My portfolio at the end of June 2017

My portfolio at the end of June 2017

Here’s the summary of my positions at the end of June. What a wild month! I believe that there were at least three large scary down days for my portfolio (as well as a lot of small up days).

Please note that any PE’s that I give are always based on adjusted earnings, usually as the company has given them, but very rarely with small modifications of my own. This month I hope to do a brief review of each stock too.

We are now half-way through the year. So how is my year going? At the ends of February, March, April and May, I wrote that results had been beyond my expectations. At the ends of April and May I wrote that I thought that this was unlikely to continue, and June has proven me correct. It wasn’t a terrible month, and I even up another 1.9%, but it wasn’t another blow-it-out-of-the-water month. In fact, the Tech stocks that I am largely invested in had at least two large sell-offs during the month.

The indexes that I’ve been tracking against, and that we “should be buying instead of growth stocks” are doing pretty well for the first six months of the year:

The S&P 500 is up 8.2% for the year, and up 0.3% for the month. (It started the year at 2239 and is now at 2423)
The Russell 2000 Small Cap Index is up 4.3% for the year, and up 2.4% for the month. (It started the year at 1357 and is now at 1415)
The IJS Small Cap Value ETF, which so excelled in 2016, is in last place, down 0.1% for the year, and up 1.9% for the month. (It started the year at 140.0 and is now at 139.8)

These three indexes (that I’ve been tracking against) averaged up 4.1% for the year so far.

Let me say a word about “Why these three indexes?” Before I started the board, I hadn’t paid much attention to indexes at all, just to my own portfolio, but when I started this board I started comparing to the S&P 500, as that is what the Motley Fool compares against. Then I started thinking that I had an unfair advantage, as the S&P is all large caps, and the smaller caps that I largely invest in tend to do better over the long term, so I added comparisons against the Russell 2000, a standard for small and middle size companies. Then last year, someone kept harping on the IJS, which closely tracks the S&P 600 Small Cap Value Index, as having the best long term results. So I figured okay, I’ll add in value oriented small cap stocks to compare against. This gives me 500 large caps (the S&P), 2000 small and mid caps (the Russell), and a 600 small cap value index with a very good past record (the IJS), which ought to give me a very representative set of standards to compare against. I’m sure some people will find fault with this and say “Why not drop this and add that?” but those 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 is doing.

My portfolio peaked twice during the month, on June 8th and June 23rd, at up 43.6% and up 43.7%. After all the turmoil, it finished June up 38.1% for the year so far, and up slightly (1.9%) from up 36.2% at the end of May.

My first four months were up a bunch each month and I wrote in my April summary that I am aware that there’s no way this can continue like that all the way throughout the year. There are bound to be reverses. But, as I said above, I’m no good on timing the market and I don’t try. If I did, I might logically have exited all my positions at the end of April, when I was up 26% in four months and was “aware” that it couldn’t continue like that (but it’s now up 12% more).

I should state here that 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 my results so far:

**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%**

Here’s how it happened: There was nothing magical about it. The stocks I was in went up! I’m sure that some of you have done even better.

Following Black Wednesday, in the middle of May, someone asked how much each of us had all fallen on the day. I was down 4.15% for the day, and said that I thought a correction was starting, but said had no skill at timing the market and I don’t try. This was a great example of why not! If I was a market timer I would have decided the run was over, and taken profits, and missed the rebound we’ve seen since. A correction will come. They always do. But I don’t know when, and I don’t guess.

Here’s how my stocks have moved in the six months since December 31. I’ve arranged them in order of percentage gain. I will also add a word about significant positions I exited since the end of February. Please take into account that all of these stocks except LGIH are well off their highs of a week ago (ie. Shopify at $87 has been as high as $99. Arista at $150 has been as high as $162, Paycom at $68 has been as high as $73. Amazon at $968 as closed as high as $1,011.) So if you are considering these companies, you would not be buying them at peak prices.

