Here’s the summary of my portfolio at the end of November. As I usually do, for my own convenience I’m figuring it from the last Friday of the month. Monday and Tuesday will carry over into December.
It was a wild month, with earnings reports on seven of my nine companies, and with two of my major positions having huge sell-offs after earnings. I sold out of one immediately and brought the other down to a much saner position size. My high for the year, a week before, had been up 93%. A week ago, after the two stock crashes, I was still up 72% ytd. Big Deal! Not bad if two of your nine companies crash and you are still up 72% on the year.
Then this last week, Monday and Tuesday, we had an indiscrimminate sell-off of all software companies. (We seem to have one or two of these sell-offs every year. The most recent previous one hit bottom in mid-May of this year).
Finally, in Friday’s half-day of trading, everything from one end of the market to the other panicked and the whole market was sharply down because of a new Covid variant. The five market indexes I follow had large one day losses for indexes, and were down an average of 3.0% on a single day! (2.2%, 2.3%, 2.5%, 3.7% and 4.1%),
And, my “risky, overpriced, scary”, stock portfolio, which was sure to go down three times as much as the market in a panic decline, was down how much?… Oops, it was up 0.2% on Friday. It marches to a different drummer.
My portfolio finished November at up 62.1% YTD (or at roughly 162% of where I started the year). Not bad, considering all that went on this month.
It was down 16% from my up 93% high of the year (1.62 divided by 1.93 equals 0.84, equals a 16% drop), and down 11% from October’s close. No big deal, especially when you consider that two of my nine positions had huge sell-offs, and then all of our companies had a sinking spell.
You just have to learn to live with these things. Trying to guess what the market is going to do is crazy-making, no matter what the market timers tell you.
[For a more intuitive way of thinking about that calculation from up 93% to up 62%: you started with 100 eggs, and someone gave you 93 more. You then had 193 eggs. Now 16% of your 193 eggs got broken. You have 162 eggs left.]
For further discussion of what happened in my portfolio during the month, and how I handled all this, see “November” in the section called “LAST THREE MONTHS REVIEW” below.
If you take my portfolio’s results from last year (2020) of up 233% (or 3.33 times what it started with), and multiply those results by this year’s up 62% gain so far, you will see that the portfolio has between quintupled and sextupled in a year and eleven months. (3.33 x 1.621 = 5.40 times what it started with on Jan 1, 2020).
Remember that this was done with no leverage, no options, no margin, no penny stocks, no fancy stuff, just a concentrated portfolio of high growth companies.
That is such a preposterous and ridiculous result that, as I’ve said before, it’s hard for even me to digest it. As I’ve said before, humans aren’t supposed to get results like that, but our companies keep on turning out extraordinary results. But wait, here come the four year plus eleven month results:
FOUR YEARS AND ELEVEN MONTHS RESULTS
You will hear an incessant chatter from know-nothings telling you that no one can beat the averages and that stock picking doesn’t work, and that books have been written to prove it, and that we will all return to the mean, so I thought that I’d give you some facts about it.
Guess what folks! The books are wrong. Here are my last four years of results compounded, which you can compare against the S&P. Remember that I’m not just picking my results off the wall. I posted my positions and their sizes every month of those four years so any one who wanted to check me out could have done so. It’s real, and others on the board have done approximately the same, some a little better and some a little worse, but in the same range. It can be done, although I strongly doubt that we will ever have another year like 2020.
**2017: + 84.2% $100 becomes $184.20** **2018: + 71.4% $100 becomes $171.40** **2019 + 28.4% $100 becomes $128.40** **2020 + 233.3% $100 becomes $333.30**
In four years those numbers compounded to 1, 351% of what I started with. That’s not up 35% or even 350%! It’s thirteen and a half TIMES what I started with, or up 1,251% in four years.
During that time the S&P was up 67% in four years. That’s up 67% compared to up 1,251%!!! You can add a few percent by adding in dividends, but that doesn’t change the comparison at all.
If you are thinking that that’s impossible and that noone could do that , here is what GauchoRico posted for his four year results: He was up 1,135% in those same four years. https://discussion.fool.com/gauchorico-portfolio-update-1312021-… Pretty much the same thing! It’s not a fluke.
And then, if you add in this year’s eleven month results we have 13.51 x 1.621 = 21.9. It thus compounded to almost 22 TIMES what I started with in January of 2017, or up 2,090% !!! in four years and eleven months, which is really, really, crazy numbers.
