MY PORTFOLIO AT THE END OF MAR 2022
Here’s the summary of my portfolio at the end of March 2022. As usual, for my own convenience, I calculate it at the last weekend of the month. Monday through Thursday will carry over into April. If you prefer you can just think of it as a four week summary.
Staying invested has been a winning plan for me. It’s enough work to find and choose great companies without also having to guess getting out and getting back in, trying to time the market. (You have to be right on both decisions!) You have to learn to live with these ups and downs. Trying to guess what the market is going to do is crazy-making, no matter what the market timers tell you.
MY RESULTS MONTH BY MONTH FOR 2022
A week ago last Monday, a week and four days ago my portfolio hit a horrendous bottom at 53.7% of where it started the year. It was down 46.3% ytd!
However, by the end of that very week it closed at 71.5% of where it started the year, down 28.5% ytd! It had risen by a third, 33.1%, in four days! (71.5/53.7 = 1.331 which is a rise of 33.1%).
This week it bounced up and down roughly around the same level, and closed at 71.0%, down 29.0% ytd. Very strange in a way.
Here’s a table of the monthly year-to-date progress of my portfolio for 2022.
**End of Jan -28.9%** **End of Feb -26.6%** **End of Mar -29.0%**
As you can see it is still about where it was at the end of January.
I just looked at Exponential Dave’s excellent End of March write-up and was struck by the similarity of our results. He reported:
__*End of Jan -24%*__ __*End of Feb -28%*__ __*Current -29%*__
Couldn’t really be closer.
And he reported:
2020 Performance: up 225%
2021 Performance: up 30%
Cumulative Performance 1/1/2020 - 3/23/2022: up 205%
As he reminded you, that was just over three times what he started with in Jan of 2020..
2020 Performance: up 233%
2021 Performance: up 40%
Cumulative Performance 1/1/2020 - 3/23/2022: up 230%
If you had had any doubt that what I have been reporting was possible, there you are. We both have more than tripled in a year and three months, and he was right in the same ballpark as me.
And guess what? Here’s what Exponential Dave wrote about March:
If you look from February to March, it looks like my portfolio was pretty steady, ending February at down 28% and edging downwards to down 29% in March. In reality… March was nothing short of violent! In fact, on March 15, I was down 47% for the year. So effectively, if I had started the year with $100, I would have only been left with $53, and now, at a 30% loss, I am back up to $70. Although I am still down a lot, going from $53 to $70 is actually about a 32% gain. Not bad!
It’s pretty clear that our results have mirrowed each other. We do have the same seven companies (in different order,of course), and he has two smaller positions at the bottom of his portfolio.
HOW DID THE INDEXES DO?
Here are the results year to date:
The S&P 500 (Large Cap)
Closed down 4.7% YTD. (It started the year at 4766 and is now at 4543).
The Russell 2000 (Small and Mid Cap)
Closed down 7.4% YTD. (It started the year at 2245 and is now at 2078).
The IJS ETF (The S&P 600 of Small Cap Value stocks)
Closed down 1.1% YTD. (It started the year at 104.5 and is now at 103.4)
The Dow (Very Large Cap)
Closed down 4.1% YTD. (It started the year at 36338 and is now at 34861).
The Nasdaq (Tech)
Closed down 9.4% (It started the year at 15645 and is now at 14169
These five indexes averaged down 5.3% ytd.
None of my companies will be reporting in April, as far as I know.
LAST THREE MONTHS REVIEW
January continued the sell-off of the most successful companies in the market. My portfolio was relatively quiet. I continued to taper my smallest position (in Crowdstrike), and then finally sold out of it , and I sold out of my smallish position in Upstart, and a week later bought back a little position. I wrote up these decisions on the board so I won’t elaborate further.
February brought some MAJOR changes.. I took a new position in Bill after it announced earnings, and decided that I wanted a full position. I built it up into a 13% position, which has grown by itself to a 16% position in 2nd place (behind Datadog), as other stock prices were falling and it wasn’t.
I also built my Cloudflare position from an 8.6% position at the end of Jan, to a 12.5% position now. Granted, that’s my smallest position, but it’s a lot bigger than it was. I added lots to Monday in the mid $130’s when it sold off irrationally after earnings (it’s already up $20 in less than a week from those purchases), and added to Zscaler, most at $213.20 when it did the same. I also added little bits to Sentinel and Snowflake when I had a chance, and trimmed some bits from DataDog when it got too much over 20% of my portfolio. (Don’t worry, it’s still at 20.9% in spite of the trims).
