To someone who waited for such a dip: If you are adding now, why didn’t you buy a week ago at their All Time Highs?
CRWD now at $106.21 is the same price as it was about 8 days ago.
DDOG now at $86.66 is the same price as it was 8 days ago.
FSLY now at $83.20 is the same price as it was 5 days ago.
Because our mind loves discounts. When looking at a chart it is much easier to buy if the price has already “proven” that it can be higher. This is the crux with our mind.
I actually did add some CRWD at $116, DOCU at $211, and AYX at $179 last Thursday and Friday, so I just missed the ATH so far, but came close. Obviously, I’m expecting that the difference in what I paid last week versus what I could have paid yesterday or today won’t matter in the next few years.
I’ve been evaluating and analyzing my portfolio and selling some old holdings to raise funds to invest in companies discussed on this board, so I had made the decision to sell some holdings on Thursday and reinvest over the next few days. I wanted to consider whether to add to current SaaS positions or also start one new positions with FSLY and LVGO. I did open a small position with LVGO at $101 and $104.
I was supposed to kayak on Friday, but my buddy decided it was too hot, so I stayed in that afternoon and made several of the purchases mentioned above.
Late Monday morning, I thought “I should have gone kayaking Friday.” I would have preferred buying at Monday’s prices, but there is no way I could have predicted the best price point last week.
Because I was still evaluating FSLY and whether to add to several other companies, I was able to make some investments this morning at better prices. So I added more CRWD, AYX, DDOG, LVGO, and OKTA and started a small position in FSLY.
So currently, I feel a little better about what I bought today than what I bought last week; however, I remind myself that if the CRWD shares bought at $100 are profitable in the future, but the shares bought at $116 aren’t profitable, then my evaluation of the company was wrong to begin with.
As mooo and Praveen both note, price anchoring can hurt returns.
So, even though LVGO’s price had gone up last week, after re-reading the following threads and other articles, I decided to open a LVGO position.
https://discussion.fool.com/lvgo-question-34551465.aspx
https://discussion.fool.com/lvgo-34474046.aspx
https://discussion.fool.com/lvgo-prelim-q2-update-34553616.aspx
In addition to the numbers, I am impressed with Livongo Health’s mission to dramatically change the health care market by helping people with chronic conditions live better lives. Although its early focus has been on diabetes and weight management, it has the potential to expand in other areas as well. However, if it is successful in these two areas alone, it has excellent growth potential and the ability to help millions. As the Covid crisis has shown, these two conditions have numerous negative impacts both on individuals and on society.
It seems to have network effects that will attract more members and keep existing ones.
In addition to price anchoring, another thing that hurts returns is confirmation bias. After buying LVGO, I was pleased to read this thread:
https://discussion.fool.com/lvgo-my-new-top-holding-34555683.asp…
But then over the weekend, I saw:
“Calling Shenanigans on Livongo”
https://discussion.fool.com/calling-shenanigans-on-livongo-34560…
Note: There have been a number of comments on this LVGO thread, so there is no need to add more or start a new one until there is more news, such as the next earnings report.
I appreciated the concerns and questions raised about LVGO and the answers provided. My point in bringing this up is that after reading the thread and seeing a price drop on Monday, I decided to add a bit more to the position. It’s still a small position, and I will be watching to see how some of the concerns are dealt with in the future and to see what the next earnings report shows.
Then I will decide whether to increase the position or not and try to ignore the price anchoring of what I could have bought it for last week or this morning. Reading this board has helped me make better decisions along these lines.
I hadn’t been following Fastly, but decided to look more closely last week. The following threads were useful:
https://discussion.fool.com/why-i-bought-fsly-34514084.aspx
https://discussion.fool.com/net-vs-fsly-which-is-better-34517311…
https://discussion.fool.com/fsly-thoughts-34527927.aspx?sort=who…
The company intrigued me, so, after seeing the price drop, it seemed like a good time to start a position and follow it more closely.
Shortly after doing so, I came across a Seeking Alpha article comparing FSLY and Cloudfare (NET). It mentioned some of the same issues raised in the “which is better” post, but decided that FSLY is a hold for now, while NET is a buy.
The article notes that Cloudflare offers a turn-key solution, which powers many small businesses. On the other hand, Fastly targets nearly exclusively large medium sized businesses and up.
It states that NET has grown faster with revenues up ~48% y/y from a higher base while Fastly’s revenues were up ~37% y/y from a lower base.
This is likely the result of Cloudflare’s age (founded two years before Fastly) coupled with its “land and expand” and “masses not classes” strategy.
However, FSLY is projected to grow at ~32.2% CAGR versus N at ~30.9% over the next three years.
It discusses a higher TAM for NET ($47 billion) than for FSLY ($35 billion), partly due to Cloudflare’s wider array of offerings for its users.
And although the Net Retention Rates favor FSLY at 130% vs NET at 115%, the author thinks that this is partly explained by the churn of NET having more small customers “the masses.”
Obviously, I would have preferred to see an article calling FSLY a buy (due to confirmation bias), but the article raised several good issues for me to watch as I decided whether to add to my small position and whether to look more closely at NET.
All the best,
Raymond
