MY PORTFOLIO AT THE END OF AUGUST 2022
As I usually do I am ending my calculations as of the last weekend of the month. Monday, Tuesday and Wednesday will slip into September. You can think of this as a 4-week summary if you prefer.
This sell-off has been going since last November, more than 9 months now, and has been very painful for me, and I’m sure for you too. However, all my main companies keep reporting good to excellent results, which softens some of the pain 
. But what is even better, our companies have taken to rising 20% the day after earnings, instead of falling after announcing good results. That says to me that weak results have been expected and priced in and when they don’t happen the stock goes up.
The last sixteen weeks seemed to have leveled out, and started back up. Our stocks are mostly way up from their lows. Bill, Crowdstrike, and Sentinel, haven’t hit a new low in almost four MONTHS! Mongo’s last low was three months ago. For Cloudflare, Snowflake and Datadog it was two and a half months ago. Does that sound as if we are still in free-fall? Granted, they all have a long, long way to go to get back to where they started at.
I explained how my portfolio closes hit the same bottom FIVE times back in May and June, within a range of 2.1% from highest to lowest, which I considered within the margin of error with the eight different stocks that make up my portfolio each wandering around independently over a period of five weeks!
And it bounced each time. To me that meant that there was strong support at that level, and that a lot of buying came in and stopped the decline. It’s now been two and a half months(!) since that last low of down 33.1% of what I started with on June 16, and my portfolio has had no new lows!.
Since then there has been plenty of anticipated bad news like interest rate hikes, that some pessimists felt would kill the market, but it hasn’t happened to our companies. I simply don’t believe it’s going to happen. I feel lots of the bad news is already expected and priced in.
Sure, I could be wrong! I know literally nothing about technical analysis. It could be a false bottom. So don’t follow what I am doing. Make your own decisions.
I have learned long ago that sticking with great companies wins out in the end, and beats market timing (looking at a long term chart of the S&P you will see that the horrendous declines of the past look like tiny dips on an ever-rising graph), but living through this decline was awful.
I can’t be sure that it has ended, but I know that our companies have secure recurring revenue, and that they are growing very rapidly, at rates almost never before seen for companies at their scale, and considering these facts really makes our companies seem way oversold to me. But that’s just my opinion.
MY RESULTS MONTH BY MONTH FOR 2022
Here’s a table of the monthly year-to-date progress of my portfolio for 2022.
**End of Jan 71.1% of what I started with**
**End of Feb 73.4% of what I started with**
**End of Mar 71.0% of what I started with**
**End of Apr 56.4% of what I started with**
**End of May 40.3% of what I started with**
**End of Jun 42.9% of what I started with**
**End of Jul 41.7% of what I started with**
**End of Aug 49.2% of what I started with**
My portfolio is still down over 50% since the beginning of the year. It’s up 49% from its June 16 low [41.7/33.1 = 1.49], but down 51% ytd is still just awful! If you are wondering how I can be so calm about it, look at the next section (Cumulative Results).
CUMULATIVE RESULTS
For those wondering about the long term results of investing this way.
**2017 – up 84.2%**
**2018 – up 71.4%**
**2019 – up 28.4%**
**2020 – up 233.3%**
**2021 – up 39.6%**
**2022 – down 50.8% first 8 months**
Cumulative – up 1007.2%
Okay, in spite of the worst sell off you could imagine in our stocks, my portfolio now has 1107.2% of what I started with five years and eight months ago. That’s just over eleven TIMES what I started with. In the same time the S&P 500 has risen 80.6%. That’s up 81% compared to up 1007.2%! Figure out for yourself which method gets you the best results?
HOW DID THE INDEXES DO?
Here are the results year to date:
The S&P 500 (Large Cap)
Closed down 14.9% YTD. (It started the year at 4766 and is now at 4058).
The Russell 2000 (Small and Mid Cap)
Closed down 15.4% YTD. (It started the year at 2245 and is now at 1885).
The IJS ETF (The S&P 600 of Small Cap Value stocks)
Closed down 8.1% YTD. (It started the year at 104.5 and is now at 96.0)
The Dow (Very Large Cap)
Closed down 11.2% YTD. (It started the year at 36338 and is now at 32283).
The Nasdaq (Tech)
Closed down 22.4% (It started the year at 15645 and is now at 12142).
