Why I trimmed CRWD significantly

At the risk of being reprimanded by Saul for an off-topic discussion, I’ll attempt to settle (or at least address) this discussion, and relate it to the initial purpose of this thread (i.e. Crowdstrike).

I think there is more agreement than it seems between buynholdisdead + rtichy and canonian. The disagreement stems from a dichotomy in the definition of AI. I hope I can provide a point of view that somewhat unites the divergence.

By the very complicated nature of defining AI, I like thinking of it as a spectrum (as canonian alluded) where humans and machines work together to generate insights. In short:

Assisted Intelligence
-Action performer: machine + human
-Decision maker: human
-Applications: following if/then decisions, filling-in forms, opening email attachments
-Examples: this is where RPA (robotic process automation) companies play, such as Blue Prism, and the soon-to-be-public UI path. Think of an Excel macro that can execute actions across your apps, not just within Excel

Augmented Intelligence
-Action performer: machine
-Decision maker: machine + human
-Applications: following commands via voice/vision, automating tasks with judgement, automating tasks that improve over time
-Examples: this is where algorithms get more complex, and where some of our companies play. A relevant example would be Crowdstrike’s Falcon’s use of anomaly detection - where it can detect and flag a vulnerability identified in my environment based on a similar one that occurred across the world a few days ago

Autonomous Intelligence
-Action performer: machine
-Decision maker: machine
-Applications: generating hypothesis, self-selecting options based on complex choices, having situational awareness
-Example: the use of autonomous intelligence is still nascent in commercial applications. Perhaps Deepmind’s Alphafold breakthrough is a decent notable example (a starting point to understand: https://www.youtube.com/watch?v=gg7WjuFs8F4&t=1s)

Another way to think about this is picturing a matrix, with “complexity” on one axis and “feedback loops” on another axis. Assisted intelligence is applicable on tasks of low complexity and strong feedback loops. Augmented intelligence becomes applicable on tasks of moderate complexity and strong feedback loops. Autonomous intelligence is beginning to become relevant on tasks with moderate feedback loops and high complexity.

There is a long way to go for high complexity tasks with low feedback loops to become relevant for AI. The challenge of strengthening feedback loops is contextual, and can be improved with the increase of digitization. Meanwhile, the challenge of complexity is technical, and will be improved by advancement in technology.

Looking at Crowdstrike’s open roles, you can clearly see that they have talented data scientists operating at the cutting edge of machine learning. For example, they’re looking for an intern to “deploy state-of-the-art machine learning classifiers that learn from extremely large amount of sample files”. There are 58 results when I search for “data science” jobs and the tech stack within those roles is as advanced (in ML) as it gets.

So, while marketers do love to tout “AI” across almost any digital business nowadays, it is fair to say that companies as advanced in data science and machine learning as Crowdstrike ought to get the benefit of the doubt. At least it’s fair to say that they are more advanced in “the spectrum” than most companies claiming the use of AI.

I apologize for the off-topic discussion, but “AI” is a prevalent theme for some of our companies and is thus an important topic for us to understand. I hope that this explanation is somewhat useful. If it is found to be too off-topic, please delete (no offense taken).

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Canonian, you keep coming to the board just to get people to argue with you without any benefit to the board. Your last two posts will be deleted, and if you continue to come here just to disrupt the board you risk being barred from the board.
Saul

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LET’S CLOSE THIS THREAD!
THANKS
SAUL

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As usual, I’m a bit behind the curve, so I’ll start by saying Happy New Year (on the 2nd).

OK, set that aside.

I don’t read a lot of posts. I just don’t have the time to read every post like I did some time ago. But, there are a few people for whom I make an effort to read every post the write. You’re one of them.

So this post really confuses me, here’s why.

Something I learned from Saul is to stay 100% invested - keep every dollar working for you all the time. Earlier in 2020 I learned another lesson. Keep a cash safety net in order to protect yourself from calamity which might come in the guise of fear. I panicked with the news of the pandemic and stupidly sold everything to cash. If I had had a safety net, I would have been much more likely to tell myself, this too will pass, even a pandemic as horrific as it might be, won’t last forever.