Tell me again that active intelligent stock picking doesn’t work! The only ones who say that are the people who don’t know how to do it.
Read the Knowledgebase several times. And the other articles on the side panel. And the posts with lots of recs by people you trust, and you may learn how to do it too.
I am no good at timing the market and I haven’t tried, but have just stuck with strong, rapidly growing, high-confidence companies. I can’t tell you what the market will do Monday, or next month, or the next three months, or six months, but I can tell you that these companies are very successful, and that I can sleep well with them in my portfolio.
MY RESULTS YEAR TO DATE
My portfolio closed this month up 62.1% (at 162.1% of where it started the year)! Here’s a table of the monthly year-to-date progress of my portfolio for 2021.
**End of Jan + 2.5%** **End of Feb + 0.3%** **End of Mar - 13.0%** **End of Apr - 0.2%** **End of May + 4.1%** **End of Jun + 16.5%** **End of Jul + 21.9%** **End of Aug + 50.9%** **End of Sep + 71.3%** **End of Oct + 82.8%** **End of Nov + 62.1%**
A thought about this: Since many of us were up more than 200% last year (more than tripling our entire portfolios), it seeemed logical to assume that our stocks (and way of investing) had overshot by a lot, were way overvalued, and would fall back this year. But here we are, eleven months into the year, and we are actually up ridiculous amounts again, in spite of wildly overshooting last year, and living through some large pullbacks.
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 month or two 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
HOW DID THE INDEXES DO?
Here are the results year to date:
The S&P 500 (Large Cap)
Closed up 22.3% YTD. (It started the year at 3756 and is now at 4595, down 0.2% for the month).
The Russell 2000 (Small and Mid Cap)
Closed up 13.7% YTD. (It started the year at 1975 and is now at 2246, down 2.2% for the month).
The IJS ETF (The S&P 600 of Small Cap Value stocks)
Closed up 27.6% YTD. (It started the year at 81.3 and is now at 103.7, up 0.3% for the month)
The Dow (Very Large Cap)
Closed up 14.0% YTD. (It started the year at 30606 and is now at 34899, down 2.6% for the month).
The Nasdaq (Tech)
Closed up 20.2% (It started the year at 12888 and is now at 15492, down 0.0% for the month).
These five indexes averaged up 19.6% YTD. At the end of Oct they were up 20.7%, so they lost 1.1 percentage points in November.
In fact, in the last seven months the “markets” gained 0.9%, 1.9%, 0.7% and 0.9%, fell 1.8 points, gained 3.3 points, and lost 1.1% for a total gain of 3.8 percentage points in those seven months, about 0.5% per month, so our large portfolio gains weren’t caused by a rising tide that lifted all the boats.
During that same time my portfolio added 62.3 percentage points.
Zscaler, CrowdStrike, and Snowflake will report next week.
LAST THREE MONTHS REVIEW
September was less exciting than some months. I still had the same eight positions that I had had at the end of August, and in roughly the same order except that I had added to Lightspeed and trimmed Cloudflare and Crowdstrike and I’d also added back a small 1.6% position in Snowflake, just because I think it’s a very important company to keep in sight. And I’d trimmed Upstart because the position has gotten too big, but it had grown to over 27% at the end of the month in spite of all my trimming.
October had no earnings announcements and was a relatively calm month. Upstart, at $390, reached 31.5% of my portfolio at one point but is now down to back to just 26.4% at a price of $322. Datadog is still in second place, and Cloudflare in third after another week in mid-October of announcements of new products and enhancements. After wondering why Cloudflare kept going up I decided to go with the flow and let it rise, which it did, rising to $195 from $134 a month ago. Monday, which I just bought in August, is now in fourth place, and is probably my second highest confidence position, after Upstart. It just took me a while to build a position because of low volume and a wide spread, and subsequent short sharp movements up and down for no reason except someone buying or selling some shares. Crowdstrike announced that they have formed an alliance with a number of companies, and seemed to be forming a security cloud. I again exited my tiny position in Snowflake, to put the money somewhere else. During the month Lightspeed had to fight off a short attack. Then in the last two weeks it announced a comprehensive restaurant solution and then a retail one, showing that it had apparently incorporated its acquisitions just fine. Finally, I’d taken a little 3.6% position in a small company that I wasn’t ready to talk about yet.
November had lots of crises. They started when Lightspeed announced a real slowdown that they seemed puzzled about and couldn’t really explain, the price plummeted, and I, among others, sold out in disappointment. The price was already depressed from the short attack in October (which had been mostly nonsense based on mis-statements or typos by the company back in 2018 or 2019), and the share price was further depressed by the sell-off after earnings before I could get out.