These five indexes averaged down 14.4% ytd.
EARNINGS SEASON is almost over.
Aug 4 – Cloudflare, Datadog
Aug 8 – Upstart, Monday
Aug 18 – Bill
Aug 24 – Snowflake
Aug 30 – Crowdstrike
Aug 31 – Sentinel, MongoDB
LAST THREE MONTHS REVIEW
June. This month I sold out of Zscaler and built up what had been my three smallest positions. I added quite a bit to Crowdstrike, less, but still significant amounts into Mongo, and Monday. I also added small amounts to Cloudflare and Sentinel. I sold out of Zscaler because: I was concerned about its very long sales cycle, and because it seemed to be getting more competition from Palo Alto and Cloudflare, and also because, while companies like Datadog, Crowd, Cloudflare and Sentinel seem to be innovating like mad, Zscaler seemed happy to stay the successful “rut” that it was in. Add in that billings growth came in considerably below expectations for the last two quarters, and the CFO called out billings as fortelling the future, I decided to exit. It may do very well but I just had better places for my money. I’m happy with the changes I’ve made.
July. My portfolio hasn’t closed at a new low since mid-June. I took no new positions and didn’t sell out of any positions this month. I fiddled around a little, with very small trims and adds, but nothing major. Datadog has fallen back to the pack this month as it was down significantly this month, on no news but just recession fears (because its growth was reduced significantly for a quarter during the first Covid quarter).
August. While the indexes were down this month my portfolio rose 18%. I finished with 49.2% of what I started the year with (or down 50.8%). It was up almost 50% from my June low of 33.1% of what I started with.
That may not sound like a lot of improvement, but at 33.1% I needed to rise roughly 200% to get back to where I started the year, but at 49.2% all I needed was a roughly 100% gain. To me, that was a big improvement.
I didn’t add any positions in the month or sell out of any. Almost all of my stocks rose by about 15% to 25% the day after their quarterly results were announced, which was a nice change. More on the individual companies below.
Please remember that I could change my mind about any one or more of my positions tomorrow, depending on new information or other factors, and I may not do another update until the end of next month. Make your own decisions. Don’t just follow mine. I make mistakes at times! Guaranteed!
DON’T MISS THIS TABLE!
Let’s look at how much each stock is up from its sell-off low, from its low since this decline started.
**BILL, from $89.9 to $167.7 up 86.5% !!!**
**SNOW from $110.3 to $197.7 up 79.2% !!!**
**MDB, from $213.4 to $353.6 up 65.7% !!!**
**NET, from $38.96 to $64.39 up 65.3% !!!**
**CRWD, from $130.0 to $183.6 up 49.7% !!**
**S, from $18.64 to $27.76 up 48.9% !!**
**MNDY, from $87.05 to $117.91 up 35.4%**
**DDOG, from $81.1 to $106.7 up 31.6%**
That is a pretty awesome list. Just look at it! Most of my companies are up between 49% and 87% since their lows!!! Weren’t the trolls telling us back at the bottom that SaaS was finished, and that our stocks were going to keep falling pretty much forever? If you put your money into cash back then, as they were urging you, that cash will now be worth a little less with inflation, and you would have missed a more than 57% average rise in value.
Granted, the stocks have only gone back up a small part of what they have fallen, and they still have a long way to go, but with all the talk of “It’s going down! It’s going down!” it was easy to lose sight of “Wait a minute, it’s quit going down many weeks ago. It has turned around and started up.”
It’s interesting that Datadog is up the least from its low, considering that for most of us, it was our top position in both size and conviction several months ago, but it shows once again why I no longer keep any 30% or 35% positions, no matter how confident I am in the company. Whenever I have had such a large position, it has done worse than my portfolio as a whole, probably because when I have been super confident in a stock, everyone else has been too, and the stock gets bid up too high. I now limit myself to 20% positions
Maybe our powerful SaaS companies are silently slipping back into favor. Perhaps it’s starting to sink in that if there is a recession, the business of a SaaS company won’t get killed to the same extent as the business of a traditional company. In fact it very, very, probably will still be growing its revenue every quarter, even if not quite as fast as before.
But who knows? I could be totally wrong and everything could turn around next week.. I’m sure the Market Bear will make further attempts to push our stocks down. We’ll just have to see what happens.
