Vinegar101's April/May Portfolio Update

Firstly, thanks so much to Saul and this amazing board he has maintained!!! I have learned so much since I started lurking early last year, and I have still have so much to learn. That said, I am up 63% YTD, and I owe it all to Saul and you guys. I am so grateful for this – I will keep trying to give back whatever pieces of value I can provide.

I hit a high water mark of up 68.4% YTD last week, but have trended slightly down since then. I had one heck of an April (ended up 36% YTD on 4/30/2020) , and May has been mind blowingly good so far.

Link to my first ever portfolio update:…

I missed the April end of month update – I have a lot of respect for those of who are able to update these every month despite work life/personal life interferences.

Before I delve into my portfolio updates, I want to talk about how my portfolio got up this high this fast. I have never been up 68% ytd before (not even close), and it is only May. I truly owe it all to Saul. I spent most of last year lurking, reading all of his updates, the knowledge board, etc. And also trying to read as many highly recommended board posts as possible. My portfolio, as you will see below, contains mostly current Saul stocks and former Saul stocks. As Saul says, do your own analysis and come to your own conclusions. I also heavily follow the Gardner brothers and Bert.

The Gardner brothers preach keeping your winners, because they tend to win. But on this board, we are more keen to sell things where “the narrative changes”. There is an art to this I believe. Shopify, for example, has mostly left hyper growth mode. But in my opinion, the narrative is still mostly intact. My decision, from nearly selling shopify, to buying more at its recent covid nadir around $330/share, has caused some very big short term gains.

So, holding Shopify helped me. Also, during peak covid nonsense, I took roughly 5% of my portfolio and bought LEAP options in Roku, AYX, and CRWD. I have since sold the AYX options after the disappointing quarterly report (still booked an 85% gain on ayx options), but I am still holding my CRWD (up 250%) and ROKU (up 120%) options. Honestly, if I had never bought the options, I would still probably be up over 60ish% this year. Options are a great way to lose money quickly, so I intentionally only used 5% of my portfolio for options.

My holdings now:
Table 1
DDOG 13%
ZM 12%
LVGO 10%
SHOP 10%
CRWD 12%
AYX 9%
TTD 7%

My holdings as of 4/30/2020:

CRWD – 13%
ZM- 12.9%
AYX- 12.3%
DDOG- 10.6%
SHOP – 10.1%
TTD – 8.3%
LVGO – 8%
OKTA – 7.4%
COUP – 7.3%
ROKU – 6.2%
BILL – 3.5%

Moves Made in May 2020:
I sold my AYX options, bringing its relative position size from around 15% to around 9%. I will probably sell more shares over the next month.

I also added to LVGO (10% more shares) and BILL (10% more shares), and I opened an ESTC position.

Moves made in April 2020 (no sells):
BUYS only
AYX ($170 JAN 2022 call options)


Why I’m Holding

My chief reasons for allowing this company to grow to a rather large 10.6% stake in my portfolio are its amazing revenue growth rate (115% yoy), its goal to be EBITDA profitable by 2021 and its progress thus far, high gross margins (74.4%), enormous total addressable market that is largely untapped, high insider ownership, and its innovation.

Livongo for diabetes currently has over 328k members enrolled, which is impressive, but there are over 34mm adults in the U.S. with diabetes. Additionally, the company uses its “nudge” technology (friendly reminders sent from the software to the user to remind them to engage in good habits) to help adults with other chronic conditions such as hypertension, weight management, and behavioral health. Assuming continued success, they will probably apply this technology to other chronic conditions, broadening the TAM even further. There are more than 147mm Americans living with a chronic condition, and 40% living with more than one.

Risks is that revenue rate is decelerating (which is pretty normal for a company growing so fast and at such a scale as Livongo), so I am not worried about this now. Other risks include the insurance industry or the government turning on Livongo (not likely, at the moment there are scientific reports done that show the effectiveness of Livongo both for people’s health and for the ROI for companies with employees using LVGO).

Rev growth yoy per quarter (most recent first): 115%, 140%, 147%, 156%, 167%

It is worth noting that Livongo’s growth slowed down quite a bit from its previous levels, however, it is obviously very much still in hyper growth mode. If it’s growing over 70%, I’m happy, but if it keeps decelerating very quickly, we should probably start asking why. It is of course normal for hyper growers to stop at some point.
Some of you may skip this one after I say this lol, but this is the only stock I own that is not recommended by any of the following: The Motley Fool (to the best of my knowledge) , Bert, and lastly, but most importantly, Saul. None of the aforementioned people have shown interest, although the fool does write positive articles from time to time. However, in the time I’ve been paying attention, I’ve seen it more than triple since it hit a low of $23.62 during peak covid, and now it’s been hovering around $77 per share (a 225% gain in under 2 months). provides enterprise software that helps small and medium sized businesses across all industries manage customer payments. A simple example of how helps is by eliminating the need for small businesses to manually process checks, something that more than 90% of SMB’s do to make and/or receive payments. The company is led by founder/CEO Rene Lacerte, who still owns 3.2mm shares, roughly a 4.4% stake worth over $200mm.

