Old names doing well, too.

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By “old names” I mean stocks that were once discussed and owned by many on this board, but then mostly sold in favor of other, potentially more lucrative, companies.

Some examples of those companies hitting ATHs in the past couple of weeks:

ZScaler (ZS): Just hit an ATH $96.67 TODAY
MongoDB (MDB): Just hit an ATH of $227.82 TODAY
Nvidia (NVDA): Hit an ATH of $367.27
Wix (WIX): Hit an ATH of $219.11
Shopify (SHOP): Hit an ATH of $844.00
Ubiquiti (UI): Hit an ATH of $199.91
Square (SQ): Hit an ATH of $87.25
Twilio (TWLO): Hit an ATH of $209.94
The Trade Desk (TTD): Hit an ATH of $327.35

To be fair, there are plenty of “old names” that continued to languish, or worse, after they were mostly abandoned: Nutanix (NTNX), Pure Storage (PTSG), Arista (ANET), Talend (TLND), etc. And, it’s worth noting that even some of the companies hitting ATHs recently have not been worth staying invested in (NVDA, for instance) due to the combination of them taking too long to get to that ATH (opportunity cost) and/or that ATH not being that much higher than the prices they were sold at.

Saul’s right that it doesn’t matter to your portfolio what the stocks you sold did after you sold them, that what’s important is what the stocks you’re holding are doing. BUT, I do think there may be learnings we can gather. After all, we originally invested in these companies because they had good products or services, a good business model, and good management. Then the story changed. The question in my mind is whether we can learn how to identify a hiccup versus a true change in the long term trend? Is there a way we could have known that Zscaler wasn’t going to be another Nutanix?

Or maybe it was right to get out at that time, but they should have remained on our radar to catch their rejuvenation. Is that something that, in hindsight, was possible and that we can apply in the future?

And while tax consequences are rightly off-topic for this board, I do think that one’s strategy of what to sell and when have to take in account consideration of whether you’re trading in a tax-deferred account like a 401K or in an account that you have to settle up with the IRS each year. Taking a 15% to 45% haircut on your profits from a sale means your new investment has to do that much better just to break even.

I sure don’t have the answers, but it seems to me that we could have usefule discussion of how high-growth stocks don’t always (often?) experience consistent high growth, and how to identify whether month-to-month or quarter-to-quarter changes are merely blips or true indications of a change in the long term trend.

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SQ’s ATH was above $100. It was just over a year ago so they only hit a 52 week high @ $87

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SQ’s ATH was above $100. It was just over a year ago so they only hit a 52 week high @ $87

Thanks for the correction. I’ll move that back to the “languished” pile.

Although there is a school of thought that their Cash app, which has had a lot more downloads than Venmo recently, is Square’s future growth engine. Between the ease of paying/receiving money in Bitcoin and free stock trades, it’s been a fueling the company’s recent growth. Whether or not that will continue is perhaps something to consider.

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Of course some sold names are going to continue to do well, there are a LOT of stocks that do well, but as Saul teaches, you don’t need to own them all, just have good ones in your portfolio, right?

But old names doing well is only realized in hindsight. When the Twilio CEO was spouting off apples to oranges rev growth comparisons, it was time to jettison them for many here. When ZS was stating their sales cycle was lengthening, many here saw what they thought would be better opportunities elsewhere for their money. When SHOP growth was slowing dramatically, same thoughts. And yes, those have ended up coming back and doing well (some others haven’t). But if someone had kept all those that ended up coming back and doing well, and continued to invest in the new, winners, like DDOG, ZM, LVGO, FSLY, etc, then you would have 15-20 stocks, or more, to keep track of. And that is not practical, I know, I’ve been there.

Also, how would you know to only keep the good ones, you may have also stayed in NTNX, or PSTG, or others that didn’t fare so well.

Using Saul’s methods have given me just under 50% returns YTD, when the mainstream markets are mostly still underwater and struggling with a global pandemic.

