stocknovice's October portfolio review

vol·a·til·i·ty /väl?'til?de/ noun 1. A tendency to change rapidly and unpredictably.

What a whacky month. As you might have heard, sometimes the market giveth and sometimes the market taketh away. October was a fine example. The month’s first half saw a broad-based surge that gaveth my portfolio a swift ~10% bump. The next handful of days tooketh those gains and flushed them right down the toilet, jerking my October to ~5% in the red. Then early earnings season whipsawed me back to positive despite the fact Halloween tried to throw in a last-minute scare. Some would say it’s enough to give you a wicked case of investor fatigue if you let it.

However, it’s become clear there’s no real point wasting time trying to read these tea leaves. The correction/revaluation/SaaS-pocalypse/whateveryouwannacallit that began in late July has yet to find its new equilibrium. All I know for certain is I seriously doubt it’s the end of the world. Having seen the extreme upside of this bargain for the first seven months of 2019 – and let’s not forget heady times do occasionally occur – I remain committed to riding this out. History tells us those who keep trickling funds into strong, successful businesses have overwhelming odds of long-term investing success. I believe ensuring my companies fit that bill is much more important than trying to reverse engineer indiscriminate price movements along the way.

Or as hmcproperties so eloquently put it: “C’mon high growth investors…put your big-boy pants on and get back to work!” That’s the CliffsNotes version, but his whole screed’s well worth the read:…. As we rapidly enter another earnings season, I for one am going to heed his very sage advice.

2019 Results:

	Month	YTD	vs S&P
Jan	21.0%	21.0%	13.1%
Feb	11.5%	34.9%	23.8%
Mar	7.9%	45.5%	32.4%
Apr	5.8%	54.0%	36.5%
May	-0.4%	53.4%	43.6%
Jun	10.5%	69.4%	52.1%
Jul	6.9%	81.1%	62.2%
Aug	1.2%	83.3%	66.6%
Sep	-23.7%	39.9%	21.2%
Oct	2.6%	43.5%	22.4%

October Portfolio and Results:

	%Port	%Port			
	31-Oct	30-Sep	1st Buy		Return
ROKU	15.3%	10.6%	05/13/19	54.6%	
AYX	14.8%	17.0%	08/27/18	23.2%	
TTD	14.7%	14.2%	06/08/17	31.6%	
MDB	11.7%	11.4%	08/29/18	33.7%	
OKTA	9.1%	8.5%	06/15/18	57.5%	
ZS	6.7%	7.1%	08/27/18	-13.4%	
PLAN	5.8%	5.9%	05/28/19	7.5%	
ESTC	4.5%	5.3%	07/15/19	-22.3%	
CRWD	4.3%	5.2%	06/12/19	-28.3%	
COUP	3.9%	3.8%	09/12/19	-1.1%	
SHOP	3.5%	3.6%	09/12/19	-12.6%	
TWLO	-	7.6%	08/27/18		
Cash	5.65%	0.05%			
			Return	vs S&P	
		Month:	2.6%	0.5%	
		2019:	43.5%	22.4%	

Past recaps for anyone who’s interested:

December, 2018:…

Stock Comments:

While it’s always tempting to shuffle the deck when things are unsettled, I stood relatively pat for most of this month. I was content with my allocations heading into October and thought it better to sit back and assess rather than try to screw around too much on the edges. I considered swapping SHOP for DDOG early, but decided we were close enough to Shopify’s report to hold through release and go from there. TWLO and AYX provided some earnings food for thought as well (spoiler alert: one was significantly tastier than the other). I have several others reporting soon, so there will be plenty more to digest over the next few weeks. Here’s where I stand heading into that stretch:

AYX – I resisted adding during September’s drop because it was already my biggest position and trending toward oversized. However, this month I trimmed some TWLO for a nibble when Alteryx dipped to just over $91. In my opinion the drop that low was overdone given the company’s quality fundamentals, and at the time I only needed to wait about 10 days or so for earnings to show me exactly where AYX stood.

It turns out AYX appears to be standing pretty tall. In fact, I think they crushed it. Growth reaccelerated to 65% and I found the supporting numbers just as strong. Gross margins checked in at an astronomical 92%, expenses are in a good place and gross profit growth has gone from 50% to 58% to 66% the last three quarters. Their expansion rate held at 132% and they showed solid profitability with non-GAAP operating and net margins of 21% and 16% respectively. Their current FY guide of 54.6% growth is just under last year’s actual of 55.2%. Given their history of beats, it’s not at all out of line to expect AYX will end FY19 with accelerating revenues for the second consecutive year. Really, you can’t draw it up much better.

