stocknovice's March portfolio review

Wow. This month’s first lesson was that these recaps are much easier when you only have a handful of earnings reports to wade through rather than the 14**(!!!)** I wrote in February.

March ended up turning into portfolio allocation month. I’ve held some of these companies long enough now to feel comfortable grouping them into core, complementary and tryout positions based on my knowledge and history. While earnings season obviously means price gyrations, I also found it an excellent time to double check the thesis and conviction level for each stock I follow. I spent most of this month honing those levels and making sure my allocations fit accordingly. Thinking of each stock in terms of percentage allocation rather than purchase price or number of buys has been a huge help in keeping the big picture in mind when managing my portfolio. I made a few more trades than normal this month to get everything in line, but virtually all of them were strategic rather than reactionary. I’m anticipating my trading smoothing out now that I generally have my portfolio where I want it.

As I put the finishing touches on my fourth recap I can say in no uncertain terms I’m more in control of my portfolio than at any time in the ~25 years I’ve owned stocks. For those of you who haven’t attempted one yet, DO IT! even if it’s for your eyes only. I know I’ve beaten this drum repeatedly, but it’s that important of a point. These recaps are incredible learning opportunities, and I offer my sincerest gratitude to everyone who contributes on these boards for the continued help and education.

March Portfolio and Results:

	%Port	%Port			
	31-Mar	28-Feb	1st Buy		Return
MDB	13.4%	10.0%	08/29/18	94.8%	
TWLO	13.3%	13.6%	08/27/18	50.7%	
AYX	11.1%	8.8%	08/27/18	36.3%	
TTD	11.0%	11.9%	06/08/17	91.7%	
ZS	10.3%	7.2%	08/27/18	67.3%	
OKTA	8.7%	7.3%	06/15/18	25.3%	
SMAR	7.3%	5.2%	01/07/19	27.8%	
SQ	7.0%	8.2%	08/27/18	-6.3%	
SHOP	4.8%	3.4%	08/06/18	29.0%	
PLAN	3.9%	4.0%	01/22/19	17.4%	
ZEN	3.4%	2.7%	02/08/19	13.1%	
PS	3.4%	-	03/04/19	-2.2%	
EVBG	2.6%	2.6%	02/21/19	11.6%	
NTNX	-	6.0%	08/30/18	-37.2%	
PAYC	-	4.5%	09/10/18	30.8%	
Cash	0.02%	4.5%			
				Return	+/- S&P
			Month:	7.9%	6.1%
			2019:	45.5%	32.4%

Past recaps for anyone who’s interested:


Stock Comments:

I dropped from 14 to 13 positions this month. Getting my allocations where I wanted required more cash than I had available, so I rotated out of PAYC to fund some other purchases. It’s not that I don’t like PAYC, but the money needed to come from somewhere. I’m trying to stay as close as I can to fully invested and would prefer to stay that way for the foreseeable future.

AYX – I made a couple of small adds during the early March drop to get my allocation closer to where it was before my pre-earnings trim. I was lucky enough to buy both lots back for less than I sold them. And I can’t emphasize “lucky” enough. I’m well aware my choice to trim would have cost me if AYX had jumped post-earnings like TTD, ZS or MDB. I’m totally okay with that. It was a peace-of-mind decision rather than any type of earnings play. I’m not good enough to do that and very likely never will be. Now to sit back and watch…

EVBG – EVBG is a late February buy that I’m still getting comfortable with so it’s sized accordingly. They have a unique platform, accelerating revenues and multiple avenues to expand their TAM. The stock could be a coiled spring if some of their targeted government or military dominoes begin to fall.

MDB – Like many here, I had March 13 circled on my calendar for a while. There had been a lot of recent noise around MDB. First, we had the January Amazon incident which turned out to be FUD. Next, we had the Lyft issue where either 1) Mongo lost Lyft as a customer or 2) Lyft was never even really a customer to begin with. Finally, we had a pricing tier change that could either cost Mongo money on the low end or make them money on the high end depending on usage. The problem was we didn’t quite know how that usage was trending. I won’t rehash the results, but it turns out usage is trending pret-tay good (

After a lot of great discussion around these parts on what to do with Mongo, I decided the company had earned the benefit of the doubt at least until earnings. Needless to say, I’m fairly happy with my choice. All that noise turned out to be full of sound and fury, signifying nothing…nothing that is except a 25%+ earnings pop as part of a 44.8% month that has pushed it from my #3 holding to #1 without adding a share. Will it pull back at some point? Probably. Am I worried about it? Not really. We have a lot of companies here that tout potentially enormous TAM’s. I’d have to think MDB’s foray into unstructured, non-relational data has a chance to be as big and longstanding as any of them.

NTNX – February’s earnings debacle and the overly complicated reasons behind it put Nutanix on my sell list entering March. I unfortunately didn’t have access to an immediate exit, and the stock plunged 30%+ with 30M+ shares flying out the door before I could even take a peek at the carnage. By the time I got settled in there was even a smattering of analysis suggesting NTNX is so cheap it now has double-secret-hidden growth that’s even better than before!! Who knows? Maybe it’s true. Regardless, the whole thing became too confusing for me to follow. Being brutally honest with myself, NTNX was probably too confusing for me all along. I’m willingly riding the SQ roller coaster because it’s a business thesis I understand and believe in. Did I ever really fully understand or believe in NTNX? Something to ponder I guess.

