My portfolio at the end of May 2017

My portfolio at the end of May 2017

Here’s the summary of my positions at the end of May. Boy, this is a lot of work to do, to put together, to format, and all the rest. As I usually do, I’m giving my results as of the last weekend of the month (it misses two trading days this month). If you prefer, you can think of it as a four-week summary. 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.

So how did my year start? At the ends of February, March, and April, I wrote that results had been beyond my expectations. At the end of April I thought that this was unlikely to continue, but May was even better.

The indexes that I’ve been tracking against, and that we “should be buying instead of growth stocks” aren’t doing terribly for the first five months of the year:

The S&P 500 is up 7.9% for the year, and up 1.4% for the month. (It started the year at 2239 and is now at 2416)
The Russell 2000 Small Cap Index is up 1.9% for the year, and down 1.3% for the month. (It started the year at 1357 and is now at 1382)
The IJS Small Cap Value ETF, which so excelled in 2016, is in last place, down2.0% for the year, and down 1.6% for the month. (It started the year at 140.0 and is now at 137.2)

These three indexes (that I’ve been tracking against) averaged up 2.6% for the year so far.

My portfolio is up 36.2% for the year so far, rising from up 8.5% at the end of January, from up 13.9% at the end of February, from up 20.4% at the end of March, and from up 26.1% at the end of April. I wrote in my April summary that I was aware that there’s no way this can continue all the way through 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 did).

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%**

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, a week and a half ago, 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 over the past week. A correction will come. They always do. But I don’t know when.

Here’s how my stocks have moved in the five 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.

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


**Shopify** from 42.90 to 90.75, 	**up 111.5%**
**Arista** from 96.80 to 146.45, 	**up  51.3%**
**PayCom** from 45.50 to 65.95, 	**up  44.9%**
**Amazon** from 750 to 996, 	**up  32.8%** 
**Splunk** from 51.15 to 64.30, 	**up  22.0%** 
**LGI Homes** from 28.73 to 32.40, 	**up  12.8%**

**Ubiquiti** from 57.80 to 47.75, 	**down 17.4%**


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


**Kite** I added a tiny position in mid-January at $47.50, 
and it is now at $73.10, so in four and a half months it’s 	**up 53.9%**

**ZioPharm** I added an even more tiny “play-money” 
position in mid-March at $5.88, and it is now at $6.29, 
so in two and a half months it’s                                **up 7.0%** 

**Talend** I started my position in mid-February 
at $26.80. It’s now at 29.87, so in three and a half months
it’s 								**up 11.5%**

**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 
it’s shot up to $28.50. So from my major purchase price, 
in roughly five weeks it’s 			                 **up 28.1%**  

**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 $22.33, so after three months it’s         **up 25.8%** 

**HubSpot**After exiting in January, I re-started a 
position in mid March, at an average price of $62.40. 
It’s now at $70.95, so after three and a half months it’s 	**up 13.7%** 

**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 13.69 so in less 
than a month, this second position is  	                        **up 25.6**

**Matinas BioPharma** is a little company working 
on a new kind of antibiotic for resistant infections. 
Someone brought it to the board, but I truly apologize 
as I’ve forgotten who it was. I took a tiny position 
(0.5%) three weeks ago  at $2.74. It’s now at $3.00 
so in three weeks it’s			                        **up 9.5%**

**The Trade Desk.** I started a small (1%) position 
on Thurs at $51.90. After two days it’s 			**up 0.7%**

**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%**	

Okay, you got an idea why my portfolio is up. 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 6 very small positions. Nevertheless, as you’ll see, my portfolio is still very concentrated, as my eleven real positions make up 93.7% of my portfolio, and average 8.5% each.

On the other hand, my six tiny positions make up just 7.3% of my portfolio in total, (I have about 1.0% 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 other:

Shopify   		17.4%
LGI Homes		11.1%
PayCom			 9.2%
Square			 8.2%
Splunk			 8.1%
Ubiquiti		 7.5%
Arista		         7.3%
Mulesoft	         6.8%
Talend			 6.3%
Hubspot			 6.1%
Amazon			 5.9% 

Let’s start with my two oversized positions (one is a lot more oversized than the other):

Shopify is a company that 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 timmed about 6.7% of my position. Its position size now is 17.4% of my portfolio (which even after the trimming, and the recent small drop in price, is up from 17.2% a month ago, 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 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.

