Despite the great earnings announcement today and the upward guidance, I exited My PLAN position today to reallocate the funds to a few other stocks I like better…OKTA and ESTC in particular. No complaints at all, as the stock was up 17% this morning!! I now have just 10 positions again. My average the past 5 years has been closer to 15 stocks, so I am more concentrated that I have been in the past. Don’t get me wrong, I still like PLAN and suspect they will do fine, however, over the weekend, a friend and I had done a detailed analysis of PLAN and while they are doing great compared to so many other companies, I feel there are other “horses” that are growing subscription revenue faster, better managed, more disruptive and have more significant barriers to entry and lead their industries. I could be wrong (and often am), so don’t take my word for it. I analyze each stock myself, make a decision…then track it. That’s how I learn, build a solid portfolio, and understand the stocks I own.
PLAN: I established a small 2-3% position in PLAN between 12/17/18 and 2/5/19 to explore the stock based on a recommendation by a few friends who actually USE the software and recent buzz in the Valley. I am very happy to have received a 27% return in less than 3 months.
After todays earnings, they have an impressive q/q subscription growth of 44%, and y/y subscription growth of 45%. That said, their q/q professional services revenue grew a scary 113%?! That is NOT the type of growth I was looking for and makes me wonder if they will continue to have to grow Professional services (at much lower or no margins) in order to add to the subscriptions growth. Hence probably the slightly lower overall gross margins reported. We shall see, but for now I have chosen to exit. I will continue to track this company and may invest again in the future, but will sit on the sidelines for now.
I regret I don’t post regularly enough to this board, but am very grateful for all the wonderful posts, analysis and discussions on Saul’s board. I was fortunate to have 47% portfolio returns in 2018 and am already up 31% YTD this year. Surprisingly (to me) the board has become an important data comparison point and source of new investment ideas, which is saying a lot 30 years into my investing career! (Yes, on a personal note, I turned 50 this month and vividly recall starting an internship learning to analyze and invest at a now defunct firm called Paine Webber, way back in 1989). I admit to still reading the WSJ and IBD…and am fortunate to live in Silicon Valley, so get to see and hear about a lot of SAAS and other companies first hand.
Thank you to all the contributors for your valuable time and effort to post your insightful comments and analysis.
Onward and upward!