Saul seemed lost his confidence in the name, after this earnings report. What’s your thought? Is the investment thesis somewhat broken now? Should we get out of the name?
1 Like
Klay,
Really, your post should be deleted, but OK, I’ll reply . . .
Would you like me to tell you what to have for dinner tonight? How about I fill out your ballot for the next election? OK, so I’m being facetious, but that is the gist of your question, folks, tell me what to do.
On a more pragmatic level, here’s my thoughts. First of all, I pay a lot of attention to Saul’s posts. He’s got a log success story. That gives him credibility. What I pay most attention to is not what he bought and sold, and not what percentage of his portfolio is taken up by each position (which is a numerical proxy for confidence), but rather his analysis and reasons for taking action.
Last September he said, “I… cut my very large Twilio position in half… The reasons I chose… Twilio was because its relatively low margin, and because it acquired a large, much slower growing company. Comparing the combined revenue to last year’s revenue makes it look like it’s growing at 90%, but it grew organically at 56% and Sendgrid was growing at 20%-ish, so that in three quarters when you are comparing apples to apples it will look as if revenue growth dropped from 90% this year to 40% next year.”
Try as I might to emulate Saul’s insightful analysis, I did not see this. It’s pretty obvious once spelled out, but it completely eluded me.
After I read that, I trimmed my position in Twilio. I trimmed it again recently in order to allocate more cash to ZM and CRWD (already having 2nd thoughts on that one) and open a small position in COUP. Saul admonishes that we should not try to copy him. I don’t. Our portfolios do not look the same, not in positions or percentages. I do my own research, but following what the folks on this board who have both technical knowledge and financial analysis ability that exceeds my own is a significant part of my research.
Armed with the knowledge gained here and elsewhere I ponder my own investments and make my own decisions. I suggest you do the same.
If you have an analysis about TWLO and want to post it in order to get critique and feedback, that would be a worthy contribution. Asking for opinions of others regarding confidence level in a given company is not.
32 Likes
Could you or Saul please explain to me why this is an actual issue?
“comparing apples to apples it will look as if revenue growth dropped from 90% this year to 40% next year.”
Do you fear investors, who don’t understand the real development of the company, will sell once the revenue drops from 90% to 40%, assuming that there is a problem? And if yes, is it an actual problem? What am I missing here?
4 Likes
Should we get out of the name?
This is not a group-think board, it’s a learn and make up your own mind board.
Denny Schlesinger
11 Likes
"Should we get out of the name?
This is not a group-think board, it’s a learn and make up your own mind board.
Denny Schlesinger"
It’s easy to look at a portfolio, see the returns, and based on that, just follow what another person is doing. However, if there is no conviction, and you actually have no idea what you are a buying but just buying it cuz SAAS is the new gamechanging disrupting thing…
Then you are gonna have a bad time when these -5/-10% days happen and question “why did I buy this?”
If you were going to buy a 20,000$, 40,000$, 100,000$ car wouldn’t you do your research on all facets of it plus the competition before buying it? The same can be said with investing. Ironically because investing can be so liquid- I think alot of people buy real quick without real investigation and second thoughts, because it takes literally 5 seconds to press 1000 shares X stock and bam you are an owner…but when it does go down…they stress about why they bought it…because there was no real conviction and homework done when they bought it.
I know this from personal experience. I just threw money around cuz it was well going up back in 2018. Today, I still put a few dollars into a few SAAS growth stocks, but majority is in dividend winners. I’m alot less stressed, but I do miss the 5-10% gain-a-day stocks. But I do have some portfolio allocated towards it. Just not all…like my 100% SQ portfolio. Having the drop in 2018 from 100 to 60 from SQ was one of the best things to happen to me. Life lessons. Oh well.
7 Likes
If revenue growth drops from 90% to 40% how could it not be indicative of a problem?
The explanation is in numerous posts all over this board. It’s also in Saul’s knowledgebase. This whole board is about growth investing. Get it, growth. Do some research. There’s an enormous brain trust here, but don’t expect to be spoon fed.
2 Likes
It wasn’t my question why a decrease of the growth rate in general can be a problem.
But it is well known since aqcuisition of Sendgrid, that the organic growthrate is lower. So how can this be an issue in a few quarters? If they didn’t acquire Sendgrid and they would have their real organic growth rate of about 40%-60% now, then things would be different?
4 Likes
But it is well known since aqcuisition of Sendgrid, that the organic growthrate is lower. So how can this be an issue in a few quarters? If they didn’t acquire Sendgrid and they would have their real organic growth rate of about 40%-60% now, then things would be different?
Mooo,
I think I understand your question. But 40% is lower than expected. Even with SendGrid, I think the market was expecting more like 50% growth. Is that such a big difference? Do the compounding math, and I think you’ll see the answer is a huge YES.
