance in my opinion.

NVDA introduced CLARA a cloud based AI system that can be connected to the installed base of older medical instruments such as ultrasound and many others. Hwang said that there are 3-5 million of these legacy instruments and that only 100,000 are replaced every year. CLARA will automatically “upgrade” these old systems and instantly provide them with additional capabilities. Amazing to watch the demonstration.

A new version of TENSOR was announced…

They demonstrated a holodeck with a driver that was driving a car in the real world from the holodeck. This was like the movie Avatar! Incredible!

They demonstrated distributed computing where 4 GPUs running “on-prem” were connected to the cloud to speed up the processing by a huge amount.

There’s lots more. Nvidia is said to have a lock on the future. This may be a very exaggerated conclusion. Check out the discussions on the board, and decide for yourself.

Finishing up. When I take a regular position in a stock, it’s always with the idea of holding it indefinitely, or as long as circumstances seem appropriate, and never with a price goal or with the idea of trying to make a few points and selling. I do, of course, eventually exit after months, or sometimes years, but I’m talking about what my intention is when I buy.

I do sometimes take a tiny position in a company to put it on my radar and get me to learn more about it. I’m not trying to trade it and make money on it, I’m just trying to decide if I want to keep it long term. If I do try out a stock in a small position and later decide that it’s not what I want, I sell it without hesitation, and I really don’t care whether I gain a dollar or lose one. I just sell out to put the money somewhere better. If I decide to keep it, I add to my position and build it into a regular position.

You should never just try to follow what I’m doing without making up your own mind about a stock. In these monthly summaries I’m giving you a static picture of where I am currently, but I may change my mind about a position during the month. In fact, I not infrequently do, and I make changes in the position. I usually don’t announce these changes until the end of the month, and if I’m busy or have some personal emergency I might not announce them even then. And besides, I make mistakes sometimes, even big ones! Don’t just follow me blindly! I’m an old guy and won’t be around forever. The key is to learn how to do this for yourself.

Since I began in 1989, my entire portfolio has grown enormously. If you are new to the board and want to find out how I did it, and how you can try to do it yourself, I’d suggest you read posts #4 through #8 at the beginning of the board, and especially the Knowledgebase that Neil keeps for us, which is a compilation of words of wisdom, and definitely worth reading (a couple of times) if you haven’t yet.

I hope this has been helpful.


For Knowledgebase for this board,
please go to Posts #17774, 17775 and 17776.
We had to post it in three parts this time.


I think the explanation is that we are in a special situation.

Yes, that…and randomness.

Ten thousand 10-stock portfolios selected at random from small cap tech stocks…

  • best was up 46% YTD

  • 17% of them up 20% or better YTD

  • average 13% YTD




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Email me and I’ll send you the data and program. You can run it yourself.

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Yes, that…and randomness.

In my opinion it is highly unlikely that Saul’s outperformance as is due to randomness.

Truth is, he got highly concentrated in a couple of sectors that have dominated the market over recent months.

I’d bet you that those who loaded their portfolios with biotech’s in 2012, 3-D printing companies in 2013, marijuana stocks in 2014, cryptos in 2017, etc would have generated similar outperformance.

Stevie Cohen once had a quote from the Market Wizards book where he said (paraphrasing) “40% of your returns in an individual stock come from the performance of the overall market, 30% come from the performance of the sector your company is in, and 30% come from the performance of the company itself.”


Hello, Ears-

Thanks for the interesting analysis. Corroborates with so many other Market performance summaries (including the Fool’s Market Performance box) that indicate we are still enjoying a bull market.

Just because we are in a bull market doesn’t mean that there won’t be periods of pullbacks, consolidation or sector rotation. All that is typical in a bull market. I figure that the bull market will continue as long as the economy is growing, so it still has a ways to go.

When can we expect a bear market? A recession almost always results in a bear market. What can trigger a recession? A serious financial meltdown of some sort (as in 2008). Given that global debt is now far higher than it was when the market melted down in 2008, a “black swan” event can occur anytime, anywhere and without much warning.

More typical though, would be a series of Fed interest rate increases that cumulatively raise borrowing costs thereby impacting business operations. That’s what ultimately stopped the dotcom bull market. I don’t remember how many rate increases finally led to the end of the dotcom boom but, if the Fed keeps raising rates (some believe we’ll witness four raises in the coming year), there’s a good chance they’ll trigger a recession (hence bear market) sometime in the not-too-distant future. What many fail to realize is that many corporations are heavily in debt. Oh how they loved quantitative easing during which they could borrow freely at ridiculously low interest rates. Those were good times leading to all sorts of financial engineering such as share buybacks and dividend increases. When all is said and done, those cheap debts will become expensive debts when they must be re-financed over time in a higher interest rate environment. An observant investor will be able to see this coming by following financial news.