So what I’m getting at is that I never (well, almost never) sell a position without a plan to redeploy those funds into some position that I feel will perform at lease as well, and hopefully better than the equity I’m selling.

In your own words, this is my #1 position right now, my favorite, and the stock I would buy first.

So I don’t get it, why on earth would you sell the stock that is the first one that you would buy? It just doesn’t even seem rational, and I know you to be a very rational guy. So I don’t get it. Now you have a pile of cash in place of your “favorite” stock.

What’s that all about? You closed with “Hope this makes sense”, sorry my friend, it doesn’t, not to me anyway.

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replying to brittlerock

“Something I learned from Saul is to stay 100% invested - keep every dollar working for you all the time.”

“I don’t get it, why on earth would you sell the stock that is the first one that you would buy? It just doesn’t even seem rational”

  1. Even Saul got out of the market during the .com peak. So, it not accurate to say he is always 100% invested. Did he know that would be the right decision? No. IMO, he trusted his “gut”.
  2. Every person has to make their own decision on what % is acceptable in the market, and in an individual company.
  3. BEAR STILL HAS 15% INVESTED IN CRWD! It’s not like he sold out completely.
  4. You never know when catastrophe might hit. It is “possible” CRWD could have a security breach / failure. It’s possible their senior management team could die from COVID. There are any number of possible bad scenarios that could happen. My personal opinion is that it is reasonable and logical to reduce from 30% to 15%.
  5. To take it to an extreme, if CRWD is your favorite, highest confidence stock, why not put 100% in it? That would obviously be a huge risk. What maximum% is acceptable? That decision is different for every person.
  6. If you are personally ok with the risk, it is equally “OK” or “logical” to be highly concentrated and have 30% or 40% in one stock.
  7. Sometimes it’s more art than science. I sometimes go with my gut instinct over what might be most logical. Some might say that’s wrong, but I’m the one who has to live with the results - so sometimes I trust instinct over logic.

Peace

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Hi analog kid, You wrote:

Even Saul got out of the market during the .com peak. So, it not accurate to say he is always 100% invested.

That’s actually not true. As I wrote in the KB

I said to my wife, “They may keep going up, but this is insane. I’ll let someone else have the rest of the ride.” The bubble broke about 3 weeks later. Sometimes selling can be the most important thing you can do. I didn’t get out of the market. I just bought non-internet stocks and was up 19% for the year.

Best,

Saul

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There’s difference between selling positions and go to cash vs reallocating capital.
What Saul did was reallocating capital.

Some people are influenced by hedge fund managers, especially Warren Buffett.
They like to say: oh, the market is very expensive right now. I want to sit in billions of cash to wait for a cheaper price to buy.

The problem with that is: hedge fund managers or warren Buffett are basically doing market timing. The reason they do this is to maintain their public image. They want to show stable returns NOT maximum ROI.

BRK is seating on pile of cash.
Let’s say they waited 10 years for the next big crash. 2009 to 2020.
And they luckily bought at the bottom of the crash.After a single year, they doubled their money!
What’s the annualized return over the 11 years? (10 years waiting plus 1 year market bounce back)
200%^(1/11) = 6.5% ! Not good at all. The effect is their portfolio show less volatility than the market. Meanwhile, SP500 returned around 12% per year during last 10 years. Ironically, Warren Buffett sold Jetliners stocks at a huge loss at the bottom.

It’s simple math. For indexers, 100% in stock will perform better than 50% in stock, 50% in cash over long term. The trade off is volatility. If you can live with volatility, it’s not real risk. The risk is selling at the market bottom. As long as you have cash set aside to live at least 1 to 3 years, 100% invested in stock is the best for maximizing return.

In Bear’s CRWD action, I think it’s his emotion(Fear) got into play. It’s a “ZM” aftershock. ZM is special case. Not all hyper growth stocks will suddenly saturated market. Most growth stocks will just go side way when growth slow down, there’s plenty of time to get out.

ZM case was so obvious. Even in ZM’s case, there’s still plenty of time to get out.
I didn’t have a big position in ZM but I reduced it on Sep 16, 2020 and completely got out on Nov 23, 2020 when many people were trying to defend ZM. It’s possible many of those people bought at the peak.

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