Reflecting on Consensus

Investment Analysis Clubs Saul’s Investing Discussions
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I’ve glanced through all the portfolios we’ve posted on this board recently. There are many differences. Some are very concentrated with several double digit positions, with some even 20%+. Others like me are trying to increase the number of positions rather than have large allocations.

We will always have our different styles. And even disagreement about companies to include is a good thing – we don’t want to be an echo chamber. But it’s interesting how much we DO agree.

Most of us hold:

ELF
AXON
NVDA
TMDX

More than half of us hold:

MELI
CRWD
TTD
SMCI
MNDY
NU

As I reflected on these, I realized the only ones I don’t hold are NVDA (I mean, my bad…I’ve been totally flummoxed by the most obvious winner of the past 2 years) and TTD and CRWD and TMDX which I love but are just too expensive (although I bit the bullet Friday and re-took a tiny sub-1% position in TMDX).

Less popular and/or battleground stocks that the board has discussed:

CELH
IOT
TSLA
ZS
HIMS
APP
DDOG
NET
SNOW
NXT
MU

Now here’s where it gets interesting to me. These companies have been discussed and the majority of the board seems to find them wanting. If you hold a large position in any of them, I think you really need to ask yourself what everyone else is NOT seeing in these companies. I think a good exercise would be to try to give the bear case. I’ll start.

I’ve had Zscaler as one of my largest positions the last few months, although at least it’s been a single digit allocation (but that’s all I’ll say in my defense). In April at around $170 I thought it looked like a no-brainer. Now at ~$200, maybe there’s not as much upside.

Maybe that’s enough of a bear case: it’s boring. It’s not cheap, it’s not hyper-growing. It’s just like SNOW and DDOG and NET and others that are now sort of uninteresting to investors. But I’ll do a little better. I think bears could rightly point out that CRWD has just outpaced them in every way. Better growth at a much bigger scale. Better profits. Less SBC relative to revenue and FCF. Leaner. Just better, by a lot. And even if they were on equal footing, CRWD is just overpriced anyway, so it needs to come back to the pack more than ZS needs more of a premium.

So it’s easy for me to see why many of you pass over ZS, as I pass over DDOG, etc. What am I going to do about this? I think I’ll keep the position small for now (5% or less), unless we get a big dip that makes it look like a no-brainer again.

I encourage anyone with a large position in a non-consensus stock to make your bear case against it. It might help you not to think everyone else is just missing something. Or if you still think that, I’d be interested to hear why.

Bear

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Hi Bear, here is what I am seeing for example in Datadog, that some on the board seem to be missing (I emphasize some, because I think saying “what everyone else is missing” is going a bit far, because I suspect there are still many less frequent posters and lurkers who are still very bullish in Datadog and other SaaS companies). Since you encouraged us to consider the bear case, let me just briefly start there, before getting into what I am seeing for DDOG. In its simplest form, the bear case for any of those SaaS companies is that their products lose relevance and/or are replaced by products of other companies. We could now have long discussions about the narrative for each of their offerings while bears would try to make the point that all these SaaS companies are continuing to drop revenue growth rates with no end in sight. Yes, revenue growth rates have come down from a couple years ago, but is there really no end in sight? Or are these companies “secretly” picking up the pace again without bears noticing? I’d argue for the latter scenario. In fact I’d even argue that they are picking up the pace in plain sight - that is, if one is willing to look beyond the enormous forward pull of revenues those companies enjoyed after COVID. So, if true, where is this “plain sight” in the numbers? We need not look further than at a somewhat forgotten metric, that has been part of our tracking sheets for a long long time, but is rarely mentioned these days: this metric is raw YoY increase in revenue. I am just giving the example of Datadog here, which tells the story in one graph, more beautifully than I could with a thousand words:

DDOG_Raw_YoY_Revenue_Increase
DDOG_Raw_YoY_Revenue_Increase1016×910 71.4 KB

Here you can clearly see the revenue forward pull as a result of COVID (starting in Q2 of 2021 which was the first quarter lapping the QoQ low in Q2 of 2020) and more importantly, you can see on this plot how Datadog picked up the pace right after Q2 of 2023, growing YoY net new revenue even faster than before COVID. I encourage you to look at the same type of plot for Cloudflare and Snowflake which tell a very similar story; a story of significantly and durably growing net new revenues, which is exactly what we want to see as growth investors.