POSITION SIZES
I didn’t add to sell out of any positions this month. I still have the same eight positions total, in “roughly” the same order, and eight is a comfortable number for me, . Here they are in order of position size, and bunched by size groups.
**.**
**Bill 17.2%**
**Datadog 15.2%**
**Snowflake 15.1%**
**Cloudflare 14.5%**
**Crowdstrike 13.7%**
**Sentinel 12.4%**
**Mongo 10.8%**
**Monday 4.6%**
COMPANY REVIEWS
Please note that when I discuss company results, I almost always use the adjusted values that the companies give.
I sometimes mention what I might do about each position, but DON’T just follow me. Make your own decisions. I may change my mind tomorrow and probably not mention it for a month. And what I invest in may not be right for you. And besides, I don’t understand anything about the tech. Agreements or disagreements with what I think about the companies, are of course welcome on the board if you include some reasons and it’s not just a one-liner.
Bill
Bill is a high confidence position for me, and now my largest position at 17.2%. It just announced results this month, and bounced up 15% the next day (on a day when almost everything else was down 3% to 4%, so you could consider that the equivalent of an 18% rise).
To quote from Stocknovice:
All things considered this was a great quarter, especially given some of the uncertainty heading into it. We got a bigger beat, continued customer growth, strong guides, and the stated expectation FY23 will be the company’s first-ever profitable year. As a shareholder, I’m not sure what more you can ask for…and best of all, the market seems to wholeheartedly agree. Congratulations to everyone holding it.
Growing like mad and made great acquisitions which have been jet propelling it. Total revenue was up 156% for instance, and organic core revenue was up 71%. I’ll take it. (read the press release and conference call transcript for more details).
84.2% gross margins, up from 79.7% a year ago!!
Not profitable but just below break-even and spending more to get more customers.
NRR was 131% for this fiscal year up from 125% a year ago !!!
Strong guidance and very enthusiastic.
Alliances with CPA.com (a subsidiary of the American Institute of CPAs), and with Bank of America, and with 85% of top 100 CPA firms, seems a considerable moat.
Jason posted this month that he had dinner with an ex-VP of Bill who told him, “No one that doesn’t work at Bill understands how deeply integrated Bill becomes in the internal processes of each enterprise customer… No one is going to ever change out of Bill for another option, even if there was a better one.”
Stocknovice let us know that Brex, a business card competitor of Bill, announced that it would stop serving traditional small business customers to focus on its startup segment instead. It will be dropping “tens of thousands” of traditional brick-and-mortar companies which had two months to migrate to another service. Undoubtedly, Bill will get some of these.
A little quote from Bert Hochfeld back in 2020, “BILL’s software is already integrated with BofA, Chase, American Express and Wells Fargo. The banks use the BILL software on a white-label basis as part of their own platform… These are very early days for this kind of offering which I believe is likely to become a major revenue tailwind.”
Down 48% from its high of approx $350, but up 86% from its sell-off low of $89.90
It seems like an excellent company, and its stock seems to be moving back up faster, and more steadily, than my other companies.
Cloudflare
Here’s the story with Cloudflare. This is a company that has been delivering revenue growth in the high 40% to mid 50% range for 14 or 15 quarters in a row (I’ve lost count). Talk about reliability! In addition they innovate and come out with new products and improvements at a pace that neither I, nor anyone else, have ever seen before. At the end of the March quarter they indicated that the incipient recession would cause a lot of caution by customers. This caused a lot of worry among investors, but by the end of the June quarter they said they got it all worked out and grew by 54% again, and reiterated that thay would be cash flow positive in the second half of the year, and for the year as a whole. Their stock rose 27% the day after June quarter results were announced. They have one of the most charismatic CEO’s you could want, and they move into new fields regularly and with success.
They have gross margins of 79%
Cloudflare is not really profitable or desiring to be right now, because it is plowing it all back in to growth, but is right above break-even. Idealistic about saving the cloud.
Adj Op Loss was just 0.4% of Revenue.
FCF was -30% for the March quarter because of a special accounting effect, but it scared everyone, but this quarter it was back to -2%
Added a record number of $100k customers this quarter (“What recession?”)
Higher capex than others because it has to build and service all its world-wide endpoints, etc
Very innovative and putting out new products like mad, certainly faster than any other company I know. In fact it seems to be constantly innovating and adding new products or upgrades.
