My portfolio at the end of Mar 2018

My portfolio at the end of Mar 2018

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

I have to start with a confession! About seven trading days ago, I started a rough draft of this monthly summary and I had decided that I would no longer give monthly summaries of my own results. My entire portfolio was up 41% in less than three months and you have to admit that that was just silly and embarrassing. Here’s what I had written in that draft:

I’m sorry but I’ve decided that I’ll no longer give monthly results for my total portfolio. It’s just embarrassing and ridiculous to be up as much as I am at the end of just three months, and it makes me feel uncomfortable to “brag” about it. Just say that my results accelerated this month, while the averages were flat to down. Those of you who have similar stocks have probably had similar results.

Well, as you all know, the last six trading days have brought us, if not down to earth, perhaps down to a low flying jet plane, instead of the moon rocket we were on. This means you get my monthly results for another month at least, after all. But if the craziness takes off again, I’ll probably quit including those figures. You won’t need them anyway.

At this point I’m up 29.1% for the year. As I was up 21.4% at the end of February, I’ve tacked on another 7.7% during this month, in spite of the horrendous end of the month, and in spite of the fact that each of the indexes was down for the month again. And in spite of the fact that each of the indexes is down for the year.

I posted at one point this month asking “What the heck is going on.” My answer is that I think 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, Kite Pharma, Nektar, etc, but it’s been that big wave that has carried us.

I got some pseudo-sophisticated comments from people who were apparently jealous about our results and who had to imagine that there must be some catch, and from some who just can’t believe that anybody could be so successful long term investing the way we are (“return to the mean” and all that). The remark that really got me was that we shouldn’t pat ourselves on the back because “A Bull Market lifts all the boats” or “Anyone can be a genius in a Bull Market” (I don’t remember which as I am old and senile).

Well, I have to laugh: “What Bull Market?” The indexes I follow average down 1.4% so far this year. Last year the three indexes averaged up 14% while many of us were up 60% to 85%. If we look at the last 15 months since Jan 1st of last year, the indexes are up all of 13% while many of us are up well over 120%, and anyone with a hand calculator can calculate that I am up 138% in these last 15 months (1.842 times 1.291 = 2.38). That means I gained 1000% of what the indexes gained. And I know that some of you have done better yet. It must have been a heck of a Bull Market to have lifted us poor foolish mistaken investors so high.

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

The S&P 500 (Large Cap)
Closed down 1.6% for the year. (It started the year at 2684 and is now at 2642). It was down 3.8% for the month.

The Russell 2000 (Small and Mid Cap)
Closed down 0.8% for the year. (It started the year at 1542 and is now at 1549). It was down 1.3% for the month.

The IJS Small Cap Value ETF
Closed down 1.8% for the year. (It started the year at 153.6 and is now at 150.9). It was down 1.4% for the month.

These three indexes
Averaged down 1.4% for the year so far. It’s clearly a Bull Market that’s accounting for all 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.

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, a year ago, 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, 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 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 kept going up and never gave us that correction to buy back in, and we would have thus missed all the rest of this enormous rise after April.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 three months. 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.

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. Well, the market recovered in a week, and my portfolio hit new highs in that week after being down 9.7% from its highs. We had another nose dive in the last six trading days. 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%**

I realize that I wrote the following at the end of last year: PLEASE don’t expect me to be up another 84% next year! It ain’t goin’ to happen, but I note that I am rising considerably faster this year than I did last year, in spite of meltdowns in both February and March. Strange world!

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 approximately 70% of my current portfolio.

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), and MongoDB

Here’s a last four months review:

December: 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.