But it’s not only the growth. Twilio is spending money like a much smaller company – one that is growing at 70% or 80%. That’s not them any more. The market is no longer going to give them credit for their potential profitability. They’re going to have to show it.
Bear
9 Likes
I am new to these boards. While I am happy to plough through the threads here (thank you to all contributors for sharing your insights and wisdom!), I find these forums quite hard to navigate. Do you have any pointers for where/how to do my combing more efficiently, starting with a few “must reads” for beginners to these forums?
Thanks a bunch in advance once again.
There is no problem and Twilio is still a good investment for the longer run.
But the style discussed here is mainly about growth and many in here pay particular attention to continued growth quarter to quarter. There is always an explanation as to why it is growing hand over fist (confirmation bias) but when the growth decelerates, there are also explanations that are in my humble opinion nonsense.
All in all it is about the numbers moving in the right direction. This movement is ‘supported’ by some of the things that happens in the business. But when they are not moving in the right direction for a little while the tendency is towards finding an explanation why the business is no good anymore and its stock needs to be sold. These explanations can always be found when it is coupled with a ‘bad’ quarterly report.
tj
8 Likes
tj -
But the style discussed here is mainly about growth and many in here pay particular attention to continued growth quarter to quarter.
This is indeed true. Being these companies are relatively small and their stocks are often volatile, paying particular attention is somewhat important. I mean, they are growth stocks after all. Each quarter’s figures provide a chance to double check your investing thesis, whatever it may be. When exactly should we pay attention if not quarter to quarter?
There is always an explanation as to why it is growing hand over fist (confirmation bias) but when the growth decelerates, there are also explanations that are in my humble opinion nonsense.
The numbers themselves are never biased. That being said, interpretations clearly can be. Twilio has been one of the most discussed companies on this board the 15 months I’ve been here, and many here have held it even longer than that. Several long-time holders independently came to the conclusion they were no longer comfortable with TWLO after this quarter’s results, mostly because delays in Flex adoption and SEND cross-selling seem to be affecting both the business and the stock. If that’s not the case and you have a different explanation, I for one am all ears. Not everyone has exited the stock, so there’s clearly a continuing bull thesis. I’ve already read Bert’s. What’s yours?
There is no problem and Twilio is still a good investment for the longer run.
That’s quite an authoritative statement. However, before you drop your mic and walk away, would you care to hum a few bars as to why you feel that way? No one wants an echo chamber. If you see a clear case for holding TWLO, would you mind articulating it? Otherwise, you’re just providing counter-nonsense to the original nonsense you’re so humbly opining against.
As an investor, my ego falls countless miles behind my greed. As someone who just sold TWLO, I’d gladly buy it back if there’s an argument showing I’ve made a mistake. However, saying “all is well” and then implying you know something everyone else is missing doesn’t lend a whole lot to the conversation.
30 Likes
Thunderhead,
Sorry for the slow response. As a long time member of the board who used to make a habit of reading every post I find myself confronted with the same problem. There are too many posts to keep up with everything. I will relate what I use as a filter, but I want to preface that with a warning. In that I don’t read every post I can’t venture a guess about what I’m missing. It might be really valuable stuff, at least some of the time. So proceed with caution.
Here’s how I filter what I read:
-
The "must read material is linked in the margin of any post (but does not show up when you display a thread). This is primarily stuff written by Saul.
-
I look at the topic. If I have no interest in the topic, I’m prone to skip the thread.
-
I look at recommendations, especially on the first post in a thread. If it has a high number of recommendations, it’s more likely I will at least open the thread.
-
I look at who wrote the lead post and who’s posted on the thread. You’ll have to decide for yourself who you think consistently has worthwhile posts. But with some experience you’ll find some folks tend to provide more value more consistently than others.
-
When there are long threads they almost without fail veer off topic. If I decide to read the initial post, I’ll follow the thread so long as it remains on topic and retains my interest. Even if I decide to bail, I’ll at least quickly scan the remainder of the thread. Sometimes there’s more substance to be gathered, even if it is off topic.
-
Once again, I may well miss some really good posts with this strategy. I’ll take my chances that I read most of the posts that I consider informative, thought provoking or otherwise of value.
7 Likes
Hi @brittlerock ,
Thank you so much for taking the time to compose that response.
One of the other difficulties with navigating these boards is keeping track of responses to your posts in a timely manner, so please accept my apologies for the delay in acknowledging your post! I see that there is an option for this under “Favourites & Replies”, but it is hardly what you would call intuitive.
I think I am getting better at searching and finding things generally in the few weeks that I have spent here, but boy, would it be nice to have a good search function for these clunky and dated threads. I know that there is a lot of wisdom to be gleaned here, which is why I am putting in the hard yards 
2 Likes