What Are you Adding to and Why?

Investment Analysis Clubs Saul’s Investing Discussions
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All, let’s show each other the power of this wonderful community and board.

Let’s keep this thread on track. No individual attacks or back and forths. If you’re adding to any of our stocks (or new ones), I’m curious to know which ones and why you are adding to one holding vs another.

This thread risks going OT into portfolio management, but let’s not go there. Let’s keep it focused on which companies are the best investments right now (it’s okay to say you wanted to increase the size of that specific position, but let’s avoid further port management talk)

I would start…but I added to several positions today and due to TMF trading rules I can’t mention those specific companies for two trading days.

So who’s starting?!

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I added to ZS and may add to SMAR.

NON Saul I may move a little from cash to treasury bonds.

Cheers
Qazulight

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I added to CRWD. It was, and still is, a small position. Why add here? Since 8/20 it has dropped almost 25%. And All my other stocks have grown to the upper limit of my comfort zone.

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I rotated some funds out of OKTA, which seems to have held up relatively well, into SMAR which has taken a beating - which it does not seem to merit in the big picture. I appreciate this is the opposite of trimming your losers and adding to your winners.

I sense a bit of angst from our stocks falling and valuations compressing, but I think that with the growth rates achieved by these entities, the stock valuations will quickly grow into the current EVS ratios; over the short term we will observe prices resuming their climb

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I bought Stitch Fix two weeks ago, and the most recent board post about the company gives a lot of the rationale. Also, I am a member of a Stitch Fix customers’ Facebook group with about 9,000 members and I see many, many delighted customers who are spending money with them. I can’t find a thing that they are getting wrong as a business, and I believe they will have very strong quarterly results.

Haven’t made my September buys yet and cannot talk about them due to the same trading/talking rules.

Karen

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I added to SFIX because I believe valuation does matter and they are profitable.

Also added ANET, ESTC and ROKU

Have limit orders in on OKTA and TTD

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NVDA:
I have a contingent order to add to NVDA. If they see a -15%** intraday low from previous day close, the contingent order fires. Will increase my NVDA holding 50%. (**-15% IS a severe drop. It has occurred twice SINCE the 2018 fall off.)

Reasoning:

  1. I think NVDA’s very wide moat on AI and graphics technology places them in a special place;

  2. Even after the 2018 Q4 severe drubbing of the downturn at the data center / bit coin mining fall off, they remain quite profitable.

(It also helps that thru it all, my NVDA holdings are well into the green.)

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I just bought shares of Elastic (ESTC). They are what is called an “in app” search company. They are not like Google, where you type in something that you are looking for. They are the underlying software that makes many of the apps we use work. Here is a 5 minute description:

https://www.youtube.com/watch?v=yJarWSLRM24

Their most recent quarter was strong:

Total revenue was $89.7 million, an increase of 58% year-over-year, or 62% on a constant currency basis.
Calculated billings was $89.4 million, an increase of 51% year-over-year, or 53% on a constant currency basis.
Deferred revenue was $169.8 million, an increase of 64% year-over-year.
GAAP operating loss was $42.3 million; GAAP operating margin was -47%.
Non-GAAP operating loss was $24.3 million; non-GAAP operating margin was -27%.
GAAP net loss per share was $0.56; non-GAAP net loss per share was $0.32.
Operating cash flow was -$1.7 million with free cash flow of -$3.3 million.
Cash and cash equivalents were $315.2 million as of July 31, 2019.

However their Sales and Marketing expense is growing faster than revenue. That is to be expected for an early stage SaaS company, but still it is something like 75% of revenue. So that is something to keep an eye on.

Jeb
Long ESTC
Explorer Supernaut
You can see all my holdings here: https://discussion.fool.com/profile/TMFJebbo/info.aspx

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I bought some more ZS and MDB. They are about 3 percent of my portfolio now. The reason I added ZS was I believe that they are disrupting the security model and the old way of using router plus VPN may not be very sustainable going forward. Also the ROI based on companies who have adopted like GE have claimed savings. So for a product that less cumbersome to manage and is cheaper overall, I can get behind. I was waiting on valuation to come down some and the recent market malaise did provide me an opportunity to add some. Valuation is still high though and one could get it cheaper if we are to hit recession but its down some from nose bleed type. My holding periods are generally longer so I can ride it out as long as the story stays the same and if it gets cheaper I can add more.

