Finding a hyper growth stock that checks all the boxes would be a great contribution. I am currently following up new rec from Bert, PLAN. I do believe it does check most if not all the boxes that the readers here value most. I’m looking into the competition a bit further before expanding my starter position.
But this is the end of the year and maybe the following review of what I’ve learned related to my current portfolio: TWLO 14%, MDB 14%, AYX 14%, TTD 13% , SQ 10, NTNX 9%, Zs 9%, ESTC 8%, OKTA 8%, PLAN 1%.
Happy New Year to everyone, I hope this post finds you and yours well. At the risk of sounding like Tiny Tim, thank you everyone!
New year Portfolio update: I was 50 years old in January 2018. I had 70% of my future retirement funds in my self directed portfolio, this consisted of 45 stocks (entirely story stocks not knowing how to follow quarterly reports well). I’d been following the Fool rec’s for ten years totally concentrated in secular growth having enjoyed books about trends and the Economist periodical.
I found Sauls’ Investing Discussions blog on The Motley Fool mid January 2018. The reasoning (see ‘This time is Different’, posted months later as supplemental reading on the blog) given by Saul and the contributions made by the many talented and gracious people who took their time to provide explanation was overwhelming. I read going back to the very beginning of Sauls’ blogging on The Motley Fool and literally felt overwhelmed with peace and subsequent joy even before the returns followed - knowing that the gift received here was going to be a better way of investing.
I should have read Sauls’ entire Knowledge Base more than once before tearing out business after business from my port. If I had read it more than once maybe I wouldn’t have turned what was 45 story stocks into a more concentrated group of businesses with a story business model (eg SaaS ) as quickly- doing so in less than one month turned out well. But, knowing what I know now, having read the contributions from people obviously more intelligent in this than I during this last year, is that there is more going into this than simply everyone moving to the cloud.
By mid February I was down to 15 companies. And since then I’ve trimmed and built up and replaced mostly Saul stocks. I did get a subscription to Bert’s news letter/service (still holding NTNX - most excited about it building out its hybrid cloud OS platform with killer apps eg.XiBeam; recently bought starter position in PLAN and am investigating their competition). Back to just after mid February: I held onto NFLX, Mercado Libre, and a few others for slightly longer. I did get NVDA at around $17 (when I thought their shield might become the ‘Netflix of gaming’). Continued to hold NVDA given their ability to rapidly out-innovate their competition. I bought SHOP when it got that double rec from David Gardner. I held onto these two until reasoning presented by everyone led me to value other Companies more.
I made some mistakes: Got back into Talend due to not following the numbers closely enough to realize that doubling cloud revenues for as long as they did must have been from a small base. That and my believing that I could move in and out quickly gave me more advantage than it did led to my losing more than I ever had in a day up to that point in time. Another advantage I thought I had and hadn’t was when I believed my being a Physical Therapist and being able to read research studies would have kept me from Losing 36% on Nectar Pharmaceuticals - I believe the fact that the stock price was based on future sales, and that I now consider mostly a speculative investment. For now I’ve decided I don’t like the secretiveness of biotech development/disruption and much prefer the winner/leader take most of open source SaaS when I can get it.
When the market sold off in September, ending the year down 6%, I consolidated around my winners and ended the year with shares in ten companies and was up 34% for the entire portfolio for the year. My Square position is still down 40% and Saul got out at $64; but, he did so for qualitative reasons and price action, as far as I can tell. SQ numbers are accelerating and I Love the possibilities of growth adjacent, so I’m staying in for now.
I think what I did right was that for the most part I bought companies with great moats (see below for what I learned this year and I’m calling it Moat), I didn’t price anchor; I really only trimmed from high performing stocks when I owned more of something than I was sure it was better than something else. I held no cash all year. I moved what I trimmed from high performers with less confidence to slower performers for which I had equal or greater confidence levels. I didn’t sell during any of the drops in this crazy year.
What I learned to value most while reading the Sauls’ Investment Discussions after that first month might be said to consist of how to value moat. I see Moat consisting of more than the typical (network effect, significant cost to enter market, patents, brand); but, it can also include: (in no particular order at this point)
- being Founder Lead (not just their habits of transparency, demonstrating vision and focused on processes of execution (eg. Agile’s velocity) but also his/her ability to communicate during CC’s (TTD vs NTNX).
2)TAM, not only from the CC’s given by the Co. but when researched in trade magazines or demonstrated by taking marketshare over time.
3)optionality/growth adjacent
4)Dollar Based Retention rate as a product of land and expand (revenue/bookings)
4.25)developer fan base (fanaticism of product users within customer organization)
4.5)Net Promoter Score even though released only in CCs, as far as I know.
5)level of product integration into customers infrastructure/processes
6)first mover/Gartner leader quadrant
7)asset light/software defined/cloudified/AI benefited - in current paradigm shift in way of doing business
Then there’s the numbers and are they lumpy,cyclical or are the predictably accelerating toward growth/FCF/Profits.
And is it ripe for share price appreciation (momentum/hidden growth/FUD)
Thanks Again
Everyone
Jason Emery
And family