The stock reacted weirdly after hours, jumping up to $98 and then immediately plummeting to $88. That was fine by me as I have a self-imposed rule of not adding shares immediately after earnings until I’ve updated all the numbers and taken a look. In this case I really liked what I saw and was perfectly happy to grab another batch at $92 as it swung back up. Please note those new shares aren’t reflected in my end of October numbers above. I’ll account for them in November.

COUP – A starter position added in September. While Coupa’s business rightfully gets lumped into the same SaaS bucket as most of my other companies, the stock is unique in that it avoided much of the August/September carnage to stay closer to its highs. I guess there’s an argument COUP has less technical support, but I prefer to think the company is simply starting to get the recognition it deserves as an accelerating growth story. You know, rose-colored glasses and all. Fingers crossed.

CRWD – Well, at least CrowdStrike didn’t get pulled too much further into Ukraine-gate. Unfortunately, that didn’t stop the stock from having a pretty lousy month. Like Zoom, CRWD’s lofty valuation appears to have been hit extra hard during this market reset. The flip side is CrowdStrike now sits at a price that should have plenty of room for appreciation if it can continue to post what have been stellar operational numbers so far. I was even lucky enough to add a share just above $50 in an account that had $52.74 in cash! Thank goodness for TD Ameritrade’s move to $0 trades.

DDOG – Watched it…thought about it…was tempted on the dip below $30…and ultimately decided I didn’t want to bump anything for it until I get a chance to review DDOG’s first earnings report on 11/12. Given the path travelled by the majority of recent IPO’s, I’m banking on the likelihood I have time to let this one simmer a bit.

ESTC – Speaking of IPO’s that have simmered a bit…

The main news from Elastic this month was the completion of their Endgame acquisition a little sooner than originally anticipated. Endgame gives ESTC “a pioneer and industry-recognized leader in endpoint protection, detection, and response.” Elastic continues to quickly and aggressively build out its security offerings even as the stock continues to drift lower. In fact, ESTC has now slid almost all the way back to its October, 2018 $70 debut. It appears the market still isn’t quite sure how to gauge ESTC’s open source business model and potential path to profitability. The hope here is those business efforts will result in accelerating growth when this quarter’s numbers are finally released (likely late-November). I’m also expecting the company to show at least some improvement in narrowing what have been steady losses. Given its continued stagnation, insufficient progress in those areas could very well make me rethink Elastic’s spot in my portfolio.

MDB – Mongo remains at the forefront of the shift to NoSQL, and I believe its long-range prospects are as attractive as any company I own. But don’t just take my word for it. This recent post by brittlerock outlines MDB’s case much better than I ever could:… . The big data age and its accompanying move to the cloud are firmly upon us. The thought here is Mongo’s burgeoning partnerships with all three major US cloud services (AWS, Azure, GCP) along with its just announced Alibaba Cloud partnership in China should serve it very well in the long run ( It’s simply a matter of checking on the numbers every three months to make sure the story holds, especially the growth of Mongo’s Atlas service. Barring any material news before then, our next update should be in early December.

OKTA – Okta had a solid month (+10.8%) on no real news, and its allocation crept up a bit as a result. I must admit to some early jitters about Okta’s growth when it next reports. I’m hoping it can hold 45%. The stock remains relatively pricey compared to some of my others, so there’s a chance I trim a percent or two if a more appealing opportunity presents itself between now and then. We’ll see…

PLAN – It was pretty much out of sight, out of mind for Anaplan this month. That’s perfectly fine by me. There’s nothing wrong with a drama-free holding or two every once in a while.


Whoa. This is the exact opposite of drama-free. The stock’s exhilarating August (+46.5%) and vomit-inducing September (-32.8%) have now been followed by a thrilling +44.7% October. That means Roku has basically carried my portfolio for two of the last three months and has now leapt to my top spot as a result. While the company’s November 6 earnings should no doubt be interesting, those results are likely just a prelude for what has traditionally been HUGE seasonality during the Q4 holiday season. That’s when we should really see just how well Roku has positioned itself as the default OS and viewing platform for the ever-increasing number of eyeballs migrating to streaming TV. For those who have dared to enter this ride, please check your safety bar and remember to keep your arms and legs inside the car at all times. The rider assumes all risks and no refunds will be given.