I work with databases mostly Oracle and other RDBMS. However, things are changing fast with NoSQL databases emerging with various flavors like document db, Key value stores, graph database, time series databases etc. I have been waiting on the sidelines for a clear winner to emerge and it seems like MDB has made that leap. I don’t think MDB will be used in place of custom built databases that solve a specific problem really well. But for most general things NoSQL I feel MDB would likely be the database of choice. Of course with Atlas there implementation has become very user friendly. Also, with Atlas now the do not have to share their code which to me was a big threat with the likes of Amazon creating forks and putting a wrapper around it with a different name. Also use cases for NoSQL dbs are exploding. It’s a growing market and feel MDB will get its fair share. Again valuation is quite high and thats true for all SaaS companies. May be there is a good reason for it, land grab and all etc. Old habit of trying to snag a good deal hasn’t completely died in my even with various exhortations of Saul and others on this board. I am generally happy with the quality of companies discussed on this board and the cogent arguments of various participants. So I am changing albeit not as fast as some others have. I should probably adopt barbell strategy with my portfolio and have done so to a large degree but more on that later. It’s probably OT here anyway.

I started a new position in PD. PD is just a starter position and I need to research more. I like their business model and think they can grown consistently for a foreseeable future with the growth in shift to cloud. So my best guess is in 10 years it should be a much larger company. Valuation wise PD is still very high but is down 50% from there all time high.

  • Ruhaan
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Did nothing this month apart from increase last week CVNA by a few % points. Waiting as sometimes it’s opportune to do so, and if I miss a big upward move so be it. It’s the huge downward moves for no apparent reason on conviction Stocks for the longer term that allows cash to do most good. Timing, not always easy.

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Heavy cash and growing monthly so when my core holdings hit my limit orders, especially near 200 DMAs I add shares.

Added past couple of weeks to MDB, ZS, ESTC, TTD. Started a position in SMAR.

Also stocks not loved by the board. Added to NFLX and FB this past week. AAPL a few weeks ago.

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The high growth SaaS have dropped while the market has gained.

A channel check by a talking head and a bad mouthing from a competitor along with a momentary loss of appetite for ‘high valuation’ SaaS from the market of late have pulled ZS down sharply. What in the business of Zscaler that have changed? Nothing? Nothing I can see right now. The report is in a few days so we will see but that will be what it will be. It’s a longer term game.
I bought some at $80 before the sharper drop from this noise. I added some more at $70 after that noise. I’ll add more if it goes lower.
Get in when it is in the ground floor. This one is for the long term.

MDB is also another one I added to. It’s good that their lower guidance will cool the expectations and it could be a set-up for an upside surprise next quarter, or not but this one has a long way up too.

I also added to SMAR and to OKTA.

I am considering adding to CRWD and ZM next week after the sellers are done with them.

tj

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I have really started to be intrigued by the concept of “optionality.”

Meaning a company can expand their offerings within a marketplace relatively easily, with bonus points if they created the market. Optionality is not the only thing I look for, but I am much more likely to “buy on the way up” if there is potential for optionality and if they are beginning to flex those muscles. Cant prove it yet, but I suspect a company with optionality has a higher probably of long term success and being a multi-bagger.

For instance:
MongoDB. Yes, its expensive. I’ve owned it since the low 30s - it’s never looked cheap to the boo-birds. MDB has a majority of NoSQL to themselves, and by creating their own conference (MongoWorld), they can showcase how others are using it, get inspired for added bolt-on services, and expand their product lineup while drumming up excitement amongst their users and cultivate a “Mongo experience” (my words, not theirs!). I own a ton of Mongo, but would absolutely not mind adding more now if a smaller % of my port was MDB. Dev gives a great CC too. Upfront, honest, and doesnt bash competitors. Always focused on their own product.

