Very Astute…

Very astute observations. I have gone back to strict rules. If the company is not clearly the dominant or disruptive force then let others invest in it.

With Nutanix I greatly opened the interpretation for those rules. Others did as well. Why? Well, it was cheap and we all thought the market misread the new business model and a great multiple expansion was upon us. Ironically, the multiple expansion increased for stocks like Zs and Mongo that were already expensive, but in the end not for Nutanix.

this is about 2 quarters before the Nutanix blow up. This is seeing things ahead. The thing that really got me back into Nutanix is that Nutanix finally took the marketshare lead (for a quarter). VMWare struck back with a vengeance last quarter. Now either the quarterly numbers were counted wrong, or something really changed from one Q to the next. I don’t know.

What I do know is that Nutanix was not clearly dominant in its category. Thus, all investing in Nutanix is speculative as it was quarter to quarter, battle to battle, against VMWare.

The warning signs observed in the above should be doubly adhered to and believed if you are investing in a company that is not clearly dominant. More likely than not ignored if you are investing in a company that is clearly dominant.

As it turns out Nutanix got destroyed last quarter in marketshare. Utterly clobbered. Another warning sign was that Nutanix was growing slower than the HCI market itself. That was mentioned, but somehow we explained it away. One should never explain away an anomaly spotted when it comes to an investment in a company that is not clearly dominant in its product category.

Just came across this post, found it worthy of a re-visit, and an example of the lesson it gives us.

As I tell my clients, “you can leave some things unsaid.” Meaning you don’t have to prove or disprove everything to win your case, just what you have to prove. In investing the same way. You don’t have to own everything. And perhaps excluding those companies that are not clearly dominant in their product category, while perhaps excluding some winners, will reduce your investment risks long-term. Particularly if the true reason you are investing in the company is because it is “cheap”.

Ironic, isn’t it. The already well multipled are the companies that ended up growing their multiple vs. the Nutanix or Nvidia or Talend. The cheap got cheaper. But another post, as well discussed elsewhere.



Except that in your scenario what are you down to, 5 or 6 stocks to invest in? 8? All pretty much in the same sector?

As these few names you refer to keep going up, what’s an acceptable p/s, 40? 50?

What happens in a year from now is your parameters to investing only allow you to invest in ZS and MDB for example, are you going to only be fully invested in two names?

So was someone wrong to buy ANET, NVDA end of December last year?

Did someone make a mistake buying NTNX at 32 after earnings last month?

It’s great to be in winners like MDB, TTD and ZS, but that’s just part of my portfolio.

I also still hold long term names like NFLX and others.

Just wondering if you are boxing yourself in to a corner.



First let me say “great name”!

I’ve only been around this board for 2 months and what I’ve gotten from it is great advice and a much deeper knowledge about fast growing stocks. I also have seen that these posters encourage us to learn to find the best companies for us too make our own choices on what to invest in going forward. Saul has even spoke to having the number of stocks at a level that “allow you to sleep well” therefore I get that is a different number for each of us. For some it’s a small number, for others much larger, for myself at the moment it 4 times as many as some of these folks. I’m happy with that, I’m not here to compete with anyone, rather I’m here to absorb the knowledge being shared. Many thanks too all who share the fruits of their research.

enjoying the ride