MY portfolio at the end of Oct 2019

Investment Analysis Clubs Saul’s Investing Discussions
#7

Mine is a shortwinded response to Zscaler plus a question

So here I am, with Zscaler, with a tailwind of inevitability, sure, but who is asking huge enterprises to revamp their entire security systems, and which has a lot of temporary obstacles in its path which may cause growth rates to diminish in the near term, like desperate large competitors, customer IT departments that don’t want to lose their jobs, and enterprise CEO’s who don’t really understand security… while I have other companies, growing like mad, and without these execution problems, so it made sense for me to reduce the size of my Zscaler position from huge to just large (and it is still a large position), and to use the cash to buy into companies like Coupa and Datadog. There isn’t any relationship at all to “momentum,” but rather it’s evaluating what is going on and acting on it. So far it’s been a good call as Zscaler is currently at $42.86, considerably lower than it was when I sold.

Your take on IT departments is spot on! I’ve been on both sides, selling and buying IT and I know from this experience the incredibly powerful influence IT departments exert, not necessarily for the benefit of the hand that feeds them. Complexity is the enemy of adoption and so is stonewalling by IT departments. Good call!

The long term prospect is real but how long did it take Mac to recover from IT stonewalling in the mid 1980s? Fifteen, twenty years?

The question: do you recall what made you rotate from banks, shoes, and other industries to SaaS? I’d love to hear that story.

Thanks,

Denny Schlesinger

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#8

The question: do you recall what made you rotate from banks, shoes, and other industries to SaaS? I’d love to hear that story.

Hi Denny, to tell the truth, I can’t really remember. I do remember that I got of BOFI because I thought it was sleazy and skating on the edge and hiring people with very doubtful pasts, etc. I got out of Skechers because when I was buying a pair in a Skechers’ store they gave me something like 40% off all of them if I would by three pairs (as I remember it). It’s also the problem with anyone who builds stores. You run out of good places to put them quickly and you start cannibalizing one store with another. And you can grow the number of stores by 50% at first but a couple of years of that and you are having to build impossible numbers of them to continue growth. The store I bought those shoes at closed down this year, by the way. I should mention that I still wear ONLY Skechers shoes, because they are so comfortable.
Best,
Saul

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#9

I should mention that I still wear ONLY Skechers shoes, because they are so comfortable.

Last December I visited Curaçao and bought a pair of Skechers shoes. Now in Portugal I bought a pair of locally made leather shoes for the Winter at half the price. They are half as comfortable! :wink:

Denny Schlesinger

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#10

Brittlerock and Friends,

Forgive Monkey for writing yet another message of appreciation, but it has to be done. Your post(s) above about your real-world, hard-won experience in the IT world and how that translates into a 7 star confidence level in MDB is exactly the kind of investing information that the bots, the wall-street analysts, the momentum gamblers, the literal gamblers, or anyone else, really, doesn’t have access to. The actual banana value of this information and the generosity of spirit with which you share it is way beyond the pay grade of my abacus.

But this analysis narrative does actually translate into an actual reality bound category I call “Sleep-Well-at Night” meaning a stock equity holding which will go down and up according to market whimsy in the short term, but about which zero flying rotten bananas are given in the long term, hence the capacity to sleep well in some high-up branches in the jungle while the rest of the critters go on screeching and making a ruckus.

Sleeping Well at Night is a very high priority for Monkey, thereby allowing his position in Mongo to reach the Top 3 level––and, currently after reading what you wrote above––gets Monkey further thinking about what would preclude it from reaching the very tippity-top of the tree-line?

So thank you Brittlerock and Saul for your continued quest to fill Monkey’s banana bucket while simultaneously being able to catch a lovely snooze in his hammock without the greying of his fur.

With gratitude,

Monkey (substantial position in MDB and about to get higher, odds are)

43 Likes
#11

Saul,

I have read several times that you bought in and out of a stock… Like MDB. Have you ever analyzed how you would have fared had you stuck with your original purchases? I am not talking about when you get out all together, like with Sketchers, but when you vacillate on a holding.

