" A camel is a horse designed by a committee."
I often try to keep that quote in mind when collating data from the many investing sources I follow. I semi attentively track all those investors, boards, free sites and subscription services in an effort to sort of triangulate my way to the best investments. Sometimes I think it works. Other times I tend to think I obtain whatever insight I attain based on the old ‘Birds of a Feather’ theory: In other words, since practically everyone I follow - every board I actually pay attention to and every service or free site a track professes - or features - a growth stock orientation. In the very least it is limiting to the portfolio and at best it radars in on really great - or wanna-be-great companies. Or does it?
Every single stock in the portfolio - on the cusp of being in the portfolio, or recently kicked out of the portfolio - or even those on the radar, comes from the same general fishing pond. And the ultimate proof of greatness resides squarely in it’s actual performance over a speculative time period of sorts. High growth doesn’t last into infinity and when it doesn’t …well us savvy growth investors head for the exits. But here’s the thing: How does one tell when a company’s future success and growth is all behind it? Now that sounds like an easy thing to determine - maybe but maybe not. Let’s take SNOW for example.
Investors are fleeing SNOW today based on yesterdays Earnings Report; which, until they got to Guidance, was on the ok side of things which in turn brings me to The Four Treasures.
A good friend of the All-Too-Lovely owns a local hole-in-the-wall Chinese restaurant complete with garish decorations, a mangy looking cat that always sits on a stool in the corner by the prep table, and lots and lots of really good tasty food. We’ve been going there for years - maybe decades if I added it all up - and every single time I order the same dish: Their version of The Four Treasures which is comprised of Shrimp, Beef, Chicken and Scallops. I bet I have ordered that dish thousands of times and always order some chicken wings to go with it. And I always make sure. to see if the mangy cat is still there and the same cat as the last one. But - you may be asking yourself…just what exactly that has to do with investing? Well…as it turns out, at least for me, quite a lot.
I have my own system of ranking stocks that combines a complicated brew of metrics important to me which actually and surprisingly appears to work…well, at least occasionally. But besides that I look at six primary things on a company Earnings Report which you might call The six Investing Treasures: Revenue Growth - ARR - Customer Retention - High Margins, Progress towards Profitability and Guidance. Now all these are the tangibles and what I believe most of the fleeing SNOW investors are currently looking at - and in particular Guidance. And to be fair the Guidance was sucky at best - just a little sucky. But wait - there is more to the dish than just Shrimp, Beef, Chicken and Scallops. Those are just individual ingredients until till tied together with the sauce. And the sauce, is the actual reason I have ordered The Four Treasures over and over and over again. Sure the quality of the Shrimp, Beef, Chicken and scallops might change at times but the sauce that pulls them all together never changes and thats what I am seeing here with SNOW. Sure they are slowing - who thought they would soar forever? But they are still SNOW - highly in demand and when the economy finally coughs up its slow down fur ball SNOW will return to being King. Besides that - all these folks who have been singing the SNOW praises until this point and who are now suddenly saying: " I have to tell you the truth - Its over for you SNOW" reminds me of this:
And thats why I have been adding on the way down - which, by the way, has reached it limit. And if its a huge mistake then I’ll own it and move on. Such is investing.
All the Best,
