This has made me really discouraged

Investment Analysis Clubs Saul’s Investing Discussions
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I’m worn out with trying to warn people about Fastly. It’s really discouraging.

People are still talking about Fastly’s “30% drop” from their highs. Right now, at the current pre-market price of $76.70, Fastly is down 44% from its high.

The market doesn’t reward “good tech”. I have no question they have good tech. The market rewards good businesses, not good tech. This is a company that hasn’t figured out how to sign up more than a minuscule number of new customers per quarter.

We talk so much on the board about not falling in love with a stock, and admitting when something is wrong, and getting out. You can always get back in if it’s warranted. To put it in perspective, I started exiting at $94.50. To get back just to there from here would require a 23% rise in the stock.

Today’s drop seems to be due to a Piper Sandler analyst downgrade. While I don’t usually get excited about analyst remarks, here’s what the analyst said so that you can see why his remarks affected Fastly,:

• Piper Sandler is now downgrading Fastly from Neutral to Underweight with analyst James Fish saying that “the market is still not factoring enough risk.”
• Fish thinks “fundamentals and risks are not appropriately reflected in the stock at these levels.”
• The analyst notes that TikTok is building its own content delivery network and estimates Fastly’s organic growth is “likely to slow into the mid-20s next year” with tough comps ahead in H1.
• Piper Sanlder cuts its Fastly target from $84 to $65.

I didn’t even think of their organic growth dropping into the mid 20’s next year due to the tough comparisons in the first half of the year without the usage surge, and without TikTok.

I think the analyst was being generous with a $65 target.

Those still in Fastly are “hoping” for a turnaround, but as it has been pointed out by so many people, turnarounds sometimes work, but it is rare. And even in the rare case where it occurs, the opportunity cost of tied up money for a year or more can be enormous.

Saul

A link to the Knowledgebase for this board is in the Announcements panel that is on the right side of every page on this board.

For some additions to the Knowledgebase, bringing it up to date, I’d advise reading several other posts linked to on the panel, especially “How I Pick a Company to Invest In,” and “Why My Investing Criteria Have Changed,” and “Why It Really is Different.”

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Saul, don’t be discouraged. We all learn at our own pace. For me, I learn very slowly. I need to touch a hot stove several times before I realize that it really is hot. Besides falling in love with technology, I like to keep a large diversified portfolio–it makes me feel safe. I like to learn about stocks over a period of years and often find it painful to end the relationship, even when I realize it is toxic. I don’t know why I make all these mistakes, but I am slowly learning how to be a better investor and still have a long way to go. This board is helping me tremendously. I think I need to go read the knowledge base again.
Thanks for providing an awesome place to learn,
Oli

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Saul, it’s good of you to issue this additional warning. Many here praised FSLY, including you. It’s decent of you to take back what you said. You’ve done so with clarity and emphasis.

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Hi Saul,

Rather than be discouraged, look at this another way. Countless times you’ve cautioned that you often make mistakes and people should not simply follow your moves.
Investors need to make up their own minds.

The recent posts on Fastly explained clearly your reasons for getting out of the stock.
Many people came to the same conclusion and trimmed or sold out completely.

If others held for their own reasons, that’s okay. Everyone has a different timeline.
One year from now, holding may prove to have been a great decision.

“Saul’s Board” has been a life changer for me and countless others who truly appreciate this forum and the generous sharing of insight and knowledge.

I sold out of Fastly after hours when they issued the press release. The next day’s post announcing that you’d exited the position made me happy because I feel like I’m learning.

Like the old adage, you’re teaching people how to fish.

Thanks
JT

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The disagreements on this board make this board stronger, not weaker. I appreciate all you do, Saul. You are a gem and I’m glad to be able to learn from you.

I can’t tell you how many times I have “averaged up”, something you have taught us, and it has worked tremendously in my favor. My last addition to Zoom was in the $200s, where as my cost basis was in the $70s. I can guarantee I would not have done this, had I not been part of this board. It’s because of you I have become much less anchored to cost basis. So thank you !

