MY PORTFOLIO AT THE END OF MAY 2022
As usual, I am figuring from the last weekend of the month. Monday and Tuesday will follow over into June.
This was another horrible, horrible month. It has been very painful for me, and I’m sure for you too. I can’t remember any other decline as bad as this one as long as I’ve been investing, except for 2008. All of my main companies, Cloudflare, Bill, and Datadog, that reported early this month had excellent results, but it didn’t do them any good, they went down with everything else. My portfolio has now hit the same bottom (within a range of 0.9% from highest to lowest) on Weds, May 11, Weds, May 18, and this Tues, May 24, and bounced each time. That may mean something or it may mean nothing at all. The most encouraging sign I can see is that Zscaler reported their results and actually rose a bunch the day after (this Friday).
I have learned long ago that sticking with great companies wins out in the end, and beats market timing (looking at a long term chart of the S&P you will see that the horrendous declines of the pastlook like tiny dips on an ever-rising graph), but living through this decine is awful.
I don’t know when it will end, but I know that our companies have secure recurring revenue, and that they are growing very rapidly, at rates almost never before seen for companies at their scale, and considering this really makes them seem way oversold to me. But that’s just my opinion.
MY RESULTS MONTH BY MONTH FOR 2022
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%**
**End of Apr -43.6%**
**End of May -59.7%**
Just look at that! The portfolio down almost 60% since the beginning of the year. That’s just awful! If you are wondering how I can be so calm about it, look at the next section (Cumulative Results).
CUMULATIVE RESULTS
For those wondering about the long term results of investing this way.
**2017 – up 84.2%**
**2018 – up 71.4%**
**2019 – up 28.4%**
**2020 – up 233.3%**
**2021 – up 39.6%**
**2022 – down 59.7% first five months**
Cumulative – up 660.1%
Okay, in spite of the worst sell off you could imagine in our stocks, as bad as 2008 when the economy was really failing, banks were going bankrupt, etc…
(drum rolls)… my portfolio now has 760% of what I started with) five years and five months ago. In the same time the S&P 500 has risen 85.0%. That’s up 85% compared to up 660%! Figure it out for yourself: which method gets you the best results?
HOW DID THE INDEXES DO?
Here are the results year to date:
The S&P 500 (Large Cap)
Closed down 12.8% YTD. (It started the year at 4766 and is now at 4158).
The Russell 2000 (Small and Mid Cap)
Closed down 15.9% YTD. (It started the year at 2245 and is now at 1888).
The IJS ETF (The S&P 600 of Small Cap Value stocks)
Closed down 5.3% YTD. (It started the year at 104.5 and is now at 99.0)
The Dow (Very Large Cap)
Closed down 8.6% YTD. (It started the year at 36338 and is now at 33214).
The Nasdaq (Tech)
Closed down 22.5% (It started the year at 15645 and is now at 12131
These five indexes averaged down 13.0% ytd.
EARNINGS SEASON
Crowdstrike and Sentinel will be reporting near the beginning of June
LAST THREE MONTHS REVIEW
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 had the same high confidence seven positions and hadn’t added any new ones or sold out of any, and at the end of the month they were 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.
April was an awful month in the market, and I made some changes in my portfolio as well. I took back a 2.3% position in Crowdstrike, feeling it had a huge tailwind with all the worries about hacking. I also took a 7.2% position in MongoDB, feeling that Atlas was finally coming into its own and revenue growth would continue to rise. I took a 1% position in Upstart, but couldn’t manage to hold on to it, feeling I had no way to predict what the numbers would be, which was so completely different from my other positions. It may do just wonderfully, and I hope it does for all the board members who are still in it, but after a couple of weeks I sold it back to add to Mongo. I trimmed more of Monday than anything else to buy the Mongo, with probably Snowflake in 2nd place, but these are still 9.4% and 10.8% positions. I probably trimmed the Monday for cash because most of my other companies are dominant in their fields but Monday, although growing very fast, has lots of would-be peers.
May. I still have the positions in Crowd and Mongo that I took in April, and the size of my Crowd position has grown quite a bit. I sold out of my Monday a week before earnings, but now have taken back a small piece, which is too small (less than 2%) to really call it a “position.” In other words, I still have eight of the nine positions I had at the end of April, and if you want to call my small piece of Monday a position too, I still have all nine.