SHOP – If you remember, I repurchased Shopify for the back of my portfolio after a September allocation review that caused some cash to shake loose. Even though it entered October as my smallest allocation and lowest-conviction stock, I decided SHOP had enough interesting things going on to at least hold through 10/29 earnings. The quarter itself came in about as expected. They beat on revenues ($390.6M) with growth clocking in at 45%. Subscription solutions, monthly recurring revenues and Shopify Plus numbers all came in at reasonable rates. The one glitch was a -$28.3M net loss affected by a one-time $48.3M tax provision, but that final number still came in a little better than guided. SHOP also raised guidance for both Q4 and the FY.

After combing through the release and call, there’s really nothing to complain about. Shopify’s story remains intact and the company continues to deliver on its promises. It’s just that SHOP is now at a size where there are few avenues for any upside surprise. The market seemed to agree with the steady-as-she-goes premise. After initially dipping post-earnings the stock quickly rebounded to about the price of their recent secondary offering (which I rightly or wrongly view as sort of a short-term equilibrium price). I decided to hold a few days with the intention of it being a candidate for cash if one of my other companies posted knockout earnings. It’s now just a straight hold for me while I figure out what to do with my newly found TWLO loot.

TTD – This was quietly a solid month for The Trade Desk (+7.1%). I can’t say TTD has the highest upside in my portfolio, but right now it ranks right there with AYX as the company whose current price/performance combo I’m least concerned about. Earnings 11/7.

TWLO – As mentioned above, I trimmed some TWLO for AYX when Alteryx took what I thought was an unwarranted dip mid-month. Twilio was my choice for the cash because it continued to be a lesser performer for me, to the point where it lagged the market YTD at the time. I was still interested in the business, but there was clearly uncertainty surrounding the stock heading into 10/30 earnings. As I’ve outlined in prior months, I felt TWLO had a fair amount to prove in its final earnings release before guiding into some very tough comps as a joint TWLO/SEND entity. Frankly, I had my finger on the sell trigger in the event of less than enthusiastic news.

As (bad) luck would have it, I had a delayed flight that took off precisely as earnings hit the wire. I had just enough time to see what I felt were mediocre headline results along with the slight guide down before getting banished to the offline wilderness on a plane with a faulty Wi-Fi system. By the time I reconnected about 45 minutes later, TWLO was already down ~10%. After finally accessing the release and dumping in the numbers I decided my previous concerns were justified. In my opinion too many metrics are sliding the wrong way and I didn’t see much in the initial call comments to ease my mind. In the end I believe the current version of TWLO simply has too much chasm left to cross to feel comfortable holding it, so I exited my entire position after hours around $94. I leave with a small Twilio profit, but obviously not as large as it once was and behind the S&P overall. I’ll continue to watch it though and good luck to those still holding.

[Epilogue: Reading the board comments it appears the conference call got mixed reviews. I read the transcript and took notes even though I’d already sold my shares (it’s on my watch list after all). I’m in the camp that management was a little off its game. I saw more explanations, rationalizations and cautions than enthusiasm for their immediate future. The big standout to me is the continued focus on the “interest” and “conversations” around Flex as opposed to actual implementations. That’s been dragging on a little too long now for my liking. They continue to litter the phrase “early innings” throughout their calls. To me it feels a bit too much like Twilio’s gotten itself stuck in a first inning loop. After adding my call notes to the quarter’s results, I’m entirely comfortable with my decision to sell.]

ZS – I made a very small add at the start of the month with my regular monthly contribution. While I’ve shortened ZScaler’s leash as the company recalibrates, I do view the stock as having a reasonable floor at these prices. I’m comfortable with ZS’s competitive position in no small part due to the excellent discussion about it on these boards. The challenge now is how quickly the new CRO can fix the sales issues outlined last quarter. I believe ZS could see a Docusign-type spike if it can similarly ease concerns about its billings slowdown. The downside is that much like TWLO ZScaler could be facing a chasm issue of its own. I’m content to wait and see what next quarter brings but won’t be adding any more shares.

My current watch list in rough order is ZM, SMAR, DDOG, DOCU, PAYC, TEAM and TWLO. This market really seems to be culling down my choices.

And there you have it. After an absolutely brutal September, October somehow haphazardly lurched to a positive finish. Large drops on 10/16, 10/18 and 10/31 were fortunately more than offset for me by sizable gains on 10/3, 10/11, 10/24 and 10/30. I also owe huge props to Roku for saving my bacon for the second time in three months. My cash percentage is essentially yesterday’s TWLO exit. I’ve already reallocated about half with my afterhours AYX grab today. I haven’t decided on the rest yet but will do it sooner rather than later as I prefer to stay fully invested. It’s just a question of current holdings vs watch list.