Then we got hit again with Upstart not living up to everyone’s wild expectations, and it sold off mightily. As I wrote on the board earlier in my post called “What I did about Upstart”, I had trimmed down from a once 31.5% position (which was way too high), to a 23% position prior to earnings, but I took a big hit on what was left. With a little more trimming and the fall in stock price, my position size is now down to a more sane 15.6% position.
In spite of that double whammy “catastrophe”, in a very concentrated portfolio which so many people worry about, I finished November still up 62% year-to-date, which is way above what I could have had with a more diversified portfolio.
The reason that my portfolio is still doing so well, in spite of the massacres in Upstart and Lightspeed, is that four other stocks in my portfolio just kept going up and up and up, and hitting new highs regularly. These were (in alphabetical order), Cloudflare, DataDog, ZoomInfo, and Zscaler.
The money from my sales of Lightspeed and Upstart went mostly into Monday and Amplitude, and some to ZoomInfo. (Amplitude is the little tryout position I talked about last month and is now up to a 6.8% position). I also again have a little 1% position in Snowflake (this must be the 4th time).
Since my last monthly summary, in addition to those from Upstart and Lightspeed, we also had earnings reports from Datadog, ZoomInfo, Monday, Cloudflare and Amplitude.
Datadog, ZoomInfo and Monday blew it away. Cloudflare continued on its merry way of 50% plus revenue growth, but made it clear with new products that it’s trying to become the fourth internet cloud (with AWS, Google and Microsoft). Amplitude had excellent growth but worried some people by not guiding high enough (which was well explained in the conference call). With earnings Monday rose $90 in a day, but then sold down $80 the next day when they announced that this earnings report satisfied requirements so that their IPO lock-up period was ending. (They have low daily volume so an attempt to sell a substantial number of shares moves the price irrationally).
For more on the earnings reports see the individual stock summaries below.
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 won’t do another update until the end of the 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 this year. 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 2021, and not from when I originally bought them if I bought them in earlier years.
**Cloudflare from 75.99 to 200.12 up 163.4%** **Upstart from 92.20 to 209.41 up 127.1% buy in Apr** **DataDog from 98.44 to 181.25 up 84.1%** **Zscaler from 186.70 to 336.90 up 80.4% buy in May** **ZoomInfo from 47.34 to 70.01 up 47.9% buy in Apr** **Crowdstrike from 211.82 to 232.64 up 9.8%** **Amplitude from 62.99 to 66.07 up 4.9% buy in Oct** **Monday from 360.51 to 339.36 down 5.9% buy in Aug**
How often have you seen people say (even on our board), “ABC has gone up 40% in two months (or 50% or 60%), so it’s valued too high now and I’m selling out to wait for a 20% or 30% pullback.”
Notice that they didn’t say that the picture for ABC had changed, or that there was anything wrong with ABC’s business, or that there was any bad news, etc, it was just that it had moved up 40% or 50% so they were selling out. Let me point out that if you make a practice out of selling out after a 40% move, you will never get the ten times 40% (400%) gains that I’ve had in Datadog and Upstart since I first bought them, just for instance.
Just think, if you had bought Cloudflare when I did at $35, and a couple of months later it was up 50% at $52.50, and you had said to yourself “Wow! Up 50% in a couple of months!” And then recited one of those platitudes like “You never go broke taking profits!” and you sold out and took your profits. Well, you took a profit of more than $17, but left another $148 (so far) per share on the table, more than eight times the profit you took.
I was adding to Cloudflare at that point, not “taking profits,” and only started trimming afterwards when the position got too large for comfort.
The lesson is don’t sell out just because the stock has gone up, unless your position has gotten too big, and then just trim it. You will make your big money on the stocks that keep going up.
I now have eight positions plus a tiny position in Snowflake that I don’t really count as a position, and eight positions is right in my comfort range. The top four have stayed the same but Upstart has fallen from first to a moderate third place.
Datadog, Cloudflare, and Monday have all increased the proportion of their positions as Upstart’s shrunk. ZoomInfo has moved up into fifth place and it and Zscaler have passed Crowdstrike (as Crowdstrike’s price has fallen while all the rest have risen). Amplitude is now a respectable size position.
Here are my positions in order of position size, and bunched by size groups.
