This month I’ve chosen to publish my first end of the month summary (Sept was a long time ago I know but these things take time). Publishing one’s results in a monthly summary is a daunting task but I think will force me to grow as a “Saul” investor. I’m not experienced in “crunching the numbers” but I think there is value in applying the wisdom of Saul and the board to my personal situation. Specifically, I see this as potentially valuable to the many less experienced Saul investors. As an analogy, I would use my experience as a former martial artist. Every dojo has a Sensei (in this case Saul). Every Sensei develops his students and eventually produces other black belts (board heavyweights). If the dojo is successful, it will attract many students (lurkers). While it is the job of the Sensei to lead/teach the dojo, it is the responsibility of each student to follow the rules of the dojo and give back and relieve some of the burden from the Sensei. Hopefully, some of you will find this summary helpful.
September Portfolio and Results (as of 10/8/2021):
% Port %YTD Gain
UPST Upstart 43.5 654.70
CRWD Crowdstrike 11.8 17.97
LSPD Lightspeed 11.0 31.54
DDOG Datadog 11.5 44.35
ZS Zscalar 6.0 35.14
MNDY Monday 5.5 93.58
NET Cloudflare 5.4 80.18
ZI Zoominfo 5.4 30.50
Comments:
UPST
? Incredible TAM in personal lending, car lending, and potentially mortgage lending
? First-mover in AI lending (make FICO meaningless, like Blockbuster)
? Incredible leadership (2 ex-Google execs and one college dropout whiz-kid)
? Customers win - quicker approval, better rates, increased diversity
? Banks win - increased lending/profits, less defaults, built-in regulatory compliance
? UPST wins - incredible potential to scale AI solution and disrupt entire lending industry (and maybe other industries)
? Possibility of decreased revenue during economic downturn
? Currently in regulatory lending compliance. Must stay in compliance in heavily regulated industry.
? Company website: https://www.upstart.com/
? Next ER 11/10/2021
CRWD
? Strong performer in endpoint cybersecurity 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
? Numerous high-profile attacks illuminate need for organizations to increase protections
? 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.
? Company website: https://www.datadoghq.com/
? Next ER 11/5/2021
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.
? Company website: https://www.lightspeedhq.com/
? Next ER is TBD
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
? Member of the Microsoft Intelligent Security Association (MISA) which means they integrate their solutions with other MISA members to make the Internet safer for everyone.
? Accepted into the FedRAMP marketplace and already being used by the FBI and numerous other US government entities for Internet security, web performance, and reliability services.
? Many board members (including Saul) are concerned that revenue growth is only 50%.
? Company website: https://www.cloudflare.com/hp/
? Next ER on 11/5/2021
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
? Recently eliminated its multiple share classes which will make the company eligible for inclusion in certain stock indices (could help the stock price)
? Company website: https://www.zoominfo.com/
? Next ER 11/2/2021
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
? Company website: https://www.zscaler.com/
? Next ER on 12/3/2021
Watch-list Themes/Companies:
• Cross-border e-commerce (GLBE)
• Buy Now Pay Later (AFRM)
• Data Storage / Data Compute (SNOW)
September 2021 Summary of Summaries: https://docs.google.com/spreadsheets/d/1BCE1DnXl6UZZ_gUhS54I…
Wisdom Focus:
This month’s wisdom focus was on these points from Saul (https://boards.fool.com/some-thoughts-for-the-week-34225696…) and how I applied them to my situation.
- Market rises can be condensed on certain days so stay fully invested: Staying fully invested is great when market rises, painful in downturns when it would be great to have cash to buy cheaper shares. I continue to be fully invested, selling/trimming one company to buy a higher conviction position.
- Pay attention and don’t just sell if over-valued: Many of our SAAS companies appear to be over-valued but due to their growth metrics, these companies have generally grown into and justified their valuation.
- Avoid complicated stories , go for the clearer ones when numbers are there: A few of my starter positions were complicated stories (e.g. Saul with Affirm). If it is complicated for Saul, then why do I own it? We should understand why we own what we own, especially in a concentrated portfolio.
- Don’t stick with train wrecks: Many months ago I owned Fastly because of the better edge-computing technology. I sold after Saul pointed out that Fastly was not executing as a company. I avoided the opportunity cost I would have paid by holding on to Fastly waiting for it to justify my expectations.
- Admit your mistakes and correct them: Based on a recommendation from Bert Hochfeld, I purchased a small position in IronSource without really understanding what they do and how they make money. I suppose my respect for Bert made me think I can skip this step of analyzing the company and its numbers. I sold my position within a few days. The company may do well but I’m trying to discipline myself to do my own homework and not buy every opportunity.
Quote of the month:
“Money is a terrible master but an excellent servant.” Phineas Taylor Barnum
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:
- Saul’s discussion board
- Motley Fool Stock Advisor and Rule Breaker paid subscriptions
- Bert Hochfeld’s TickerTarget paid subscription
- Seeking Alpha paid subscription (Many great articles and current stock information)
- SEC Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system for company filings