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, as you know, 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, which might or might not come through. (The acquisition didn’t come through, but a nice partnership did). At the time I had more long-term conviction in Nvidia. 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: As I have described at length, I decided to take a full (but not oversized) position back in Nektar, and also took a much smaller position in MongoDB. To raise money to buy them I trimmed some Hubspot, which just ignored me and kept moving up, and some Talend, and I trimmed quite a bit of Nvidia. (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 after a great investor conference, and Shopify, 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 Nividia, and also to Shopify, Nutanix, Twilio, and Nektar. I don’t understand the ins and outs of the technolgy of Nvidia like some of you, but I could listen to the presentations management made, and hear the enthusiasm and confidence, and the almost euphoria that they are feeling. I bought back a lot of the Nvidia that I had reduced earlier in the month…

Here’s how my current stocks have done in the first three 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 38.18		up  	48.6%
Square from 34.67 to 49.20		up  	41.9% 
Nutanix from 35.28 to 49.11  	        up 	39.2%
Alteryx from 25.27 to 34.12		up  	35.0%
Okta from 29.95 to 39.85		up  	33.1%
Shopify from 101.0 to 124.6  	        up 	23.4%
Nvidia from 193.5 to 231.6		up  	19.7%  
Pure  from 16.72 to 19.96		up 	19.4%
MongoDB from 38.00 to 43.40		up 	14.2%
Arista from 235.6 to 255.3,   	        up 	 8.4%
Nektar from 103.0 to 106.3  	        up 	 3.2%

By the way, my big star has been Nutanix, up 128.4% from when I bought into it just over six months ago at $21.50, now at $49.10.

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.

MongoDB I just bought two weeks ago at about $38.00, and I sold half of what I had bought at a price of about $43.40 during the last couple of days, to raise cash to buy more Nvidia.

Exited positions this year [showing 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% 
Mime from $32.34 to 30.85	  down		 4.6%   
LGIH from 75.0 to 71.0 		  down 	         5.3% 
Wix from 69.2 to 61.8    	  down		10.7%

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 just realized that I’ve been writing this same thing 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. With adding two stocks and selling out of two, I’m still at 11 positions, which I feel is pretty ideal for me. Here are the 11 positions in order of position size.

**Alteryx 		14.1%**
**Nutanix			13.9%**
**Shopify   		12.8%**
**Arista		 	11.2%**
**Square			10.5%**
**Nektar			 8.8%**
**Nvidia	 		 7.4%**
**Twilio			 7.2%**
**Pure Storage		 4.4%**
**Okta			 4.2%**
**MongoDB			 0.9%** 

It’s a very concentrated portfolio. Eye-balling the list you can see that I have five quite large positions running from roughly 14% to 10%, then stepping down to three positions between roughly 9% and 7%, two more at roughly 4%, and one little position at 0.9% (see above for that story)…

Let’s start with Shopify, Alteryx, and Nutanix, my three largest positions, which are very close to each other in size. They have exchanged places back and forth a few times during the month, as Nutanix has risen like mad, Shopify descended, rose again, and descended again, and Alteryx just kept doing its thing.

Shopify in third place at 12.8% 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 some and redeployed the cash. At the end of February it remained my largest position, but it was displaced this month when it fell past Alteryx after another 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 last week after the short attack. 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 $124.6, so in spite of the short attacks, it is up about 361% (almost a 5-bagger, for those who count), since I first bought it maybe a year and two-thirds ago.

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 presage 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 really love investing in this company.

Alteryx is now at 14.1%, and in 1st place. It was a new position in December. It finished March at $34.12 after starting the year at $25.27, so it’s up 35% for the year so far. It’s very rare that I would take a new position and have it become my largest position after three months. I have great hopes for this company. 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’s already a very large position. I’ve written endlessly about Alteryx so I won’t repeat myself, but I’ll let Bear describe their latest earnings report here:

