My portfolio at the end of Jan 2018

My portfolio at the end of Jan 2018

Here’s the summary of my positions at the end of January. As usual, I figure as of the last weekend of the month. Think of it as a four week summary if you prefer. Also note that any PE’s that I give are always based on adjusted earnings, which very rarely may also have small modifications of my own.

When we started the month, I was thinking that results for just one month might not seem very meaningful after the results we had last year, and I wanted to give some continuity and perspective, so this year for the first time, and for January only, I will give my results for 13 months (2017 continuing through this month), as well as one month (year-to-date) . Here are those results but, contrary to my expectations, January turned out to rise enough to be equal to a very good year by itself. (At the end of February it will be back to just year-to-date results.)

My portfolio closed 2017 up 84.2%.
My portfolio closed this month up 16.9%
My portfolio closed 13 months up an amazing 115.3%

(In case you are wondering how that works: 1.842 x 1.169 = 2.153)

The three indexes that I’ve been tracking against closed as follows:

The S&P 500 (Large Cap)

Closed 2017 up 19.9%
Closed this month up 7.0%.
Closed 13 months up 28.3%.

The Russell 2000 (Small and Mid Cap)

Closed 2017 up 13.6%.
Closed this month up 4.3%.
Closed 13 months up 18.5%.

The IJS Small Cap Value ETF

Closed 2017 up 9.7%.
Closed this month up 3.7%.
Closed 13 months up 13.8%.

These three indexes

Averaged up 14.4% for 2017.
Averaged up 5.0% for Jan 2018.
Averaged up 20.2% for 13 months.
(The averages would be slightly higher if you use the S&P with dividends added, but for comparison purposes it’s irrelevant as they are almost 100% behind my results.)

You may ask, “Why these three indexes?” When I started this board I compared my results to the S&P 500. Then I considered that the S&P is all large caps, and smaller caps tend to do better over the long term, so 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.

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 last April, when I was up 26% in four months and was “aware” that it was “impossible” and couldn’t continue like that. It’s hard to remember now, and it sounds odd in retrospect, and even out-of-date and old-fashioned in light of the results we actually had, but…back at the end of last April, up 26% seemed like a ridiculously ENORMOUS amount to be up in just four months, and way “over-bought,” but I finished the year up 84%, and these 13 months up 115%, which some would say was even more ridiculously overbought.

And if you or I sold out at the end of April, because we thought the market was overpriced, we never would have bought back, because the market has never taken enough of a rest. And that’s the problem with trying to time the market!!!

Earlier this month 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. I’m up four times that in one month. Don’t listen to that stuff! Did you ever hear of an economist who got rich investing in the stock market? Or an analyst either, for that matter? If the analyst could do it successfully, he’d be investing for himself instead of working for a salary for a brokerage company.

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 carried for 13 months, and for January alone:

**End of Jan 		+ 8.5%**
**End of Feb		+13.9%**
**End of Mar		+20.4%**
**End of Apr		+26.1%**
**End of May		+36.2%**
**End of Jun		+38.1%**
**End of Jul		+45.7%**
**End of Aug		+48.7%**
**End of Sep		+64.8%**
**End of Oct		+76.6%**
**End of Nov		+97.0%**
**End of Dec 		+84.2%**
**End of Jan 	       +115.3%** 

And here’s 2018 so far:

**End of Jan 		+16.9%**

I’m sure that some of you have done even better, as I made some bad choices along the way that cratered as soon as I bought them, and others that continued going up after I sold them.

The stocks I’m still in since the beginning of the 2018 are those I had at the end of 2017 (I haven’t exited any yet) and they make up 92.8% of my current portfolio.

New positions I added since the beginning of 2018 have been: Pure Storage, Twilio, and Mimecast and Okta, two very small cyber-security companies, which I’m not yet sure that I’ll keep.