The company is still quite small, having a market cap of $5.5bb, and only 91k customers. The company estimates their market to include 6mm SMB’s.

In its most recent quarter (earnings released on 5/7/2020), they grew their core revenue 63% (comprised of subscription revenue and transaction revenue) to $36.1mm, non gaap gross margin to 78.8%, total customers to 91k(28% yoy growth), 6mm payment transactions (23% yoy growth), and total payment volume to $24.2bb (33% yoy growth).

Although a lot of people (myself very much included) suspected would be susceptible to revenue growth slowdown due to its exposure to SMB’s, the CFO indicated COVID had a very immaterial effect on revenue, causing the business to lose about $100,000.

In some ways, covid may actually accelerate the need for - processing, approving, and depositing payments electronically is necessary in a world where you can’t get your employees to go to the bank, or meet with clients, or retrieve snail mail.

The stock is volatile, and it has a potential price changing event coming up, its lockup period ends in mid June. Assuming no massive exodus by key insiders, any lock up associated dip should probably be considered a buying opportunity.

Quarterly yoy Rev growth (most recent quarter first): 46%, 50%, 59%
Quarter to quarter rev growth (most recent quarter first): 5%, 11%, 9%, 14%, 8%, 18%
Definitely seems like we are seeing deceleration in quarter to quarter growth. It could just be seasonality in their earnings? I am not sure. It might also be more helpful analysis if I had historical data for core revenues, as opposed to just plain old revenue.

Truly astounding quarterly report:
Revenue Up 87% yoy
Gross profit Up 105% yoy
Op income from -9662 to 3778

89% increase in custoemrs spending more than $100k, DBNER of 130%
–63% of customers using more than one product, up from 58% last quarter and 34% last year
–GM of 80%, up from 78& last quarter and 70% last year
–RPO was 256mm and 86% growth yoy
–in general, not impacted materially by covid.
–Rev growth going backward looks like: 87 - 85 - 88 - 82 – 76

adjusted gross margin improved yoy to 80% from 73%
Q2 rev growth is being guided to 63% on the high end

I’m gonna over-simplify elastic as a company that makes software for software engineers. My opinion is that software engineers and their budgets are probably one of the least impacted spaces by covid (see DDOG, or TWLO’s latest quarter). Of course, I don’t know how many of ESTC’s customers are in the restaurant and/or hospitality industry. If it ends up being a lot, quarterly earnings scheduled to come out in a few weeks could be quite rough.

More about the company: A key use case is the ability to search through logs quickly and visualize logs elegantly with their Kibana product. Their solutions span the following three major domains: search, observability, and security.

I think PaulWBryant laid out a great case that this company has not had industry tailwinds priced into its stock for some reason. Perhaps the profitability issue that caused Saul to sell, or maybe something else. I am also not clear on ESTC’s pricing strategy – how much of it is based on usage? ESTC’s website is a bit vague on this matter (they ask you to “contact us” for more info). My understanding is that usage based pricing drove a lot of TWLO’s numbers higher, and I am somewhat speculating that ESTC may have enough usage based pricing to propel their numbers to a surprise beat.

Even if my speculation is off, the company fundamentals are solid. Key metrics for the 9 months ended 1/31/20:
DBNER: 130%
Revs up 57% to $304mm over 9 months ended 1/31/19
GM: 70.9% vs 71.4%. In the most recent quarter, it was 74.8%
Operating expenses up 71% (this is bad)
Net income 136mm loss vs 67.5mm loss (this is also bad)
Adjusted net income of 28.9mm loss vs 6.51mm loss (more bad)
$294mm in cash/equivalents
22% of their revenue comes from ESTC cloud, which grew at 115% yoy
44% of revenue is international

Quarterly yoy rev growth (most recent quarter first): 59%, 57%, 57%,
Net profits in millions (most recent quarter first): -44, -50, -42, -35, -21, -28, -19, -13

If profitability gets better or other conditions improve, I will consider upping my position. For now, ESTC remains a small speculative part of my portfolio.

TDOC- I sold this in early March, only to buy in again in early may. Selling was obviously not my wisest move. I did so because, in early March, I thought covid fears were overblown, and TDOC had already appreciated greatly due to covid. So I thought TDOC was gonna deflate back to normal once people realized covid fears were overblown. At least I held zoom :slight_smile:

Anyway, they have since announced quarterly earnings, which convinced me to rebuy. Here are some highlights:
Revenue jumped 41% higher to 180.8mm
Net loss was $0.40, versus $.36 expected
Subscription fee revs rose 29% to $137mm
Visit fee rev jumped 93% higher to $43.7mm (mostly from U.S. market)
Growth in U.S. market rev – 33% yoy to $107.9mm
International subscription access fee rev – Up 17% to $29.1mm
Acquisition of MedicinDirect helped revenues, but 40% of 41% of rev was organic
Visits up 92% to 2 million for the quarter
U.S. fee-only subscrioptoins are up 263% to 227k
Paid membership up 61% - the heart of the company’s business (businesses paying subscription fees to use teladoc’s telehealth services
Forecasting FY 2020 to be over $800mm. Midpoint of range would be 49% yoy growth.

