stocknovice's January portfolio review

I’m back for another try. My first recap (…) took a loooonnng time to write and I wondered if I had another in me. However, I was absolutely shocked at how much my December recap prepared me for managing my portfolio this month. Gathering my thoughts not only set a baseline for all my companies, but held me very accountable to the plan I laid out. It really sharpened what I paid attention to and why I made the adjustments I did. I ended up creating a comment log this month for thoughts and reasoning as I go. Nothing drastic – just the date, the transaction/thought and a short reason. It is remarkable how much it clarified my thinking and how much easier it made this write up. For those of you that have never done something like this, WRITE IT DOWN!!!. Believe me, you’ll be amazed at what you learn.

January Portfolio and Results:

	%Port	%Port			
	31-Jan	31-Dec	1st Buy	XIRR	vs S&P
TWLO	13.3%	12.2%	08/27/18	32.2%	36.0%
AYX	11.9%	11.4%	08/27/18	22.9%	26.9%
MDB	10.4%	11.5%	08/29/18	22.4%	26.8%
TTD	9.8%	9.7%	06/08/17	38.2%	36.6%
OKTA	8.0%	7.6%	06/15/18	31.0%	34.0%
ZS	8.0%	7.9%	08/27/18	20.2%	24.6%
SQ	7.5%	7.2%	08/27/18	-14.4%	-9.6%
NTNX	7.0%	4.6%	08/30/18	-2.8%	0.1%
NEWR	5.2%	5.0%	08/29/18	5.7%	11.1%
SMAR	4.5%	-	01/07/19	24.0%	18.7%
PAYC	4.2%	4.2%	09/10/18	6.4%	10.1%
WIX	3.8%	3.9%	09/04/18	6.5%	11.1%
SHOP	3.4%	3.4%	08/06/18	18.8%	20.1%
PLAN	2.0%	-	01/22/19	6.4%	5.1%
VCEL	1.1%	1.4%	12/20/18	14.7%	6.6%
ABMD	-	2.3%	12/03/18	-3.4%	0.9%
BIP	-	2.1%	01/07/11	77.6%	37.6%
ILMN	-	2.9%	02/01/18	6.7%	14.9%
Cash	0.1%	2.6%			
				XIRR	vs S&P
			Month:	21.0%	13.1%
			2019 YTD:	21.0%	13.1%

Stock Comments:

I dropped from 16 to 15 positions overall. The whats and whys are below:

ABMD – I might be a contrarian here as I sold out a few days after they pre-announced. Last month I wrote “They’ve said their full-year guidance MO is to hold the high end in Q1/Q2 while raising the low end as needed. They reassess the high end in Q3. They’ve come through with the low end raises the first 2 Q’s. I’m hoping for a high end raise next report.” To their credit they raised FY guidance from $770M to $780M. My problem was their other numbers. Overall growth dipped from 37% to 30%, US growth from 33% to 27% and Int’l growth from 67% to 59%. Their Q4 guide is 25% even with the FY raise. I know they are being methodical and have no real competition, but the declines across the board made me uncomfortable. Given I’m committed to growth and wrote last month about trimming a position or two, ABMD got bumped back to my watch list.

AYX – I made a small conviction add while AYX spent the first 3 weeks of January flip-flopping with TWLO for my #1 spot. Their earnings pre-announcement caused a slight pause both in the market and on these boards (…). I plan on holding at least until the official release. After all, the reason they pre-announced in the first place was Price Waterhouse decided they would rather use and resell AYX’s services than take AYX’s money to be their accounting firm. Barring any stumbles in their guidance or conference call, I’m guessing AYX remains a high allocation.

BIP – A former Hidden Gems rec I decided to sell in September. Tax implications made it so I had to do it in stages. The calendar change let me close it out and it won’t be reconsidered. Sayonara.

ESTC – No position, but listed because I was on the verge of pulling the trigger and then decided not to. Prior to their October IPO I did a lot on my own and read a ton here. Then the $26-$29 IPO estimate became a $70 first day close, which put me in watch mode instead. I was set to buy early this month, but it spiked just as the cash came free and I hesitated (I know, I know…). A few days later there was a discussion here determining you can use somewhere between one and eleventy gazillion shares when trying to value it (…). I moved it to my temporarily too confusing pile as I realized I just can’t get comfortable enough with it as these prices. However, I wanted to write this out for if and when I revisit it.

ILMN – A pre-Saul position I closed at a small profit. I knew 2018’s revenue jumps would create some tough 2019 comps. That reared its head right out of the gate when they pre-announced. Growth dipped from 25% to 19% with a guide for 11% next Q. I trimmed some early this month to open a position in SMAR. I sold the rest after my remaining lot benefited from the mid-month market bounce. ILMN is down from that point while SMAR is up sharply. Yay me! (Short term thinking be damned.)

MDB – We all know the news. The Amazon boogeyman has entered the building! I originally planned to trim on day 2 of the 3-day bad news rule, but the stock opened slightly up that day and held. Meanwhile my MF teammates swooped in to 1) fill in the gaps between Mongo’s and Amazon’s products and 2) point out that Microsoft already tried this gambit and failed while MDB was even less established. Many thanks to all of you as the tech itself is above my pay grade. I still like the company and didn’t have any higher conviction positions I felt comfortable expanding. In the end I stood pat and continue to hold the same number of shares.