**POSITIONS I’ve been in SINCE THE BEGINNING of the year.**

**Shopify** from 42.90 to 86.90, 	**up 102.6%**
**Arista** from 96.80 to 149.80, 	**up 54.8%**
**PayCom** from 45.50 to 68.40, 	**up 50.3%**
**LGI Homes** from 28.73 to 40.20,  **up 39.9%**
**Amazon** from 750 to 968, 	**up 29.1%** 
**Splunk** from 51.15 to 56.9, 	**up 11.2%** 

**Ubiquiti** from 57.80 to 52.00, **down 10.0%**

**POSITIONS I’ve ADDED since the beginning of the year** 

**Talend** I started my position in mid-February 
at $26.80. It’s now at 34.78, so in four and a half months
it’s 						   **up 29.8%**

**Mulesoft** I took a small position in mid-March 
at $23.50 or so. It went nowhere for the next six weeks, 
getting as low as $21.75. I about quadrupled my small 
position over a period of weeks at a surprisingly 
consistent price of about $22.25. In the last two weeks 
of May it shot up to $28.50, but it gave back most of 
that in June, finishing at $24.94. So from my major 
purchase price of $22.25, in roughly two and a half months,
 it’s 			                           **up 12.1%**  

**Square** I re-started a position at the beginning 
of March at $17.75 or so (convinced by Bert’s enthusiasm 
for it). It’s now at $23.46, so after four months it’s         
                                                   **up 32.2%** 

**HubSpot** After exiting in January, I re-started a 
position in mid March, at an average price of $62.40. 
It’s now at $65.75, so after three and a half months it’s 	
                                                    **up 5.4%** 

**Hortonworks** started the year at $8.31. I sold 
out in April at an average price of about $10.44, so 
when I sold it it was up 25.6%. I repurchased a small 
position in early May after earnings (because of 
Bert’s enthusiasm) starting at about $10.90. It’s 
now at $12.88, so in about two months, this second 
position is  	                                    **up 18.2%**

**Little Biopharmas I’ve ADDED since the beginning of the year**. (Kite is a 2.8% position. The other four combined add up to another 2.7%). 

**Kite** I took a small position in mid-January at $47.50, 
and it was at $73.10 at the end of May. It’s now at an amazing 
$103.70, so in five and a half months it’s 	    **up 118.3%**

**ZioPharm** I added an even more tiny “play-money” 
position in mid-March at $5.88, and it is now at $6.22, 
so in three and a half months it’s                  **up 5.8%** 

**Cellectis** I bought a tiny position in mid-April 
at roughly $22.70. It’s now at $25.82, so in two and 
a half months it’s                                  **up 13.7%**

**Matinas BioPharma** is working on a new kind of 
antibiotic for resistant infections. I took a tiny 
position (0.5%) in early May at $2.74. They made a 
stupid mistake in a study, which tanked the stock. 
I’ll be glad to discuss the issue if anyone is interested. 
It’s now at $1.69 so in a little less than two months it’s 
                                                    **down 38.3%**			                                

**Bluebird Bio** I took a tiny position in BLUE last week at about $107.40. It finished the week at $105.05, **down 2.2%**

**Significant POSITIONS I’ve EXITED since the end of February**

**Signature Bank** It started the year at $150 
and I sold out in March at an average price 
of $160, so when I sold it it was 				**up 6.7%**

**Twilio** started the year at $28.85 and I 
sold out in April, for reasons I discussed last 
month, at an average price of about $30.00, so when 
I sold it it was 						**up 4.0%**

**Wix** I started a small position in mid-April 
at about $73.25 average. I sold out in mid-May at 
about $74 because I thought that it was too similar 
to Shopify, and combined they were way too much 
concentration in one field. So when I sold it it was 		**up 1.0%**					

**A. O. Smith** I started a tiny position in 
late-Apr at about $51.10 average. I sold out about 
10 days later at about $53.80 for several reasons 
I’ve already discussed (it was overexposed to China, 
among other reasons) so when I sold it this very 
tiny position it was 						**up 5.5%**	

**The Trade Desk**. I started a small (1%) position 
on at the end of May at $51.90. I sold it two weeks later 
at about $50.65, so when I sold this small position it was  	**down 2.4%**

Okay, now you have an idea why my portfolio is up.

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.” All of their charts and indicators proved it in 2011, 2012, 2013, 2014, 2015, 2016, and still now.

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 staying out of this market for the past seven years. Picking good stocks makes much more sense than trying to pick good stocks AND trying to time the market too.

Okay, let’s look at my position sizes. I’m still trying to keep the number of positions in my portfolio small and streamlined. However, I have trouble saying no to good new ideas, so in spite of myself, I’m at 11 real positions and 7 very small positions. (These 7 include my 5 little biopharmas, which all together total to less than 1 real position). Nevertheless, as you’ll see, my portfolio is still very concentrated, as my eleven real positions make up 92.2% of my portfolio, and average 8.4% each.

On the other hand, my seven tiny positions make up just 8.3% of my portfolio in total, (I have about 0.5% on margin), and average just 1.2% in size.