Made a big acquisition for email security.
Moving rapidly into security and competing with Zscaler and PaloAlto in Zero Trust. This is from their announcement:
Cloudflare One provides a comprehensive Zero Trust SASE solution that is built natively into Cloudflare’s global network, spanning more than 270 cities in over 100 countries. This deeply integrated approach ensures a simple deployment in just a few clicks, lightning fast performance wherever users are, and robust security across endpoints, networks, and email.
They announced that they also equipped their partners to deliver the Zero Trust solution.
Also moving rapidly into data storage, processing, and distribution. I can’t resist including a little quote from Software Stack Investing https://softwarestackinvesting.com (which I advise subscribing to):
…the progress in data services has been a welcome surprise. A year ago, I wouldn’t have considered Cloudflare to be a data company. Yet, if we fast forward 5 years, it could become one of the larger providers of data services. Granted, it won’t replace large, centralized database solutions that run heavy analytics and ML workloads, but there is a growing demand with similar potential for facilitating the transmission, in-flight processing, and distribution, of data across the globe… [which] would benefit from Cloudflare’s global network of data centers, distributed compute and localized storage…It puts compute and data storage within 50ms transit to 95% of the world’s population…They are already landing deals for these capabilities with customers like Meta and Atlassian.
Jason pointed out in a post on our board:
I can’t help thinking about the fact that Cloudflare’s Zero Trust services are already being used across the Federal government, including the FBI, State Dept, and Library of Congress. That was done even without FedRAMP certification. That’s not to say Cloudflare won’t get FedRAMP, Moderate, soon. But, even without FedRAMP, Cloudflare won these high profile wins.
And Muji wrote:
Cloudflare has added extensible policies in Access, which can tie Cloudflare One into any API to make Zero Trust decisions. This greatly opens the door to how organizations can manage their Zero Trust. This makes Zero Trust programmable, and it feels like a disruptive change over other Zero Trust providers.
Net Retention Rate (NRR) was 126%.
In July introduced Cloudforce One, an internal team to track and disrupt online threats, led by a guy who has worked at CrowdStrike and at the National Security Agency, …
Very enthusiastic, and doing what it does very, very, well
So its mixed picture is definitely improving: growing revenue slower than others but very steadily, very innovative, high valuation, higher capex than others, no desire to be profitable any time soon, negative FCF, Net Retention Rate steadily rising, it is rapidly and strongly moving into new fields with new products, especially Zero Trust security, and data services, etc, etc.
Down 71% from its high of approx $222, but up 65% from its sell-off low of $38.96.
It’s now a 14.5% position
Crowdstrike will report its July quarter next week
I think of Crowdstrike as the big gorilla of its security space, while I see SentinelOne as the new kid on the block who is growing a lot faster but not yet profitable. They are both nimble, both adding new functions all the time. Crowd’s emphasis seems to be more on teams of people solving problems, while Sentinel’s seems more on having AI instantly solving the problems, but I’m sure that they overlap a lot. I think that there is plenty of room for both of them.
Crowdstrike slowed down quite a bit a couple of years ago because of the law of big numbers, but it has leveled off now, growing in the low 60% range, turning out lots of cash in both FCF and net income, and is also nimble and innovating as a bonus.
It’s back to being a high confidence position for me. It’s a 13.7% position, and is back to being one of my large positions. I thought that they reported an excellent April quarter.
Growing subscription revenue at 64% and probably slowly slowing, but dominant in its field and quite profitable.
Total subscription customers were up 57% yoy
Subscription gross margin was 79%
Op cash flow margin was 44% of revenue
Free cash flow margin was 32% of revenue
Net profit margin was 15%
They are thus very profitable, and increasingly so.
Got Impact Level 4 Authorization from the US Defense Information Systems Agency and received German Federal Office for Information Security Approval, which is important for E.U. sales. In June it announced General Availability of Falcon Identity Threat Protection for U.S. Public Sector Organizations requiring FedRAMP Moderate or IL-4 authorization
A strategic partnership with Mandiant to benefit joint customers, and expanded the partnership with Cloudflare with technology integrations.
They also announced Crowd Asset Graph, Humio for Falcon, Graph Visualization, new Partners, and most recently their AI powered Indicator of Attacks, and a host of minor products and updates.