“It just sounds like they are growing as fast as they can. This is some incredible stuff!
Revenue: 38.6M (up to 55% growth…wow), a $2.7M beat
Adj. EPS: 2 cents, a 5 cent beat
Gross Profit: 32.3M, up 56%
Operating Expenses: 34.2M, up 31%
Operating Loss: 1.9M, down from 5.6M (down 66%!)
Nice to see Gross Profit growing so much faster than expenses.
Cash Flow from Operations: 12.5M! (and 18.9M total for the year)
Dollar Based Net Revenue Retention Rate: 131%
Customers: 3,392 (up 46% YoY)
New Customers this Quarter: 338 (up 11% sequentially!)
Deferred Revenue: 114M
New Deferred Rev this Quarter: 32M! Nice.
March 2018 quarter guidance:
Revenue: 39M - 40M
Adj. EPS: $(0.06) to $(0.07)
Full year 2018 guidance:
Revenue: 176M - 190M
Adj. EPS: A loss of 24 to 29 cents. Ha! I don’t think there’s any way they won’t beat that…they’ll probably raise guidance every quarter.
They were cash flow positive this year and said they will be again in 2018, but are expecting to invest more. Translation: Look for more fantastic growth to come!
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.

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.

Nutanix is in second place at 13.9% of my portfolio. 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. 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. . It closed last Friday at $49.10. Note that please. I bought it and praised it a lot when it was in the low $20’s. Now six month later, it’s almost $50, up roughly 128% in six months or so.

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

Nutanix reported awesome Jan 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 all your customers absolutely love you.)

Nutanix’s area is “hyper-converged infrastructure” in data storage. Gartner rated it 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 (hardware sales no longer being counted, and with subscription revenue being counted only month by month, even if all paid in advance).

Arista was in third place in Feb after selling off about 20% after reporting excellent results but giving “cautious” guidance that they could be sure of beating. In March they dropped to fourth place because Nutanix just blew past them.

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 last week in the $240’s.

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).

Square is now in fifth place, at 10.5% of my portfolio, and up to $49.20 from $34.67 at the end of the year. I started my position last 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. This month I added some at $46.60 early in the month.

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.

Nektar. I bought back into Nektar at the beginning of this month. It’s in 6th place at 8.8%. So much has been written about it this month that I have nothing to add. I really like this company, but probably won’t let the position get bigger except by stock price appreciation.

Nvidia At the end of January Nvidia was in ninth place at 3.6%. Then I finally got serious about it, talked into it by all the great write-ups and discussion by members of the board, as well as by the last quarterly report and built up my position. I sold some back early this month when I needed cash to buy Nektar, but I bought a lot during the meltdown this week, when it should have been going up. It’s now in 7th place at 7.4%.
What was so good about their last report? Well 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 seems 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.

Twilio is now in 8th place at 7.2% of my portfolio. It has been discussed at length on the board, including by me, and I don’t have too much to add. I’ve been in and out of Twilio, selling out because of all the pessimism about it becoming commoditized in the future. This was a new small position in January. I bought it back 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. I took my initial position at $25.75, and added a little at various prices before earnings. And then after earnings I added a bunch. Their non-Uber revenue was up 62% and their non-Uber dollar-based retention rate was 136%. Doesn’t sound to me like it’s being commoditized.

Pure Storage was a new position in January, and it’s now in ninth place at 4.4% 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.

Okta was another new position in January, and a small cyber-security firm. They IPO’ed in April, almost a 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 wrote last time that I was giving just a sketchy summary because I was not sure that I’m going to keep it. Obviously I decided to keep it, and it’s now up to a 4.2% position. Here are some Jan quarter results:

• 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 to Okta this month.

As you can see, this month I weeded out two companies that seemed like good successful companies, but which didn’t seem to me to have the potential to become “great” companies. For example:
Hubspot, which changed its model to give away its basic program for free, and then attempt to upsell. That gave me the impression that they were having trouble selling their basic program, but what really turned me off was this quote from the conference call: “The dollar-based retention rate was over 100%, and I think the full year was over 100% too.” To me that sounded way too low
Talend, had nothing wrong at all (except a lot of stock-based compensation), but I needed cash to add to some companies that were selling off unreasonably (like Nvidia, for instance). Talend was sitting still during the sell-off, buoyed buy hope of an acquisition after Mulesoft was acquired. Talend may be acquired, at a good premium, but that’s not why I buy stocks. I have nothing against it and may buy back in sometime in the future, depending.