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)
**Monday from 107.81 to 115.01 up 6.7% New in May**
**Crowd from 231.39 to 166.82 down 27.9% New in Apr**
**Mongo from 387.16 to 250.06 down 35.4% New in Apr**
**Bill from 226.25 to 125.30 down 44.6% New in Feb**
**DataDog from 178.11 to 98.07 down 44.9%**
**Sentinel from 50.49 to 26.97 down 46.6%**
**Zscaler from 321.33 to 160.00 down 50.2%**
**Cloudflare from 131.50 to 58.91 down 55.2%**
**Snowflake from 338.75 to 129.91 down 61.7%**
All in all, it’s a really ugly picture.
POSITION SIZES
I now have eight positions, plus a very small one in Monday, which is a comfortable number for me. Here they are in order of position size, and bunched by size groups.
**.**
**Datadog 18.3%**
**Bill 16.3%**
**Sentinel 15.1%**
**Snowflake 14.3%**
**Zscaler 13.5%**
**Cloudflare 12.9%**
**Crowdstrike 9.7%**
**Mongo 6.5%**
**Monday 1.9%**
While I sold out of Monday and used most of the money to build up Crowdstrike, I’m struck by how unchanged the rest of my positions are.
COMPANY REVIEWS
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.
Instead of giving you a deluge of information about each company the way I have done in previous monthly summaries, perhaps drowning you in details, I’m going to try a different format, a summary of how I think about each company. I will give a little idea about what I think about each company and what I like and don’t like, and what I MAY do about each position, but DON’T just follow me. Make your own decisions. I may change my mind tomorrow and probably not mention it for a month. And besides, I don’t understand anything about the tech.
I’d be glad to get feedback about the new format, but off-board please.
Comments about the companies, and agreements or disagreements with what I think about them, are of course welcome on the board if you include some reasons and it’s not just a one-liner.
Finally, a little thought game: You may have noticed that these companies have had nothing wrong with their business outcomes, just with their stock prices. I will put down how much each company’s stock is off from its November high. Let’s assume each of them will probably eventually (but I don’t know when), return to that all time high price, just by growing into it if nothing else. To put it in perspective, a company currently down 75% from its high will have quadrupled your money when it arrives back there, and a company down 66% will have tripled it. Your happy thought for the day. 
Bill
Growing like mad.
Made great acquisitions which have been jet propelling it.
80% gross margins
Not profitable but just below breakeven and spending more to get more customers
FCF positive $23 million, FCF margin was 14%
Down 64% from its high of approx $350
NRR was 125% at Jun 2021 fiscal year
Strong guidance and very enthusiastic
Alliance with CPA.com and with Bank of America, and with 85% of top 100 CPA firms
It seems like an excellent company, and I was thinking of just holding as is, but it’s not pure SaaS, and may be hit more in a recession, so I trimmed my 17.3% position down to 16.3% .
Cloudflare
Solid company growing at 54%.
79% gross margins
Not really profitable or desiring to be but right above breakeven. Idealistic about saving the cloud.
FCF quite negative last quarter but they say it was largely because of a unique tax payment
Down 73% from its high of approx $222, but still not cheap. However, to put it in perspective, a return to that high (which will probably eventually happen) will quadruple your money.
Higher capex than others because it has to build and service all its world-wide endpoints, etc
Putting out new products like mad
Moving rapidly into security and competing with ZS and PaloAlto
Moving rapidly into data storage, processing, and distribution (I don’t understand the tech).
Net Retention Rate (NRR) 127% and rising
Big acquisition for email security
Very enthusiastic, and doing what it does very, very, well
So it’s a very mixed picture: growing slower than others but very steady, high valuation, higher capex than others, no desire to be profitable any time soon, negative FCF, Net Retention Rate steadily rising, moving into new fields with new products, etc, etc.
It’s a 13% position and I could trim just a little to add to smaller positions, but I have no current plans to do so.
Crowdstrike
Growing at 63% and probably slowing but dominant in its field and quite profitable.
Down only 45% from its high of approx $301, but that’s partly because it didn’t go up like the others in 2021.
Op cash flow margin is 37%
Free cash flow margin is 29%
Net profit margin is positive 16%
They are thus VERY profitable, and increasingly so.
New products for new fields.
Got German Federal Office for Information Security Approval
Enthusiastic
It’s grown to a 9.7% position. Hold. Don’t add more.
Datadog
Grew at 84% and 83% the last two quarters
Gross margins 80%
Very profitable: trailing EPS is 66 cents, with 24 cents last quarter.
Adj Op margin was 23%!
Op Cash Flow Margin was 40%!
FCF Margin was 33% and 36%! last two quarters
Dominant in its field
Down 49% from its Nov high of approx $200
NRR over 130
Moving into security in a big way and succesfully
Analysts called results stupendus, terrific. CEO very enthused.
