SNOW and CRWD on the Horizon

UPST is deservingly getting top billing in the recent discussions on this board. Like I suspect is the case for many others, the market’s reaction to the last earnings report has made it my greatest allocation. If the next few months are anything like the last few, volatility will be the price of admission.

BUT, there are two companies that have yet to report, and I was hoping to spark some conversation about SNOW and CRWD. There doesn’t appear to be much argument about both companies having outstanding leadership and business fundamentals, so I would like to focus this discussion on how they might be valued by the market in the near future.

CRWD closed yesterday at $243. It closed at $242 2/12/21, 6 months ago.

SNOW closed yesterday at $291. It was around that same price 10/22/20, 11/24/2020, 12/30/2020, 1/15/2021, 2/2/2021, and 2/19/2021.

Saul’s very recent reminder regarding SAAS companies and valuation got me thinking about what an incredible bargain might be right in front of us. I’ve read posts suggesting that the law of large numbers may begin to affect CRWD, and there have been countless posts on SNOW’s valuation. Still, for 2 amazing companies growing revenue rapidly and months of flat stock price, it seems that both are primed for market recognition.

Your thoughts would be much appreciated!

Best,
Nate

P.S. If this article by Muji https://hhhypergrowth.com/a-blizzard-on-the-horizon/ doesn’t make you want to have a heavy allocation in SNOW…

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So glad to see this post. I have been pondering over the same last couple of days.

I sold out of Roku and Pinterest few days after the Q2 earnings results due to slowing user growth and company management not looking too optimistic for the next quarter either. I love these companies and would get back in if and when the trend reverses.
Really thankful to Saul for hammering this point home about not getting too attached to a company and being flexible enough to exit a position in the face of new information.

Closing down Roku and Pinterest freed up 20% of my portfolio. 8% of this cash went into an already large Upstart position before earnings (wink!!!). Now, I am left with 12% cash and don’t want to sit around waiting for the next correction.

I looked at ALL the end of July portfolio summaries to see if I like a company which someone here already holds. Except Upstart (which is already my largest holding by far), nothing seems more attractive than CRWD and SNOW given the quality of business, growth rate and current price. These are already my second and third largest holdings at 19% and 15% respectively, but my available 12% cash is going into these two on Monday. I have never been this concentrated (down to just 4 positions) but these companies don’t keep me anxious and I can still sleep well at night (especially since I am willing to accept the downside of such a concentrated portfolio for the potential upside).

Chintan
Long UPST(42%), CRWD(25%), SNOW(21%), DDOG(12%) → expected position sizes after deploying available cash on Monday.

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“Saul’s very recent reminder regarding SAAS companies and valuation got me thinking about what an incredible bargain might be right in front of us.”

Oh, I don’t think that’s the point at all. Maybe you are right. Or maybe the current valuation is right. Or maybe it is still too high? Well, nobody knows because this type of business has only been around since “yesterday.” So, rejoicing about valuations is no different from worrying about them.

“nothing seems more attractive than CRWD and SNOW given the quality of business, growth rate and current price.”

That, again, is letting valuation sneak in. I am not saying which way one has to go, but valuation either matters or it does not. If it does not matter when high, then it also should not matter when low.

“UPST(42%), CRWD(25%), SNOW(21%), DDOG(12%)”

I guess the question is “What happens if a company making 42% of a portfolio is hit by a company-specific Big Problem out of left field?”

Personally, my problem is the opposite, that of narrowing down. I am not suggesting that I have the magic recipe by any means but 42% seems a lot.

Here are other companies I like for the next 3-5 years: U for AR and PATH for automation. I also like it that they are early in their journeys and with a chance to see their growth pick up rather than slow down. But it could be a little early for either or both.

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Glad someone brought up Unity. 48% YOY revenue growth. Beat earnings estimates by 83%. Over 1 Billion cash on hand. Great leadership. Premiere gaming platform but expanding their AR and VR capabilities into other industries. Very excited about this company.