**.** **Datadog 19.7%** **Cloudflare 16.0%** **Upstart 15.6%** **Monday 15.0%** **ZoomInfo 10.4%** **Zscaler 8.1%** **Crowdstrike 7.6%** **Amplitude 6.8%** **Snowflake 1.0%**
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 mostly alphabetical order but I’ll start with Upstart again. Here are my up to date thoughts and what I’ve done:
In late Sept or early Oct I had over 31.5% of my portfolio in Upstart. I decided I wasn’t comfortable with such a huge position in any one company and over a month and a half I gradually trimmed it in fits and starts, so that, in spite of the price still rising, it was down to 26% at the end of October. By the time we were going into earnings in November I had reduced it to about a 23.4% position, still too large.
Then came earnings. While I was out of my Lightspeed position within 24 hours, I had no such implulse with Upstart. At first I didn’t buy or sell any. I didn’t sell any because I didn’t see any need to and I certainly didn’t add any, even after the sell off, because I thought 20% or high teens was enough. Especially for a non SaaS company. But the more I thought about it the more the fact that it was consumer facing, macro economics influenced, and non-SaaS company weighed on my mind, and with a combination of a little further sell off, and a little more trimming on my part, it’s now down to a 15.6% position, which is much more reasonable in my eyes.
Why didn’t I sell out, the way some others did? Let’s look at some numbers:
Revenue was $228 million, up 250% yoy. To put that into words that are perhaps more intuitive, that’s half way between tripling and quadrupling their revenue yoy! Sure some of us were hoping for even more, but REALLY!
Fee revenue was $210 million, up 235% yoy, again more than tripling.
Transaction volume of loans originated on the platform up 244%, also more than tripling.
Operating income was $28.6 million, up 134%.
Net Income was $57 million up 367%, more than quadrupling and almost quintupling, from $12 million. These are positive numbers folks, not losses.
Adj EBITDA was $59 million, almost quadrupling from $15.5 million
The Adj EBITDA margin was 26% of revenue, up from 24%.
So why in the world would anyone have sold out of this company???
Here’s what the guidance had been for some of these numbers:
Revenue of $215 million
Adj Net Income of $30 million
Adj EBITDA of $32 million
Clearly they beat them all, net income and adj EBITDA by huge percents, but revenue they only beat guidance by 6% (getting better at predicting).
Let’s look at sequential:
Revenue was $194 last quarter, and $228 this quarter, so it “only” rose by 17.5%. That’s not a trivial gain by any means. It’s a run rate of up 91% per year. But let’s see what guidance was for next quarter. It was $265 million. If they beat that by 6% (which I would consider the absolute floor), we are talking $281 million, or a 23% sequential gain, or a run rate of up 129% (more than doubling). And, if they just beat by 8%, they will be up 25.5% sequentially, or a run rate of up 148%. Etcetera, you get the picture.
Should we run away from this company??? This is a company that isn’t at 30 or 50 times revenue, but is under 15 times forward revenue while growing at over 200% yoy. It’s not at the end of its TAM but just starting out up the S shaped curve. They mentioned in passing that they had a fraud attack, which they warded off with no financial consequences, but every company on earth has daily attempts at breaching it. Big deal.
So that’s why I kept Upstart in my top four positions. They had told us that auto wasn’t ready to kick in yet, and it wasn’t, but we knew that. Half way through this quarter more is apparently happening because their guidance is more secure.
Amplitude was a little try-out last month but has grown into a real position. Investor Mookie brought it to the board on Sept 28, the day of its Direct Listing. A lot of the below comes from Mookie’s write-up.
Amplitude provides data analytics software that allows firms to better understand their customers’ behavior.
Customers incude giants such as Ford, Walmart, BurgerKing, Canal+, UnderArmor, Le Monde, and newer firms such as Square, Hubspot, Smartsheet, instacart and Atlassian.
Competitors include Google Analytics, Adobe, and plenty of companies I am unfamiliar with, but apparently not Datadog.
Datadog is focused on logging and observability inside of systems and infrastructure. How is my system performing? Where are potential anomalies and where are potential cyber attack points?
Amplitude is ‘customer telemetry’ and customer upsell – Where are my customers clicking? What ‘user journey’ do they go on? Where are my opportunities to sell/upsell?
Thus Amplitude helps companies understand customers, and what they are doing, and to convert that understanding into increased sales. This seems to be something that practically any company would be interested in. But I certainly could be wrong.