Here are my full positions in order of position size. You’ll see by observation that after the huge drop from Shopify to LGI Homes, the rest are fairly well grouped together and decrease only slightly from one to the next:

Shopify   		16.0%
LGI Homes		 9.8%
PayCom			 9.5%
Square			 8.6%
Splunk			 7.9%
Ubiquiti		 7.8%
Arista		         7.8%
Talend			 6.8%
Mulesoft	         6.4%
Hubspot			 6.1%
Amazon			 5.7% 

I thought that perhaps a little graphic presentation could give you a better idea of relative size. Here is a vertical bar graph of all my positions from largest to smallest, with each X representing a half percent of my total portfolio. The very tall column on the left is Shopify of course. The letters under the line read down and are the stock symbols. Please let me know if you find this graph is of any use at all, or whether it is just difficult to follow and confusing. Thanks.

X    X    
X    X    X
X    X    X    
X    X    X    X    
X    X    X    X    X    X    X 
X    X    X    X    X    X    X    
X    X    X    X    X    X    X    X        
X    X    X    X    X    X    X    X    X    
X    X    X    X    X    X    X    X    X    X    
X    X    X    X    X    X    X    X    X    X    X
X    X    X    X    X    X    X    X    X    X    X
X    X    X    X    X    X    X    X    X    X    X
X    X    X    X    X    X    X    X    X    X    X
X    X    X    X    X    X    X    X    X    X    X
X    X    X    X    X    X    X    X    X    X    X    X
X    X    X    X    X    X    X    X    X    X    X    X
X    X    X    X    X    X    X    X    X    X    X    X    X        
X    X    X    X    X    X    X    X    X    X    X    X    X    
X    X    X    X    X    X    X    X    X    X    X    X    X    X    X    X
X    X    X    X    X    X    X    X    X    X    X    X    X    X    X    X   X    X
**S    L    P    S    S    U    A    T    M    H    A    K    H    Z    N    B   C    M**
**H    G    A    Q    P    B    N    L    U    U    M    I    D    I    V    L   L    T**
**O    I    Y         L    N    E    N    L    B    Z    T    P    O    D    U   L    N**
**P    H    C         K    T    T    D    E    S    N    E         P    A    E   S    B**

From this, it’s easy to see how oversized my Shopify position is, how my full size positions are bunched between 10% and 6%, and how truly insignificant most of the little biotech positions are.

Let’s start with Shopify, my very oversized position.

Shopify helps small merchants, and increasingly larger ones, open and operate online stores. It’s growing VERY fast. It has grown to be my largest position. At the start of the year it was at $42.90. In April they announced new features like a card reader integrated with their system and the Unity Buy SDK which lets game programmers insert a Shopify store right in their game to sell game emblazoned knick-knacks. At the end of April it was up to $76 and 17.2% of my portfolio. I wrote then that I’ll probably let it run a little further. When it got to $94 in May, its position size was becoming way too high for my comfort (19.8% or so), so I trimmed some in May and June between $94 and $89. Its position size now is 16.0% of my portfolio (which even after the trimming, and the recent small drop in price, is way oversized, and certainly doesn’t show any lack of faith in the company)

By the way, I have to thank the MF for this one. When they recommended it two months in a row in the middle of last year they got my attention as I’d never seen them recommend a stock twice in a row before.

Here were their results for the Mar quarter:
Total revenue was up 75%. In the real world companies don’t grow revenue at 75% per year! That’s amazing.
Subscription revenue was up 60%. This is almost all recurring revenue.
Merchant Solutions revenue was up 92%!
Gross profit was up 80%
The percentages of growth of each metric are stupendous(!) even as they slow slightly with size as Shopify grows.

Adjusted net loss was just 2.7% of revenue.
Cash was $396 million in cash, up from $392 million sequentially, and $189 million a year ago.

Shopify is slowing slightly with size but remains an incredible success story. I know that it’s too big a position and I’m bringing the percentage size down gradually, but for now it is what it is.

Next are ten large positions running fairly smoothly from roughly 10% down to roughly 6%. Note that they are a lot smaller than my Shopify position.