With those results, I’m not looking for ways to reinvent the wheel.

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Also, how would you know to only keep the good ones, you may have also stayed in NTNX, or PSTG, or others that didn’t fare so well.

Well, that’s exactly the question I’m asking, not rhetorically.

And, even if not staying in, how to keep them on the radar to catch a possible turn-around?

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Also, how would you know to only keep the good ones, you may have also stayed in NTNX, or PSTG, or others that didn’t fare so well.

Using Saul’s methods have given me just under 50% returns YTD, when the mainstream markets are mostly still underwater and struggling with a global pandemic.

With those results, I’m not looking for ways to reinvent the wheel.

Amen brother! You have no way of knowing whether a slowing growth stock will re- accelerate at some future date. Most often it does not. All you can determine is that the stock which you choose as its replacement has growth parameters sufficiently large to justify a switch.

I sold most of the laggards , some before I found this board, and kept a handful, Even at that my portfolio is up 54% in 7 months from the time I began to adopt this investment approach. I know its not a regular occurrence but it does illustrate the point.

Cheers

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how to keep them on the radar to catch a possible turn-around?

I tend to keep a 1% holding to keep them on the radar. I did that with SHOP, SQ, ZS but not MDB. Admittedly it hasn’t made a big difference to my returns but psychologically it helps and I did end up buying more SHOP as I was still following the news reel

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With those results, I’m not looking for ways to reinvent the wheel.

Sure, but some of the stocks we’ve discarded are doing better than some of the stocks we’ve moved into.

Using Saul’s methods have given me just under 50% returns YTD

That’s great! But, SHOP is up over 90% YTD. Zscaler is now up over 110% YTD. MDB over 76% YTD. Even NVDA is up over 50% YTD. OK, perhaps YTD isn’t the best metric. So, let’s look at annualized and compound returns since selling.

For instance, many abandoned SHOP around $145 around Aug/Sept of 2018. Today it’s over $757. That’s a 422% gain in 21 months, 241% annualized, or 157% compound annualized ROR.

NVDA was sold by many around the same time for about $250. Today it’s over $353. That’s a 41% gain in 21 months, 23.5% annualized, or 21.7% compound annualized ROR. That’s still not shabby, and better than stocks like Elastic or Docusign for some people.

you would have 15-20 stocks, or more, to keep track of. And that is not practical, I know, I’ve been there.

I’m different I guess. For me personally, the hardest part is the early part - getting to know the company, its products, how it makes money, what the growth has been and likely will be. How they do their accounting, how transparent they are with what’s going on, what data they tell us and what they hide (and figuring out why), as well as whether they are typically conservative or aggressive in stated guidance. Once I’ve done that, tracking the changes affecting a company is relatively easy.

For me it’s easier to keep track of 2 companies I already understand than it is to get up to speed on and keep track of a whole new company.

I understand and acknowledge that this may not be true for other people. One would need to understand the issues that are making you sell / thinking of selling and decide whether they are short or long term in nature. And if you are selling, you have to keep following to decide when to get back in, if ever.

The current example that’s on my mind is Nutanix (NTNX). mekong22 just gave a great May Portfolio Update here: https://discussion.fool.com/mekong2239s-may-portfolio-update-345…

He’s up over 50% on NTNX shares bought in April. His rationale for re-investing in NTNX is:
84% of their billings are now subscription, and subscription is now growing at 43%! Just because their GAAP accounting has shown revenues only growing at single digits in recent quarters, really isn’t reflective of how the business has performed. Keep in mind NTNX’s total revenues are still much higher than most of the SaaS companies we follow. It’s a much bigger company with a much lower market cap. For their subscription, which is the large majority of their business, to be growing at 43%, I feel their valuation is incredible cheap.