This is a small company with plenty of room to run. Quarterly revenue was only $45.5 million, accelerating to 72% yoy growth. RPO was $152 million, up 66%. Adj Op Loss was only $2 million (not counting the one-time Direct Listing costs). Adjusted EPS was a loss of 5 cents. Paying Customers were 1417, up 54%. NRR was 121%, up from 119% yoy. And they just appointed someone who was formerly President of IBM and CEO of Red Hat, to their Board of Directors, which gives me the feeling that they are considered a reputable and solid company, or he wouldn’t have accepted.
They also announced an integration with Snowflake so that “anyone who uses Snowflake can be an Amplitude customer in just a few clicks”. This means every member of an organization can use Amplitude to run lightning queries of Snowflake data on the Amplitude platform. This integration speeds up time to insight from days to minutes, expands data accessibility, and maximizes its return on data cloud investments.
As a reminder, they did not sell shares or raise any capital during their direct listing.
They also opened a new data center in Frankfort, in conjunction with AWS, to support customer growth in the EU.
**Cloudflare (NET)**has been a star of my portfolio, almost sextupling since I first bought it in 2020. Last time I said that I didn’t understand why it’s going up like that. It’s growing revenue steadily at 50% or so, which is certainly a great rate of revenue growth, but is slower than my other positions.
So what was the market seeing that I wasn’t? I suspect that there is a perception that this company is on its way to take over the cloud world . Well, maybe it is! It continued on its merry way of 50% plus revenue growth, but made it clear with new products that its goal is to become the fourth internet cloud (with AWS, Google and Microsoft). People pushing the stock up with what must be massive buys obviously believe it. This month Cloudflare is back up to 16% of my portfolio and is in 3rd place.
It’s really a shame that some people totally sold out in August or September simply because Cloudflare was rising more than they thought it should, and they thought it was too expensive, or valued too high. Cloudflare is up more than 100% in a few months since then, and keeps going up.
Crowdstrike announced their report for the quarter ending in July in September. It was a very solid “boring” quarter but a lot of us were disappointed. We expected more growth with break-ins and breaches all over the place, but they just hit 70% revenue growth, flat with the quarter before, down from 84% yoy, and showing no reacceleration.
“Wait!” you say, “You were disappointed with 70% revenue growth! You’ve got to be kidding!” …You have a point, but we were.
Like I said, it was a good solid quarter. Free Cash Flow Margin was positive 22%, up from 16% a year ago, from minus 27% two years ago, and from minus 64% three years ago. Clearly they are going in the right direction, but we were still left wondering why, with all the breaches and ransomware all over the place, their revenue wasn’t growing faster.
Then in October they announced that they have formed an alliance, the CrowdXDR Alliance with a bunch of other prominent security companies, which indicates, it seems, that they are forming a security cloud.
In November they acquired SecureCircle, a SaaS-based cybersecurity service that extends Zero Trust security to data on the endpoint.
They then had three interesting press releases:
Center for Internet Security selects CrowdStrike as Premier Partner for Endpoint Security
Crowdstrike has been selected by the Center for Internet Security (CIS) as its premier partner for endpoint security. The new fully-managed CIS Endpoint Security Services (ESS) solution, powered by CrowdStrike, identifies, detects and responds to security alerts and incidents for U.S. State, Local, Tribal and Territorial (SLTT) governments.
Previously, CrowdStrike was chosen to protect the CIS’s Elections Infrastructure Information Sharing and Analysis Center, and this new solution expands on the existing partnership –– providing a new, fully managed 24/7 next generation cybersecurity offering exclusively tailored to SLTT organizations, including more than 12,000 Multi-State Information and Analysis Center members across the U.S., with more than 14 million endpoints in total.
CrowdStrike announces Falcon Horizon support for Google Cloud, extends cloud security posture management solution across world’s largest cloud providers
Crowdstrike announced Falcon Horizon support for Google Cloud environments, extending its Cloud Security Posture Management solution to now protect the three largest cloud providers. Organizations with a multi-cloud strategy can now have an end-to-end solution for security posture management and cloud workload protection from the same security vendor.
CrowdStrike Falcon wins Best Endpoint Detection and Response Solution by SE Labs for Second Consecutive Year
SE Labs Award is latest independent, third-party validation that showcases CrowdStrike’s market leadership and best-in-class technology
CrowdStrike announced that CrowdStrike Falcon was named Winner of the Best Endpoint Detection and Response Product for the second year in a row in SE Labs’ 2021 Annual Report.
As the world’s most tested next-gen Endpoint Protection solution, this prestigious recognition marks yet another third-party validation to the power of CrowdStrike Falcon – the only truly cloud-native, single-agent endpoint security platform on the market.