LGI Homes is still in second place at 9.8%. It’s a small home builder that specializes to selling first homes to apartment dwellers. Its 2016 annual earnings were up 36% from 2015. It started the year at $28.75, and was $31.83 at the end of April. LGIH had weak closings in Jan and Feb, reflecting weak sales in Nov and Dec, but they held their guidance for the year. During April when LGIH got down in the $30 range, some members of our board talked about selling out of their positions (which I advised against) before earnings. After earnings it moved up nicely and is now at $40.20. In the conference call they explained the weak closings in Jan and Feb as follows:

The primary reason that our closings are down year-over-year as that we had strong closings in December 2016 and our inventory of completed homes (available to sell) during Q1 was not as high as we would have liked….We believe the situation will correct itself in the next few months as we are bringing new inventory online with additional homes under construction and the completion of new development sections….As we continue to build back our inventory, we are continuing to sell homes. Sales over the last 90 days have been very strong. We have had over 500 net sales in each of the month of February, March and April. We currently have more homes under contract than we have had at any one time in our company history. Based on our backlog, we expect to close between 450 and 500 homes in the month of May, resulting in an absorption pace north of six closings… and right on track to meet our goal of closing more than 4700 homes for the year….

Sounds good to me. Its current PE is 12.0, by the way. I did trim a little bit of it this month when I needed some cash to buy stocks which had sold off for no reason, and LGIH was not only second only to Shopify in size, but up while everything else was down.

Paycom is now in third place at 9.5%. It helps small and mid size companies do payroll and human services with an integrated solution, and has been growing like mad. As a sideline of sorts it helps its customers with paperwork for filing taxes and for the Affordable Care Act. After the election it fell 25% from $52.50 to $39.50 in two weeks, in spite of revenue up 40% and EPS up almost 100% mostly because the Affordable Care Act looked like it was going to be repealed.

Then revenue for the December quarter came in up 35%, and up 13.6% sequentially. Gaap EPS for the year was up 100% from 37 cents to 74 cents, and adjusted EPS was up 117% from 40 cents to 87 cents, and people stopped obsessing over the ACA when the company pointed out it was only a small part of their business. The price rose to $57.50 at the end of March, and is $68.40 now. I added a bunch in February, mostly from $43.50 to $48.50, and added tiny amounts three times in April. In May they announced Mar quarter results, which included revenue up 33%, adjusted earnings up 42.5%, and recurring revenues at 99% of total revenues.

Square is in fourth place, at 8.6% and at a price of $23.46. I had taken a tiny position in Square in January, but sold it in early February. My reasoning at the time for getting out was: It lives in a crowded space, and a tough neighborhood. It’s growing revenue and adjusted EBITDA okay, but I’m not sure that they will have a large TAM to grow into in this space.

I bought back in in March and added to my position in April, and added more in May at about $19.75, on the way up. So why did I buy back in? What follows is mostly taken from Matt’s intro to the Square in Dec. (slightly edited):

Square’s original purpose was to allow any vendor or merchant with a mobile device to be able to accept card payments “anywhere, anytime”. Since then, Square has evolved into a much more robust payments solutions business.

It offers basic payments solutions:
point of sale (POS),
online, and

It also provides more sophisticated services under subscription and service revenue that their merchants seem to love, including customizable platforms for merchants. Three of the company’s fastest growing services are: Instant Deposit, Square Capital, and Caviar. Let’s take a closer look at these:

Instant Deposit - This service allows retailers to receive money instantly in their bank accounts upon swiping a customer’s credit or debit card, instead of waiting up to four days, which creates cash flow problems for small businesses. For each instant deposit, Square charges 1%. This is incredibly lucrative for Square, as it amounts to little more than 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 can pay the loan back gradually, as a percent of transactions. The average loan size is about $6,000. These loans especially appeal to small businesses that don’t normally have access to capital to cover unexpected expenses, or purchase new equipment. And, because Square is so familiar with its customers’ businesses, it can choose whom to offer these loans to with a high amount of accuracy.

Caviar - might seem an odd addition to this list of catalysts for a payments solutions company. After all, restaurant delivery service is fiercely competitive. However, Caviar has quickly grown since coming aboard. In the first year and a half, weekly order volume was up eleven-fold since its acquisition in Aug 2014. The most important thing is that restaurants that use it often sign up for all the rest of Square’s services.

Square announced March results in May, and everything was great. Revenue was way up. Adjusted EBITDA was positive $27 million rising from a loss of $9 million, Gaap Net Income was minus $15 million, up from minus $49. Adjusted earnings were 5 cents, up from a loss of 5 cents. Transaction-based revenue was $403 million, up 34%. Subscription and services-based revenue was $49 million, up 106%, from a year ago, and this growth accelerated from 81% growth sequentially.