Enthusiastic management.
Down only 35% from its high of approx $301, but that’s partly because it didn’t go up like the others in 2021. It is, however, up 50% from its sell-off low of $130.
Datadog
A high confidence position. Datadog is truly dominant in its field. They had results that most companies would drool over, but they were down a bit for for their effort.
Grew revenue at 74%, which was up from 67% a year ago, but down fron 83% sequentially.
Gross margins 81%, up from 76% a year ago, and from 80% sequentially
Quite profitable: Trailing EPS is 81 cents, with 24 cents last quarter, which was up from just 9 cents a year ago, and flat with 24 cents sequentially.
Adj Operating margin was 21%!
Op Cash Flow was $73 million ! and
FCF was $60 million ! Believe it or not, those were both considerably down sequentially, although way up from a year ago.
NRR continues “over 130%.”
Moving into security in a big way and succesfully.
In June they announced monitoring and security for Kubernetes and Open Telemetry Protocol Support
They also announced Observability Pipelines.
They also launched Audit Trail and Service Catalog
They acquired Seekret for improved API observability
Every quarter more companies are using more of their modules.
The big problem for many people was their conservative guidance (well what did they expect?) The concern was because they had a substantial decrease in growth in the Covid quarter, because they are somewhat usage based, and people were afraid it would happen again. Here’s what they said about their guidance (It may be paraphrased, as I’m taking it from my notes).
…in July, we did see an improvement on those trends, but we still remain conservative in our outlook for the short term because of the noisiness of the data we’re seeing there. We have always been conservative in our guidance by using lower organic growth and other metrics than we’ve seen historically, and we continue to maintain that philosophy. So I would say there was some incremental conservatism put into this guidance.
So what they are saying (the way I read it, anyway), is that you shouldn’t pay much attention to our ridiculously low guidance, but we are giving it to cover ourselves in case of unforeseen disaster.
Datadog is down 47% from its Nov high of approx $200, and up 32% from its sell-off low of $81.
A 15% position, down from 18% last month because the rest of my portfolio was growing faster. It’s been passed by Bill and is now tied for 2nd and 3rd place in my portfolio with Snowflake. I have no current plans to reduce it.
Monday
I really like Monday’s growth and its growth of $50k customers, but it has a lot of competition, it’s not considered mission critical in the way that some other of our companies are, and companies in this field have a tough time becoming profitable, so I’ve kept my position a lot smaller than the others. Thus another mixed picture.
I wrote last month that it is my smallest position and my lowest confidence position, but that the market’s expectations are very low, and if they beat them significantly I’d expect a strong response. Well, this quarter they rose 18% the day after announcing earnings, and have gradually given it all back, and more since then. Expectations are apparently still very low. The below is from a post I placed on the board after earnings:
How I see Monday. I have the feeling that, as with many of our companies, people “can’t see the forest for the trees.” What I mean by that is that (in my opinion) they can’t see the shape and health of the forest because they get lost examining every little tree. In other words lots of people have a long list of metrics that the company has to satisfy each quarter and they are looking for perfection on each of 15 or 20 details. They get lost in the details. No company will meet all 20 metrics you set out for it so there will always be things to be unhappy about.
Here’s what I see in Monday:
We have a company growing revenue at 75% per year. That’s basics, not details. Yes it’s down from over 100% growth at one point, but how many companies are growing at 75%? They are being very conservative in guidance because a lot of their business is in Europe which is in a certain amount of economic chaos at present due to Russia’s invasion of Ukraine, and the cut off of oil and natual gas to Europe, but all of that doesn’t mean that there is anything wrong with Monday, the company,or its business model. The invasion was in March, and they just grew at 75% in their April to June quarter, for gosh sakes!
Then we have their enterprise customers, customers spending over $50k per year, which are growing at 147% this quarter, and with a record number of new $50k customers (200 this quarter).
Now, it can be a little bit difficult to grasp what 147% growth means. It doesn’t mean they have 47% more of these customers than they had a year ago. It means that they now have roughly two and a half times as many $50k customers as they had a year ago. I’ve never before seen ANY company grow enterprise customers that quickly, or anywhere close to that quickly, and I doubt you have either.