Gordon

1 Like
#12

It is always possible in theory to be more perfect … but one works without hindsight and with the whims of the market, so second guessing is an exercise in futility.

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#13

Tamhas,

My question is not about having second sight, or even second guessing yourself. It does have to do with psychology, however. If after trading In and out of thesame stocks numerous times, but find you would have been better off staying with your first inclination, than perhaps you will have learned something.

I try to learn something from each of my trades. Self analysis can be a good thing.

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#14

Saul - first thank you so much for your post. I am learning a lot. I mistakenly have known about this board for about 6 years and have not pulled the trigger on reading the knowledgebase til now. I was too focussed on trading which takes up too much time and I am not successful at it. Had I followed the recommendations here, I would be much richer. Live and learn. I hope you are around for many more years for us all to learn more.

Saul/brittlerock

But it is these relative decisions that set us apart. Let me explain. During my career I watched two database products dominate the industry. First, the IBM product, IMS DB/TP (that translates to Information Management System Database/Teleprocessing). IMS was not the only database product

…

Why am I relating all this history? In a word, Mongo.

I want place an addendum here and say I believe you are both correct in the potential success of Mongo but for other reasons.

I work in Software Engineering and have done so for 20+ years. I started coding large enterprise systems in Java and over the years have learned lots of different languages (JavaScript, Scala, Kotlin etc.) and now lead teams of engineerings on high throughput, low latency, critical systems.

My experience of Mongo as a company (10Gen a few years ago) has been appalling - they tried to modify our NDA during evaluation stage to take any IP of new products they discovered while working with us and removed any of our rights to those products. It leaves a bitter taste still.

At the same time, there was an explosion by an anonymous blog post stating everything wrong with MongoDB including cascading failures, faulty data integrity (transactions reporting as completed when they weren’t) etc. All 10Gen’s CTO could say was “what are the support ticket numbers?” A pathetic response, at best. For those of you that don’t know, data integrity is key in any system. Without it, we just get the wrong answers and tracking down WHY is extremely difficult.

Now let’s turn to today. Mongo are going gangbusters. They now have transactions spanning clusters and I have found on their own JIRA board with just a few seconds of searching a couple of bugs submitted saying it is terrible at best.

BUT

this does not matter.

IMO, IT execs look at features such as cloud agnostic, Atlas, full text search and any other products that will get them up and running quickly for a fast route to market/solution to their issues. They want to alleviate their pain quickly.

If the Mongo issues I described emerge, by that point there is a general consensus in the company of “the engineers have to fix it” and the Mongo contract has already been signed.

They clearly have a fantastic sales arm and product strategy. From an engineer’s POV, their tech execution leaves us wanting.

The sales decision is disjoined from the production performance of the system the Mongo products are used in but it doesn’t matter.

The metrics say it all and I plan on opening a position in Mongo too.

Thanks again for everyone’s contributions.

Much appreciated.

29 Likes
#15

Point being that I perceive Saul as someone who isn’t likely to worry about things like that. He makes buy and sell decisions based on what seems right at the time. Occasionally, he may go in and out and in again, but not often and always because it seems like the right thing to do at the time. Even if it turns out that staying in the whole time would have been a good thing, one would have to compare it with what was done with the money while he was out, which easily could have been better yet. And, supposing on some particular occasion it would have been better to stay in, changing that would require changing the rules of how he makes decisions about in or out … rules that have been working pretty d**m well up to now.

To be sure, less experienced investors might well learn a lesson or two about being less jumpy, but Saul? :slight_smile:

#16

Saul, Congrats !! keep inspiring and helping the community here. I am a newbie. Could not find the announcements panel to read the knowledge base. Could you please share the link or screenshot?

Thanks,

#17

Look to the right side of this page------------------------------------------> for knowledge base

#18

Datadog just started the last day of Sept, and it is now a 12.3% position, and my third largest, in just a month. I can’t remember ever building a position as quickly as that, except perhaps Alteryx, almost two years ago.

Hi Saul,

I have to wonder why such a large position in DDOG. I look at the following as negatives:

  1. no real evidence of moving toward profitability: last 10 quarters of operating margin (oldest to recent):
    -3%, -7%, -1%, -2%, -1%, 0%, -9%, -11%, -14%, -4%. These numbers are not horrible but they have been moving in the wrong direction for the 4 quarters.

