Now that the earnings season is almost over, I wanted to share:
**1. Some of my thoughts**
**2. My take on the recent reports**
**3. And my current allocation**
1. My thoughts:
This is the best part of investing for me. The earnings season that is. It gives you something tangible to digest/think/act on.
I always try to have my expectations set well before the earnings. The best time to set your expectations is right after the previous earnings season. By doing so, you know what you are looking for well in advance, so you don’t get distracted or scared away right before the next earnings report comes out (it’s also midnight where I live by the time the report comes out, so I need to know what I’m looking for and act accordingly — access to after-hours trading is crucial).
I personally don’t understand the thinking of selling right before earnings in fear of the company not delivering solid results. Yes, this period we are in where everyone is edgy, and stocks sell for no particular reason (other than not delivering outstanding results) then you might say that this is justified.
But if you are not sure of what you are holding, then why wait until the earnings? Sell it well before or don’t even buy it in the first place (unless you are good at market timing — I’m not). I personally believe that if earnings seasons scare you away then maybe you are in the wrong game. Or in the wrong approach.
Index investing is no joke. If you can’t sleep because of portfolio concentration or because you overthink your holdings, then switching to a different approach might suit you better. Just because you landed on this board, it doesn’t mean that you need to adopt the principles. Everyone is different.
Personally, I want to be able to sleep well at night. Every night. However, I just love this newly found (for me) game of investing. And I really like Saul’s approach (even if sometimes I don’t agree 100% — that’s the point of discussion I guess, right?). So, I stick to it and try to improve along the way.
The problem with investing/trading decades ago was that access to info was a lot more difficult. Now, the opposite is true. Does it make it easier? Maybe. Does it matter if you act on every single piece of info? Maybe. I already have 1 full-time job (and 1 part-time too) so I can’t spend much time glued to my screen. I’m neither a day trader nor a full-time investor.
I also have trouble comprehending the idea of something is already baked in. Nothing is ever priced in. Otherwise, we wouldn’t have stock price movements. Just a flat price line that would only be derailed by major events and then maintain its steady course.
We need to remember that not everyone invests/acts the same way. If for example, a company is dropping growth and the price declines, it doesn’t necessarily mean that everyone sold out. There are plenty of people still waiting for another quarter maybe with the hope that the company accelerates. If that doesn’t happen more people would sell. So, the price would drop even more. Not everyone is acting exactly in the same way and/or at the same time.
I also don’t agree that we let stock price movements change our thesis. For example, MNDY dropped but many board members added to their positions. Some sold out or reduced.
UPST went up but many sold out. Others added. ZS dropped but many added. AMPL went down and many sold out. This shows that some stocks went up or down, but board members acted differently. Yes, price movements sometimes confirm a result. But some other times it is just out of whack. This is why you need to know what you own and why. And set your own expectations. And you need to remember that different allocations weigh on you differently. You can play around and see your own limits (personally I’m trying to stay within 10-20% for most of my positions).
2. My take on the latest earnings:
DDOG: 9.5/10
Expected: $310-315m
Results: Outstanding
Concerns: No major concerns here. Just the QoQ guidance is not as strong as previously.
Decision: Added to my position
Thoughts: Has the potential to keep growing at hypergrowth levels and to even accelerate a bit.
BILL: 9.5/10
Expected: $150m
Results: Outstanding
Concerns: No major concerns here. Just want to see the acquisitions keep providing leverage to the entire organization.
Decision: Added to my position both before and after earnings.
Thoughts: Has the potential to keep growing at hypergrowth levels without signs of deceleration at the moment.
UPST: 9/10
Expected: $300m
Results: Excellent
Concerns: Some concerns regarding the level of growth going forward. And how fast other flavors of credit can kick in (auto, mortgage).
Decision: Kept my position
Thoughts: I can’t forecast growth. Lumpiness. However, I decided right after Q3 to sell most of my shares and only kept a small position which I plan to keep between 5-10% max.
ZS: 8/10
Expected: $255-260m
Results: Very good
Concerns: My only concern was the slower growth (59%) in billings which as explained in the call was mostly because of the government that since they got approval now this help with this.
Decision: Added to my position after hours when it dropped.