I already had cash to deploy entering March, so I decided to hold a few days looking for an oversold bounce after the initial blood in the streets. It didn’t exactly work out that way, but I did end up exiting on a day when everything else crashed while NTNX barely moved. I used the money to open a position in PS and buy more OKTA, AYX and ZEN. In the end I took my 37% loss like an adult. Don’t worry, I didn’t let the door hit me in the a$$ on the way out. For those of you who are waiting it out or even bought more, I sincerely wish you the best of luck.

OKTA – I made small adds on both early March dips. The first was a 10% drop due to an analyst downgrade on a bad market day despite the fact the target price was actually being raised to $90. The second was the 10%+ drop post-earnings. The market viewed earnings as good rather than great, which just goes to show how spoiled we’ve become with expectations for some of these companies. As I said last month, I was looking for revenues in the $116-118M range for 50-53% growth based on prior results. Okta came in right about there at $115.5M and 50%. Subscriptions, customer growth, cash flow and pretty much all of their margins continue to trend the right way. Their conference call comments were very positive and they hinted at more announcements during their Oktane customer conference April 1-4. I wasn’t concerned by their revenue guidance, but did have initial questions about the guided jump in operating loss. Their quadruple-whammy explanation of seasonality, the Azuqua acquisition, payroll taxes and the costs for Oktane all hitting Q1 eased my concern about any changes in their business dynamic. In the end I thought the selloff was overdone. Okta seems to be chugging right along.

One thing I should note on OKTA this month is my purchases led to some reflection on my style. Was I just trading rather than investing? That’s NOT who I want to be, and frankly I don’t have the skill for it. We can all feel like geniuses when everything’s going up. After looking at it, I decided I wasn’t playing day trader. I believe in the company, and these purchases fit within the allocation parameters I had for OKTA based on my conviction level. These weren’t trading lots but instead shares I plan on holding until the company tells me otherwise. Stepping back I feel I added to a stock I like at an opportune price. So far, so good on that call. It’s just coincidence it happened twice in such a short period of time. I’m content to let it ride.

PAYC – I ended up trimming PAYC three times and eventually rotated out of it to tweak positions in AYX, OKTA, SMAR and ZS. Paycom a 30%+ grower with already strong leverage and margins. Its price had jumped 22%+ in February and climbed ~48% YTD entering March. While its business performance makes it an excellent company, I didn’t see a similar catalyst for the stock and felt those others were better options for maximizing returns. PAYC will stay on my watch list though as I can’t say I wouldn’t be willing to hold it again.

PLAN – A market-beating monthly gain. No real news. Thesis still intact. Steady as she goes.

PS – A new buy. Pluralsight runs a cloud-based learning platform focused on “closing the global technology skills gap”. There’s a tsunami of technology flooding into the IT space right now, and someone needs to teach IT pros how to use it. Companies can’t afford to let their people learn by trial-and-error, and PS’s courses are well-positioned to help solve that problem. Revenues are growing 40%+, expenses are in line and margins are heading in the right direction. FCF margin is of particular note, improving from -17% to -1.5% to 8% with the company expecting to be cash flow positive for FY19. PS is approaching 17,000 customers and they anticipate their current 128% retention rate to grow to 130%+ this year. In a nutshell Pluralsight seems to have found a lucrative niche teaching IT pros how to use many of the products our other companies are selling. I purchased a starter lot in early March and then nibbled again when PS dipped after secondary offering and convertible debt announcements which I believe shouldn’t have a major impact long term. I’m comfortable seeing where this small allocation goes over the next few months.

SHOP – Another month, another 9.2% of yawn-inducing but market beating price appreciation (fourth best of all my stocks in March). They’ve been on my bubble list since the start of the year, but the stock just keeps marching upwards (49.2% YTD so far – sixth best). Last month I wrote SHOP had a spot in my portfolio because I didn’t have 14 better ideas. After lining up my convictions this month, I realized I didn’t have nine ideas I like better than SHOP. So that’s the spot it landed after I added a touch to bring it more in line with my conviction. At some point I have to acknowledge that SHOP is doing some pretty darn good things and deserves a chance to keep on keepin’ on.

That being said, Square’s recent online storefront announcement is a clear entry into Shopify’s e-commerce world. It’s an enormous market with room for both companies, but this is something I’ll be watching closely over the next couple of months.

SMAR – Smartsheet had been on an absolute tear this year heading into 3/19 earnings. I wrote last month I was hoping for revenue and subscription growth to stay within shouting distance of 60%. SMAR didn’t disappoint, coming in at 58% and 56%. Subscriptions are now 89% of revenues at 88% gross margins. They grew billings 63%, hit a record 134% expansion rate, saw their average ACV grow 50% and finished FCF positive for the first time as a public company. The number of customers with ACV >$5K (+63%), >$50K (+135%) and >$100K (+126%) are all growing rapidly. My previous purchases starting in early January had grown organically to ~5.8% of my portfolio heading into earnings. A couple small adds – including one on the 9% dip 3/21 – brought it to its current allocation.

