Portolio & Increasing Your Quality

Investment Analysis Clubs Saul’s Investing Discussions
#1

Hi Everyone,
If we are in an extended downturn, I think the best plan is the same as if you are in a bull market: always seek to increase the quality of your holdings. Here’s my portfolio for your consideration:

12.9% Alteryx - you know the story, they are rocking the data analysis world

10.8% Twilio - leader of communications as a service.

10.7% Mongo DB - the future of databases, if they can keep others from pilfering IP.

9.4% Oneoke- coiled spring due to the transition to natural gas & well placed pipelines.

9.4% Mercadolibre- Great growth in online shopping and payment systems in Latin America.

7.9% Square - cashless society & stupid drop due to CFO departure - might buy more.

7.7% The Trade Desk- Great tailwinds & advertising alternative to Facebook and Google :o)

7.5% Skyworks- Business has been SOLID, but they have been punished due to being a large Apple supplier. I think 5G will cause a step change in cell phone demand + IOT device sales to benefit Skyworks greatly.

4.9% Align - crushed due to a recent marketing debacle, but TAM still looks good. Competition needs to be watched carefully - low conviction stock.

4.1% Zscaler- Awesome earnings. Planning to nibble a bit at this, though valuation seems high to me.

3.5% Arena Pharmaceuticals- very, very promising pipeline, with exceptionally low risk for a clinical stage pharmaceutical company.

Cash is balance, but being steadily employed in these and new ideas. Stocks that I am considering:

Teledoc - demographic shifts should benefit this business, though I am not sure the management can scale this well enough to capture the value.

Abiomed- Demographics and the technical moat seem to position these guys well. Recent drop makes them even more appealing.

OKTA - Keep telling myself that I have enough SaaS stocks, but their performance seems to be too good to stay away from.

Illumina - Leader in genetic testing.

Guardant Health - Love the technology around cancer detection.

My day job does not permit me to spend the time that Saul and others do on their portfolios. I am deep into 4 R&D projects that I love. I could retire, enjoy spending more time on my investments, but I would build a Bat Cave to do research and end up doing the same thing anyway. Because of that and because I am stubborn when it come to investments, I tend to wait and see more than Saul does. That does not benefit me during bull markets, but is helpful now as I am finding a bunch of stocks that I think are attractive now.

Anyway, if your looking for some growth ideas, I hope these are worth you consideration.

Best,

bulwnkl

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#2

9.4% Oneoke- coiled spring due to the transition to natural gas & well placed pipelines.

Bulwnkl, since you’ve suggested Oneoke as a growth idea, can you provide some numbers or details to explain why? That would give us something to go on.

Thanks in advance.

Speedy

#3

Hi Speedy,
I won’t go into a lot of detail on this because this is OT for the types of growth stocks most are interested in, but here’s why something with a lot value built in looks like it is poised for growth:

  1. There is a worldwide trend to move from coal to natural gas. Although the article discusses domestic conversions, the same is true internationally in places like China.
    https://www.powermag.com/coal-to-gas-power-shift-driven-by-e…

Natural gas releases far less carbon dioxide when burned than coal and a domestic abundance of gas has driven a wave of closures of coal plants. In 2017 utilities shut or converted from coal-to-gas nearly 9,000 megawatts (MW) of coal plants.

  1. Pipelines coming online have generated distributable cash flow growth of 25.7% coupled with a 5.8% current dividend.

  2. Sometimes the stock tanks because oil tanks. It has tanked recently due to the price of oil. This should not be an exact correlation. It makes money irrespective of the price of oil. It’s the volume of natural gas that is critical for this business. The last time I mentioned Oneoke on this board, it gained 100% in a year. I think it’s a very good value now.

  3. Oneoke has an excellent balance sheet with a debt to EBITA ratio of 3.4, way better than many pipeline peers.

  4. Its pipelines are in premier locations, so it gets way better returns - it has an ROE double its peers (16.6% vs 8.5%)

https://simplywall.st/news/oneok-inc-oke-delivered-a-better-…

The best analogy to Oneoke is a rock quarry. A rock quarry is a wonderful business because nobody wants one near them, so getting them approved is difficult. Once you have a quarry approved, you get product almost free, but you sell it based on comparative transportation costs. Prices are set so that it is just below the price required to ship from the next quarry over. Pipelines, in the same way, are way cheaper than any other transportation method so when they are in a good location, everyone one wants to use them. Prices are such that there is no economic transportation alternative.

Again, this is more a value or GARP stock, but it is one I like a lot. I don’t want to have a lot of discussion on this, because Saul put this board in place to cover growth stocks. OKE has a lot of value components to it. I think it’s pretty much off topic, but I hope this is helpful.

Best,
bulwnkl

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#4

Thanks bulwnkl. I appreciate it!

1 Like
#5

If you like oke you should look into Ge as well. However the common theory there is gas power plants are a horrible industry to be in right now.

Ge power division is having difficulty because gas turbine orders are at a 23 year low. And competitors are also I retreat. New power plants being renewable energy instead of gas is the main culprit, which goes opposite of what you’re saying. But if it’s true though, hopefully those orders come sooner than later. I recently purchased a little Ge in a taxable account and plan to add a little a month. If they don’t liquidate or dilute it should work out quite well years from now.

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#6

If you like oke you should look into Ge as well. However the common theory there is gas power plants are a horrible industry to be in right now. – 12x

If you’re even considering GE, google a few Seeking Alpha articles and read up. GE is in tremendous trouble. They’re trying to sell off stuff to pay down their tremendous debt and some of their businesses are in trouble as well. They just cut their dividend to a penny as they grapple with their problems and you can expect further debt rating downgrades.

I try to warn people off from GE because its such a horrific story. Beware…

Other than that, how did you like the play, Mrs. Lincoln? :wink:

Rob
Rule Breaker / Market Pass Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

4 Likes
#7

All,
I didn’t want to go off on a value tangent. I don’t mean to sound harsh to 12X. Maybe 12X is a contrarian investor, but I think GE is a train wreck due to its pension liability. I would stay far, far away from that. Dig into OKE numbers further if you wish. I think it is a great stock. More importantly, this is a growth board, not an income board or a value board so I didn’t want to go into too much depth on OKE or value companies out of respect to Saul’s wishes. I merely presented my portfolio as it is. It’s not 100% high growth stocks, but it is mostly growth stocks, and it’s the stocks I really like. As Saul says, we all need to make up our own minds.

Maybe we could refocus the conversation on the growth stocks I presented?

Best,

bulwnkl

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#8

Bulwinkl is right. This is completely OFF-TOPIC. Let’s please END THE THREAD NOW. There are whole boards set up just to invest in value stocks.

Thanks for your cooperation,

Saul

#9

Sorry Bulwinkl, our last two posts on this thread crossed. I wasn’t referring to your original post about growth stocks when I said it was off topic, it was that the thread somehow wandered off into Oneoke and oil and gas stocks, and then GE of all things.
Best,
Saul

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#10

I don’t pretend to have a good answer, but buying “quality” in a downturn only works if you are pretty close to the bottom. Fortunately, that is more often than not the case.

As i recall something like 90% or more of stocks are held by mutual funds and index funds. If and when downturns continue, fear increases and fund redemptions pile up. These entities that are holding 90% plus of AYX, WIX, TWLO, etc. sell indiscriminately and don’t care a wit about anyone’s opinion about “quality.” The downward pressure is too much.

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