-Ben

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This is a great topic for discussion.

First, there’s some assumptions we can make. A portfolio made up of the consensus companies on this board is going to vastly outperform the S&P in the long run. We know this because Saul, yourself, and others who have tracked their results for a long time have posted returns that typical financial advisors say are impossible to achieve.

We also know we can easily achieve these results by simply buying these companies and doing little research. There’s a lot of smart and talented investors on this board so we can do well with this approach, and this approach could make sense for someone just getting started with growth investing.

I believe our goal as individuals should be to outperform the average returns of the board. Most board members are attempting to do this even if this is not their explicit goal, and why we have such a wide variety of companies. To achieve this outperformance of the average board results, one is going to have to leave out some companies in the consensus companies, and have companies that are top conviction positions outside of consensus. This is also going to leave us open to under-performance if we pick companies nobody owns, and they do poorly.

One thing I’ve noticed about a lot of bear cases on companies I own which are not consensus is they may have made incorrect assumptions about the business. There’s a logical reason for this in they will almost always know less about the company, simply by not being invested. Usually someone with a 0% position isn’t going to be researching the company the same way that someone holding a 15%+ in a company is.

It’s a solid approach to do extra research on companies which fall outside of the board consensus. Anyone of us can easily overlook critical aspects of a business which can cause it to fail. Each business is unique and complex and the human mind isn’t capable to analyze all the factors perfectly.

There are three companies I have which fall into the grouping of not being followed or not liked by the board. Another commonality of the three companies is that they are in industries which many board members would never consider of: solar, tele-health, and free to play games.

For the three in the category I’ll list out some bear cases and my short refutation of those points in parenthesis,

Hims & Hers Health

  • Telehealth companies typically do not do well (this is a greenfield market for a company to do correctly)
  • They are a cheap provider of generics (The offer a lot of unique products and form factors)
  • There are significant competitors in the space (The competitors are small, unprofitable and have poor reviews)
  • This is an unregulated and shady business (The company works directly with the FDA to produce products which need a prescription)
  • Margins are poor for this type of business (The company has an 82% gross margin and completely owns the pharmacies producing)

AppLovin

  • Free to play games cannot be a serious business (The growth of free to play games is big business)
  • This is not a subscription model (The customers keep coming back and cannot buy enough, meanwhile the SaaS market seems broken right now)
  • The company has a lot of debt (They can easily pay back this debt but instead choose to reduce shares outstanding by over 20%)
  • AppLovin is overly reliant on iOS and Android ad policies and Apple has borked the market before (A realistic bear case, but mobile is not something new, companies as large as Meta completely depend on the same policies. AppLovin has navigated the changes well)
  • AdTech especially on free to play games is a murky business at best (AppLovin is dominant in a growing field nobody else wants to get into, and they have opportunities to expand TAM by getting in other fields which advertise such as CTV)

Nextracker

  • This is a low margin business and race to the bottom on price (Nextracker has the highest tech solution, and pricing power as their global supply chain was built by their parent company)
  • The tracker only adds a small percentage gain to the solar panel (Almost all new projects use a tracker because if you can spend 10-20% and get a 30-40% MW yield it always makes sense)
  • There’s tons of competitors and many are from low cost countries like China (Actually the tracker portion of solar only has about 5 players, which is unlike the panel producers which have endless competitors)
  • Regulations could expire especially if there’s a change in administration (This is a very real concern of mine too, however I believe this company can do well without the “45X” regulation. It may be somewhat priced in that this regulation will end)
  • Solar is a secular business that will crash soon (Most metrics show large growth ahead of estimates, and I’ve found a lot of evidence that places like Saudi Arabia and China are all-in on solar)

There’s one company I would like to challenge from the consensus group which is Axon. The CEO Patrick Smith has a long documented history of unethical behaviors and I’m curious if investors are aware of this, or why they consider this a non-issue?