Splunk is in fifth place at 7.9%, but note that all these stocks can change places from day to day with market action, as they are close in position size. Splunk is a company that is riding the big data wave. It collects, organizes and analyzes loads of miscellaneous machine data for companies. Its pricing plan is based on the amount of data it analyzes for a company, rather than a number of seats purchased, and the secret sauce is that companies keep analyzing more and more data. Splunk released great Jan quarter earnings in March but the market had a little hissy fit over low-ball guidance for the April quarter and it finished March at $62.30. They moved up just a little in April to $64.30, and to almost $69 in May before earnings were announced. They announced April earnings in May and again crashed after earnings, and are down $56.90. This is what those Apr quarter results looked like:

Total revenues - up 39%.
Adj earnings were 25 cents, up over 100% from 11 cents.
Op cash flow was $102.5 million
Free cash flow was $84.4 million.

They had warned last quarter that they were changing from a perpetual license model to a subscription model and that this might cause some turmoil. If those results were turmoil, I’ll take it. I trimmed a tiny amount before earnings at about $65.50, because I didn’t know what to expect after that warning.

Splunk wins an incredible number of awards. Forrester awarded their enterprise security solution their highest possible score. They got a 5-star review from SC magazine. They won three awards in TechWorld’s Techies 2017: Best Security Technology of the Year, Best Cloud Technology of the Year, and the Grand Prix Award. They won Best Hybrid Cloud solution in The Cloud Awards. LinkenIn named them one of the best companies in the US at attracting and keeping top talent. And the list goes on…
By the way, this was the 10th consecutive quarter that they beat analysts expectations (for the little it got them).

Ubiquiti is in sixth place, at 7.8% of my portfolio. In February it fell from $64 to $49 in a couple of weeks after announcing results, a drop of over 23%. Why? I’ll let you figure it out. Here were the results they announced:

Their revenues were up 32% .
And their earnings were up 24%
Gross margins fell from 48% to 44% because of one-time reasons that the CEO spelled out clearly.

Their revenue guidance was up 29% to 215 million from 167 million the year before.
EPS guidance was up 20.6% at the mid-point.
And on the basis of these terrible results Ubiquiti lost 23% of its market cap ! to a PE well under 20.

In May they reported March quarter results, beating their guidance midpoints throughout:
Record quarterly revenues of $218 million, up 30%.
Gross Margin of 45.4%
Adj net income up 22% year-over-year
Adj EPS of 78 cents, up 24% from 63 cents

Their new Enterprise line revenues topped cash-cow Service Provider revenues for the first time, and were up 60%, and up 16% sequentially.

I added a tiny amount on the drop in February, and added a bunch more in May when it dropped to $47 after those March quarter earnings. I’m cautious though about jumping in feet first because, after all, they do manufacture internet hardware, they are moving into new markets, and they don’t really have recurring income. Their current price is $52, up about $4 from May. Their PE is 17.5. Analysts just don’t believe that anyone can continue to be as successful as they are with such an unconventional model.

Arista is still in seventh place at 7.8%. Arista does something tech-wise that I don’t understand, but what I do understand is that it was founded by a small group of very smart guys who used to work at Cisco. They developed a better way of doing whatever it was, 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.

Arista got up to about $100 in January, but then US Customs reversed a previous decision and decided to provisionally bar their imports as possibly infringing on Cisco, and the price dropped to $88 in a day. They worked their way back to $100 as people realized they can manufacture in the US (which may be at a slightly lower margin). In February they announced December quarter earnings and the price jumped 18% in a day and finally closed the month at $120.60. They continued moving up and finished March at $132.30, and April at $139.65. At the end of May they were at $146.45. In June they got to $161.60, but sold off this week to finish the month $149.80.

The Mar quarterly results looked like this:
Revenue up 33.6% up 38.5%. (This is an acceleration. Last quarter they were only up 33.5%)!
Adj gross margin of 64.2%, flat (down 0.2%) from the year before
Adj net income up 46%. (last quarter they were up 35%)
Adj earnings of 93 cents, up 37% from 68 cents.

The risk of the Cisco suits is fading away and Arista keeps introducing amazing new products.

Note that my top seven positions, making up 67.3% (or more than two-thirds) of my portfolio, are still the same top seven, in the same order. My Shopify position is obviously too large, but Shopify keeps performing. It is what it is. I am aware of it, but unlikely to do much about it unless something happens which will force me to do so. Let’s keep moving further down the list to:

Talend is at 6.8%. Its price is $34.78, nicely up from $29.87 at the end of April. I’ve added a little to my position as well. Bear had brought Talend to the board in February. Here’s his explanation of what they do:

Data Integration is another rapidly growing area within the “big data” landscape, and Talend is carving out a niche, especially integrations including cloud sources, and Hadoop, I think Talend’s growth thus far speaks volumes, and I also believe big data is such an emerging tsunami that there will be plenty of integrations to go around, whether Talend gets all of them or not.