Results of the October quarter will be announced next week.
My Take: In spite of all the great announcements, the stock price has been dribbling down, and hasn’t advanced really for several months. In fact it’s close to where it closed eleven months ago. It’s down to a 7.6% position in 7th place in my portfolio. I’m holding my position, but I trim a tiny bit here and there for cash. I think expectations are really low, and Crowd might do well in response to results that are better than expected.
DataDog is in first place currently in my portfolio. They posted outstanding Sept quarter results in November. Revenue growth was up 75% yoy, and had accelerated from up 67% yoy in the June quarter, which in turn had accelerated from up 51% in the March quarter. Operating Cash Flow was $67 million, up from $52 million sequentially. Free Cash Flow was $57 million, up from $42 million sequentially. They are doing just fine.
Monday AGAIN had one of those quarters that just seemed perfect! In their second quarter as a public company they reported revenue up 95% (up from 94% sequentially). 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 95%.
The number of enterprise customers over $50,000 was 613, up 231% from 185 a year ago. That’s not a misprint! … 613 up from 185 are the real numbers. NRR was 130%, 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 going to minus 11%, greatly improved from minus 72% a year ago, and there’s lots more good stuff, but I’ll let you research the rest. Pay attention and be careful of the buying process if you decide to buy any as it is a high price/low volume stock, with a wide spread between bid and asked.
ZoomInfo is in 5th place.
To quote the Morgan Stanley analyst in the March quarter Conference Call:
…all the growth metrics are accelerating up and to the right. Is it fair to say that there’s a fundamental shift that’s happening right now, and that shift is actually accelerating in its pace?
What was the analyst referring to? Well their yoy revenue growth, which had been going along at a pedestrian 42%, 40%, 41%, all of a sudden, in the December quarter, accelerated to 45%, followed by 48% in the March quarter, 57% in the June quarter and now 60% in the Sept quarter. These are rates it had never seen before. International revenue is growing at 80%. Operating cash flow was $46.5 million, and Free Cash Flow was $73 million.
Here is some of the business development news:
Our Intent products, which find consumption patterns to help go to market teams identify and gauge prospects, experienced significant growth with active users growing more than 5x yoy.
Acquired RingLead, a leading provider of data orchestration and revenue operations automation.
After the acquisition in July, we announced our first integrations with Chorus.ai platform in September, allowing customers to transcribe and analyze calls taken in ZoomInfo Engage, access Chorus’ Momentum Insights within our platform, and unlock our business-to-business data and insights for the Chorus offering.
Our board of directors unanimously approved the move to a single class of common stock, with one vote per share.
Closed the quarter with more than 25,000 customers, and more than 1,250 customers over $100,000, who now represent more than 40% of our overall ACV with the ACV from that cohort growing by more than 85% yoy.
International continues to be a success story. We had international revenue growth greater than 80% yoy, with international representing more than 11% of our overall business or over $80 million on an annualized basis. We now cover nearly all businesses with more than 100 employees in Europe.
In ZoomInfo Recruiter, we added a number of new features to improve the user experience and open up the platform for more integrations. While still early and small, we more than doubled the number of recruiter customers… sequentially!!!.
We’re again raising our financial guidance for the year. We now expect to deliver revenue growth of 54% in 2021 with organic growth of 50% at the midpoint
Saul: Well, I feel that this is one of my only companies that is clearly undervalued.
Zscaler will announce October quarter results next week.
Here are some July 2021 fiscal year results:
• Revenue: $673 million, up 56%, with growth up from 42% last year.
• Gross Margin was 81%.
• Adj op income was $78 million, up from $38 million last year
• Adj net income was $76 million, up from $41 million
• Adj EPS was 52 cents, up from 24 cents
• Op Cash flow was $202 million, up from $79 million last year
• Free cash flow was $144 million, up from $27 million!!!.
• RPO was $1553 million, up 98% !!!
• Current RPO is 49% of that, or $761 million, which is 13% and $88 million more than their ENTIRE revenue for this fiscal year just finished (which was $673 million)!!!
• NRR was 128% up from 120% a year ago.
• Cash was over $1.5 billion
Their alliances with Crowdstrike and other partners are really moving along.
They got approval to operate at the Dept of Defense Impact Level 5: (“Government agencies and their contractors will be able to use Zscaler’s Zero Trust platform for systems that manage their most sensitive Controlled Unclassified Information (CUI) as well as unclassified National Security Systems (NSSs).”)
Has to be good news.
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 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 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.