  • Nearly the entire Axon Ethics board resigned after the CEO forced his agenda to equip drones with Tasers. The ethics’ board contention was that an idea like this needed to be considered very carefully. Since that time the company has bought two drone makers and pressed ahead with it’s agenda.
  • The company worked with police departments to reclassify deaths from Tasers as Excited delirium - Wikipedia. Here’s how Taser inserts itself into investigations involving its own weapons. Axon works to cover up it’s Taser deaths which are a lot more common that most are aware of, here’s one story of about the estimated number of taser deaths which is almost certainly an under count. For every story of a life saved from a Taser vs gun there are still massive police abuses with these devices. Some examples: one officer was found to have discharged his Taser over 500 times in a short time frame, two officers tased the same person over 50 times killing the person, an officer tased a pregnant woman after she pleaded not to be tased because she was pregnant.
  • Axon is known for a toxic and cult like workplace where the CEO encourages people to get tased at work, live on campus, and get tattoos of the Axon logo. The CEO proudly displays his tattoo for media encounters. This is absolutely cringeworthy to me that the leader wants to build loyalty to the company itself like a cult, when realistically companies like this are firing people all the time for various reasons.

Additionally I got burned by Axon once before when it was still called Taser. The company’s numbers were going to down and all the CEO could do was go on non-stop spending sprees for frivolous items like retina scanners, marble floors, and private jets for him and brother who also ran the company. This CEO has shown consistently he doesn’t care about shareholder value and values an obsession with gadgetry above all else. I decided to invest in this company only again at one point because the company effectively changed his role to traveling salesman and hype man which is his main skillset.

On ZScaler,

  • I view the company as having poor tech or an inferior solution that was built before most applications were cloud native
  • I believe Cloudflare to have the superior technical solution and they are a company which has proven they will sell a product at breakeven
  • The Zero Trust Solution is still not a must have for enterprises. Most enterprises are not even aware of the need (A bull case could be this is greenfield and open)
  • My own anecdotal evidence working in software engineering is that I’ve never seen any of their products or heard them mentioned by anyone. This is in contrast to products like Datadog, PagerDuty, Atlassian’s JIRA, and Slack which I’ve seen universally used at all of the recent companies I’ve worked for. I have the general impression their solution only works well on Windows and not Linux/Mac.

There’s a couple things I see ZScaler as doing really well though,

  • They have probably the best sales organization in all of SaaS. They really exceed at sales, especially comparing to Cloudflare which is especially impressive when I consider ZScaler to be technically inferior
  • Their last quarter was the first profitable one, and the market may not have awoken to this switch over to profitability. I’d be curious to know more about the reasons.
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@SlowAndFast and @wpr101 -

Thank you for the responses, but the exercise wasn’t to list a few bear points and then knock them down. The exercise was to see if you could actually update your beliefs by stretching yourself and managing to see what others are seeing. By doing this, I actually came to believe that there are weaknesses others saw in Zscaler that I couldn’t, and so I lowered my conviction.

I encourage you to truly take a crack at this. I guess perhaps it’s not easy…but I think we have much to learn from each other. If you really think you’re right and everyone else is wrong, even after re-examining things, please let me know, and I’ll be happy to contribute some more items to the bear case to make it a little more difficult for you to refute. But again, I think it’s worth really trying this on your own.

Bear

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This indeed is an interesting exercise. Thanks for the topic, Bear!

At work, when I am negotiating I often ask this question - what is that one assumption, if turns out to be not true, you would change your opinion? Very few actually answer with an assumption. Most usually say, these are facts or truth and they won’t change their minds. So to me, what assumption I am standing on, especially positions that are oversized is key.

Looking at the work you have already done Bear, looks like 2 of my four double digit positions are in the “Most of us hold” category. And one squeaked into the “More than half of us hold” group. Phew!

That leaves me with the hot potato, HIMS!
Currently 20% of my portfolio. So here are things that would make the bear case louder for HIMS and make me pause/trim/sell out.