I (Saul) wrote it up early in May, which I won’t repeat, but briefly, what I like most about it is that its revenue growth is actually accelerating. It was up 44% this much quarter compared to up 34% a year ago. I consider it a catgory crusher, as it seems to have no effective competition at present. In the 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’d never heard a CEO say “our win rates remain ridiculously high” before. I can’t say I mind it.

Mulesoft is a recent IPO which I took a position in in March, and quadrupled the size of the position since, is at 6.4%. Mulesoft is a disruptor and an unrecognized category crusher. It’s in a field where the legacy companies have essentially no growth at all, and Mulesoft grew revenue 71% last year. It basically has no effective competition in what it does. I wrote it up the board on March 25th. Here is a link to the thread.…

Bert also wrote it up, liked everything about it, but then said he couldn’t recommend it because it was overvalued (one of the MF Rule Breaker criteria for a good purchase, by the way).

Hubspot is at 6.1%. What does it do? Hubspot pioneered inbound marketing. What’s that? Inbound marketing refers to bringing customers to you, rather than going out and chasing them. As your customers get more technically savvy, reaching out to them isn’t as effective as it used to be (they do their own research online, they don’t answer their phones if they don’t recognize your number, unsolicited marketing emails go to their spam folders, ad-blockers block your online ads, etc). Inbound marketing is about building up an online presence that will bring in leads over time through social media, search engine optimization, blogging, etc, etc, and everything is stored in a single database with full integration amongst all the tools.

Traditionally, businesses use separate tools for each of these functions, which makes it very difficult to pull together a total view of marketing performance, and followup sales performance, for various marketing channels. As the CEO put it:

Our customers, need a blog, need a website, need social media monitoring and need search engine optimization, and typically that will be four different vendors they’ll have to deal with in order to get that right. And that’s pretty painful.

Hubs pulls everything together into a unified, easy-to-use, platform. They say clients increased the number of leads generated by 5.7 times after one year of using the platform, on average.

That’s what they do. Here are some highlights from the great March quarter they recently reported:

Total revenue was $82.3 million, up 40%
Subscription revenue was $77.5 million, up 41%
Other revenue was $4.7 million, up 18%
Adj operating margin was positive 1.6%, up about 7.7% from minus 6.1%, a year ago.
Adj operating income was $1.3 million, up from a loss of ($3.6) million.
Adj net income was $1.2 million, or 3 cents up from a net loss of ($3.9) million, or ($0.11) per share.
Cash was $160.6 million
Free Cash Flow - generated $11.6 million, up from a loss of ($4.9) million a year ago.

Most recently they’ve added an integrated sales product to their marketing product.

Amazon is currently at 5.7%. It closed at $925 in April and is now at $968. Amazon seems like a steady grower to me. No longer a wild grower like Shopify, but more an anchor type stock for my portfolio. That’s not because it’s a staid company or out of ideas, but simply because of the size of the company. That makes it not one that I can see tripling in price in the next few years, which is part of why I chose it as the one to trim to raise cash when I needed cash in March. I have no current plans to trim it any further.

Amazon announced its March quarter results in late April and it looked good to me: Revenue for the quarter was up 23%, compared to up 28% the year before, but to keep that in perspective, we are talking about a company with revenue over $30 billion dollars growing at 23%. AWS revenue was up 43% for the quarter. GAAP earnings for the trailing twelve months were $5.32, up 118% from $2.43 a year ago. That’s not much earnings for a $900 stock, and thus it’s a long, long, way from a value stock, but at least it’s moving in the right direction at a good clip.

From 2013 to 2017:
TTM Operating Cash Flow at the end of the first quarter has gone year to year (in billions of dollars): $4.2… $5.3… $7.8… $11.3… $17.6 !
TTM Free Cash Flow at the end of the first quarter has gone from year to year: $0.2… $1.5… $3.2… $6.4… $10.2 !

They also announced a well received new product in April, designed (as I understand it in my limited way) to bring the AWS cloud to smaller businesses. In fact they announced so many new things that I can’t keep track of them and I’m just sitting back and enjoying the ride.

Now to my really smaller positions.