I’m also in the same camp as you on FSLY. FSLY is a semi-unknown at this point. I’m happy to re-initiate a position at a much higher price if the company warrants it/posts solid growth #s. Actually, I’m hoping for that scenario - I’m not giving up on FSLY at all. But for now, as the Sharks say, I’m out.

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Cannot agree more.
Fool has always warned against “Price Anchoring” bias.
I have been averaging up on ZM too.

Thanks,
Pravin

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Saul - much respect. (insert fist bump emoji)

I trimmed my FSLY holdings by 50% after the news. I’m not sure I have ever responded to a change that quickly before. Baby steps for me.

In hindsight, I wish I had sold everything at that point. I has cost me a decent amount (so far).

Speaking as someone new-ish to the board, it is not normal for me to exit a “high conviction” stock that quickly - even when the news changes. Part of the reason is that I don’t feel like we have complete info at this point. Another part of the reason is that I was hoping the 2 main technical resources I rely on related to FSLY (MUJI and Peter) would chime in with some opinions. They have not (at least as far as I have seen).

After your message today, I cut FSLY further - it is now a 3.5% position for me. I’m considering selling the rest. Just conflicted about it still.

Thanks for your input/counsel.

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How do you know that you are learning?

Has the board ever collectively done a review of stocks that were sold to see what the future would be if those stocks were simply held?

I know that MF has conducted such a review and concluded that they would have been better off never selling and that’s why you see them hold some very small old positions…

While short term the selling of Fastly seems like the right move it’s not clear that it’s the best move if the objective is simply to make the highest return irrespective of volatility and saying you will simply buy it back when things look better is not realistic with a stock that could move 50% in a day potentially

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Hi Analog,

I could be wrong but it’s possible that Poffringa made some adjustments per home page update in between his bi-weekly posts.

NET and FSLY both at 22% each as of Oct 16, 2020 after market close.

https://softwarestackinvesting.com/software-stock-recommenda…

I think as of FSLY’s recent acquisition he was reportedly north of 30% but I haven’t caught up on my reading so he may have discussed his reallocation in between somewhere.

Thanks,
Eddie

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" it’s possible that Poffringa made some adjustments per home page update"

Yes, I looked at that also but assumed the new % were just due to the recent change in share price for NET and FSLY.

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I know that MF has conducted such a review and concluded that they would have been better off never selling and that’s why you see them hold some very small old positions…While short term the selling of Fastly seems like the right move it’s not clear that it’s the best move if the objective is simply to make the highest return irrespective of volatility and saying you will simply buy it back when things look better is not realistic with a stock that could move 50% in a day potentially

For me personally, one of the lessons I have learned from this board is to take your best ideas (say 5-7 stocks) and ride those until the story changes. There are so few companies growing at 60%, 70%, 80% etc that to wait on companies growing slower, or even falling in FSLY’s case, in hopes of a turnaround hampers what could be a much greater total portfolio percentage gains instead of sticking with those firing on all cylinders.

If company A returns 50% year 1 and 50% year 2, thats 125% total over the two years. =SUM(1)(1.5)(1.5)/1-1

If company B falters for a bit and grows by 10% year 1 and then magically returns to grow at 80% year 2, thats only a total of 98% over those same two years. =SUM(1)(1.1)(1.8)/1-1

So yes, while the Fool says it might be better to never sell, it doesn’t mean its the best way to approach how many on this board invest.

Brandon

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Poffringa on Fastly

My portfolio allocation to FSLY went from roughly 40% to about 20%. Half of that was due to the drop in price from $120 to $80. The other half was re-allocation to NET, DOCU, TWLO and ESTC. I needed to balance my portfolio for FSLY’s size, but wanted to avoid a large capital gains hit. At the lower price, this was possible. Not ideal, but more palatable. If FSLY recovers to ATH, it will be my largest position again.
5. Between FSLY and NET allocations, I am now at about a 40% allocation to edge networks. I think both will benefit. I really like how NET is executing and think the two will compete in some areas and diverge in others. There is a large market opportunity IMO. Of course, I am very much looking forward to the Q3 reports for both.