  • Revenue Growth Slows Down below 30% - the revenue growth slowing is a concern already, mainly because 4 quarters ago it was 88% and now 46%. But the drop in rev. growth has slowed down to 2% qoq and I will be paying close attention to that.
  • Margins and FCF starts going the wrong way - They have recently gone FCF positive. If they start printing two to three quarters of negative FCF, that will definitely give me a pause
  • GLP1 drug shortage ends and HIMS revenue starts to overtly rely on GLP1 sales. This will have both headline and bottomline impact. So I will definitely trim in this case.
  • Market share declines - As a tele health provider, they have been taking market share from competitors every quarter. Currently sitting at 54% of new customers. If this starts to go the wrong way, that will be a red flag as well
  • More product launches - there are about 11 more products they have highlighted in their investor deck for future launch. If this pipeline slows down or they fail to launch new products in couple of quarters, that will be another red flag

Ok, I am going to stop before I scare myself anymore.

Thanks,
Ryshab

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@PaulWBryant I’m not clear what the point of the exercise is maybe because I don’t see any bear case you provided for ZScaler? I looked through the ZScaler thread linked and don’t see anywhere you pointed out something which lowered your conviction, or you see as a negative.

I thought what you were suggesting doing is steel manning the bear cases for our companies like I did in my post to see if they make sense. Most of the bear cases I presented are from what I’ve heard other investors say for why they wouldn’t invest in said company. In some of my comments I mentioned which ones are concerns to me. None of those have to do with valuation or whether I think something is overpriced.

It seems like you are investing based on valuation and focusing on purely financials, as opposed to what the company is actually doing, your vision for the company, or your conviction in the company. You’ve mentioned price ranges of where you see ZScaler is cheap at $170, pricey at $200 and plan to trade based off of that. That seems like a complete antithesis to Saul’s approach? How is that investing in your top conviction companies if you are just going to sell out of the company at an arbitrary price?

Here’s what Saul says about selling on price in the Knowledge Base,

I don’t sell out of a stock because the stock price has gone up. Ever . That’s not a sufficient reason to me, no matter what it does to the EV/S. If my position has become too big I’ll trim my position around the edges…

In your original ZScaler write up you wrote,

Valuation-wise, ZS’s trailing PE is 66.4, lower than MELI’s! (But to be clear this is very apples to oranges, because ZS’s “E” is non-GAAP and MELI’s is GAAP.) But ZS’s (non-GAAP) net margin is a lot higher, about 21% by my calculation. So their PE is a lot closer to their FCF multiple, 54. Therefore, it’s unlikely ZS’s profit margin will double in short order, but I still think it can expand some, and rapidly growing revenue will be a multiplier, so I see the above chart continuing.

I get that you like the numbers, but what do you like about the company other than that? The only thing I saw you mention in the ZScaler thread that you like other than financials is that they are a market leader.

Do you see the Zero Trust market as being greenfield? Do you think all enterprises will eventually need this product?

Do you think ZScaler’s product is superior to Cloudflare’s?

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The point is to actually see what others are seeing and change your belief/perspective on a company.

What I was trying to say about the ZS bear case (in the first post in this thread) is that like DDOG and SNOW and NET, there might just not be enough growth going forward. Previously, I was probably giving too much weight to the “cheap” valuation, so I noted that and lowered my conviction and my position size.

Hat tip to @ryshab for mentioning some risks for HIMS that could actually happen and would change his conviction. My gentle nudge: Maybe the fact that those (and other) risks are enough to keep most of the board out of HIMS, or keep their position small, beg the question of whether a 20% position is justified. Is HIMS really the best idea available right now? Better than all the consensus companies?

But look, I know consensus is far from perfect. A lot of us were in BILL and ENPH for a while last year before we were proved wrong. Most of us missed SMCI until recently. But in general, I think there is something to be learned from consensus. Maybe it doesn’t have to push you out of a company you like, or into a company in which you don’t agree with consensus. But I feel like at the very least, when we are off on our own with a non-consensus company, it can help us re-evaluate our conviction (and maybe our allocation percentage).

