I know it’s scary out there, as many of our favorite stocks are down 20% or 30% or more within a matter of days. I don’t know where it will end, but take comfort in the fact that this is normal, and happens from time to time. And this may sound a little silly, but rather than focusing on what you’ve lost on paper, focus on what you have: ownership shares in companies that are growing daily and becoming increasingly valuable.
What have I been doing? Today I have been buying more DDOG, MNDY, ZS, AMPL, and BILL. I sold CRWD so I could use that money towards the big 5. My cash position is down to 4% – not a typo. I’ve been buying like crazy.
I may be “early,” but it’s not about timing the market. It’s about owning more shares of increasingly valuable companies.
Some examples of what Saul does on days like this:
Reminders that things get better:
The sell-off last couple of weeks was different (and maybe more worrisome) than the one in March this year. March was driven by rising rates and nothing to do with the fundamentals.
However, rates this time round were not rising at all. The reason this time was that many hypergrowth and saas reported weak Q3 results. the list is long: Docusign, SEA, ROKU, Square, Upstart, Elastic, Salesforce, Asana, Amplitude (weak guidance).
Docusign CEO yesterday admitted that they got a covid bump and now demand is back to a more normalized pre-pandemic pattern SUDDENLY.
This got me thinking whether the same would apply to other SaaS stocks. Could the same be said for Work management (Monday, Amplitude) cybersecurity (Zscaler, Crowdstrike) or ecommerce related (Amplitude)? When Q4 comes, they will give the same warning as Docusign?
The nature of all the above products clearly benefit from remote working/staying at home. The question is whether those rate of growth trends can be sustained post pandemic (not just the absolute numbers but the rate of growth). Any thoughts appreciated.
One more thing to add: there is also an expectation that rates are likely going up in the coming weeks or months as we continue heading into a post-covid world and as supply chain issues get resolved.
In fact, many affected companies (not in the saas world) have talked about a peak in supply chain issues in Q3 earnings call.
I am concerned that hypergrowth is headinginto a rising rates environment with weaker fundamentals. That would be a perfect storm.
I started my journey on this board in last week of july, 2019. I bought stocks at all time high and soon after that it started to melt down. My portfolio was down by 40% at peak of “sell growth buy value” phase. In January, people again started buying growth.
Since than, My
Portfolio has multipled many times over. It happen again in March this year. Again, the same companies’s shares came roaring back!
What I understand is that there are not many companies in the world (out of SaaS) which have gross margin from 70 to 90% with business model that is capital light and they save money for their customers. They are growing at 50% to 100% and they are debt free. Even pendemic does not hurt their business as they do
not need to physically
Move the product.
Every time when shares start to go down people post that “ Its different this time”. Its NOT different this time. I think SaaS is the best business model in the world where they charge for product or servies again and again without selling the product/ software outright.
Out companies are great bunch of companies and their share price has gone down not their PERFORMANCE.
There is a brilliant post from Saul where he compares SaaS company with Auto company. I think you should read that as it will be very helpful.