Last four months review: I didn’t sell out of any positions in January. During Dec I sold out of my positions in Ubiquiti and Splunk, and also the one I had taken in Varonis, when I decided to take a full position in Alteryx. I exited Ubiquiti because it was one in which I had lower longterm confidence, Splunk because I liked Alteryx better, and Varonis because I preferred Alteryx’s 50% growth rate and low cost of customer acquisition to Varonis’ 30% growth rate. In Nov I took little try-outs in Align and Nektar. I decided to exit Align and keep Nektar, but in a smallish position. I’ve continued to add to it, and the price has risen too, and it is now at about a 5.0% position. (That’s how I usually take a position, slowly. Alteryx was a real exception). I wrote at the end of Sept that Alarm and Brinks were little positions that I wasn’t sure I’d keep. I sold out of Brinks in October and out of Alarm in November, not because I found anything wrong with them, but because they just weren’t my really my kind of company, and I needed cash for other purchases. I sold out of Instructure in Nov because I felt it would be years until they showed a profit, if then, in spite of everyone loving their products. I’ve toyed with taking a tiny position back, but I haven’t. In October, I was briefly in and out of TFSL, a little bank stock. Nothing wrong with it, a good value stock, but just not my thing. I dipped my toe back in Splunk in October, but as I wrote above, I sold it in December.

Here’s a review of how my continuing positions did last year. I use the start of the year price for stocks I was in all year, and my initial buy price for stocks I added during the year.

LGI Homes from 28.73 to 75.0, 	up 161.1% 
Arista from 96.80 to 235.6,   	up 143.4%
Shopify from 42.90 to 101.0,  	up 135.4%
Square from 17.50 to 34.67,   	up  98.1% 
Nutanix from 21.70 to 35.28, 	up  62.6%
Hubspot from 62.4 to 88.4,    	up  41.7% 
Talend from 26.80 to 37.48,   	up  39.9% 
Nektar from 46.0 to 59.7,    	up  29.8%
Nvidia from 161.2 to 193.5    	up  20.0%  
Alteryx from 27.72 to 25.27, 	down 8.8%
Wix from 69.20 to 57.55,        down16.8%

And here’s how those same stocks did in January. I’ve arranged them in order of percentage gain. I use 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. (These are one month results).

Square from 34.67 to 46.00   	up  	32.7% 
Nektar from 59.7 to 79.0     	up  	32.3%
Shopify from 101.0 to 129.1  	up 	27.8%
Nvidia from 193.5 to 243.3    	up  	25.7%  
Alteryx from 25.27 to 30.48  	up  	20.6%
Arista from 235.6 to 283.5,   	up 	20.3%
Hubspot from 88.4 to 101.7    	up  	15.0% 
Talend from 37.48 to 39.35   	up  	05.0% 
Wix from 57.55 to 57.55,      	up  	08.4%
LGI Homes from 75.0 to 71.2 	down     5.1% 
Nutanix from 35.28 to 32.99  	down     6.5%

And here’s how they did since the beginning of 2017. (or since I bought them.)

Shopify from 42.9 to 129.1  	up 200.9%
Arista from 96.8 to 283.5   	up 192.9%
Square from 17.50 to 46.00   	up 162.9% 
LGI Homes from 28.73 to 71.20 	up 147.8% 
Nektar from 46.0 to 79.0    	up  71.7%  
Hubspot from 62.4 to 101.7    	up  63.0% 
Nutanix from 21.70 to 32.99  	up  52.0%
Nvidia from 161.2 to 243.3    	up  50.9%  
Talend from 26.80 to 39.35   	up  46.8% 
Alteryx from 27.72 to 30.48 	up  10.0%
Wix from 69.2 to 62.4    	down 9.8%

And my New Positions taken in January:

Pure St. from 16.72 to 19.91	up 	19.1%
Twilio from 25.70 to 26.53	up  	3.2%
Okta from $29.95 to 30.98	up  	3.4%
Mime from $32.34 to 32.22	down	0.4%  

when I entered or the beginning of this year, and when
I exited)

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. Really! I’ve heard the same song every year! Eventually they’ll be right, and think “See! I was right all along!”

Of course a marked correction will come eventually. Look, it could come 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. 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 and I’m currently at 11 “real” positions, 3 tiny positions that I’m making up my mind about, and 1 small position that I’m slowly tapering out of.

Here are the positions in order of position size, at the end of last year, and currently.