  2. DDOG seems really expensive compared to other companies. EV/Sales is 37 which is almost twice as high as AYX and considerably higher than CRWD even though CRWD is growing faster with slightly higher gross margins.

I think people pay attention when you take a huge position quickly. If I recall your Alteryx purchases correctly, I don’t recall you buying in that much (pretty it grew into a larger position through appreciation). I have a tiny 1% position in DDOG but it seems really expensive compared to our alternatives. I’d love to hear what is it about DDOG that you like so much. I think you must think that growth will remain really high for a while. Thanks.

Chris

33 Likes
#19

If I recall your Alteryx purchases correctly, I don’t recall you buying in that much (pretty it grew into a larger position through appreciation).

That happens not to be correct. In Saul’s month-end summary for December 2017, the first one where he owned Alteryx, it was a 12.1% position.

1 Like
#20

Whoa…

As a real estate developer with only basic knowledge of the engineering concepts that are often discussed on this board, I must say that I come away from Hyperion’s reply to this post a bit confused.

Hyperion; when somebody of your background and experience posts on this message board, I tend to listen closely, try to learn something and then weigh the opinions of educated and experienced professional such as yourself when evaluating my holdings (i.e. Mongo).

I am wondering if I have the correct take-away from your post. It seems to me as if you are saying:

  • Your experience with Mongo was appalling,
  • You worked with Mongo on a professional level and was left with a bitter taste in your mouth
  • You are aware of other engineers that have posted horrible things about Mongo on various tech-boards,

However,

  • all of this does not matter to you because Mongo has a really slick sales team,
  • the customer wants to be up and running quickly and Mongo can give deliver customers an inferior product that gets them there,
  • then, once the proverbial poo hits the fan; Mongo is out and dumps all the bugs and issues on the customers’ engineers
  • But, your going to overlook all of that because the “metrics say it all”

Is that really the thesis in a nutshell? Or, am I missing something?

Harley

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#21

Hyperion may want to talk about the timeframe when all this happened. I know MDB had a shaky start and bad reputation years ago but they have turned their image around.

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#22

- Your experience with Mongo was appalling,
- You worked with Mongo on a professional level and was left with a bitter taste in your mouth
- You are aware of other engineers that have posted horrible things about Mongo on various tech-boards,

However,

- all of this does not matter to you because Mongo has a really slick sales team,
- the customer wants to be up and running quickly and Mongo can give deliver customers an inferior product that gets them there,
- then, once the proverbial poo hits the fan; Mongo is out and dumps all the bugs and issues on the customers’ engineers
- But, your going to overlook all of that because the “metrics say it all”

Hi Harley,
It may be unfair, but I read that as a disguised post from someone who is short Mongo, and trying to drive the price down.
Saul

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#23

I think hyperion summed up his view of Mongo as an investment in this line:

The metrics say it all and I plan on opening a position in Mongo too.

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#24

Hi Chris,

I wrote up Datadog, and why I was investing in it, a couple of weeks ago. Perhaps you missed it.

https://discussion.fool.com/datadog-ddog-thoughts-and-purchases-…

I think it answers why I’m investing in it very well.

Best,

Saul

7 Likes
#25

I think it answers why I’m investing in it very well.

It does, Saul, but Chris didn’t ask why you were investing in DDOG. He asked why it was already a top position for you. I have to admit, I’m curious about the same thing. The market seems to be giving DDOG the “new kid” premium. Its market cap is within 10% of CRWD’s, but CRWD has 25% more revenue already and is growing faster.

So to restate Chris’s question: I know you like CRWD and have added to it too. Why do you like DDOG even more? (I’m assuming you do since the position is bigger.)

Bear

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#26

Hi Harley,
It may be unfair, but I read that as a disguised post from someone who is short Mongo, and trying to drive the price down.
Saul

Hi Saul,
Why do you think his posting here would have any impact on the market price of a $7.2b market cap firm that trades $200m shares a day?
Naj

4 Likes