Maybe it’s not even about seeing what you’re “missing,” but rather, seeing what you’re underappreciating. Like when I got out of Remitly, I realized that I was hand-waiving their lack of profitability too much. It’s not like I didn’t know that was an issue. I was just hoping it would get better. The rest of you were being more realistic.

Anyway, I’m not sure if any of this helps. I still like the exercise, but I’m fine if we just want to leave it alone.

Bear

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That’s happening all the time on this board in various threads. Here’s a good example on the ARM thread where I had started an 8% position one day, and after another poster informed in the thread that Softbank owns 90% of the company, I sold my whole position the next day. That ownership issue of an investment bank holding 90% of the shares was unacceptable for the investment criteria I am looking for.

That is the real value of the board to me, because I could have gone a very long time investing in ARM before discovering Softbank owns the company. In about 1.5 months time since I posted about ARM went from $120 to $180 or about a 50% gain, so sometimes it doesn’t always play out the way you want. It’s still better off for me to get that information early and make a decision based on it.

Maybe the fact that those (and other) risks are enough to keep most of the board out of HIMS, or keep their position small, beg the question of whether a 20% position is justified. Is HIMS really the best idea available right now? Better than all the consensus companies?

Are you really trying to suggest that board members lower their own conviction or lower their allocation in positions because they are not in the consensus group that the board invests in? That again seems against Saul’s philosophy which is to think for yourself, and make decisions based on your own conviction. There’s no part of the philosophy which says to look up what others are holding, and adjust your allocation based on that. On one hand you are saying we need to avoid group think, but then saying you should seriously consider re-evaluating your companies if they are not in the consensus.

I’m curious why I cannot get anybody to respond to my bear case for Axon with the CEO’s unethical actions. I don’t understand why this topic has never come up on the board, or why investors either don’t care or don’t know. I’ve mentioned the CEO’s actions before for my own reasons for selling, but I’m also hesitant to post too much about it because I know so many are invested in the company. I think we should be looking critically at any company, and not just saying this is a good investment because it is “consensus” and other investors like the company.

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Yes, I really am. I see no reason why 2 things can’t be true at the same time:

  1. I have my own opinions
  2. The opinions of others lead me to reconsider my non-normative opinions.

For me, if I can’t convince many other folks that a rogue company I’m invested in is a good one…I continually ask myself why. I think that’s a good practice. I don’t assume everyone else is missing something.

I’m curious what others think about this.

Bear

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Like I wrote, when others present information that changes my opinion such as with ARM I change my conviction. What I am not doing is counting up how many board members are investing in specific company and putting some value on that. I’m not sure why you are labelling some company as “rogue” because only a couple investors on the board invest there.

It sounds you would have considered Supermicro as a “rogue company” last year, but now you are investing a tiny allocation to the company. Do you have any conviction in the company Supermicro and why do you like it? Or are you simply recognizing more board members are adding Supermicro and that makes it a worthwhile company to look at now?

I’m still waiting for you or another board member to address the bear case for Axon based on the CEO’s proven unethical behavior. I know I asked you about the story regarding Axon’s toxic workplace awhile back in your monthly summary because it was your top holding. To paraphrase what you wrote, you said you would place zero value on a Reuters hit piece. To me it is a red flag for Axon that nobody can provide a serious rebuttal to what I wrote about Axon above.

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Lots of point-counter point in your references. Lots of controversy with the product for sure. But what we have is basically something that reduces fatalities - even though it can be mis-used or inadvertently cause unintended deaths under certain circumstances. The company’s moat is super wide and they have added software with body cam footage in a time where these things are sorely needed, further providing advantages to them and their customers.
Adding it all up, the CEO has benefited the company more than he has hurt it, wouldn’t you agree?
As for the Ethics Board - They were advisory and got their nose out of joint when he didn’t follow their advice. Maybe it works and maybe it doesn’t. Successful companies float trial balloons all the time - check out AMZN, for example.

Vince

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My gentle nudge: Maybe the fact that those (and other) risks are enough to keep most of the board out of HIMS, or keep their position small, beg the question of whether a 20% position is justified. Is HIMS really the best idea available right now? Better than all the consensus companies?