			Dec 31st	Jan 26th 
Shopify   		14.7%		14.7%
Arista		 	12.6%		13.3%
Hubspot			12.2%		12.2%
Alteryx 		12.1%		13.2%
Nutanix			11.9%		 9.8%
Square			10.1%		10.5%
Talend			 6.9%		 6.1%
LGI Homes		 5.5%		 1.0%
Wix	 		 4.9%		 3.3% 
Nvidia	 		 4.8%		 3.6%
Nektar			 2.6%		 5.1%
Pure Storage		 0.0%		 3.3%
Twilio			 0.0%		 1.4%
Mimecast	 	 0.0%		 1.3%
Okta			 0.0%		 1.5%

While I have more positions it’s still a very concentrated portfolio. Eye-balling that list you can see that I have six quite large positions running from 14.7% to 9.8%, and those six make up about 74% of my portfolio (so all the remaining nine positions make up just 26%), then five mid-size positions running from 6.1% to 3.3%, and finally, four very small positions, of which the largest is only 1.5%.

Let’s start with Shopify, my largest position.

Shopify helps small merchants, and increasingly larger ones, open and operate online stores. It’s growing VERY fast, and grew to be my largest position by far. It got up much higher than I was comfortable with, and well above what I recommend, and I’ve trimmed it down some, mostly for cash. I trimmed some more this month, to keep my position size reasonable, but it remains my largest position at 14.7%, by a good amount. Yes, I know 14.7% is still a large position, but I haven’t seen too many Shopifys in a lifetime of investing.

I bought Shopify in 2016 at about $27 as I remember… It closed Friday at $129, which is up about 378% since I bought it, maybe a year and two-thirds ago (and up $28 this month). Growth is slowing slightly with size but it remains an incredible success story.

This is a SaaS company with no GAAP earnings. They guided to positive adjusted earnings in the December quarter, but they surprised, as I predicted they would, with positive earnings a quarter early (in the Sept quarter). Revenue is almost all recurring in one sense or another. They weathered a short attack from Citron in October. It’s a smaller percent of my total portfolio than it used to be, partly because its price was hit by the short attack while the rest of my portfolio was going up, but also, as I said, I sold some for cash, including some this month. The reason for my trimming the position is that I have a lot of positions that I like and I didn’t see that it made sense to have any one position that was so much larger than the others. It’s still my largest position. During this last week Tim Cook from Apple visited Shopify to see how they were integrating enhanced reality into their platform to help their merchants sell products. It may presage some alliance between the two companies, which would certainly be more good news for Shopify,

Arista is in second place at 13.3%. I’ll let Smorgasbord explain what they do:

They make ethernet switches, which has been Cisco’s bread and butter for decades. However, instead of each switch being its own separate entity, Arista’s switches use SDN (Software Defined Networking), which enables the entire network (no matter how complex) to be modeled and controlled via software

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. This month they were up an enormous $48 to $283.50.

Their last quarter was another incredible one with revenue up 51%, and up 8% sequentially, and EPS up 89% year over year and 21% sequentially. I bought some after earnings, even though it had already shot up. I added more in December at $217 and $229. In January I trimmed a trivial amount at $271.

Alteryx is now in third place at 13.2%. It’s was a new position in December, and I wrote interminably about it the last two months, so I won’t repeat myself. It finished the month at $30.48, up 21% from $25.27 a month ago. It’s very rare that I take a large position like this in a new stock within a few weeks. I have great hopes for it. During the month I added to my already large position at $27 to $28.

Here was my summary from one of those “interminable” posts: So what do we have? A small company which is little understood by investors, which hasn’t yet been run up to astronomical levels, and in a category of its own (more or less) with a TAM 100x larger than its revenue, and growing revenue at over 50% per year in the 9 months its been public, and this actually seems to be accelerating, as they only grew revenue 42% from in 2015 over 2014. With an enormously rapid rate of customer acquisition (3054 customers last quarter, up from just 1140 in two years!) with a very low cost of acquisition. With many household names among their customers (Ford, GE, Microsoft, Shell Oil, HP, BBC, etc). With positive Operating Cash Flow. With an Adjusted Operating Margin moving up rapidly towards breakeven, and having perhaps just started having positive adjusted earnings. With a land and expand strategy, which is working like gangbusters, with the highest Dollar-Based Retention Rate I’ve ever seen (133% to 135%), and with 2014 and 2015 cohorts growing take by 70% and 90% in the second year. With a gross margin of 86%. With a reasonable EV/S ratio for a rapidly growing company. With high customer satisfaction and happy customers who keep signing up for more and more. (Gartner just set up a new award for them in Customer Satisfaction). What more could I ask for?