Historical revenues % yoy growth (most recent first) look like this: 41%, 26%, 24%, 36%, 43%, 59%, 60%

Unsurprisingly, it seems pretty clear TDOC got a large COVID revenue boost. Hopefully people start using telemedicine, enjoy it, and keep using it. Usage of Teledoc’s platform has show this to be the case - people who use it one time are likely to keep doing so going forward.

SHOP – Being honest here, in my last update, I indicated that I wanted to sell it, and that I very well may. Something funny happened, right before I was about to sell I read a great article by Bert, as well as an update from a certain investment service very famous around here that I can’t mention explicitly. Anyway, I held, and was heavily rewarded for doing so. Just goes to show you, I’m no genius, no one can ever predict which of their stocks will be better than others with complete certainty.

Revenues rose 47% to $370mm, much higher than the 443.1mm consensus, leading to a profit of 22.3mm, or $0.19/share. Analysts expected a loss of $.18/share!!

Gross merchandise volume up 46% to $17.4bb w/ gross payments volume of $7.3bb

GMV through point of sale went down 71% from mid march to mid april, but merchants were able to get back 94% of those sales through their digital sales.

Shopify capital (lending to small businesses) has 192mm in loans outstanding, up from 150mm at year end 2019. Monthly recurring rev fro this is up 25% to $55.4 mm

Quarterly YoY rev growth rate looks like this (most recent quarter first) 47%, 47%, 44%, 47%, 49%, 54%, 57%, 61%, 68%, 70%

I’m largely in agreement with Saul and StockNovice on this one. Alteryx is being negatively affected by coronavirus, or worse, (my thoughts here) maybe the business already peaked anyway and was going to report a subpar quarter with or without coronavirus. Maybe coronavirus just gives them a good excuse.

Most likely, AYX is still a great company and will pick things up again, and we will see revenue growth back in the 60’s and 70’s, as opposed to this quarter (just 43%). In any case, I am still very bullish on AYX over all, but not bullish enough to let it be 15% of my portfolio. Hence, I sold my AYX options but held my shares, keeping my position at 10%. I may sell some more later this month and buy more of something else.

In the most recent quarter, revenue was up 55% yoy to $321mm
Platform rev up 73% yoy
Active accounts are now at 39.8mm
Streaming hours were 13.2bb for the quarter
ARPU hit $24.35
Opex Up 76% (sounds possibly problematic to me)
Net loss was 54.6mm, or $0.45 per share
Adjusted EBITDA of negative $16.3mm

Covid is hurting ad revenues (short term) but boosting the total users(who will likely stick around for the long term). Covid related problems are also being offset by dollars moving to Roku from traditional tv.

Quarterly Revenue growth rate (yoy) looks like this: 55%, 49%, 50%, 60%, 51%, 46%, 39%, 57%

We had a new earnings report on 5/8, but my thoughts are basically the same as before:
Revenue growth has been slowing, but profits continue to rise. I think this company’s strong competitive position, growing profits, and extremely high TAM make this a potential “CAP” play that could still deliver strong returns. That said, it is on my watch list to sell. CAP plays can turn into complete duds very quickly.

Highlights from quarterly update:
Revs up 33% yoy to $160.7mm vs analysts forecast of $158.3mm, (was up 35% yoy in previous quarter)
Expectation is for a significant slowdown in Q2, with no guidance provided
EPS (non gaap adjusted) was $.9, vs $.49 a year ago
EBITDA margin up from 20% last year to 24% this year
$445mm of cash/equivalents
CTV ad spend was up 100% yoy
Audio ad spend up 60%
Mobile ad spend up 38%, mobile in-app up 55%, mobile video ad spend up 74%

Quarterly YoY rev growth looks like this (most recent quarter first):
33%, 35%, 38%, 43%, 41%, 55%, 51%, 53%, 62%, 43%
So we see the trend of decelerating revenues continues. Covid headwinds may have sunk this latest quarter though, to be completely fair.

ZOOM –What can I say about zoom that hasn’t already been said here? This grew to be a top position and am more than happy letting it stay that way. Nobody knows how much covid benefit will fall to the top and bottom lines – it truly will be a guessing game. Expectations are high, but there are good arguments to be made that perhaps, zoom will smash those high expectations. Earnings on 6/2/20.

CRWD –Same as zoom, I don’t have much insight to add here. The board is very bullish on CRWD, their last earnings report was out of this world, and next earnings is for 6/2/2020.

COUP – I’m expecting a solid quarter from them when they report in June. I may add some more COUP before then.

In closing, TWLO is on my watch list. Seems they are still duping people by including SendGrid in current results but not separating out revenue growth (Saul pointed this out when they started doing it). Still, I will be watching their next quarterly report, since that should be the first quarterly report where they fully had SendGrid in it in the year prior. Their little trick won’t work anymore.

Congrats to people who made it this far in my report – hope you enjoyed. Thanks again so much to Saul and this incredible board.


Great summary and update. Would you mind explaining what a CAP play means?

Thank you!