CAR-T These stocks have been discussed extensively on the board. They were brought to the board by bulwinkl, and Ray (imuafool) has done a series of incredible deep dives on the CAR-T opportunity, so I won’t duplicate that. The four together make up 5.1% of my portfolio.

In order the stocks are Kite at 2.8%, ZioPharma at 1.0%, Bluebird Bio at 0.8% and Cellectis at a tiny 0.5%. Kite as the likely first to be approved by the FDA, ZioPharma as the developer of the Sleeping Beauty system, which gives them a rheostat switch and should cut serious side effects greatly, as well as other shortcuts to cut time and expense, Bluebird Bio with very excellent results working with Celgene, and a second possible line of products in gene editing, and Cellectis, working with Pfizer to develop off-the-shelf CAR-T treatments. Kite this month got its patent upheld, seems likely to get approved by the FDA, and was ranked 7th on that MIT list of the 50 Smartest companies. The first two bits of news probably account for its price run-up this month.

One more biopharma is Matinas Biopharma, but it is working on a novel way of delivering antibiotics, rather than an anticancer medicine. It’s just a 0.4% position.

Then we have Hortonworks, which as I told you last month, I had quit in April. I had good reasons, so I wrote to Bert about it, and he was very reassuring and pointed out again the enormous deferred revenue that they have in the bank ($198 million, at present). It’s subscription income and comes in at high margins. So I took a small position back, starting at $10.90 but adding as it rose (and fell, it’s a high beta stock). It’s now at $12.88. It’s currently just a 1.9% position. I’ll probably keep it this time, but beware, that’s “probably”!

Finally Nvidia is an atypical stock for me as it sells enhanced microchips, but you all convinced me to take a small position in early June at an average price of $149.50. It got up to $159.00 during the month, but I changed my mind about it and sold out on the way down at $154.40, which happened to be a small gain, but that wasn’t why I sold it. Then I saw it auto company after auto company partner with it, it was rated number one on that MIT technology list of Smart Stocks, it came out with a special chip set to take advantage of the Bitcoin Bubble, so I changed my mind again and took a small position back at $146.30 on Friday. (It’s a 0.9% position.)

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. 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 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 Post #17774, 17775 and 17776.
We had to post it in three parts this time.

A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board


Thanks Saul for another excellent and detailed write-up on the status of your portfolio. I appreciate it greatly, as I’m sure almost everyone else who follows this board does.

My performance so far this year trails yours, but not by a lot. I’m currently up 32.8% since the first of the year. The simple fact that I know that is thanks to you. I don’t exactly follow your methodology, nor do I try to mimic your portfolio. While I hold several of the same companies, there are equities in my portfolio not held by you, and there are equities in your portfolio not held by me (i.e., I can’t for the life of me understand why you still hold Ubiquiti). Also, of the names we have in common, the percentages tend to be different (i.e., I hold almost twice as much Arista as you).

One thing that I struggle with is relative performance. Sure, I can tell you which stock is up the most by dollars or percent, but that does not account for holding period. My broker (Fidelity) provides weighted average cost, but not average weighted holding period so there’s no easy way to determine APR for each investment. A given stock may be up the more than another, but that may simply be a function of how long I’ve held and when I’ve chosen to buy/sell increments. Another stock that may appear to not be performing as well may actually be performing much better due to a shorter holding period.

Care to take a stab at how one might determine relative performance without too much arithmetic stress?

I was eagerly awaiting your June-end report, to see what you had done with LGIH. I sold 19% of my oversized position on June 30 at $41.42. I’ll be thinking about this a couple more days. June sales should be out either the 3rd or 5th. Back in May when we were forecasting/guessing annual 2017 closings I came up with 4,230 and earnings of $3.88 then adjusted down to $3.68 for higher sales as % of sales. So, forecasted $36.80 with p/e of 10. The current price was $31.03 so it represented a 19% gain in less than a year.

I started buying more on the 8th, 9th, 17th, 18th, 19th. In the meantime, LGIH came out firm for 4,700 closings and if I remember correctly forecast $4.00 to $4.50 eps. Those mid-May prices were $32-$34 so still good forecasted gain at the lower end of guidance, about 19% more. But when LGIH hit $41… Mid-range guidance of $42.50 and p/e 10 = $42.50. O.k., p/e 11 is $46.75. Anyway, I took a little off the table.

But still, if they hit $4.50 there ought be a little exuberance. No. Not. I think the “high” p/e now reflects the projected earnings. So, $41/4 = p/e close enough to 10. So, that’s what I’m wrestling with. Does the market now believe the guidance and has priced it in? We’ve come a long way, baby. 33% in 60-days, right?