LGI Homes is still in second place at 11.1%. 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 shot up to about $33.95 and it’s now at $32.40. 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 all of 9.7, by the way. I did trim a little bit of it this last week when I needed some cash to buy a starter position in The Trade Desk.

Next are nine large positions running fairly smoothly from roughly 9% down to roughly 6%. Note that they are a lot smaller than the oversized ones, especially than Shopify.

Paycom is now in third place at 9.2%. 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, and the price rose to $57.50 at the end of March, and is $65.95 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, up from sixth, at 8.2% and at a price of $22.33, up 22% from $18.24 in just the month of May. 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 this month 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 software and data products that their merchants seem to love, like
customizable platforms for merchants;
business loans,
instant pay features, and even
Restaurant delivery services (“Caviar”), which is their fastest growing revenue category.
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. Weekly order volume is 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 now in fifth place at 8.1%, 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 a couple of days ago and again crashed after earnings, down to $62.40 where they are now. 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 7.5% 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 $47.75. Their PE is 16. 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 7.3%, down percentage-wise due partly to me trimming somewhat at about $146, and partly because their price hasn’t risen as fast as the whole portfolio this month. 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 are currently at $146.45.

In April the International Trade Commission staff recommended in their favor, and the US Customs reversed itself again, and again allowed importation of Arista’s reworked products, but in May there was a finding against them that they had infringed on two out of six contested Cisco patents. The May 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 results were great, but they weren’t quite as upbeat in this conference call as the last one, perhaps due to having to rework some products again so they won’t infringe on Cisco patents. It
sounded like stress fatigue, and it was that that influenced me to trim a little.

Note that my top seven positions, making up 68.8% (or more than two-thirds) of my portfolio, are still the same top seven, although not in the same order. My Shopify position is obviously too large, being almost double the size of third place, 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:

Mulesoft a recent IPO which I took a position in in March, and quadrupled since, is at 6.75%. 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).

Talend is at 6.3%. Its price is $34.16, nicely up from $29.87 at the end of April. I a little regularly to my position as well. Bear had brought it 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 earlier this month, 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.
Personally, I’ve never heard a CEO say “our win rates remain ridiculously high.” I can’t say I mind it.

Hubspot is at 6.1%, triple its portfolio share of two months ago, so you can tell I’ve been adding to my position. 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.

Amazon is currently at 5.86%. It closed at $925 in April and is now at $996. 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 from 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. Note again that positions 8, 9, 10, and 11 averaged about 6.25%, so there is quite a drop off in size to these really small positions. There are six of them.

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 three together make up 3.5% of my portfolio.

In order the stocks are Kite at 2.0%, ZioPharma at 1.0% 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, and Cellectis, working with Pfizer to develop off-the-shelf CAR-T treatments. In May, I added super tiny little bits to a couple of them.

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, as I described above, starting at $10.90 but adding as it rose (and fell, it’s a high beta stock). It’s now at $13.69. It’s currently just a 2.0% position. I’ll probably keep it this time, but beware, that’s “probably”!

The Trade Desk, which I just took two days ago on Thursday, is a put-it-on-the-radar position. It’s a 1.3% position. As with all these little positions, I can’t guarantee you I’ll keep them.

I took a tiny position early in May in Matinas Biopharma, as I mentioned above. It’s just a 0.5% position.

Stocks I exited this month:

A.O. Smith, a water technology company, was a little 1.0% try-out position at the end of April. I said that it was an atypical position for me and I wasn’t yet sure I’ll stay in it. Well, I decided I was just too worried with their major plant being built in China, and over a third of revenue and growing coming from China. In addition it was an industrial company. It was slow growing. But it had a PE of about 27. So I decided to exit.

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


Saul, as I have told you before, you do a fantastic job of running this board and these monthly posts are a big part of it. I love being able to follow your train of thought throughout the month and then have this thorough recap at the end. I know it is very time consuming, but as you can see by the number of recs, it is much appreciated by many. And by many more who did not give you a rec.

So let’s not leave it unsaid, thank you.



Saul, as I have told you before, you do a fantastic job of running this board and these monthly posts are a big part of it. I love being able to follow your train of thought throughout the month and then have this thorough recap at the end. I know it is very time consuming, but as you can see by the number of recs, it is much appreciated by many. And by many more who did not give you a rec. So let’s not leave it unsaid, thank you.

Thanks Jeb, for your very welcome pat on the back!