SQ – I continue to wait this one out even though the stock has hit a lull the past couple of months compared to some of my other holdings. Square is constantly innovating, the underlying numbers remain strong and they continue to progress toward building an all-encompassing business/banking ecosystem. As mentioned in my SHOP notes, SQ just turned last year’s Weebly acquisition into a new Square Online Store product that greatly expands their potential as a one-stop e-commerce provider. While reviewing SQ I asked myself if fear of a recession is weighing on the price and whether I should lower the allocation. The intrigue of the online store announcement has me staying put for now, but trimming SQ is likely the first thing I’d consider if there’s a need for funds at some point in April.

TTD – A core holding that continues to perform. I briefly contemplated adding on the recent drop, but my allocation is already near the top of my range so I didn’t. My heartfelt thanks to all of you who are leaving enough digital footprints for TTD to send a targeted ad or two your way.

TWLO – It’s Twilio. ‘Nuff said.

ZEN – I made a small add during the early March sector dip. As I wrote last month, “…I believe ZEN has sowed the seeds for potentially accelerating revenues and improving margins simultaneously as 2019 goes on.” I still believe that to be the case.

ZS – The post-earning pop was a great way to start the month and took some of the sting out of my NTNX losses since ZS was a larger position. I even added a few shares during a dip later in the month. The price remains high, but the numbers are excellent and their present market position is about as dominant as it gets. Bert’s recent free article summed up the thesis best: “…the opportunity to invest in a technology that is replacing one of the foundations of IT is not one that happens frequently. My guess is that in a few years, the battle between the legacy solutions of appliances and firewalls and secure web gateways will be over, and that the kinds of solutions that ZS offers will become the industry standard.” I think that’s what most of us with larger allocations are banking on.

Zoom (ZM) – No, I don’t own it but I’d love the chance to move some dollars around to make room for it. I acknowledge the competition and moat concerns, but 108% growth for a company that just posted a $105M quarter is absolutely amazing. They’ve got 50,800 customers with >10 employees (+97% YoY), 344 with ARR >$100K (+141%) and expansion rates of 138%, 139%, and 140% the last three Q’s. Their GAAP operating margin was 5% last Q and 2% for the year while breaking even on EPS. Basically everything they do is growing like a weed and trending just the way you want. The bear case is Zoom is “just” video conferencing. The bull case is Zoom is in the process of reimagining the entire business meeting concept as a seamless digital experience using video as its core. This one could be a real doozy.

The wild card with Zoom is how crazy the price might get on opening day. That was my issue last October with Elastic when their estimated $26-$29 IPO soared to $70 by the time it actually hit the public. That spike was really frustrating for me. It was classic fear of missing out (, but I successfully forced myself not to chase it. My transactions history says I begrudgingly – and I mean every bit of begrudgingly! – split the cash earmarked for ESTC into additional nibbles at MDB, OKTA and ZS. As I take a look now my return history says my 14% in missed ESTC gains since that time has turned into 119%, 48% and 96% instead. Wait…WHAT?!? I can honestly say I’d never checked those numbers before researching Zoom and doing this write up. I guess I don’t feel so bad now. Not to mention the fact this makes me even more certain of the benefits of writing things down every once in a while. Things that make you go hmmm…

In the end I really want to own Zoom right this second. However, I’ll be sure to remind myself I don’t really need to own Zoom right this second if it doesn’t make sense to me. I already own some pretty impressive companies, and one or more would have to be trimmed for the cash. Man, this condensed portfolio thing sure makes you focus! We’ll see how it turns out.

My current watch list in very rough order is Zoom (duh!), GH, ESTC, TEAM, COUP, DOCU, PAYC, NEWR and VCEL. ABMD is on life support. PagerDuty’s IPO is kinda interesting. ZUO falls off my list after disappointing earnings. I also took a look at TEUM but just can’t warm up to it at present. First, it’s a little too acquisition driven for me. Second, their website and conference call both gave me a carnival barker vibe. Pareteum strikes me as more of a flyer for a portfolio with a larger number of holdings.

Well, there you have it. Another good month in what has been a great year so far. I even briefly passed a 51% portfolio gain YTD on 3/21, although it didn’t hold. Hopefully Mr. Market will let it come back around again. Regardless, I’m happy with my current holdings and am looking forward to sitting back and observing the next few weeks.

As we move past earnings season I hope everyone’s spring is off to a pleasant start. Unless, of course, you’re one of our Aussie mates. In that case I hope your early autumn has been a bloody ripper. Until next time…


Excellent write up SN.

What is fascinating is your note about you didnt miss ESTC spike in real results and may be got better results… thats just amazing…

I generally dont like to chase IPOs. While LYFT has come out and PagerDuty, Zoom and others are on the dock, it will take me some time to review and consider these… specially with so many great companies we own in this universe of SAAS / cloud, i dont see need to rush into any of the hot IPOs.

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