Is stock picking crucial in a bull market? Not really. Most stocks rise at one point or another in a bull market because money continues to flow into the market and prices keep rising. That’s why indexing was so popular lo these many years since 2009.

I believe stock picking is critical in a bear market. During bear markets, money keeps flowing to safer investments offering acceptable returns. This is when stock pickers come to the fore, carefully picking companies that can thrive in a recession. There aren’t that many, but there will always be strong contenders.

Let’s not keep staring at blue skies. There’s a rough road ahead.


The case for randomness in a bull market with special circumstances ie…the rapid rise of the
baby SaaS companies, Cloud, and AI is proven by Ears data. Even so, If I’m interpreting it correctly, the data shows a pretty big spread from highest to lowest results. Meaning for me, that Saul’s specificity in picking stocks is among the 17% best grouping. Is that correct? Moreover, Saul’s outstanding performance results over a large number of years would seem to indicate that more is in play here than simple randomness. Is that not true?


proving luck (randomness) vs skill is impossible . Especially in the relative short time span of an individual investor.

The quote about relative importance of general market , sector,individual stocks is true. There is lots of hard data back this up.

But I suspect that if it was railroads or motels that were expanding fast that’s where Saul would be. His adherence to staying invested will cost him dearly in bear markets , but almost every valley has a hill somewhere beyond it, he will probably find the best stocks to go back up that hill.

IMO his best skill is knowing when to get out of a stock. He dates but does not go steady or marry. So when he exits, I pay a lot of attention.

Having had our big secular bank failure related super crash in 2009 I suspect one of a similar magnitude is unlikely until we get a fresh generation of bankers and regulators.


Hi Saul,

I really appreciate your post. But to clarify:
Square just bought another small company called Weebly that will allow Square to go into fancy catering for enterprises and meetings. This gives more restaurants more motivation to sign up with them.

That was Square’s acquisition of Zesty:…
The addition of Zesty will enable Caviar, Square’s food ordering platform, to strengthen and scale its growing corporate ordering business.

Square’s acquisition of Weebly looks even more significant to me:…

Addition of website-building company will enable sellers to easily start or grow an omnichannel business with one cohesive solution…
Weebly will expand Square’s customer base globally and add a new recurring revenue stream. Weebly has millions of customers and more than 625,000 paid subscribers. Square will provide Weebly customers with access to the company’s ecosystem of managed payments, hardware, and software, which complement Weebly’s services, which include free website hosting, premium (paid) website design and hosting, online store, and marketing tools. Nearly 40% of Weebly’s paid subscribers are outside the U.S., which will help accelerate Square’s global expansion.



Hi Saul,
Thanks for your monthly updates. Always interesting to me to see how you are thinking and what you have done since last month. This month it is interesting to note that AYX and NTNX are now a bigger position than SHOP. I know (or at least it seems) that you are not too big on valuations in that you don’t even really follow the Price/sales ratios of your positions. I am curious as to your thinking. Do you see AYX and NTNX as having a brighter future than SHOP? Did they pass shop in value because it has slumped or did the slumping cause you to move the investment capital around a little bit.

I find it fascinating that you are in love with a company and then a couple months later you have found something better without any significant news (except rogue short sellers comments). And I realize you still have a big investment in SHOP, just not nearly as big as it was a few months back. No criticism at all, just difficult for me to get my head around trying to do that myself. (I.e. emulate you without just copying).

My gut tells me that you are able to sense the market’s feeling for a stock because you track things so closely, but i don’t know that there is any truth in that at all.

Again, just trying to learn how you operate. I understand that you find great, fast growing companies, but there seems to be nuance that goes on top of that first (great) principle… Any light you can share on how you decide on which of the few stocks you really like to add to or subtract from over time would be appreciated.

Again, the fact that you do these monthly summaries is awesome and very much apreciated.

Long NTNX, SHOP and AXY…


I really appreciate your post. But to clarify:
Square just bought another small company called Weebly that will allow Square to go into fancy catering for enterprises and meetings. This gives more restaurants more motivation to sign up with them.

That was Square’s acquisition of Zesty… Square’s acquisition of Weebly looks even more significant to me.

Hi John,
Yeah, I realized that a little earlier today, but was busy with other stuff and never got to fix it. Thanks for helping out,

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Thanks for your monthly updates. Always interesting to me to see how you are thinking and what you have done since last month. This month it is interesting to note that AYX and NTNX are now a bigger position than SHOP… Do you see AYX and NTNX as having a brighter future than SHOP? Did they pass Shop in value because it has slumped or did the slumping cause you to move the investment capital around a little bit.