Where did I get the money for all those purchases? Well I sold out of my little Upstart position and never looked back. I felt a sense of relief. I know it will probably do quite well, but I just couldn’t take the total uncertainty each quarter, and simply not knowing what the f— was going on in a complicated, complicated, business. It’s just me. I had companies that I could be much more confident in. I also sold probably half of my little Amplitude position before earnings, for money to pay for Bill, and sold the rest after earnings. It’s gone. As I said for Upstart, it may do very well, but I had companies that I could be much more confident in. And finally, I sold out of ZoomInfo after earnings to build up my Bill and add to Monday, Zscaler, Cloudflare, Sentinel, and Snowflake. No special reason to sell ZoomInfo except that in times of trouble I like to be in my highest confidence positions, and in a smaller number of them. It’s another that may do just fine, but… well you know the song.
March While March was far from quiet as far as a sharp selloff in the first half of the month, and a sharp bounce back in the next two weeks, it was another quiet month as far as my portfolio. I still have the same high confidence seven positions and haven’t added any or sold out of any and they are now, all seven, in the same price range. I did trim Datadog, which was down less than the others, for cash to bring the others into line.
Please remember that I could change my mind about any one or more of my positions tomorrow, depending on new information or other factors, and I may not do another update until the end of next month. Make your own decisions. Don’t just follow mine. I make mistakes at times! Guaranteed!
HOW THE INDIVIDUAL STOCKS HAVE DONE YTD
Here’s how my current positions have done so far in 2022. I’ve arranged them in order of percentage gain. As always, 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. I tend to keep buying as the price rises, so my average price is almost always higher than my starting price.
Please remember that these starting prices are from the beginning of 2022, and NOT from when I originally bought them if I bought them in earlier years. (For instance, I bought Cloudflare in July of 2020 at $34.97, but it’s listed below as starting at $131.50, because that was its price at the start of this year)
**Bill from 226.25 to 219.57 down 3.0% New in Feb** **Cloudflare from 131.50 to 119.63 down 9.0%** **DataDog from 178.11 to 146.84 down 17.6%** **Sentinel from 50.49 to 40.86 down 19.1%** **Zscaler from 321.33 to 230.32 down 28.3%** **Snowflake from 338.75 to 219.81 down 35.1%** **Monday from 308.72 to 150.45 down 51.3%**
All in all, that’s not a pretty picture, but as you can see, Monday and Snowflake are pulling the portfolio down, and are down more percentage points than the other five put together, having sold off in spite of excellent results.
I still have seven positions which is a small but still comfortable number for me. Here they are in order of position size, and bunched by size groups. (I always say that but there is only one group now. )
**.** **Datadog 17.2%** **Bill 17.1%** **Snowflake 15.1%** **Cloudflare 14.5%** **Sentinel 14.3%** **Zscaler 13.7%** **Monday 13.3%**
Here’s how they stand today, but please notice that the seven of them are so close together in position size that some of them change places almost daily based on one day’s differences. Also notice that in February the top and bottom positions were a large-ish 8.4% apart, but they are now only 3.9% apart
I’ll give you a little capsule of the positions before moving on to the extensive company reviews:
DataDog is a high confidence position, as are all seven of my positions. It’s dominant in its field and seems to have little if any effective competition left. It had been in first place for a long time but recently has been passed by Bill
Bill was a new postion in February. It seems dominant in its field and it had enormous results which overcame my initial hesitation, so I decided to jump in even though the price had significantly risen.
Snowflake. I took my current position in November and December, and added to it in Jan and Feb. It’s still highly valued, though not nearly as much as a year ago.
Monday fell a large percent from its high during the pullback, apparently due to lock-up expiration coinciding with the sell-off. It then announced excellent results in February but sold off mightily again over a metric or two that apparently didn’t suit the people who operate the trading bots. I added a lot in late February when it sold off. It was extensively discussed on the board.
SentinelOne is a fairly new position that I took in December after it announced its extraordinary Oct quarter results. It’s a smallish security company growing at enormous rates. They announced Jan quarter results in March and revenue was “only” up 119%.
Zscaler is the big daddy of the Zero Trust cloud-native security companies. It grew at 63% in its most recent quarter, its highest rate of growth in several years, so it sold off of course. I added to my position.
Cloudflare had been weak, falling more than 60% from its all time high during the decline, with no bad news except its high valuation (which was really very high). It keeps bouncing along at a very consistent 50% to 53% yoy revenue growth (moving up slightly in recent quarters, and churns out new products like mad. I suspect it may start accelerating that growth.
Please note that when I discuss company results, I almost always use the adjusted values that the companies give. I’m going to discuss them in alphabetical order.