Hubspot is now in fourth place at 12.2%. They rose $13 or 15% this month, to $101.7. It’s another SaaS company with very rapid growth, lots of recurring revenue, and just breaking into positive adjusted earnings.

What does it do? It’s a complicated and long description, so see my Oct end of the month summary, which you can access on the right panel of this page

They’ve been reporting great earnings and revenue and raising guidance regularly. This year they moved their conference (which fell into the Dec quarter last year), back into the Sept quarter where it usually is, but this cost them about 12 or 13 cents in yoy comparisons in the Sept quarter. This just didn’t register for casual observers, and the stock initially fell somewhat. Then smarter people figured out what was going on, and the price finished up about $6 in Dec to $88.40, and up another xx to xx in Jan. In December there was a rather foolish short attack by Citron, and the price has actually risen quite a bit since then. This month I trimmed a very small amount at $91 for cash.

Square has moved up to fifth place, at 10.5% of my portfolio, and up hugely this month at $46.00, up from $34.67 at the end of the year. I started my position in March at an average price of about $17.50, and have added several times along the way, but then selling a little at about $45.50 and $47.00 in December, and trimming a little more this month at about $42.00.

Square is growing revenue like mad (45% last quarter, which accelerated from 41% growth the quarter before), and also has a lot of recurring revenue. It has been profitable for the past six quarters, but not a huge amount.

Its original purpose 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.

Nutanix has fallen to sixth place at 9.8% 0f my portfolio, mostly because it dropped $4.50 last week on a downgrade, while everything else was rising. It was a new position in September, which I entered when Bert praised it very highly, and it was discussed at great length on the board at the time, with a lot of skepticism. This month it started by rising from $35.25 to $38.50, but fell as I mentioned, and finished at $33, down $2.25 for the month. I didn’t buy or sell any this month.

Nutanix is growing revenue at a great rate, has loads of deferred revenue ($409 million last quarter, up 48% from the year before), but no earnings as of yet. It’s area is “hyper-converged infrastructure” in data storage. Like Arista in a way, it sells hardware but what counts is its software and operating system. It is, in fact, doing away with the pass-through zero-margin hardware that they were selling, and pivoting to be a pure software company (also moving towards a SaaS model). This makes their revenue look growth look deceptively slow (hardware sales no longer being counted, and subscription revenue being counted only month by month, even if all paid in advance).

Talend is in seventh place at 6.1%, and a price of $39.35, up almost $2 on the month. I wrote it up early in May, and you can probably look up my summary. Suffice it to say that it’s another big-data analyzer that is growing very rapidly, has no earnings, but has huge amounts of deferred revenue, and is free cash flow positive. I consider it a category crusher as well as a disrupter, as it seems to have no effective competition at present. In the May conference call the CEO said:

…our win rates remain ridiculously high, which is evident from the growth rate… The market dynamic is that the large (legacy) players continue to be challenged, and long term I think most of the competitive battle is going to be fought with very small players that are trying to get up to scale right now. So we’re in this kind of special period in the middle right now (with no functioning competitors) and we’ll see how long that lasts.

I trimmed a little this month. That was my first sale ever of Talend. Then I reconsidered and bought back part of what I had trimmed. Their Analyst Day 100+ slide presentation was pretty euphoric.