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.


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.




How does PSTG stack up? One year (3/30/2017-3/30/2018) CAGR…

Denny Schlesinger


It’s just embarrassing and ridiculous to be up as much as I am at the end of just three months, and it makes me feel uncomfortable to “brag” about it.

Dear Saul,

I have seen may of the comments that probably led you to conclude what you have. I would like to offer you a different opinion: every month that you crush the averages, I am ecstatic for you and feel like you are never bragging but celebrating your returns with us. Those that assume that you are bragging are on the wrong side and are wasting their energy by being envious instead of wisely spending their energy studying your stocks, your methods and your victories.

I also understand that these wonderfully interesting monthly updates must take an appreciable amount of time to put together. If you’re just tired of spending that time, then I thank you for what you have done for us and understand completely. If, however, you feel like there are too many people (wrongly) hating on you for your updates and want to stop because of that, I would implore you to continue, haters be damned!

Further, I would add that if you are celebrating your returns, we are celebrating our returns. Your allocations are much more aggressively placed than mine, which means that over the last year, my returns have lagged yours by around 50%. Is that really something to complain about?! I say no: my allocations are within my comfort zone, and I am still privately celebrating my (still) great returns, and the greater good fortune of having discovered your board at its inception.

Lastly, with regard to having discovered your board some years ago, let me add this:


Any of you that have been around awhile know why this is the case. It was Saul’s questioning of the whole WPRT pick that led to an avalanche of disparaging remarks years ago, which led to Saul’s stating his 30-year return average, which led to another avalanche of people questioning Saul’s honesty, which led to Saul’s stating his precise year by year return, which eventually led to: Saul’s Investing Discussions.

I was one of those investors in WPRT at the time. I lost about 70% of my investment. However, that investment has paid of handsomely, like bread crumbs in the forest lead to the castle.

I veered off topic, but the gist is this: please don’t pay attention to the naysayers. Your board has become the greatest, most interesting, most intelligent board in Fooldom, in good times and in bad (and this board HAS had bad times).

If this is indeed the end of the monthly updates, cheers and thanks to you, Saul! I hope we can encourage you to change your mind!

MisterSideshow :slight_smile:


Well done Saul and Bear. Agree what last poster said. For me though if one reads very carefully it’s your allocation of where you think the cash works best for you at any given time that sets you apart from the rest. Learning this skill and sticking to it is an art form and does not come easily to most including myself but I’m getting there thanks to you.


I’m sorry but I’ve decided that I’ll no longer give monthly results for my total portfolio. It’s just embarrassing and ridiculous to be up as much as I am at the end of just three months, and it makes me feel uncomfortable to “brag” about it. Just say that my results accelerated this month, while the averages were flat to down. Those of you who have similar stocks have probably had similar results.


You are very humble. I think it is a mistake to feel “embarrassed” about your returns. The returns are what they are. If you were trailing the indices, would you quit reporting. Here’s the thing: people do benefit from your reports because they get to see how you are investing. I can say that my investing has changed significantly since I started watching how you do things. In fact, in reading your report, in particular, the following:

March: As I have described at length, I decided to take a full (but not oversized) position back in Nektar, and also took a much smaller position in MongoDB. To raise money to buy them I trimmed some Hubspot, which just ignored me and kept moving up, and some Talend, and I trimmed quite a bit of Nvidia. (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 after a great investor conference, and Shopify, 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 Nividia, and also to Shopify, Nutanix, Twilio, and Nektar. I don’t understand the ins and outs of the technolgy of Nvidia like some of you, but I could listen to the presentations management made, and hear the enthusiasm and confidence, and the almost euphoria that they are feeling. I bought back a lot of the Nvidia that I had reduced earlier in the month.