I agree, it is no doubt an oversized position. I have seen so much losses that being up so much on a position and having to manage risk is new to me, lol. So I am sure I need to learn a lot in this area.

In my case, I have been accumulating HIMS since late 2022 when the p/s was around 2 something. So the position actually has earned it’s size. I only added once recently when I saw the CEO fumble and the stock got beaten down for political commentary. Had nothing to do with fundamentals.

And it did reach 25% size of my portfolio, so I trimmed it down to 20%. (essentially 5% my portfolio size came out of HIMS). I would do it again if it gets to 25% ever again. But my personal opinion is it can reach a p/s of around 10. Why? Because if you look at some non-saas companies like ELF and CELH, they have reached that valuation. Of course, HIMS has to perform. If it holds 35 to 45% rev growth, with 80%+ margins and improve their 5% FCF to say 15 to 20% in the next couple of years. It will have some elite level numbers. That is not very unrealistic, based on the way they are currently performing.

To you point, is it the best idea right now, i don’t think so! There are other better companies but are quite richly valued. Every time I say CRWD, it makes me cry! But HIMS is a combination of getting better at quality numbers and still undervaluation that is unique.

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Wpr101 - long time lurker and first time poster. I am grateful for all I have learned on this board and for the contributors taking their time to share. I also really appreciate your contributions and wanted to give you a response to the ethical issues you cited for Axon’s CEO.

I think the lack of response it because ethics is a very subjective topic. Some on the board may have ethical reasons not to invest in HIMS, data scraping companies, or even TSLA. In my opinion, the board seems to function best when looking at objective data and topics that are subjective tend to wander and end inconclusively (see TSLA, for example).

To illustrate the subjectivity point, let’s take the example of encouraging employees to live on campus, get tattoos and taser each other. Some may view this as a creating a toxic work environment, while others may see it as building a motivated, tight-nit, focused team that is intimately familiar with their products. Many sports teams and military units (of which I have personal experience) use a similar approach in order to build team cohesion. Both sides have valid points, but ultimately this is a subjective argument.

From a personal perspective, I look at a lot of factors before investing in a company. I consider ethics as a minor factor and not determinative on whether take a position in a company. It would become determinative for me if it crossed into illegalities or there are attempts to deceive the investors.

Note: I don’t have a position in AXON, but it is on my watchlist.

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Bait is not really in the spirit of the board, but I’ll comment here.

Elite performers sometimes have a singleminded focus that’s hard to articulate and even harder to understand. I believe @Rudderspin has it exactly right. While he/she/they provided the military angle, I spent three decades in professional sports. Talk about unforgiving. You literally do the job today or someone else will be doing it tomorrow with a gang of talk radio callers telling you not to let the door hit you in the a** on the way out. It doesn’t get starker than that.

We shouldn’t underestimate the sheer will of leading any company this size. A lot of behaviors often come off as unlikable or even over the line. If you don’t believe me, read Walter Isaacson’s biography of Steve Jobs some time.

What you call unethical others call commitment. For better or worse, no top CEO is your kindly Aunt Mary or Uncle Fred. While I might not want to work at Axon, I don’t begrudge anyone who does. If anyone doesn’t like CELH’s ingredients or the tatoos on Axon’s CEO, then don’t invest. There are literally thousands of companies out there. One of the perks of investing is there are plenty of ways for you to do you.

I totally get @PaulWBryant’s point about using this board to stress test ideas. However, this is the risk of any thread along these lines (and why I usually sit them out). Just a handful of messages in we are already spinning into topics outside the companies at hand and underlying business performance. If we can’t stick to that, there’s not much point in continuing the discussion.

Thanks to @ryshab for the introspection. Very well thought out posts.

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Wow, what a spiritied conversation.

Bear, I have to confess it took me a while to realize you call yourself Bear because your tilt in investing. At first I thought it was just an unrelated nickname like “Moose” or whatever. Dumb me!