Nektar is in eighth place at 5.1% of my portfolio and a price of $79, having moved up from 2.6% and a price of $59.70, just a month ago, up 32% in the month. Nektar, has irons in the fire in a number of biopharma areas, and good partnerships. I took my initial position at $46 back in November, thanks mostly to Chris, and the stock price rose from there and I kept adding small amounts. It wasn’t really something that I tried to keep up with, but it was just to have a little representation in the biopharma field, but a few days ago HeartMD wrote a great summary which helped me understand it a bit more. I added several more times this month. I love adding while a stock is moving up like this. This is very different from those who keep looking for cheaper prices to buy their stock at.

Nvidia is in ninth place at 3.6%, at a price of $243, up $50 or 26% on the month. I got back into it in August, talked into it by all the great write-ups and discussion by members of the board. I have nothing that will add to the discussion, except that I was making an exception in buying shares in a “chip” company, but I have since learned that they are at least 50% a software company. I sold some during the month for cash. I net trimmed my position during the month, mostly at $230 to $240. Why? It has a cap of $144 billion. I have a lot of companies that I can see tripling in market cap or more, but it’s hard to imagine Nvidia doing that, so I wanted to redeploy some cash, while keeping a smaller position in Nvidia. I may be wrong in selling some, but that’s what I did.

Wix is in tenth place at 43.3% and a price of $62.40, up minimally on the month, compared to the others. It’s been discussed a lot on the board. It’s growing revenue very rapidly, at 50%, 51%, and 47% the last three quarters. Its Free Cash Flow and Operating Cash Flow both keep growing every quarter. And they finally made a small profit last quarter after breaking even the quarter before. They also came out in December with a new product called Code, which was very well received. I originally took a position at about $70. I can’t make up my mind about this one. I sold some in November when I got discouraged when they fell a huge amount after earnings, but I bought most of it back in December. Then I trimmed my position again in January.

Pure Storage is a new position this month, and in eleventh place, also at about 3.3% 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: last quarter’s revenue was up 41%, gross margins were over 66% (it’s not a commodity, for sure), net loss was $2 million, improved from $19 million a year ago, EPS was -1 cent per share, improved from -10 cents, they have $551 million in cash, operating cash flow was 10% of revenue, etc. If you are interested I suggest you read about it, and look at the investor presentation slides. I took my main position at about $16.75, but didn’t hesitate to add small amounts at $18.50, and again Friday at over $19.00.

Now we get down to four very small positions, all between 1.2% and 1.6% of my portfolio. It’s kind of silly to rank them in order, as the order can change any time depending on unimportant market action.

Twilio has been discussed at length on the board and I really have nothing to add. It’s a new small position this month. I bought it back basically because of the hypothesis that their non-Uber and non-FB revenue is growing at 60% and will hopefully soon make the Uber situation fall into the rear-view mirror. That remains to be seen. Also several board members made convincing cases for it, as did Bert. I took my initial position at $25.75, and added a little at $26.55

LGI Homes is now one of these small “one percent plus” positions and is down from a 5.5% position a month ago. For those not familiar with it, LGIH is a small home builder that specializes to selling first homes to apartment dwellers. It started 2017 at $28.75 and is now at $71.2, which is up 148%. I had bought a bunch more early on, when it got as low as $19.50. My purchases at $20 are up over 250%.

Why is my position so much smaller than it was? Because I’ve been gradually tapering my position. Why is that? I realize that there is a nationwide shortage of homes now, and they are selling them as fast as they can build them, but this is a cyclical industry that will eventually get overbuilt. But that was true a year ago too! What makes the difference? The difference is that it has already has had that huge run that I was expecting. I don’t see it happening again to the same extent. The PE is much higher now, and I feel that to keep growing at 50% per year now, they have to grow their number of active communities by 50%, compounded, each year, as well as replacing the ones that sell out. That just gets more and more impractical. The rate of growth will slow down.

On the other hand, I’m not in any hurry, and am simply selling shares as they become long term. Look, I know that they will have great comparisons in the December and March quarters! Great comparisons! I just want to re-deploy the money into situations that I can imagine growing longer and faster.

Okta is another new position and a small cyber-security firm. They IPO’ed in April, nine months 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 $231 million, which is up 67% from TTM revenue of $138 million a year ago. I’m giving just this sketchy summary because, obviously, I’m not sure that I’m going to keep this one. My average purchase price was about $29.85.