PAYC. Payroll, talent management, HR. A competitive field, but they continue to outperform, and are less than 10% the size of ADP. Also very heavy on PAYC.

DOCU. Love the ability to expand into different markets (like mortgages). I work in an ER and have to sign a bajillion forms for credentialing whenever I re-credential or go to a new facility; I had one that required a DocuSign - it saved weeks between getting it to me, getting it signed by others, sending it back, etc. It can shave weeks off actionable items, and probably helps close more deals and saves alot of human capital (time, resources, angst, etc). May not be explosive growth, but 30% YoY is a long term winner. I’ve added over the weeks, and may consider adding in the near future.

CRWD. growth is doubling, and yet the street didnt flinch. I love the “marketplace,” that they have their own cybersecurity conference, and that they are reducing overhead, friction and cost in IT protection. I’m actively accumulating CRWD. Its a crowded field, but reducing friction and bolt-on’s for the company are usually good for business, and their recent report seems to suggest that customers agree.

BPMC. yeah, I know, not really growing with sales, but they have a platform for biotech’s equivalent of optionality- tumor agnostic targets and just got their first approval. Focused management, lots of ways to move the needle in the next 6-18 months.

BLUE- see above. I’ve recently started a BLUE position, in part because I buy the mission, in part because they have been methodical, have late stage trials with cash on hand. I wrote an extensive post on Bluebird on the biotech board, so I’ll refer you to that. They recently dropped 20%, and this is a bumpy ride, but I could see this company being a behemoth if your timeline is long enough.

Just growing without a reasonable competitor- W & LULU. No one has the customer service as Wayfair for the products they offer, and they are honest to a fault which also keeps us coming back. LULU - well, no one really has such an iconic brand for women’s athleisure as LULU. They have demonstrated staying power since I first started noticing LULU as a brand almost ten years ago. Kudos to them for continuing to grow and maintain their identity.

Disclosure- I own all of the above, and would add to any of the above positions right now unless I had a significant overweight position.

PS- what do others think of the concept of optionality!?!?!

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Hi,

I am new to investing and this is my first post. I have added AYX which is 20 percent of my portfolio. I have also added ROKU after doing some research.
Thank you so much for posting such detail analysis of various growth stocks.

regards,
Maulik

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Transferred my money from my high fliers mdb, crwd, ayx, roku, zs near their recent highs into more value companies such as: tndm, lvgo, bzun, sfix, ntnx, estc, stne and newr.

While I don’t like these as much as the high flier saul stocks I’ve been right as the ones I’ve sold have all taken a 10-30% haircut while these more value plays have been mostly rising. Ps. I realize that ayx and roku haven’t dropped much yet but should.

With that in mind ill likely swap back sometime in October.

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I had increased my cash available to invest significantly as of the last week or so as I finally sold out of my NVDA and NTNX positions with the increases in those shares over the past couple weeks. Yes, I know it would have been much smarter to have exited those positions when most here did, but what can I say, I didn’t. I’m still a work in progress…and my reluctance to sell has worked in my favor in some other cases (SHOP comes to mind!). Incredibly, with those 2 sales, I’m down to 14 holdings! Honestly never thought I would be able to get to that few of holdings when I came to this board 4+ years ago with over 80 stocks. And I can attest that it has done WONDERS for my results!

I’ve started deploying some of that additional cash over the past couple weeks, adding to existing holdings: MDB, ZS, SQ, OKTA, ESTC and CRWD. These are all pretty widely held around these parts and I’m in agreement with a lot of the reasons mentioned by others on these, but mostly, that I look longer term than the next 1-2 quarters and think all these stocks will be long term winners, as they’re disrupting industries, so I’m adding when I think it will be enriching (long term) to do so.

Then some of the stocks I’ve added to that AREN’T widely held here (but have been discussed some, if only by myself and a few others, but are definitely growth stocks): STNE, EXAS, and TNDM. You can search to find previous threads on this board for these companies. I’ll highlight EXAS and TNDM here as to why I still really like them, and am adding…their accelerating growth! As simple as that, with accelerating growth seems to come multiple expansion.