An 18.3% position and at first I thought I should reduce it, but after this review I decided I’ll hold.
Monday
Another mixed picture.
Down about 74% from high of approx $450, but that was a one-day spike. Really more like down 70%, which is still a lot.
Enormous revenue growth rate of 91% was up from 85% growth a year ago, but actually down from 95% yoy growth in the previous quarter.
Sequential revenue growth of 14% was excellent for the first quarter, which seems to be seasonally low for all our companies.
London/European office, just opened in November, is now moved to a much larger office to accommodate rapidly increasing business.
They are spending to get every customer they can, and they thus still have negative operating income and net income.
Net Retention Rate is fine at 135% for companies with over 10 seats, and 150% for companies with spend of over $50k. (Monday often lands with just one or two teams in a customer and expand from there).
Growing number of customers over $50k very rapidly (by 200% yoy)!
Op cash flow and FCF both turned positive last quarter.
Expectations are low because they seem less mission critical than our other companies in a recession.
They have a lower valuation than our other companies, but they do have lots of competitors, and the other companies in the field have never succeeded in turning sales into profitability.
My position is just 1.9% and I’m slowly adding to it.
Mongo
Growing revenue at 55% and accelerating every quarter because of Atlas growing much faster and now almost 60% of revenue
Gross margins were 74%
Had been “open source, “ which I considered a negative as an investor, but is less open source now that it had to patent/copyright to stop AWS from copying it, and now that Atlas is growing so fast
Almost profitable with Adj Net Inc -2% up from -12%
Op Cash Flow of $22 million
FCF of $17 million, up from a loss of $21 million a year ago. Only 6% FCF margin but on its way!
Dominant in their field.
Down 58% from its November high of approx $592.
I don’t have their NRR but Atlas NRR is probably very high (150 or so)
It’s a 6.5% position and I should hold it as is.
Sentinel
Mixed picture:
ARR up 123% yoy
Growing revenue at about 120%… BUT
Gross margins are lower than our other companies at just 63% and
Op margins are very negative at -66% last quarter (improved from -104%, but still).
FCF margins improved to -11% from -84% a year ago, but could be just because big customers are paying in advance
NRR of 129%, improved from 117% a year ago.
Stock is down 66% from its high of approx $79.
New alliances and acquisitions
Growing customers over $100k by roughly 140% yoy, and total customers by 70% (really growing fast)
Great tailwind of worries about breaches with the Ukraine war
Enthusiastic guidance.
It’s a 15.1% position, but it maybe shouldn’t be that large with such a mixed picture. I may trim it but I have no current plans to do so.
Snowflake
Down 65% from its high of appox $408
Another mixed picture:
Gross margin is 75%.
Dominant in its field but potential competitors arising.
Very rapid revenue growth. It was over 100%, but this quarter the growth rate was cut to 85% by allowing faster computing by customers without raising prices. (They told us about this last quarter). Also some minor usage cut back by consumer facing companies.
Very high NRR (in the 170%’s), but that will be coming down too.
Share price and valuation are both way down from their heights. Heck, its share price is down to where Warren Buffet bought it at the IPO, and it has MUCH more revenue, RPO, FCF, etc, now than it did back then .
New partnerships with AWS, Dell, Stripe, etc
Setting up vertical silos for data sharing (healthcare, retail, finance, etc).
Moving into new international markets
Buying back employee RSUs to prevent dilution, which is already under 1% per year.
Very enthusiastic.
Going to become a behemoth of a company, long term. (It already IS becoming a behemoth )
Usage based, so it will be hit more in a recesion than a SaaS company who gets the same subscription revenue come what may.
Overall, it’s quite a positive picture. It’s a 14.3% position. I have no intention of trimming it at present.
Zscaler
Rate of revenue growth accelerated to 63% but has now levelled off at 63% and may start declining.
Definitely profitable. Trailing EPS is 57 cents per share.
Op cash flow was 30% last year. FCF was 21%.
FCF last 12 months was $184 million
Down 57% from high of about $369.
Tailwind of every company’s need for security with all the breaches.
Competes with PaloAlto who is a tough competitor
I have a 13.4% position and I will probably just hold, won’t add or trim, but could lean toward a slight trim.
SOME THOUGHTS ABOUT THE GROWTH OF OUR BOARD
We started our board in the beginning of 2014, more than eight years ago. Until just a few months ago we had NEVER, EVER, had a post with more recs than the high 300’s. Yet earlier this year 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 why 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 done and why it’s necessary.
Thanks for your cooperation
FINISHING UP
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 age, 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.
THE KNOWLEDGEBASE
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.
Saul