Then there is their net retention rate. For the whole company it is over 125%. For companies with more than 10 employees it’s over 135%. (That means excluding the tiny 3 or 4 employee companies). And for their enterprise customers (over $50k), the NRR is over 150%.
They are also pivoting to making their Work OS into a platform, not just for collaboration but for doing just about anything.
They announced it a quarter ago and released four new products during this quarter: Monday Sales CRM, Monday Developers, Monday Projects, and Monday Marketer, all to work through Work OS. Customers can switch between them within Work OS. Although these products were released so recently, they already have over 1000 paying users. That’s pretty remarkable in itself.
This company has a consistent gross margin around 89% (!) That’s a high, high, gross margin, which shows clearly that they do not need to give major discounts to get customers.
In the first quarter they had high operating expenses and an operating margin of -40%, very possibly due to the cost of producing and preparing to introduce all those new products. This quarter that had improved back to -12%.
After the first quarter they guided to 54% revenue growth for the year. This quarter they raised that guidance by 9 points to 63% (!). To me that says at least 70% by the end of the year. Talk about conservative, it’s basically impossible to average as low as 63% for four quarters with the first two quarters at 84% and 75%. (Figure it out for yourself).
Finally, for a view from another source, Google’s President of Americas and Global Partners showcased Work Os’s momentum in his Keynote Speech at Google Marketing Live. There’s a link to his talk in Monday’s Investor Letter which came out with the earnings yesterday.
So that’s how I see Monday. I could be totally wrong. And it’s still only a 4.6% position and my smallest by far.
Mongo
Will announce earnings next week.
This is another company that is doing very well, and I probably should have a larger position than my current 10.8%.
Growing revenue at 55% and accelerating every quarter because of Atlas growing faster than the legacy part of business, and Atlas is now 60% of revenue and growing at 82% yoy.
Gross margins were 75%
Had been “open source, “ which I considered a negative as an investor, but is less open source now that it had to patent/copyright to stop AWS from copying it, and now that Atlas is growing so fast, however I was appalled that they decided to make their new product open source (see below)
Now profitable with Adj Net Inc of $15 million up from a loss of $4 million a year ago
Op Cash Flow of $12 million last quarter
FCF of $8 million, flat with a year ago.
I don’t have their NRR but Atlas NRR is probably very high (150 or so)
Dominant in their field.
In June they released Queryable Encryption to encrypt data during the time it’s being queryed. However, they are doing it open source which means to me that anyone who wants to, and is able, can copy it! That seemed to me to be an insane way to run a business, to me anyway (although I was assured by my tech friends that it’s not as easy to copy what they do as it seems).
MDB is down 40% from its November high of approx $592, but up 66% from its sell-off low of $213.40.
Sentinel
As I wrote above, Sentinel is the young blood in its security space while Crowdstrike is the big gorilla. They are both nimble, both adding new functions all the time. Crowd’s emphasis seems to be more on well trained teams of people solving the problems, while Sentinel’s seems more on having AI instantly finding the breach and stopping it without needing human intervention, but I’m sure that they overlap a lot. I think that there is plenty of room for both of them.
Sentinel will announce earnings next week!
Another mixed picture. Here are last quarter results:
ARR was “only” up 110%, “decelerating” if you want to feel bad about up 110%.
Revenue grew at “only” 109%… BUT
Gross margin was up 15 points to 68% from 53% a year ago, and was up 5 points from 63% sequentially
Op margins are very negative at -73% last quarter because they are spending like mad on growth (improved from -127%, but still).
Operating Cash Flow and FCF margins are terribly negative.
NRR was a record 131%, improved from 124% a year ago, and from 129% sequentially.
Cloud security is their new field and has grown to 20% of their business from practically nothing a year ago. Cloud security revenue was up 50% SEQUENTIALLY this quarter.
Endpoint security was their main business and they are adding one thing after another (like Cloud and Identity, etc), but Endpoint is still growing like mad too, as is everything else. This company is growing incredibly fast.
Made a huge increase in annual guidance, bringing it up to just under 100% again (with three more quarters to raise in), but it’s hard to evaluate as they will be including Attivo from now on. All in all you can say that they will be reporting annual revenue growth probably over 110%, which is enormous, but organic growth about 95% or 100%, as a piece of revenue will be from the acquisition.