Bill.com (BILL) is a leading provider of cloud-based software that simplifies, digitizes, and automates complex back-office financial operations for small and midsize businesses (SMBs). It also has begun collecting transaction fees on helping the customer companies pay and collect bills. It has made two small acquisitions which have jet propelled it. I was afraid of it at first because it sounded like a complicated story, and tied to the economy, but their last quarter results were so incredible that I cast doubts aside. Here’s enough to get you interested
Results of Dec quarter
EPS of zero cents beat by 18 cents
Revenue of $156 million beat by $25 million
Total Revenue of 156.5 million, up 190% yoy!!!
Core Revenue of $155.5 million up 197% yoy!!! (Consists of Subscription and Transaction Revenues)
Organic Core Revenue was $97 million, up 85% yoy
Subscription fees were $49 million, up a measly 85%. Subscription fees are becoming a smaller and smaller part of their revenue as Transaction fees are twice as large and growing more than twice as fast.
Organic subscription fees were $40 million, up 51%.
Transaction fees were $106 million, up 313%!!!
Organic transaction fees were $57 million, up 121%!!!
Divvy spend management revenue was up 188%!!!
There’s plenty more of course but that should get you interested and enable you to see why I built up my position so fast
**Cloudflare (NET)**had been a star of my portfolio, almost sextupling, at one point, since I first bought it in 2020. I had been saying that I didn’t understand why it was going up like that. It’s growing revenue steadily at 50% or so, which is certainly a great rate of revenue growth, but it is slower growth than my other positions.
So what was pushing the price up? I suspect that there were two issues.
First was that they were putting out new products and enhancements to older products at a rate that has rarely been seen before, and the thesis is that this will enable high growth to continue for many more years than currently expected.
The second issue was a perception that this company is on its way to both become a fourth cloud (along with AWS, Azure, and Google). . The people pushing the stock up, with what must have been massive buys, obviously believed it.
Well in December the price rise finally ended, in conjunction with the pull back in all the high growth software companies, and the stock price fell even considerably more than the rest of my portfolio (except Upstart). It remains a great company and I have no plans to exit it. It fell a lot more in January, down to an unbelievable $80. I bought considerable amounts, mostly in February, from $86 to $116 on the way back up. It finished this week at $119.63, which is up roughly 50% from its $80 low close.
DataDog posted outstanding December quarter results.
Revenue growth was up 84% and accelerated from up 75% in the September quarter, and from up 67% in the June quarter, which in turn had accelerated from up 51% in the March quarter.
Operating cash flow was $116 million, up from $67 million sequentially, and up from $24 million a year ago.
Free cash flow was $107 million, up from $17 million a year ago.
NRR was over 130% for the 18th quarter in a row
They are doing just fine.
Announced FedRAMP Authorization at the moderate impact level.
Announced a global strategic partnership with AWS.
Announced the launch of Sensitive Data Scanner which provides their customers with an easy way to detect, classify and protect sensitive data found in their application logs.
Achieved the AWS Graviton Ready designation.
Achieved AWS Migration & Modernization Competency status for AWS Partners.
Announced integration with Confluent. Users running Confluent Cloud, can now use Datadog to monitor their Confluent Cloud resources alongside the rest of their technology stack.
Monday AGAIN had an excellent quarter. They help people work together and cooperate, and yes, I know that there are lots of other companies in that field, but none that I know of growing revenue at 91%.
The number of enterprise customers over $50,000 was 793, up 200% from 264 a year ago. That’s not a misprint! … 793 up from 264 are the real numbers. I personally have never seen any company grow enterprise customers at 200% yoy! And it’s not a fluke, they’ve been growing those cusotomers at 200% or more for at least the last eight quarters.
NRR for customers with more than 10 employees was 135%, up from 130% in Sept, which in turn was up from 125% in June and 121% in March.
Adjusted gross margins topped 90%.
They seem to be rapidly moving towards profitabilty with Adj Operating Margins coming in at minus 10%, greatly improved from minus 47% a year ago.
On this glorious report they dropped from $195 to $128, a 34% drop at the bottom !? Can you believe it! As I said, I bought all I could at about $136 average.
There’s lots more good stuff, but I’ll let you research the rest.
SentinelOne Well there have been so many posts on Sentinel that I won’t go into great detail, but merely say that they had an excellent quarter, even if they didn’t duplicate the absolute blowout of the October quarter. Here are some of the numbers from the most recent quarter:
Revenue was $66 million, up 119% from $30 million yoy
• Revenue growth progress for the last seven quarters has been yoy growth of 96%, 103%, 97%, 108%, 121%, 127%, and now 119%. The most recent 119% was accelerating from 97% a year ago. The Jan quarter seems to be lower growth than the October or April quarter. We shall see.