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Has the board ever collectively done a review of stocks that were sold to see what the future would be if those stocks were simply held?

Have you missed Saul’s frequent reminder that it doesn’t matter what happens to a stock you don’t own … the only thing that matters is what happens to the stocks you do own.

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Learning is highly individual and idiosyncratic. When I found this board in the fall of 2019, and began consolidating from 40 stocks to 15 now, I decided to sell many stocks (not all) that weren’t being discussed here, and bought many (not all) that were being actively talked about so I could follow along and learn. That meant dropping SQ, ROKU, and TWLO…those have done quite well this year. Hindsight is 20/20. And, I hung onto SHOP and MELI, two of my highest conviction stocks, even though many folks here either exited or weren’t invested in the first place. While my portfolio has grown an astonishing amount thanks to the wisdom here and Saul’s encouragement to buy ZM on the way up, I’m now learning to maybe take it a bit slower for the time being so I can really make this process my own. I halved my position in FSLY, it’s now down to 3.2%. I chose not to exit completely because I’d like to wait and see, at least until earnings, and partly because I am not sure where to put the money, given my current allocations.

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Have you missed Saul’s frequent reminder that it
doesn’t matter what happens to a stock you don’t own

I seldom disagree with Saul but I do on this one.

An important part of ANY educational endeavor, including learning how to invest, is to learn from one’s mistakes. That includes mistakes like selling too soon… the stock then becomes a “stock you don’t own” but is still worthy of space in your memory if you erred by selling too soon.

Eric [still holding a 0.69% piece of FSLY]

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“How do you know you are learning?” Am unsure but feels like this was directed at me.

My knowledge of technology is limited. Do I understand the different strengths of Fastly vs Cloudflare? No.

Analyzing financial statements isn’t a strong suit either. That’s why I appreciate everyone who posts and shares their insights.

Yesterday my IRA portfolio was up 200% YTD, an unheard of gain for me. The results are because of decisions and choices I’ve made.
I didn’t blindly follow Saul or anyone here. Yes, I pay attention and try to absorb as much as possible.

I have done an analysis of “what if” I didn’t go to 25% cash in early March. (Cost me 9%. Was the peace of mind during that scary time worth it? Maybe… maybe not)
Also recently did an analysis what if I simply held my portfolio from January that included AYX, MDB, TWLO, and ZS. Selling those stocks and buying others resulted in additional gains of 15%.

The Motley Fool philosophy is great. In my opinion Saul’s philosophy of investing is superior.
But it’s not for everyone.

The beauty of this board is the shared information. Pick and choose what you want to act upon.

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I don’t think Saul ever said you can’t learn from your mistakes.

He said that the only thing that matters is what you actually own.

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https://www.fool.com/premium/coverage/investing/2020/10/22/w…

https://www.fool.com/premium/coverage/investing/2020/10/21/f…

why would the ones who bought at ~$20 and made FSLY a smaller part of their portfolio be selling at this point?
I would hardly call that a turn around story. Yes it came short one quarter but it is still one for the long ride.

tj

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It is not just short one qtr.
The rate at which they add enterprise customers(~85% of business) is decelerating.

Q3’19 Q4’19 Q1’20 Q2’20
Ent Cust +/- +12 +14 +9 +7
Ent Cust Total 274 288 297 304

Couple of qtrs in this trend…they are finished.

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Dear Saul,

Please do not be discouraged. This message board and your posts have been nothing short of life changing for me. I have an entirely new outlook on investing and it’s all because of you and the wonderful community here.

I agree with your posts on Fastly and I exited the position a few days after their earnings announcement. I did not post my thoughts because I didn’t want to clutter up the board, but there are probably many others who also agreed with you.

I think people are trying to figure out how to think for themselves and not copy you blindly.
We are all trying to learn from the best here. Give us time and know that we like to make our own mistakes (and hopefully learn from them)!

EV12

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