As I look at my October performance, I’ve now beaten the market 9 out of 10 months in 2019 and 12-for-15 since starting growth investing. I say that not to brag, but more to keep things in perspective. This board is a fabulous resource and we should never lose sight of that. We’ve spent a TON of time lamenting the vagaries of the last couple of months. While major declines are always difficult to endure, that doesn’t change the fact many of these companies continue to handily outperform the market longer term. Again, volatility is a funny thing…it just tends to be less amusing when the gyrations are down rather than up. The important thing to me is more often than not my portfolio seems to keep staggering higher at the end of most months. That’s ultimately all I can ask, and I remain grateful for the help I’m receiving along the way.

Thanks for reading and I hope everyone has a great November.


Great post

What would you do if your AYX or ROKU oversized to more than 20%? I remember you said you don’t like one stock over 15% but what if after this time mass cleaning. The true pearl eventually show up. You will still insist your rule?

Great post again, really help.


What would you do if your AYX or ROKU oversized to more than 20%?

I’m honestly not sure and a problem I’m more than willing to have! Thinking about it, I find myself in different spots with the two names.

Last month in my AYX notes I said: “Apparently, I’m OK letting a position grow to >15% but am uncomfortable adding any new shares much beyond that level.” That just changed when I bumped AYX from 14.8% to ~18% right after the 10/31 earnings release. I thought the numbers were tremendous and my confidence level rose a notch. I can’t see how AYX doesn’t get back above $100, hopefully leaving double-digits behind for good. My initial thought with AYX is I’ll likely start to squirm at 20%, but that’s theoretical as I’ve never actually had that happen before.

ROKU is a different story. My original target allocation was 8-12%. I built it up to about 10% before it took off. This month’s jump from 10.6% to 15.3% was all price appreciation with no additional shares. I plan on holding what I have at least through 11/6 earnings. Roku’s business momentum is crazy good right now and I have a hard time seeing it slowing down at any point through the remainder of 2019. Right now I feel like my squirm factor is in the 17-18% range.

I guess from a strategy standpoint I find myself working within comfort ranges something like this:

< 5%
8-10% (I know I said 8-12% above with ROKU, but this is probably more accurate for most names.)

I seem to be building positions toward the bottom or middle of those ranges with the idea of letting them run past the top end if they can. That being said, I guess it’s more feel than a hard rule. And I have no real idea yet on the upper limit for the 12%+ group. As outlined above, I haven’t really experienced that scenario enough to figure it out.

Thinking it through, I’m comfortable with all my present allocations. However, these two make me pause a little:

OKTA - I’m thinking 8-10%. It’s hovering around 9%. As I said in my recap, I might trim before earnings. I remember doing something similar a few months ago when I cut OKTA from 10% to 9% to buy more AYX.

CRWD - I always had it 5-8%. I already topped it off once when it dropped below 5%, but it’s now down to 4.1% again. I can’t bring myself to add right now, so I’ve likely made the mental switch to < 5%. That might change though as I still have a little bit of TWLO cash to work through and I can’t completely rule CRWD out.

I always knew I was thinking in terms of percentages with my holdings, but never really articulated even to myself what the exact guidelines were. I guess now I know. :slightly_smiling_face:

Thanks for the question and I hope that helps.


I always knew I was thinking in terms of percentages with my holdings, but never really articulated even to myself what the exact guidelines were. I guess now I know.

Hi stocknovice,
From my own experience I think it is hard to stick with any prescribed percentage for any one stock. It drops a little this week and you add a little to it, and next week the stock price returns to where it was, but the percent is now more than you had planned. Or the stock price doesn’t change but the value of the rest of your portfolio rises or falls, and the company’s position size falls or rises as a result, without you doing anything. Or some piece of news hits the wires and you reduce or add to your position a little bit, but it takes you out of your percentage of portfolio. I find that it’s a work in progress and in constant flux, rather than a fixed percentage.


From my own experience I think it is hard to stick with any prescribed percentage for any one stock.

Great points, Saul. I definitely don’t consider myself a slave to the percentages, but can better see the pitfalls you describe now that you’ve pointed them out. I guess I viewed the ranges I listed more as conviction buckets similar to your system of using stars. I’ve been using them as rough guidelines of how much of any company I’d be comfortable holding. I can then adjust my allocations from there.

That being said, I hadn’t fully considered the effects of random portfolio moves around the stock in question. My recent AYX and ROKU experiences are good examples. My AYX adjustment was based on a clear piece of news. ROKU’s move is nothing more than a smoking hot stock. Trying to treat them the same would be a big mistake as each should be judged on it’s own merit.

Thanks for the additional context. Good learning points for me. That’s why I like posting these recaps.