I had to chuckle because I independently did very similar things. I added to NTNX significantly in March. I had sold all my HUBS already. I sold almost all of my TLND to buy a bunch of NVDA, more NTNX, and a little ANET. I closed all my SQ options expiring in 2019 (calls) to buy NVDA calls (leaps expiring in 2020). I think that my investing is now very similar to yours and I can now do it on my own. I learned most of this by following how you do things over the past 4 years. If you had not posted your results and explained how and why you did what you did then I could not have learned it. I think most people who frequent your board probably have not learned it yet but some may be able to learn if you keep doing what you do. Also, the board provides everyone with some great analysis, and a big part (probably the main part) of why people are attracted to the board is because they want to learn to invest for themselves and they want to get access to the analysis that happens here. By following what you do and how you think about your decisions makes the learning possible. Anyway, just my opinion.



Saul, Chris

I look forward to your posts. Both of you provide a great deal of value to this board and to me. Please continue.

And, thanks




Keep it up… the posts I mean. Someone once said “It ain’t braggin’ if you can do it.” The Duke maybe? Dizzy Dean? I don’t recall… it was something like that.

In all seriousness, please continue posting the monthly summaries, they are very informative beyond the returns IMO.



I agree with MisterSideshow, Illegitimi non carborundum!

About WPRT, that was a stock I followed but never bought. For those not familiar with the story, here it is in one picture:

Denny Schlesinger


I’ll echo the requests to continue the monthly updates.

Those are a big part of what makes this board the extremely valuable place that it is.

Thanks, to MisterSideshow for providing that bit of insight into the genesis of this board. That will give me some archives over on the Stock Advisor boards to read through sometime. I recall hearing about Westport a number of years back, probably partially due to some Motley Fool articles about it (from long before I actually became a member).

I’ve only known of this board’s existence since early May of 2017, but I have actually made a row in my spreadsheet specifically to track my returns since the day of my first post here on this board as compared to the S&P 500. As of now, I’m up 35.7% compared to 10.1% for the S&P 500 since May 11, 2017, even with the pretty big/decent-sized drops experienced by NVDA, SQ, MELI, ANET, SHOP, PSTG, and others since March 12th. I had been up 51.2% since 5/11/17 compared to 16.0% for the S&P 500 as of 3/12/18.



I 2nd other comments so far especial Mistersideshow.

I understand why you may not want to continue your monthly results based on some limited negative feedback.

In bowling there is a saying, “If you want to be a better bowler, bowl with better people.”

I can tell you based on my 40 years of bowling experience, it has held true every time. I get to see the higher average bowlers scores daily, along with their average in every tournament they are in. Displaying numbers is not bragging. Its just truth. It gives us the drive to achieve the same level and put in the time and effort to continue in the pursuit.

On another note, we NEED more people like yourself. You SHOW, not tell, us there is a better way and the results are monthly and not “average 11% per year over 140 years.” It is the results shown by you and others on this board who convince us not to fall for the typical financial speak from TV commercials showing us an avg return of 7% a year (while they take upwards of 3%) is phenomenal and is our path to stability in retirement.

I got your back in whatever you choose but I personally choose for you to continue the path. :slight_smile:



Hi Saul!

I echo the sentiments on this thread and am in the same boat with Mr. Slideshow. I’m a long time lurker and learning slowly. Please continue to post (if you can) and it has been a great learning experience.



Dear Saul,

I’ll get right to the point.

Please, please continue your month-end summaries. As you can see from the less-familiar names writing you today, so many of us have learned so much from your generous, patient teaching and honest sharing of your thinking and moves. We learn from your Knowledge base and your willingness to change your mind, and explain why.

A good friend of mine says, “when the student is ready, the teacher appears”.

For me, you and other wise investors on your board have been (and I hope, will continue to be) my excellent teachers.