Thoughts: ZS seems like a leader in its space. Solid growth at scale.
NET: 7.5/10
Expected: $190-195m
Results: Solid
Concerns: Can they show faster acceleration? Will investors lose interest if it keeps growing at 50% only? Is the valuation too rich?
Decision: I initiated a position in NET when it dropped to $80 a few weeks back. I also added a bit after the earnings. I don’t plan to sell but I’ll trim when it goes over 12-15%.
Thoughts: It seems that NET can keep growing at a steady pace and this gives investors reassurance especially since the rich valuation dropped a lot already.
MNDY: 7/10
Expected: 98m to maintain their 18% QoQ and 95% YoY.
Results: Solid? Or Disappointing?
Concerns: QoQ in Q4’19 was 26% (accelerated from 24% in Q3’19). Then, in Q4’20 was 18% (an acceleration from 17% in Q3’20). And now Q4’21 15% (deceleration from 18% in Q3’21 and 20% in Q2’21). That is my main concern and not the profitability or the crazy spend on the super bowl ad, or even the low(er) guidance.
Decision: Sold half my overweight (18%) position as soon as the report came out. Sold the other half a few days later when the stock climbed a bit higher.
Thoughts: Kudos to those who kept their allocation small on this. It seems that concerns of the competition were correct. I’m sure the company will do well. I just took other opportunities and moved funds elsewhere where I have more confidence for the foreseeable future.
ZI: 6.5/10
Expected: $222m
Results: Met expectations in terms of revenues but very weak guidance.
Concerns: relatively slow growth. Not enough leverage kicking in from acquisitions? Very weak QoQ (3%) and FY (34%) guidance.
Decision: Sold my small position right after the report. Didn’t even listen to the call.
Thoughts: I like other companies better.
SEMR: 5/10
Expected: $54.25m to keep them above 10% QoQ.
Results: Mediocre
Concerns: even with half a million less, the QoQ went from 12%, 9.5%, to 9% now. And the guidance for the next Q (even if they beat it as usual) it will be even less at 8% QoQ which annualizes to 36% (1.08^4=36). Also, the guidance for the FY is too slow at 30% YoY even if they actually come closer to 40%.
Decision: Sold my entire position after the report and reallocated the funds to SNOW when it dropped to $260.
AMPL: 4/10
Expected: 52$ for the same QoQ growth
Results: Bad
Concerns: I was expecting a minimum of $52m to keep the same QoQ growth. Yes, even 2m less is concerning. Why didn’t they surprise with 2 more million in the upside? If they struggle with small numbers, then what happens when they approach bigger ones?
Decision: Sold my entire position as soon as the report came out. Didn’t even listen to the call.
Thoughts: Too soon. Too small. Too young. Too slow.
SNOW: TBA (expect 8-9/10)
Expecting: $372-380m
S: TBA (expect 8-9/10)
Expecting: $67-70m
3. My current allocation:
**DDOG 19%**
**BILL 17%**
**ZS 17%**
**S 17%**
**SNOW 12%**
**NET 12%**
**UPST 6%**
I don’t hold any cash. I don’t have an emergency fund. I don’t have an opportunity fund. Me and my wife work 2 jobs each and live in a 1-bedroom flat along with our 4 cats with relatively low living expenses (I don’t even own a car). The reason I don’t have a fund of any kind was to avoid temptation/distraction (we both have health insurance). However, moving forward I decided to start slowly-slowly creating a fund in case we have a child soon.
May God bless us all,
twitter.com/Pavlos__21
[ps: Sometimes I wonder if we put more emphasis on money than on anything else. Our time is limited. Friends and family go away. Lives end every single day. I understand that we only see what we have in front of us. But some others have it a lot worse. Ukrainian people are trying, as I write, to defend their land from invaders. I empathize with them as the small island I live in (Cyprus) has been illegally invaded and still occupied for 48 years now. My family lost everything along with many other people.
And this is the main reason for investing for me. To, maybe, have something better (both financially and educationally) to leave behind to the next generation. And this is why, I believe, Saul’s approach is superior to index investing since indexing won’t teach you the process and all that. And financial education is not the icing on the cake. It’s the cake itself :)]