Bear pointed out to me that the quarterly results I posted on Splunk were from the previous quarter (January). He was correct. Here are the results of the April quarter (first fiscal quarter and seasonally their lightest):

Total revenues were $242.4 million, up 30% year-over-year.
Adj operating loss was $2.8 million;
Adj operating margin was negative 1.2%.
Adj loss per share was one cent.
Operating cash flow was $41.4 million
Free cash flow of $35.8 million.

Sorry about that, and thanks to Bear for pointing it out.



We are reviewing the transcript of the HUBS confrence call and your write up.

We were looking over the price action and saw the huge dip that occured a year or so ago.

The wife pointed out she would have sold, I pointed out that if she was intimate with the company she would have bought and made a great deal of money.

I think the intimacy is one the secrets to making money.


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Once again a phenomenal write-up and many thanks for all the work you pour into your board.

Just a minor housekeeping note to maybe keep you and others from being confused in the future: Square has recently renamed its software and data product revenue to subscription and services based revenue.

Long SQ
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at


Square has recently renamed its software and data product revenue to subscription and services based revenue.

Thanks Matt, I had changed it on my tables of revenue, but forgot to change it on end of the month write-up.


Saul, We are reviewing the transcript of the HUBS confrence call and your write up. We were looking over the price action and saw the huge dip that occured a year or so ago. The wife pointed out she would have sold, I pointed out that if she was intimate with the company she would have bought and made a great deal of money. I think the intimacy is one the secrets to making money.

Nice observation Qazulight. Certainly familiarity with your company is crucial. I think that’s one of the advantages of only having a manageable number of positions, so that you can follow earnings, news, conference calls, stockholder information decks, and all the rest. You can do that with fifteen stocks or less, but not with fifty.



First, great write-up. You’re doing really well and thanks for the board and your guidance.

The S&P 500 is up 7.9% for the year, and up 1.4% for the month. (It started the year at 2239 and is now at 2416)

Actually, the S&P 500 is up about 8.8% for the year. You should include dividends. A good site for getting this number is:

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?

Obviously, there’s a difference between an Index Fund and a market average. I’ve read reports that most people spend more time matching socks after laundry or planning vacation than they do on their investments. For those people, as Buffet says, buying an Index Fund is probably a very good idea.

Most of us on this board, however, are willing to put the time and effort in, and so it’s right that we compare our results to those of Index Funds - both when we’re doing well and when we’re not doing so well.

. Certainly familiarity with your company is crucial. I think that’s one of the advantages of only having a manageable number of positions, so that you can follow earnings, news, conference calls, stockholder information decks, and all the rest. You can do that with fifteen stocks or less, but not with fifty.

we may differ in methods and approaches, but our goals are the same—

Making money to support our families—

I agree that a limited amount of securities is helpful increasing portfolio overall performance. My wife and I went to many shareholder conferences. Since I focus on small market cap companies there were 3 that my wife and I were the only public investors at, other than the insiders.(All 3 were tiny companies that were bought out within 2 or 3 years at 10 to 20 times our original buy in price) Very educational and extremely profitable. You can get a lot of information when you are the only outside shareholder present at the meeting and you interrupt the CEO in his presentation by saying “Excuse me, but I don’t understand, could you please explain that to me, a little more fully” I found that getting familiar face to face–one on one is a valuable investing tool.

Keep up the good work



Shop has Shopify Pay and Shopify Payment. Do these compete with a business such as Square?

What do you think of Paypal versus Square?

Anyone here talked about MOMO? What do you think of it?


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What do you think of Paypal versus Square?

Hi tj, I don’t use either and don’t have a clue which is better. I do know that Square is growing rapidly, and that the new peripheral services it provides are growing revenue at 100% or more, and I’m content with that.


“Boy, this is a lot of work to do, to put together, to format, and all the rest.”

Saul, I really appreciate all you do for the board. I want to encourage you to only do what seems fitting for you. If it benefits you to do these write up’s monthly, then do so. If it is taking too much effort, consider altering the format. You could just give a brief summary of anything you find significant enough to talk about.

I really appreciate all of the work you do on the quarterly reports, so maybe that is a better place to put in the effort to give all the data. I guess I want you to know that I appreciate it, but I don’t want you to burn out. Maybe save the deep dives for the quarter?

I really feel like I am learning a lot from you and this board. I have been working some more on the numbers for a few of the other companies you follow, and I will put those up soon to see if you see them the same way I am.

Thanks for everything.


Thanks Saul,

These are very helpful. I will look into them.

tom e

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