MimeCast is another new position and also a small cyber-security firm. They IPO’ed in 2015. What this one does is to protect email security and data archiving. Their TTM revenue is about $221 million, and is “only” up about 40%, and their dollar-based retention rate is just 111%, which indicates to me that haven’t had that much to upsell with. On the other hand their FCF, adjusted EBITDA, and adjusted earnings have reached breakeven or better. Again, I’m not sure I will keep this one either, but decide for yourselves. I took my little bposition at about $32.30.

This was a great January for our stocks. But what will happen for the rest of this year? I don’t have a clue.

I wrote last month that I had heard that big winners this year, like Apple, Facebook, and Netflix, had large short positions, presumably taken by people who said “This stock has run up a lot so I’ll short it!” and I said that I imagined it was the same for a number of OUR stocks, and that if so, those large short positions would be a big positive for us. The way January went, maybe that’s what happened. How’s this for a story: our stocks fell in December because hedge funds were taking huge short positions, (selling) our stocks that had had big rises in 2017. Aided by a few short attacks. But then in January our stocks came roaring back, triggering a minor short squeeze. Six of the eleven stocks that I started the year with were up more than 20% in a month in January, after all.

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.


Congrats Saul,
May it continue for you throughout the year and again thank you for such a great board, research and your methods…

The one for me anyway which I also use time and time again and is the magic sauce(plus your uncanny instinct on when to get out of dodge)is this…

“I love adding while a stock is moving up like this. This is very different from those who keep looking for cheaper prices to buy their stock at”.

And I know that you have preached many times to also not be scared of high prices…takes nerve at times but can pay off.

Cheers. Bran.


Up 16.9% in the first month of 2018 is really impressive!


So many stocks are hitting (or near) their all-time highs these days…

So many stocks are hitting (or near) their all-time highs these days…

Two thirds (32 out of 49) of the stocks, ETFs, and indexes on my wish-list have made new all time highs in January. A few others made new 52 week highs.

**Date        Ticker  Company** 
01-26-2018  V       Visa Inc.
01-26-2018  TDG     TransDigm Group Inc.
01-26-2018  SPR     Spirit AeroSystems Holdings, Inc.
01-26-2018  ^GSPC   S&P 500 Index
01-26-2018  ROST    Ross Stores, Inc.
01-26-2018  ODFL    Old Dominion Freight Line, Inc.
01-26-2018  NFLX    Netflix, Inc.
01-26-2018  ^IXIC   NASDAQ Composite
01-26-2018  MNST    Monster Beverage Corp.
01-26-2018  MELI    MercadoLibre, Inc.
01-26-2018  MA      MasterCard Inc.
01-26-2018  HCSG    Healthcare Services Group, Inc.
01-26-2018  SOCL    Global X Social Media ETF
01-26-2018  FDN     First Trust Dow Jones Internet ETF
01-26-2018  FB      Facebook, Inc.
01-26-2018  EXPO    Exponent, Inc.
01-26-2018  EW      Edwards Lifesciences Corp.
01-26-2018  ^DJI    Dow Jones Industrial Average
01-26-2018  ALGN    Align Technology, Inc.
01-26-2018  AIEQ    AI Powered Equity ETF
01-26-2018  AOS     A. O. Smith Corp.
01-25-2018  ISRG    Intuitive Surgical, Inc.
01-23-2018  IRTC    iRhythm Technologies, Inc.
01-23-2018  ROBO    Robo Global Robotics & Automation ETF
01-23-2018  TREE    LendingTree, Inc.
01-23-2018  BOTZ    Global X Robotics & Artificial Intelligence ETF
01-22-2018  XPO     XPO Logistics, Inc.
01-19-2018  PSCT    PowerShares S&P SmallCap IT Portfolio ETF
01-19-2018  MKTX    MarketAxess Holdings Inc.
01-18-2018  AAPL    Apple Inc.
01-17-2018  XSD     SPDR S&P Semiconductor ETF
01-05-2018  CNI     Canadian National Railway Company

