swood1963Oct2021Portfolio

With new ERs upon us, October seems like a long time ago but here is my end of October summary. Producing these summaries forces me to acknowledge and address my weaknesses as I learn and apply the collective wisdom of Saul and the board. As I near retirement, I thought boredom might be an issue. Not anymore. The TAM for learning will keep me excited and busy. I’m truly grateful to Sensei Saul and the entire board for the opportunity to participate, learn, and grow. The benefits are not just financial.

October Portfolio:


                   Port%
UPST  Upstart      43.8%
DDOG  Datadog      13.4%
CRWD  Crowdstrike  11.7%
NET   Cloudflare    8.5%
ZS    Zscalar       6.9%
MNDY  Monday        5.3%
ZI    Zoominfo      5.8%
LSPD  Lightspeed    4.6%

Portfolio Performance vs Indexes (YTD per month):


Month Day  Portfolio  Nasdaq  S&P 500  Dow Jones  Russell 2000
1      31       6.52    5.55     1.98      -0.04          9.26
2      28      12.02    7.01     5.44       4.34         16.93
3      31      -8.21    4.32     7.36       9.12         14.11
4      30      -2.77    9.96    12.98      12.08         16.47
5      31       3.73    8.17    13.55      14.40         17.93
6      30      13.92   14.22    16.13      14.16         18.74
7      31      20.68   15.61    18.55      15.27         13.85
8      31      61.69   20.17    22.21      17.00         16.85
9      30      79.22   13.78    16.40      11.98         13.28
10     31     104.44   22.82    24.67      18.83         21.18

Since starting Saul-investing earlier this year, my portfolio has undergone a tremendous transition to a concentrated portfolio (~80 stocks down to 8-10). The results above show greater success as I applied the wisdom of the board and increased my Saul holdings (especially UPST 269% YTD, NET 129%, DDOG 81%, and CRWD 70%) over time. Converting to a concentrated portfolio required setting up guard-rails agreed upon with my risk-averse wife. We agreed that I could take a third of our net worth (leaving two thirds for guard-rails) and invest it Saul-style. Thankfully, the Saul investments are now one half of our net worth and hopefully will be more moving forward through hyper growth, fully realizing that dreaded 30-40% downturns can and will occur.

Company Comments:

UPST
The most discussed company on the board. Not much to add but if the Well Fargo rumor (read https://discussion.fool.com/upstart-working-with-wells-fargo-349…) is true, the term hyper-growth might not be sufficient.
Incredible TAM in personal lending, car lending, and potentially mortgage lending
First-mover in AI lending (make FICO meaningless, like Blockbuster)
Company website: https://www.upstart.com/
Next ER 11/10/2021 - should be interesting!

CRWD
On 11/1, acquired SecureCircle to extend its industry leading Zero Trust endpoint security device and identity capabilities to include data
Strong performer in endpoint cyber security which remains an urgent issue for business and governments as employees increasingly work remotely and applications move to the cloud.
Because of the Internet of Things (IoT), the number of endpoints needing security has grown exponential
Crowdstrike Falcon platform processes over 5 trillion events a week
Partners with Zscaler to deliver end-to-end Zero Trust security protection from the endpoint to the application
Must monitor growth rate which may be slowing due to a large Market Cap (56B) and increasing competition from SentinelOne and others
Company website: https://www.crowdstrike.com/
Next ER 12/2/2021

DDOG
Top class SAAS company providing modern monitoring and security
Companies gain complete visibility into their cloud-scale infrastructure
Ability to analyze the performance of every service and user request
Automatically detects security threats and misconfigurations in real time
Provides over 450 turn-key integrations including AWS, Azure, and mongoDB
Increased growth expected by achieving AWS Government Competency Status in July which will increase visibility with customers and AWS
Granted an Authority to Operate by 12 Federal Agencies as listed in the FedRAMP marketplace. The FedRAMP mission is to promote the adoption or secure cloud services across the Federal Government by providing a standardized approach to security and risk assessment
Incredible ER on 11/5/2021 (read https://discussion.fool.com/ddog-q3-2021-fiscal-results-my-notes…)
Company website: https://www.datadoghq.com/
Next ER 2/10/2022

LSPD
Provides a one-stop commerce platform for retail, hospitality, and golf merchants
Recent short report by Spruce Point caused huge decline in stock price, achieving their goal. Report did not challenge post-IPO numbers and the growth numbers look great so holding for now.
Poor ER on 11/4/2021 and stock was pounded (-30%). See Wisdom Focus below.
Company website: https://www.lightspeedhq.com/
Next ER is NLC (No Longer Care)

MNDY
Productivity/project/collaboration management SAAS player powering over 125k companies worldwide
Provides a customizable automation tool for every industry (huge TAM)
Monday uses Monday (this is important). When you use your own product, you see its strengths and weakness and are more likely to improve the product quickly
Provides fully customizable no-code platform, cross-department solutions, and enterprise-grade security which are advantages over Asana, its chief competitor
Company website: https://monday.com/
Next ER on 11/17/2021