BTW, half of what I sold Friday was purchased 6/16 after the housing starts report came in below expectations. Housing stocks sold off a bit. I figured low housing starts was good for LGIH because I felt they were still building. Fewer houses on the market good for sellers. That was a quick 11%.

There were recent posts on algo-trading. I think that does affect intra-day volatility. Also, ETF’s. I read recently that there are more ETF’s listed than the underlying stocks they contain. More ETF’s than stocks and the ETF’s slice and dice the markets by cap, industry, sub-industry, geography, sub-sub-industry. So when housing starts come up short, sell your portfolio’s housing ETF, LGIH and all.

And, since the market has/had been sour on LGIH, if the money manager wants to be long housing, buy the ETF and short LGIH to differentiate from the herd. So that LGIH short interest might not be absolutely negative on LGIH, just a bet on its underperforming the positive housing sector position.

'Nough rambling. Happy 4th.

KC, with LGIH still #2 holding at about 11%



You took positions in 5 biotechs???

Have you ever done that before?

I am calling a market top :wink:


Saul: You took positions in 5 biotechs??? Have you ever done that before?

Hi Duma, All five together add to less than one real position. Sure, I’ve had a big position in Celgene in the past (way larger than these five all put together). These are just play positions for me (although Kite is doing very, very well).




You write really great reviews too.

Please let me know if you find this graph is of any use at all, or whether it is just difficult to follow and confusing. Thanks.

I think it must be helpful for something like 95% of people. I know first hand because I work with people who can’t understand any of my numbers until I show them a graph. Myself, I have this weird quirk/ability/disability/i’mnotsurewhattocallit where it’s usually easier for me to just have numbers in tables that to see a graphical display. (What a weirdo…)

From this, it’s easy to see how oversized my Shopify position is, how my full size positions are bunched between 10% and 6%, and how truly insignificant most of the little biotech positions are.

Agreed, but I’d say that KITE position has become significant. Sure, it’s a small position, like HDP, but not tiny. But I am amazed (probably jealous) how well it’s done!

One note: For Splunk, again you’ve got Dec quarter results listed, not Apr quarter.


Sorry Bear, I meant to fix that!


Thank you as always, Saul. I’m very grateful for this board and all your work helping others (like myself) learn how to invest like a rock star. (Is that a thing?)

Thanks to all here,


…learn how to invest like a rock star.

Not literally, I hope.



Not literally, I hope.

Ah, so that is a thing, but nothing we aspire to. I’ll have to work on my similes.


it is surprising that you went up by ~1% this past month considering that SHOP your 16% position has been down 15% in June and that most of your 5 to 10% positions were down as well.

How do you account and explain that? did you smaller position grew so much to reverse this?



it is surprising that you went up by ~1% this past month considering that SHOP your 16% position has been down 15% in June and that most of your 5 to 10% positions were down as well. How do you account and explain that? did you smaller position grew so much to reverse this?

tj,…Where did you get those ridiculous numbers? If you looked at my May quarter results and compared them to my June quarter results you’d get the answer right away. Shopify down 15% in June??? When I calculated my May results on the last weekend of the month, Shopify was at $90.75. When I calculated my June results it was at $86.90. That was down a little over 4%! Not 15%!!

Compare that to my second largest position, LGIH that went from $32.40 to $40.20. That was up 24%!! Do you think that my second biggest being up 24% might have made up for my biggest being down 4% ?? Really??

If you are not happy with your results for June, don’t blame all of us who eked out a small gain in the month, and don’t imply that all of us must have faked our results (as you did in your post to Bear).



I am not implying anything here, and don’t assume anything about me.

I am just trying to see how the differences between portfolios contribute to very different results.

I can see how a large winner can dominate the gain. That is what typically happens in a venture capital portfolio.


I was up 1.9% for June despite the downturn in so many of the tech stocks at the end of the month.

My wife, who is Chinese and knows nothing about investing, just asks about the sum total of our three portfolios. She is always somewhat disheartened to hear when the total moves down. I pointed out to her that volatility is the nature of the game, especially with high growth companies.

I also pointed out the following rather extraordinary total portfolio performance for the year so far (my goal is 20%/year):
End of Jan: +3.5%
End of Feb: +9.0%
End of Mar: +15.7%
End of Apr: +21.6%
End of May: +30.9%
End of Jun: +32.8%

I also remind her that past performance is no guarantee of future performance when she asks me to speculate on where we’ll be at the end of the year.