Thank you again.



For one additional factor to throw into the “To post or not to post” debate (that is really a landslide), I will note that 84% of respondents (I love that the percentage is right at 84%) to the poll here on the board fell into the 2 categories of beating the S&P 500 by either a non-trivial amount or even more.…

Of those 125 people (as of when I’m making this post), I would guess well more than half would attribute at least a portion of their out-performance and/or their desire to actually track their results more rigorously to the generosity presented by Saul posting monthly summaries here on the board.


see what I did there with the bolding



This is my first post on your board so let me begin with thank you! I have learned so much from you and the others on this board. If it is merely a question of feeling embarrassed or not wanting to brag then please continue to post your monthly returns and cumulative annual returns in percentages. Let me explain why I feel it is so important.

First, this board is about investing in a different way. Numbers matter. I wouldn’t buy into a fund or a service if they told me they were doing “real good”. I want to know exactly how good as a number, and how that compares to my number. I’m not going to change my investing style or try to learn from folks who give me a bunch of subjective adjectives to describe to me how they are doing. “Saul’s doing extremely well, Bear’s doing really well etc. etc.” What the heck does that mean? And then when someone throws out a number once in a while like “I was up 110% last year” everyone will cry BS. Posting your results monthly and seeing that others do the same with similar results is what gives all the wonderful discussion here legitimacy. As a lurker and learner, it also gives me context to compare how the changes I am making and my preferred style stack up to what others are doing.

I was up 58% in 2017 and I’m up 11% in 2018. If you all hadn’t posted your returns, I wouldn’t have made changes that made that possible. Please continue, and thanks again!


Hi guys, I ‘m sorry. I didn’t mean to make anyone think that I was going to quit giving exact portfolio figures because I was upset at something that someone had said, or might say, or anything like that. I thought I was clear about the reason but I guess I wasn’t. I just thought it was plain SILLY to be up 41% in less than three months (as I was at the time). As Bear aptly said in his monthly review, “I would have been happy just to go sideways during this turmoil. Instead, I have been up as much as 40% [during the month]. That is I-N-S-A-N-I-T-Y.” … I (Saul) felt the same way. It was plain embarrassing to be up that much.

Think of it this way: Last year was an incredible year in which I was up 97% at the end of November and, after a pull back, I finished up 84.2% for the year. Last year at the end of March I was up 20.4%. So, that 40-41% that Bear and I had before the pull-back (and I think I remember Heart MD mentioning the same numbers approximately), was a rise at DOUBLE last year’s rate. That was CRAZY!

Austin (CMFAleeb) wrote I don’t think he’s going to stop posting updates – just % results.
He was correct, that was what I had in mind, but I can see that there is a lot of enthusiasm for me to keep posting my actual portfolio results. I will therefore keep posting all my results and portfolio contents and changes. I really appreciate the outpouring of encouragement from all of you.

Thanks so much!



Keep up the good work Saul. I’m up about 44.3% so far this year. Prior to the little tech correction we had, I peaked at being up over 70% for the year which is insane. Considering adding to Okta, but haven’t had much time to read about them yet.

Take care,

You know, not posting results may be a good idea.

It forces lazy people like myself to read and put your positions in spreadsheet and conpare your moves to mine.

Just a thought.


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I don’t think that you have any idea of how many people you have touched and helped with your selfless giving of your time and intellect. You are changing lives for the better. At the end of the I can’t think of a better legacy. You have a talent. Thanks for sharing and being the person you are.



That is I-N-S-A-N-I-T-Y.” … I (Saul) felt the same way. It was plain embarrassing to be up that much.

Isn’t that what happens at market tops…insanity?

Wish you hadn’t used that word ;(


I will therefore keep posting all my results and portfolio contents and changes. I really appreciate the outpouring of encouragement from all of you.

Breathes sigh of relief! :slight_smile:

Thanks Saul, you are the best.


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