Hi Randy, thanks for the question. If you check back, you’ll see that Alteryx and Nutanix both actually passed Shopify a month ago, not this month. It was because Nutanix shot way up in March, Alteryx rose quite a bit too, and Shopify fell quite a bit in price while this was going on. Here were the portfolio percentages at the end of March:

Alteryx 		14.1%
Nutanix			13.9%
Shopify   		12.8%

Now in April I did trim some more Shopify but it’s still at 12.1%, so not very much change. I added some trivial amounts to Nutanix and Alteryx, who changed places due to market action, not due to purchases.

Alteryx and Nutanix were both companies that were beaten down and got no love about the time I bought them. Lot’s of skepticism about them. Then, all of a sudden, in the first three months of the year they started to be recognized and suddenly both rocketed higher. Shopify did its rocketing last year, and this year has been just hanging on and fighting off another short attack.

Did they pass Shop in value because it has slumped? Some, but mostly because they rose.
or did the slumping cause you to move the investment capital around a little bit? Probably a little of this too, as when wanted some cash to buy more Twilio I took a little from Shopify (along with the other sources I described).

Hope that helps,



“40% of your returns in an individual stock come from the performance of the overall market, 30% come from the performance of the sector your company is in, and 30% come from the performance of the company itself.”

A perfect example of a set of irrelevant statistics. These numbers are averages that apply equally whether or not the performance is positive or negative. They perfectly demonstrate the same thing as talking about a market index. When the strategy is to pick a small set of specific stocks based a their individual performance, management, and business model these sweeping statements about generic, average performance are at best useless and more often misleading.


you are in love with a company and then a couple months later you have found something better without any significant news
I don’t think Saul is ever in love with a company. Dating it perhaps.

If you find something better you have to raise the cash from somewhere,so sell something.
Unless you are an insider trading illegally you get the same news as everybody else. What separates winners from losers is how fast and how well they process this data.

Saul is really not a long term buy and hold type guy. Though he says that is his intent, it seems not to work out that way.

His results speak for themselves

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Shopify will report before the market on Tues, May 1st. They are the only one of my companies reporting before the market and my guess is that this predicts a very strong earnings report, but we will just have to wait and see.


I think they always report before the open so there shouldn’t be a prediction one way or another.


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How do you factor in the following news:

  1. Nutanix delaying its Xi Cloud product?

  2. VP of product at OKTA leaving?

  3. not sure what was BERT take on Tableau competition with Alteryx.

  4. TWLO this commoditization issue has not magically disapeared. Has it? are you playing this as an acquisition target a la Mulesoft?




I would be interested to hear your thoughts on Bert’s article on Nutanix this weekend?


Saul, I always note with wry amusement your line about intelligent stock picking can beat any index, followed by ‘How could it not?’.

This cannot possibly be a disingenuous remark so a quick riposte is required.

The plain, awful fact is that not only could it not, it manifestly does not!

After any reasonable investment horizon, say 20 years, the number of fund managers left standing against the index is roughly the same as pure, random chance (the coin-flippers) would predict. Hell, there aren’t that many after 15 or even 10.

I take it we can assume all those thousands of active fund managers (those who are not merely closet indexers) are trying their very hardest to beat the index. Indeed it is a super-competitive business to be in. They are scrambling over one another in the cause of intelligent stock picking to make their name and receive acclaim.

That is the reply to your ‘How could it not?’.

Investors have reacted to these findings accordingly. The vast and growing size of the ETF market (at the expense of intelligent stock picking) is now becoming not only an embarrassment to active fund managers but a danger to the overall market.

Being human, I feel you might just be ‘the exception that proves the rule’! Keep up the good work.


How do you factor in the following news:

1. Nutanix delaying its Xi Cloud product?
2. VP of product at OKTA leaving?
3. not sure what was BERT take on Tableau competition with Alteryx.
4. TWLO this commoditization issue has not magically disapeared. Has it? are you playing this as an acquisition target a la Mulesoft?

Hi tj,
I guess I just miss out on all those little nuggets of negativity. :grinning:

  1. Nutanix - delaying its Xi Cloud product? - (up 41%) See my new post #40714.

  2. Okta - VP of product at OKTA leaving? - (up 39%) Who is he?

  3. Alteryx - not sure what was Bert’s take on Tableau competition with Alteryx. - (up 21%) Bert thinks it’s a non-issue.

  4. Twilio - this commoditization issue has not magically disapeared. Has it? - Yep! (up 62%) Do you have to ask with the stock price up 62%, non-uber revenue up 62%, non-uber dollar-based expansion rate of 136%, etc. Does that sound as if they are being commoditized?

  5. Twilio (again) - are you playing this as an acquisition target a la Mulesoft? - Nope. Not a chance that it’ll be acquired the way I see it. I’m playing it for a business success and a stock price rise.



Saw this on StockTwits this morning…