EXAS - here are the last 6 Qs of results and growth rates:

	Revs ($M)	Seq Rev Growth	YOY Rev Growth	TTM Rev ($M)	TTM YOY Rev Growth

1Q18	  $90	             3.0%	      86.0%	    $308	      131.5%
2Q18	 $103	            14.4%	      78.8%	    $353	      108.5%
3Q18	 $118	            14.6%	      62.5%	    $398	       86.3%
4Q18	 $143	            21.2%	      63.6%	    $454	       70.7%
1Q19	 $162	            13.3%	      80.0%	    $526	       71.0%
2Q19	 $200	            23.5%	      94.2%	    $623	       76.5%

I’ve highlighted before that EXAS grew at triple digit rates for over 2 years prior to the results shown above and then the growth started to come down (as expected when the numbers get larger). It was almost exactly a year ago, Aug of 2018, that EXAS announced a partnership with Pfizer where the Pfizer sales force would be able to start selling the EXAS Cologuard product into their large network of doctors/clinics. I predicted then that this would re-accelerate revenues and it has happened as expected. Pfizer started selling the Cologuard product for I think one month of 4Q18, with stopped the slowdown in revenue growth, and then accelerated it since, from 64% to 80% to 94% growth. I think growth could hit triple digits this next quarter, when they’ll be comparing to $118 M in sales, and then will probably start coming down again (hopefully slowly), but they’ll be near a $1B run rate at that time, doubling revs YOY, that’s pretty amazing!

The EXAS stock price has been on a pretty steady climb over the past 2 1/2 years from around $20 to $120 now (with my cheapest shares being in the $30s and continuing to buy all the way up) and I look for that to continue with the accelerating rev growth we’re seeing. They’ve also already made the necessary investments in lab capacity over the past year+ to be able to process the large increases in samples they’re seeing, so I think the bottom line should start improving soon, too.

TNDM - again, the last 6 Qs of results and growth rates:

	Revs ($M)	Seq Rev Growth	YOY Rev Growth	TTM Rev ($M)	TTM YOY Rev Growth

1Q18	  $27	           -32.5%	      42.1%	    $115	
2Q18	  $34	            25.9%	      61.9%	    $128	
3Q18	  $46	            35.3%	      70.4%	    $147	
4Q18	  $76	            65.2%	      90.0%	    $183	       71.0%
1Q19	  $66	           -13.2%	     144.4%	    $222	       93.0%
2Q19	  $93	            40.9%	     173.5%	    $281	      119.5%

There’s obviously some seasonality, but check out the YOY growth rates, 42, 62, 70, 90, 144, 174, what’s going to be next? I don’t know that they’ll be able to keep accelerating, but barring any disaster, the next quarter should for sure still be in the triple digits, then maybe coming back down to more sustainable growth rates after that.

The TNDM stock price has been range bound between the high $50s and low $70s for the last 6 months, but not wholly unexpected when you consider that in the one year prior to 6 months ago, the stock essential went up 20X in price (wish I had been a part of that, but didn’t hear about it until $60), from $3 to $60! It currently has a P/S around 14-15, so even with that huge run up, I think that with the continued high growth that this one is displaying, it has the chance to go much higher.

So these 2 stocks aren’t software, they sell “things”, and don’t have subscription models (but do have some recurring revs). Yes, they have risks and warts, like almost any stock, but if the growth continues for these two that I highlighted, I think it will overshadow those concerns. I don’t have as large of positions for these 2 as I do for my SAAS holdings, but I’m willing to take the risk with their high growth prospects.

I’m the furthest from an expert in any of these fields, so do your own research and make your own decisions on any stocks that I’ve mentioned.

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I am generally happy with the quality of companies discussed on this board and the cogent arguments of various participants. So I am changing albeit not as fast as some others have. I should probably adopt barbell strategy with my portfolio and have done so to a large degree but more on that later. It’s probably OT here anyway.
- Ruhaan

OT? I don’t agree. One of the best synoptic observations of the landscape that I have read (anywhere) in a very long time. Looking forward to more.

Have a rec.

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