NEWR – A steady month for a steady stock. It hasn’t rebounded quite as much as some of my other positions, but the thesis and allocation still seem to make sense. On the whole I can’t see the need to monitor infrastructure and apps going away any time soon. Besides, how can you go wrong with a company that can boast about CRAMER! and FORTNITE! simultaneously:… ? One caveat worth watching is it appears ESTC is creeping into this market. Stay tuned for earnings February 6…

NTNX – I made a couple of small conviction adds. The basic thesis holds, the stock price is rising and they’re feeling enough swagger to basically tell their #1 competitor to go pound sand:… and…. NTNX should be very interesting to watch in 2019.

OKTA – There’s nothing as underappreciated as being boring good. OKTA did nothing but creep up in price all month, which means my allocation crept up as well. Move along. Nothing to see here.

PAYC – Their success the last few Q’s has been driven by operating leverage rather than growth (check them out on tchalla’s most excellent chart:… ). Unfortunately, there’s been a disconnect between those fundamentals and the stock price during much of that time. They enjoyed the SaaS premium through September, then got the full SaaS spanking during the corrections. The problem is they haven’t gotten quite as much love as many others during the rebound. Their February 5 earnings are the first since touting an upmarket sales push. They would likely move onto the bubble or out the door if their numbers or guidance disappoint at all.

PLAN – A new position. I didn’t post a prior write up on PLAN, so here’s my potentially faulty logic: Revenue grew 40.3%, 40.8% and 40.3% the last three Q’s with a guide for 38.1% in 4Q. Beating by just $1M puts it right back at 40.3% and anything above that means accelerating growth. Subscription growth has dipped from 52% to 45% to 42%, but subscriptions overall have increased to 88% of total revenue at 83% margins (both slightly up sequentially). YoY billings growth improved from 33% to 44%. Operating expenses have slowly contracted both YoY and as a % of revenues the last two Q’s. They had 228 customers with ARR >$250K (+43%). In addition, both their top 10 land and top 10 expand deals last Q were >$500K. Their top 25 customers average $2.5M ARR and their net expansion rate is 124% (up from 123% last Q and >120% the last six). The company hit enough conviction checkpoints to earn a starter spot.

SHOP – A lower conviction position entering 2019 even though I bought a small trading position in December when I thought the market overreacted to their secondary offering. Fortunately, that purchase has worked out so far. I thought I might sell either the trading lot or the whole position this month, but the generally strong holiday season and Ant’s take on the Canadian cannabis market (…) has me at least curious about earnings. I decided to hold for now and exit ILMN instead.

SMAR – Another new position, and one I’m very happy with so far. I did post a prior write up on SMAR and don’t feel like retyping it, so if you’re curious about my potentially faulty logic on this one you’ll have to click here:….

SQ – Last month I referred to SQ as “my biggest gap between financial logic and stock price emotion”. That gap has closed quite a bit. Despite a big drop after a late-month downgrade, Square ticked up the last couple days to finish January as my second-best price performer behind Okta. Merchants are coming off strong holiday sales, it appears the market likes the new CFO, and SQ seems to announce a new service about every 90 seconds or so. Can they keep adjusted revenue growth >60% and subscription/service growth in the 150% range? I wouldn’t put it past them. Guidance will be key though given the general economic jitters we’re seeing.

TTD – A pretty simple investment thesis: 1) The wait for CTV continues and 2) “Mr. Green, TEAR DOWN THIS WALL!” (… and

TWLO – I made a small conviction add. I know it won’t last forever, but I wish every company made me feel as comfortable as TWLO does right now.

VCEL – A “try it to see if I like it” position that has been profitable so far but was my portfolio laggard this month. Anything I write would be an injustice to Ethan’s continued outstanding work: VCEL will either impress with their MACI numbers this Q or they won’t. If they don’t, these dollars will almost certainly be reallocated.

WIX – Chugging along and doing their thing. The December release of their Ascend all-in-one business tool has the potential to open new revenue streams. I’m hoping their strong numbers lead to a multiple expansion during 2019.

ZS – I’m learning that I’m not really a valuation guy – no offense to valuation guys of course – but this one’s admittedly making me a little nervous. I love the company and what they do. Even a non-techie like me can understand the value in replacing the complexities of the firewall going out and the VPN coming in. Should I lock in some partial gains as it retests its highs? A good problem to have I guess.

My current watch list in very rough order is COUP, TEAM, ZEN, EVBG, ESTC, DOCU, ABMD, ACRGF and ZUO.

There you have it. A great month for my portfolio. In fact, I’d have to say it’s almost certainly a personal best in my roughly 25 years investing. I owe a ton to all the posters here and continue to appreciate everyone’s willingness to share.

I hope others don’t mind me open-sourcing their previous message board code in this recap. I assure everyone I haven’t been able to monetize any of it. That being said, feel free to send me your licensing agreement if you believe I’ve violated any terms.

Here’s to everyone having a productive and profitable February.


For those of you that have never done something like this, WRITE IT DOWN!!!. Believe me, you’ll be amazed at what you learn.

Wow, stock novice, again you are no novice. Great write-up! Thanks!