NET
Global network designed to make everything you connect to the Internet secure, private, fast, and reliable (what else could you want)
Secures websites, APIs, and Internet applications
Protects corporate networks, employees, and devices
Allows customers to write and deploy code that runs on the network edge
Excellent ER on 11/4/2021 (read https://discussion.fool.com/net-q3-results-34971079.aspx?sort=wh…, especially Muji’s insightful posts)
Very insightful thread, requested by Saul, on why NET’s large valuation does not match low YoY revenue growth (low 50’s) (https://discussion.fool.com/cloudflare-here39s-what-we-were-miss…)
Company website: https://www.cloudflare.com/hp/
Next ER on 2/10/2022

ZI
SAAS marketing information platform trusted by over 20,000 businesses to improve B2B communications by using high-quality, actionable data
Acquired RingLead in September to help customers combine, cleanse, and route disparate data sources
Acquired Chorus.ai in July to use “intelligent conversation” software to help customers analyze sales communications of clients and help them formulate effective sales growth strategies. This seems to be accelerating growth, therefore a great acquisition so far.
Excellent ER on 11/1/2021 and summary thread (thanks wsm007) https://discussion.fool.com/zoominfo-q3-my-thoughts-and-notes-34…
Company website: https://www.zoominfo.com/
Next ER 2/20/2022

ZS
SAAS Cloud Security platform built using a Secure Access Service Edge (SASE) architecture
Announced CRWD partnership in September that will integrate the ZS cloud security platform with CRWD’s AI-powered Threat Graph to provide customers increased threat-protection and improved security across their enterprise
Zscaler Private Access achieves DoD Impact Level 5 (thanks Saul).
Company website: https://www.zscaler.com/
Next ER on 12/3/2021

Watch-list Themes/Companies:
Data in Motion/CFLT - love the technology and problem to be solved but is it a good investment. Interesting thread from Saul (https://discussion.fool.com/confluent-why-i-decided-not-to-buy-n…)
Cross-border e-commerce/GLBE - what a great problem to tackle. Was invested for a few months but not sure how to determine exit criteria so I got out. Also, possible supply chain headwinds for now
Buy Now Pay Later/AFRM - Hyper growth but assumes great risk on loans. Also, each needs to decide about the “morality” of our investments. The board spent considerable resources on this recently. IMO, morality should be considered in any investment but especially in a concentrated portfolio where there are numerous investment options. My issue with BNPL is it provides for and thrives on the “Impulse buy” which many people struggle with
Data Storage/Data Compute/SNOW - exited because of waning RPO but the stock continues to grow. Exponential data is the future so I might just get back in

October 2021 Summary of Summaries:
The end of month summaries (written by Saul and others) have been an invaluable resource for me. I catalog the summaries each month and find the data to be helpful in analyzing my portfolio and forming my own convictions. This month’s summary of summaries can be found here: https://docs.google.com/spreadsheets/d/1BD0ymCxfKxmllJX3u6rD…

Wisdom Focus:
This month’s focus from Saul is when to sell a stock and the opportunity cost when deciding to hold on to a stock where the story (thesis) has changed dramatically.(https://discussion.fool.com/knowledgebase-2019-part-2-34381931.a…)

From Saul:
There really are some times when it makes sense to sell a stock. Saying that “it would be better if I held” because at some time in the future the price may go back up is not valid (it’s silly, even). Just think of a stock that you sold at $200. It dropped to $50. It gradually came back and now, 5 years later, it’s at $220. Would you say it would have been better to have held because it’s now up 10% in 5 years!!! That really is silly. You could have thrown the money at a dartboard of MF recommendations and beat that result by 500%. And could have done lots better than that by intelligent picking. There’s a big opportunity cost to leaving your money in a stock which keeps going down, and then stays down, as well as whatever paper loss you have.

Back to me:
As we now know from Lightspeed’s ER, customer growth slowed dramatically and guidance forward details expected supply chain headwinds. Personally, I built LSPD to a medium conviction months ago when listening to a CEO podcast recommended by Saul. I loved the story and the potential. After the short article published weeks ago, I trimmed because it became a lower conviction stock for me. After this latest ER, I will soon sell my position (I’m slower than others on this board; felt like musical chairs where I was last one standing haha). The wisdom applied is that the LSPD narrative and numbers have changed for me and LSPD no longer belongs in my concentrated portfolio of 8-10 stocks. (The wisdom not applied is to listen to the ER and get out sooner). The stock may bounce back but I’m learning to invest only in my highest convictions.

Quote of the Month:
“The desire of gold is not for gold. It is for the means of freedom and benefit.” Ralph Waldo Emerson – (Sums up my reasons for investing Saul-style)

Search Tools: There are numerous great posts about each of the companies above. To find posts, select “Board Search Sites” on the Knowledge Base.

Helpful sources:

  1. Saul’s discussion board
  2. Considering paid subscription to Muji’s Hypergrowth (https://hhhypergrowth.com/author/muji/)
  3. Motley Fool Stock Advisor and Rule Breaker paid subscriptions
  4. Bert Hochfeld’s TickerTarget paid subscription (https://tickertarget.com)
  5. Seeking Alpha paid subscription (Many great articles and current stock information)
  6. SEC Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system for company filings

Previous Portfolio Summaries:
September 2021: https://discussion.fool.com/swood1963sept2021portfolio-34951005…

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