At this moment in time, it’s going to take me much less time to get up to speed on where Nutanix is right now. I already spent a whole bunch of time in mid-2018 understanding its products the their appeal (you can read my thoughts here: https://discussion.fool.com/what-nutanix-really-does-33158672.as… ), so compared to understanding new companies I’m considering, say Cloudflare or Livongo, I’m already a leg and a half up.

And, since I have concerns about Zoom and especially Roku, I may end up pulling money out of those to invest in NTNX. If so, I’ve not increased the number of companies in which I’m invested. We always are on the lookout for new companies in which to invest - so why not consider old favorites, especially since they’re easier to get up to speed on and then decide?

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No need to picky yourself about the metrics for your own portfolio, no one is perfect, people need to keep learning while you do the job right. Just choose the company you like to live with, and check the mistakes you made while others posted their own monthly review.

You never know what stock you left could be next TWLO or ZS. This just means Saul’s board could pick really good company even we don’t own them anymore.

Rick

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Hey Smorg,

You made the following statement:

The current example that’s on my mind is Nutanix (NTNX)…up over 50% on NTNX shares bought in April.

Saul said the below in his May review that more than answers this better than I could so I’ll repost this portion of his report here (bolding is mine):

But what if one of the ones you stayed in was Nutanix? After all, it is back up over 50% to $24.06 from $15.60. However its high was at $63 in 2018, and $54 in 2019. Would you be glad that it’s now up to $24??? while you’ve been sitting in it for a couple of years now, with all that opportunity loss, while our stocks went up and up. Let me put it into simple-to-understand terms.

Nutanix’s high was on Aug 30, 2018, a year and nine months ago.
On that day NTNX closed at $60.82. Today it closed at $24.06.
On that day AYX closed at $56.65. Today it closed at $143.94.
On that day OKTA closed at $61.69. Today it closed at $195.58

Nutanix is DOWN 60.4% since then.
Alteryx is UP 153.0% since then.
Okta is UP 221.1% since then.

And what does that mean in dollar terms?
$100 left in Nutanix since then is worth only $39.60
$100 left in Alteryx since then is worth $253.00
$100 left in Okta since then is worth $331.10

So would you feel so vindicated if one of the losers you decided to stay in was Nutanix when everyone else got out? Or would you have been better off putting the money in one of our other companies? That is the question? How would you know for sure which one of the losers will come back, and even then, their gains would probably be much less than the companies that just kept going.

You say mekong is up over 50% in NTNX, but if you’re advocating that we sold out too soon, that’s not the case, because most of my NTNX purchases were in the $50-$60 range. I added some more on the way down in the $30s, but then finally got out. ALL of my purchases would have still been underwater. And even IF I had bought more at the $15 low, my total position of NTNX would surely be a massive loser!

This is the most important thing I’ve learned from this board in my 4-5 years of being on it, to drop the stocks you feel are not worth it anymore, and put the money into ones you feel are better opportunities. This alone is what has completely turned around my returns over the last few years from merely having market-like returns to absolutely crushing the market, even in today’s environment!

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You say mekong is up over 50% in NTNX, but if you’re advocating that we sold out too soon, that’s not the case…

Here’s one thing I said in my original post:

Or maybe it was right to get out at that time, but they should have remained on our radar to catch their rejuvenation. Is that something that, in hindsight, was possible and that we can apply in the future?

This is the most important thing I’ve learned from this board in my 4-5 years of being on it, to drop the stocks you feel are not worth it anymore, and put the money into ones you feel are better opportunities.

Sure. And I’m suggesting that something a “better opportunity” may be a stock we have previously gotten out of because management has turned things around. After all, we did like management at one time, so it shouldn’t be surprising that a not trivially high percentage of these management teams were able to turn the company back around to a successful growth path.

I, too, an up over 54% YTD in a portfolio that’s got a mix of stocks discussed here now, stocks previously followed, and some other stocks, including the-one-that-shall-not-be-named. ;^) I’m always interested in improving my results.

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