I appreciate always hearing the bear case, including yours. Always. And yet I must agree with WPR101 - if we are intelligent investors on this board, we have considered the bear case and decided we disagree with it. And as WPR101 says, we are all independent investors making our own decisions. And there is always a bear case to every stock. ALWAYS. We have to invest despite the bear case on every stock we own.

I certainly would want to hear pieces of a bear case I have yet not considered. So by all means everyone, make your bear case.

But I do not understand why you would post that you want us to consider and change our minds based on our own bear cases. By definition if we know about these bear cases, we have decided to invest despite what we know.

We are not of one mind. Sometimes going against the board - SMCI immediately comes to mind - really pays off. And sometimes it doesn’t.

If i were to post the bear case for stocks I own it would naturally follow that I would post the refutation because I own it. It seems more useful for me to see the refutation of others’ bear cases along with the bear case rather than the bear case without the refutation. I want to know why you are ignoring the bear case, maybe it will convince me to do the same! Or what would change your mind, like ryshab!

People on the board have gotten me to sell stocks. And buy stocks. That is what makes this board so amazing. I think it’s great you asked for this exercise but what would get me to sell a stock is a NEW bear case. Not the ones I have already considered and invested in spite of.

And now, just for fun, I am going to post a bear case for AXON that has kept me out of this stock and to my knowledge has never been posted before. Feel free to refute!

I owned AXON early on, before the board, and made some good money on it. I did not know about the toxic behavior - that affects some people and others not, it does affect me, I would never invest in TSLA but respect the rights of others to do so.

The reason I left AXON, somewhat prematurely, is I asked myself, how penetrated are they into the US market and what other markets are there beyond that? I hear some board members talk about vast international opportunities. I respectfully disagree.

In order to buy AXON’s products you need three things:

  1. Money
  2. A problem with your policing
  3. A desire to make things better for your population vis a vis your policiing

Well, money rules out a huge portion of the world. A desire to make things better for your population rules out another huge portion of the world (Putin’s Russia, anyone?)

So that leaves basically Europe right now. And most countries in Europe don’t have a problem with policing. France, a little. Britain, a little. But British policemen don’t even carry guns!

Am I missing something? And if it’s just the US market, I do get that software is opening new markets for them and they have definitely exceeded my expectations, but budgets are not infinite.

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I thought he choose the name after Paul William “Bear” Bryant the head coach of Alabama Football team.

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Bear, my apologizes if that’s true! So it’s just a coincidence that since I’ve been on this board, you primarily take the bear case. But what a lucky coincidence that you have taken that name.

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I would like to thank both Bear and wpr101 for the exchange, which I think creates a lot of value. As investors, we always need to entertain both sides of an argument, to look at both the bull and bear cases before making a decision. And I try to do the same when it comes to consensus. It’s a helpful tool, but we must be careful not to rely on it too much.
This topic has also pushed me to dig into ZS a bit more, particularly regarding their technology, by reading opinions from their users. So far, there are a lot of mixed signals, which is not what I want to see. The worst part is reading complaints from regular workstations users who have performance issues caused by the zscaler service. These seem to be caused by misconfigurations (i.e. it’s not normal), but it says something regarding the ease of use/setup of their solution.

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I sum my views on this by quoting a prior poster here from some years ago.

‘I have enough doubts of my own. Please point out why you believe in this company.’.

Lose aversion is much more powerful than group think, IMO. Saul’s brilliant criteria for how to get started looking into a company set the bar high enough for me. Although, I do appreciate people highlighting why their not in a position. I see no reason to beat it like a drum across several threads like everyone didn’t hear it before. And I couldn’t agree more with wrp101 that valuation is not ever unsaid.

Best

Jason

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This thread has been fairly wide-ranging, yet always interesting. Of the many stocks followed on the board, AXON has always been on my short list, but I have never gained enough confidence in my understanding of it to ‘pull the trigger’ (so to speak).

Mizz made some points that I hadn’t considered before, and I wonder if any of the current holders – I guess that includes Bear, but anyone else who feels confident in Axon – have any reasons why those concerns are not so important?

Great discussion!

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