12-18-2017  BTCY    Biotricity, Inc.
11-21-2017  NEOG    Neogen Corp.
10-13-2017  TTD     The Trade Desk, Inc.
09-11-2017  FIZZ    National Beverage Corp.
09-08-2017  BEAT    BioTelemetry, Inc.
08-08-2017  PCLN    []( Inc.
07-28-2017  EXPE    Expedia, Inc.
07-25-2017  NUVA    NuVasive, Inc.
07-24-2017  ASR     Grupo Aeroportuario del Sureste, S.A.B. de C.V.
07-24-2017  PAC     Grupo Aeroportuario del Pacifico, S.A.B. de C.V.
06-14-2017  AAON    AAON, Inc.
06-05-2017  ULTA    Ulta Salon, Cosmetics & Fragrance, Inc.
03-01-2017  BCPC    Balchem Corp.
12-08-2016  MIDD    The Middleby Corp.
07-29-2016  ORLY    O'Reilly Automotive, Inc.
08-03-2015  NVO     Novo Nordisk A/S
04-10-2015  ATRO    Astronics Corp.

Denny Schlesinger


So many stocks are hitting (or near) their all-time highs these days…

The economy has been rising for nine years now, since the beginning of 2009. And the technology stocks we are invested in are transforming the world we live in. Is it odd that a lot of them are hitting new highs?



I seem to always get new insights when I read your monthly summaries. I am sincerely grateful that you provide these summaries of what and why during the previous month. Admittedly, a fair amount of what you write is repeated from one month to the next, but I get it, you have no way of knowing if the reader also read last month’s report so if things haven’t changed significantly, just copy and paste.

But turning to the new information, I had not even considered trimming LGIH which has grown quite a lot since I first bought, then sold, then bought again, then trimmed, then bought, etc. Presently, ~12% of my holdings. All the while I kept asking myself, “What’s their moat?” I couldn’t see any. I finally decided that they do things differently enough that it makes them hard to emulate. LGIH has a captive sales force. An established builder would have to make a clean break with their brokers and MLS to copy the LGIH model, most of them could not survive the transition, especially with the debt load most builders carry. It’s one thing to start out that way, a different animal to try and transition to that model. Cyclical as home builders are, I didn’t feel they were anywhere near saturation or end of cycle. And even with rising interest rates I felt they would not be impacted for at least another year. But, you have an uncanny gift for getting out . . . I’ll have to watch this one more closely than I had been.

I sold my position in NTNX after they announced a $500M debt offering. Sold my position in TLND because I don’t believe the CEO when he claims they are without competition at present. Maybe I didn’t examine their product offerings closely enough, but it looks like another ETL platform to me. Maybe best in class (currently), but still, a member of a fairly large class. Again, I see no moat. And, I’m not in love with companies that have IT as their primary customer. That’s just a legacy of my 30 years in IT; an admitted bias.

I wouldn’t buy either of the cyber security firms in which you hold small positions irrespective of their numbers. Cyber security is obviously a growing concern and therefore a growing market, but in my eyes, it’s pretty much like trying to pick a winner in the growing pot growing business. Which ones are going to make it through the inevitabil shake-out? I no longer buy with the intention of holding forever, but these little niche cyber security players make me nervous. In fact the whole cyber security field is fragmented over a bunch of niche players. It’s really quite a mess. I’ve been on the inside of how the buying decisions got made at one very large company with very serious cyber security concerns (like national defense concerns as well as a lot of proprietary and personal information). To me, the whole thing looked like whack-a-mole. That being said, I did hang on to a small position VRNS (~3%). I don’t intend to grow this position unless they perform exceedingly well. The only advantage I see for VRNS is that they take aim at a fairly large mole.

And of course I’ve been in ANET for quite a while (IT customer, not cyber security), I’d buy more if it wasn’t already over 15% of my portfolio, largely due to growth. And yeah, you talked me down on AYX after the data spill so I’ve gotten back in (~6%), but I don’t view their customers as IT. Their product demands IT engagement on an ongoing basis, but as a BI company, their end customers are business analysts.