Unveiled a new product, XDR Ingest, a disruptive step in democratizing XDR, it provides our customers with a limitless data platform to ingest, retain, correlate, search, and act on all enterprise security data – real time and historical, from any source.
Cybersecurity is a data problem. SIEM has been the technology for retaining security data and applying security analytics to uncover and respond to threats. But the data ingestion process is arduous and retention costs are high. It requires too many operators and too much manual interaction to be effective at scale. XDR Ingest solves the people, process, and technology challenges, and we’re excited for our customers to thrive in the XDR era”.
Sounds awesome to me! but remember that I’m not a techie and don’t understand the tech at all, but people who are techies that I talked to also felt that it was “awesome”. We’ll have to see.
New alliances and acquisitions including an integration with Okta just announced this quarter.
Growing customers over $100k by roughly 110% yoy, and total customers by 55% (rate of growth was down from last quarter, but still growing at rates most companies can’t even dream of).
Great tailwinds of worries about breaches with the Ukraine war, as well as new exciting products, and the acquisition of Attivo.
Stock is down 65% from its high of approx $79, but up 49% from its sell-off low of $18.64. Not being currently profitable is definitely out of favor in the current market, which makes it hard for the small very rapidly growing companies like Sentinel, but I’m sticking with it. It’s now a 12.4% position.
Snowflake
My take on their July quarter (just announced): An excellent quarter which should relax everyone. Revenue growth was up 18% sequentially. That’s a lot, and it was up from 10% in the April quarter and from 15% in the Jan quarter (two quarters back). Dollars of revenue added sequentially were $75 million, up from just $38 million added in the Apr quarter. YoY revenue growth only gradually descended from 85% to 83% sequentially, and part of that is from their increased computing speed without increasing price…
Million-dollar customers exploded to 246, up by 40 or 19.4% sequentially, from 206 in the Apr quarter. That number, 246 of the million-dollar customers, is up 112% from just 116 a year ago.
Adj FCF was “only” $59 million with a 12% margin, but they are guiding to 17% for the year, so they will finish with over 17% for the year. They are churning out money.
NRR is staying at nosebleed levels at 171%, although two quarters ago they told us it wouldn’t be able to stay in the 170’s.
Gross margin is 75%.
Dominant in its field but potential competitors arising.
Very rapid revenue growth. It had been over 100%, but last quarter the growth rate was cut to 85% by allowing faster computing by customers without raising prices, and this quarter it fell slightly to 83%. Also some minor usage cut back by consumer facing companies.
Share price and valuation are both way down from their heights.
New partnerships with AWS, Dell, Stripe, etc
Setting up vertical silos for data sharing (healthcare, retail, finance, etc), which will make them much more sticky.
Moving into new international markets
Taking advantage of the need for security monitoring with CyberSecurity Workload, which serves as a platform for the data from companies who want to do their own security analysis, or to hire one of Snow’s partners to do it. Snow gets more data storage, and more data analysis, on their system, without the cost and headache of creating their own security analysis. The customer benefits from cheaper and easier.
New products for new fields. A new Cloud Native Application Protection Platform to allow developers to develop, deploy and monetize applications, all on Snowflake.
From Frank Slootman, CEO: Our next frontier of innovation is aimed at reinventing cloud application development. Our ambition is far reaching. Our aim is to transform how cloud applications are built, deployed, sold and transacted. To help achieve this, we launched our Powered by Snowflake program. Today, we have 590 Powered by Snowflake registrants, representing 35% quarter-over-quarter growth.
Introduced UniStore and Hybrid Tables to allow analyzing transactional SQL data on Snow. Here’s a little excerpt from FinallyFoolin’s post on the Hybrid Tables. (He’s a techie and I’m not).
Just finished watching a webinar of Snowflake’s Hybrid Tables. IMO, this is a HUUUUUUUGE deal !!! Companies can build applications, using row-store (good for lots of small transactions; think booking an airline or checking out at the grocery store). capabilities of it and it AUTOMATICALLY gets copied to a column-store (Good for analytical workloads & faster BIG queries). Snowflake under the hood automatically determines which version of the hybrid table to use to return the query.
The BIG, BIG, BIG, benefit of using Snowflake is that it will be MUCH MUCH MUCH easier & cheaper to do analytics.