• Annualized recurring revenue (ARR) was up 123% to $292 million from $131 million a year ago.
• Total customer count grew more than 70% yoy from 3,900 to over 6,700 customers, adding 700 this quarter.
• Customers with ARR over $100K grew 137% yoy to 520 from 219 a year ago. They added 104 sequentially while a year ago they only added 46.
• Dollar-based net revenue retention rate was 129%, up from 117% a year ago.
• Adj gross margin was 66%, up from 54% a year ago
• Adj operating margin was minus 66% of revenue, improved from minus 104% a year ago. Not only that but the last four quarters the Adj op margin has been -127%, -98%, -69%, and -66. Clearly improving.
• Free Cash Flow Margins went from minus 86% to minus 11% yoy, and from minus 38% to minus 11% sequentially
• Cash was $1.7 billion so they are clearly not going to run out of money
They had multiple significant announcements in Jan and Feb:
First, they increased their integration and partnership with AWS (Amazon Web Services).
Second, they announced that KPMG utilizes SentinelOne for cyber incident response services. “KPMG’s Cyber Response Services team, which has been involved in many of the most high-profile breaches worldwide, will use Sentinel’s Singularity XDR platform to accelerate investigations and response to cyberattacks”.
Thirdly, Barracuda Networks, who protects over 200,000 global customers, “selected Sentinel’s Singularity XDR platform to help MSPs prevent, detect, and autonomously respond to threats at machine speed with AI-powered XDR”.
Fourthly, they integrated with Mimecast to improve security for emails (as far as I can tell)
Fifthly, they integrated with Zscaler, simplifying XDR and Zero Trust adoption
Sixth, they launched DataSet, a “revolutionary” live enterprise data platform, which leverages cybersecurity data expertise to help enterprises ingest, store, and understand real time data at scale – beyond cybersecurity use cases.
Seventh, their new modules are growing “phenomenally” (over 10x yoy, although granted, they are still small).
Eighth, Mandiant selected Sentinel as a global go-to-market partner. Mandiant is one of the world’s leading Incident Response (IR) firms “and this strategic alliance brings the best of both worlds to our joint customers – top incident response consultants leveraging the best-in-class XDR platform.
Ninth, they acquired Attiva in March.
Snowflake Had excellent results but there were things you had to understand. Here are some of the results:
Total revenue of $384 million, up 101.5%, but up only 15% sequentially. (How can you really be dissatisfied with a company growing revenue over 100%)
Product revenue of $360 million, up 102%
Adj Prod Revenue Gross Margin was 75%
RPO of $2.6 billion, up 99% yoy. This is 7.2 TIMES the current quarterly product revenue!!!
Total customers were 5944
Customers over $1 million were 184, up 139% yoy from 77, and up 24% sequentially from 148.
Net revenue retention rate of 178% !!! (actually accelerating both yoy and sequentially).
Op Margin was 5%. They hit positive 2.5% last quarter for the first time.
Op Cash Flow was $80 million
Op Cash Flow Margin was 21% of revenue
Adj Free Cash Flow was $102 million or 27% of Revenue !!! Just look at those numbers.
They did say that they improved their computing so that their customers can do more analysis in the same time and they are passing that gain on to their customers (to encourage them to move more and more data to Snowflake). This will slightly hold back gains for the coming year, but increase them for future years
In Jan they announced support for ITAR (Gov’t) Compliance on Microsoft Azure Government and on AWS GovCloud. I’m not sure what it means but it has to be good news.
They also announced that they maintained a perfect recommend score for the fifth consecutive year. 100% of Snowflake customer survey participants said they would recommend Snowflake to other organizations.
“It is best in class for virtually all product measures including scalability, usability, ease of installation, ease of administration, customization, and extensibility, and ease of upgrade/migration to new version. It maintains a perfect Recommend score,” said Howard Dresner, founder and CRO at Dresner Advisory Services.
I can best summarize with a great long excerpt from a post from Poleeko after Snow sold off following this earnings report :
“I parsed through the actual KPIs for the company, listened to the call, reviewed the financials, and tried to decipher and deduce the actual future performance of the company by looking at their other key “future” growth predictors and indicators to see how they might actually do going forward. Is the company falling apart? Are there red flags? Fraud? Losing market share? Sitting on their laurels? Proven slow down (not just sandbagged guidance)? Customers running away. Lower NRR?
No. No. No. No. No. No & No. Folks, you are free to disagree, but I feel SNOW is still a phenomenal company, growing faster than almost any other company out there at this size, with an amazing management team, expansive greenfield pastures to keep growing, a relatively strong moat, incredible growth and impressive FCF (and reaching their FCF goals much earlier than they guided).