Considering PSTG, they will be commoditized for sure, just like spinning disc, but maybe with first mover advantage they can grow for quite a while before they get upended by lower cost competition. They also will face supply chain trouble (if not already). Solid state storage is in high demand and from what I’ve read there’s a world wide shortage driving up prices. New and enhanced memory foundries were the biggest single category of semiconductor CAPEX in 2017. Not sure when these investments actually come online, but the experts are predicting an over capacity situation will develop. That could be either good or bad for PSTG, it will reduce their input costs, but it also makes it easier for competition to enter the field. And then there’s a large number of new storage technologies with much higher densities, faster transfer rates and lower power requirements. Yeah, they’re all still in laboratories, but some are bound to go into production in the near future. I have no idea how this might impact PSTG, if they can transition rapidly, it might be a good thing, but if they’re tied to their legacy products, it could be another CSCO/ANET story, only unfolding much more quickly. I’ve really not looked at PSTG very closely, but they might warrant more study.

Thanks again for your informative and thought provoking posts.



I don’t think it is uncommon for big builders to have a captive sales force. When you build large communities its cheaper than going with the RE brokers. However, when you build a small community you need a realtor.

I live north of Seattle, and several of the communities going up have captive sales force.

And the pictures if you like…,SHO…,TL…,p…

1 Like

But turning to the new information, I had not even considered trimming LGIH which has grown quite a lot since I first bought, then sold, then bought again, then trimmed, then bought, etc. Presently, ~12% of my holdings. All the while I kept asking myself, “What’s their moat?” I couldn’t see any. I finally decided that they do things differently enough that it makes them hard to emulate. LGIH has a captive sales force. An established builder would have to make a clean break with their brokers and MLS to copy the LGIH model, most of them could not survive the transition, especially with the debt load most builders carry. It’s one thing to start out that way, a different animal to try and transition to that model. Cyclical as home builders are, I didn’t feel they were anywhere near saturation or end of cycle. And even with rising interest rates I felt they would not be impacted for at least another year. But, you have an uncanny gift for getting out . . . I’ll have to watch this one more closely than I had been

It’s funny, I just took profits on LEN (lenar), and was eyeing LGIH profits too. Today it fell below the 50dma on strong volume, a sign of weakness. So triming tomorrow.

Notice it hit the 50dma in mid-Jan and bounced, a good sign, but not this time. Institutions are taking profits and rotating. Things like CAT and OSK and CXO,FANG, FCX, VALE, etc are starting to move and attrack institutional money. LGIH can still be a great company without being a great stock for a while.

Big thanks to Saul for he (and this board do)!



Glad I discovered TMF 1.5 years ago.
Glad I just discovered Saul and all his wisdom.


1 Like

Congrats on a great start to the year. As I am new to the board and seeking to learn, I am trying to understand your post on SQ.

Square is growing revenue like mad (45% last quarter, which accelerated from 41% growth the quarter before), and also has a lot of recurring revenue. It has been profitable for the past six quarters, but not a huge amount.

I just went through an evaluation of SQ to see if it might be of interest to my portfolio, and I am not seeing those results. Quarterly Revenue growth in the low 30%'s/high 20’s with trailing in the mid-20%'s. Sizeable SG&A and R&D expenses keeping them from being profitable too. Am I missing something?

I love the business model and see the product everywhere, so it might be a good add for me.

1 Like

I just went through an evaluation of SQ to see if it might be of interest to my portfolio, and I am not seeing those results. Quarterly Revenue growth in the low 30%'s/high 20’s with trailing in the mid-20%'s. Sizeable SG&A and R&D expenses keeping them from being profitable too. Am I missing something?


Adjusted revenue is what Saul was referring to and that was up +40%. Remember, with SQ you want to look at adjusted revenue, not total revenue. A good part of the total revenue Square collects are interchange fees set by payment card networks and are paid to card issuers, in addition to assessment fees paid to payment card networks, fees paid to third-party payment processors, and bank settlement fees. Hence, adjusted revenue is a much more relevant metric to SQ than total revenue.

Long SQ
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at


Perfect Matt, thank you for the reply. I had been interpreting adjusted revenue and earnings as GAAP adjusted or re-stated and that was confusing me. Guess I need to curl up with that 10k and get reading. Cheers.