There’s no need to move data regularly and maintain these mega operations; especially when needing up-to-second accuracy on their reports. ETL processing [Extract, Transform, and Load] is very time consuming and expensive. The most expensive and time consuming part of big reporting & analytics.
Snowflake was ranked first in JP Morgan’s survey of where CIO’s planned to spend additional funds in 2022 (ahead of Microsoft, Google cloud, and Crowdstrike).
Buying back employee RSUs to prevent dilution, which is already under 1% per year.
Investment in, and partnership with, Tecton announced in July.
Management is very enthusiastic.
Snow is going to become a behemoth of a company, long term. Heck, it already IS becoming a behemoth !
To quote Morningstar’s headline from its report after results: Snowflake’s Q2 beats by taking its upmarket by storm; shares attractive even with shares up 18% in premarket
Usage based, so it could be hit a bit more in a recession than a SaaS company who gets the same subscription revenue come what may.
Snow isdown 52% from its high of appox $408, but up 79% from its sell-off low of $110.30.
Overall, to me it’s a very positive picture. It’s a 15.1% position, tied for 2nd and 3rd place with Datadog in my portfolio. I have no intention of trimming it at present.
SOME THOUGHTS ABOUT THE GROWTH OF OUR BOARD
We started our board in the beginning of 2014, more than eight years ago. Until six months ago we had NEVER, EVER, had a post with more recs than the high 300’s. Yet earlier this year I had a ordinary post, just a post about what I had done about a stock, that had over 660 recs. That is crazy!
Our success has flooded us with new posters and readers (that’s you, most likely), so you can see why we have to limit our posts to meaningful ones to avoid flooding the board and destroying it. I may at times seem arbitrary in deleting posts but that’s why it’s done and why it’s necessary.
Thanks for your cooperation
FINISHING UP
Let me remind you first, that I have NO IDEA what our stocks will do next month. I’m terrible on predictions. But I know that the businesses of our companies will do just fine for the most part.
I feel that my portfolio is made up of a bunch of great companies. But that’s just my opinion, and I can’t say often enough that I’m not a techie and I don’t really understand what most of them actually do at all ! I just know what great results look like. I figure that if their customers clearly like them and keep buying their products in hugely increasing amounts, they must have something going for them and, as I’ve often said, I follow the money, the results. And I listen to smart people about the prospects of these companies.
When I take a regular position in a stock, it’s always with the idea of holding it indefinitely, or as long as circumstances seem appropriate, and never with a price goal or with the idea of trying to make a few points and selling. I do, of course, eventually exit. Sometimes it’s after months, and sometimes after years, but I’m talking about what my intention is when I buy.
I do sometimes take a tiny position in a company to put it on my radar and get me to learn more about it. I’m not trying to trade it and make money on it, I’m just trying to decide if I want to keep it long term. If I do try out a stock in a small position and later decide that it’s not what I want, I sell it without hesitation, and I really don’t care whether I gain a dollar or lose one. I just sell out to put the money somewhere better. If I decide to keep it, I add to my position and build it into a regular position.
You should never try to just follow what I’m doing without making up your own mind about a stock. First of all, you may have a completely different financial picture than I have. Different age, different income, different assets, different debts, different expenses, different financial and family responsibilities, etc.
Besides, in these monthly summaries I’m giving you a static picture of where I am currently, but I may change my mind about a position during the month. In fact, I not infrequently do, and I make changes in the position. I usually don’t announce these changes until the end of the month, and if I’m busy or have some personal emergency I might not announce them even then. And besides, I sometimes make mistakes, even big ones! Don’t just follow me blindly! I’m an old guy and won’t be around forever. The key is to learn how to do this for yourself.
THE KNOWLEDGEBASE
Since I began in 1989, my entire portfolio has grown enormously. If you are new to the board and want to find out how I did it, and how you can try to do it yourself, I’d suggest you read the Knowledgebase, which is a compilation of my “words of wisdom”, and definitely worth reading (a couple of times) if you haven’t yet.
A link to the Knowledgebase is at the top of the Announcements panel that is on the right side of every page on this board.
For some additions to the Knowledgebase, bringing it up to date, I’d advise reading several other posts linked to on the panel, especially:
How I Pick a Company to Invest In,
Why My Investing Criteria Have Changed,
Why It Really is Different.
Illogical Investing Fallacies
I hope this has been helpful.
Saul