Are they expensive…dang right and should be! But this is definitely not a company that I feel deserves a 30% stock price haircut (after hours today). Yes, of course, it is eventually a certainty that a company this size will start to slow down from a blistering 106% growth shown this year, but its also possible and even probable that they can and will continue to surprise us over the next few quarters and years when I consider the exponential explosion of information, data analysis, and data sharing, along with today’s extremely conservative guidance that deserves little credence.”
I see yet another great quarter and no detrimental landmines at this time to their business model. Strong FCF (and earlier than they predicted), the largest bookings in Q4 of any quarter EVER (so much so that Slootman had to warn us on the call that FCF in Q1 would be huge), seven new $30m deals signed in the quarter, NRR of 178%, the purchase of Streamlit this quarter (1.5m new apps already build on SNOW’s platform), 99% growth in RPOs, the announcement of a KPMG partnership, additional $1.2b in bookings primarily from AWS partnership and Azure co-sellers. Then there is international expansion into India, Brazil, Asia & Europe as they go after the Global 2000 largest companies, the supreme confidence expressed by Frank Slootman…and…and…and… I saw no reason to panic sell my investment in the company after hours today. I strive to invest long term with an eye towards holding for 1-5 years or more in great companies that are leading the digital transformation.”
Thank you Poleeko!
Zscaler is the big daddy of the Zero Trust cloud-native security companies. It had excellent Jan quarter results, at the end of February. It grew revenue at 63% its highest rate of growth in years, so it sold off of course. I added to my position. Let me point out that they have enormous tailwinds with this war in the Ukraine and our government warning of the the possibility of Russian cyber attacks.
Remaining Performance Obligations (RPO) were $1.95 billion, which for them also means that they already have 7.6 TIMES this quarter’s revenue already on the books for the future. A worry seemed to be that their sequential growth was light, but Muji pointed out that it’s always light this quarter:
“But this is the 3rd year in a row that Q2 has been the lightest on QoQ growth. Mgmt has always pointed out how Q1 is seasonally lightest for bookings, having had 25% sequential drops every year. This then leads Q2 to be the seasonally weakest QoQ for revenue growth. “
SOME THOUGHTS ABOUT THE GROWTH OF OUR BOARD
We started our current investing spurt in the beginning of 2017, about five years ago.
When you sign on to the board you’ll see in the middle of the screen a little icon that says “<< 7 days >>” click on it down to where it says “365 days”, and go back 5 years (5 clicks). Back then our board was a twentieth of the size it is now, at most. The first page I came to had a total of 45 recs on an entire page of 20 posts, or an average of a little over two recs per post. A post with 25 recs was unusual, 50 was uncommon, and 100 was really rare. We also had many fewer posts each day.
As an example, until just a few months ago we had NEVER, EVER, had a post with more recs than the high 300’s. Yet earlier this month I had a ordinary post, just a post about what I had done about a stock, that had over 660 recs. That is crazy!
Our success has flooded us with new posters and readers (that’s you, most likely), so you can see we have to limit our posts to meaningful ones to avoid flooding the board and destroying it. I may at times seem arbitrary in deleting posts but that’s why it’s necessary.
Thanks for your cooperation
Let me remind you first, that I have NO IDEA what our stocks will do next month. I’m terrible on predictions. But I know that the businesses of our companies will do just fine for the most part.
I feel that my portfolio is made up of a bunch of great companies. But that’s just my opinion, and I can’t say often enough that I’m not a techie and I don’t really understand what most of them actually do at all ! I just know what great results look like. I figure that if their customers clearly like them and keep buying their products in hugely increasing amounts, they must have something going for them and, as I’ve often said, I follow the money, the results. And I listen to smart people about the prospects of these companies.
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. Sometimes it’s after months, and sometimes after 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 try to just follow what I’m doing without making up your own mind about a stock. First of all, you may have a completely different financial picture than I have. Different income, different assets, different debts, different expenses, different financial and family responsibilities, etc.
Besides, 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 sometimes make mistakes, 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 the Knowledgebase, which is a compilation of my “words of wisdom”, and definitely worth reading (a couple of times) if you haven’t yet.
A link to the Knowledgebase is at the top of the Announcements panel that is on the right side of every page on this board.
For some additions to the Knowledgebase, bringing it up to date, I’d advise reading several other posts linked to on the panel, especially:
How I Pick a Company to Invest In,
Why My Investing Criteria Have Changed,
Why It Really is Different.
Illogical Investing Fallacies
I hope this has been helpful.