June has been a good month again - it’s up and to the right. I’m up 31.2% for the year vs 23.4% end May and 15.9% for the S&P.
| 1 Jan 2023 to | YTD Return |
|---|---|
| 30/6 | 31.2% |
| 31/5 | 23.4% |
| 30/4 | 2.1% |
| 31/3 | 15.1% |
| 28/2 | 17.3% |
| 31/1 | 7.2% |
Portfolio 30 June
I re-opened a position in Samsara (IOT) and opened a new position in Axon and a small, try-out position in Enovix (ENVX). I sold out of SentinelOne (my reasoning is here) and Digital Ocean (DOCN), although I’m tempted again at DOCN’s current price.
| Ticker | 30/6 | 31/5 |
|---|---|---|
| BILL | 15.8% | 15.7% |
| CRWD | 12.7% | 11.5% |
| CELH | 11.5% | 10.3% |
| ZS | 12.7% | 11.1% |
| PSTG | 11.3% | 3.6% |
| AEHR | 11.9% | 3.0% |
| ENPH | 8.1% | 7.1% |
| AXON | 7.5% | - |
| IOT | 5.3% | - |
| TMDX | 3.4% | 3.7% |
| ENVX | 2.8% | - |
| MNDY | 0.3% | 8.1% |
| S | - | 15.3% |
| DOCN | - | 6.4% |
| Cash | -3.4% | 2.6% |
Bill
Bill remains my largest holding as it has a rule of 40 of 76% (based on operating margin), just grew at 63% yoy (albeit only 4.8% qoq)and guided for 40% yoy next Q. Yes, qoq growth has really decelerated - but this is to be expected given the exposure to SMB’s and transaction revenue. But subscription revenue (+8.5% qoq) and Divvie revenue (up 14% qoq) were strong and the overall revenue numbers mask the underlying strength. The stock is up only 7% ytd - less than the S&P which does not seem deserved imo.
Crowdstrike
Crowdstrike has emerged in my mind as the next gen winner in endpoint security with a strong platform play. And they have kicked SentinelOne squarely in the teeth. They partner extensively with Zscaler, which has also proven their mettle. Rule of 40 is at 59%, most recent quarter growth was 42% yoy / 8.7% qoq and they are guiding for 36% growth yoy next q. With a >30% fcf margin that’s pretty awesome.
Celcius Holdings
Still no signs of slowing down here. Recent Nielsen data seems to suggest that they have even been accelerating, which is pretty crazy given that they just grew revenue by 95% yoy in the last quarter. They sport a rule of 40 of 114% (which is about double CRWD’s, at a similar revenue run-rate market cap multiple). I may increase this one.
Zscaler
Zscaler and its CEO clearly have their collective tails up. In recent conferences he could not have sounded more confident, and he articulated how they are winning against the point solutions of newer competitors and against the older tech of incumbents. They also have none of the sales force issues that some of their competitors (Cloudflare…) have, quite the contrary. They have a rule of 40 of 61%, just grew by 46% and guided for 35% next Q and are valued at a similar RR multiple to CRWD. Solid winner here.
Pure Storage
Pure storage had this to say in their most recent results:
This slide says it all.
#1: the subscription part of their business is growing nicely (revenue was -5% yoy but sub revenue was +28% yoy and is now almost half of total revenue)
#2: their new product, which is now price-competitive in all segments of the market (vs only the top end previously) is selling like hotcakes
#3: they keep on investing in their software
#4: And this is the big one for me - they should benefit greatly from accelerated AI infrastructure rollouts
#5: order size seem to point to acceleration coming
#6: cash flow positive with a fcf margin >20%
Like AEHR, I’m betting on acceleration from here on vs the performance already being visible in the current numbers. Revenue was down 5% yoy, rule of 40 is only 17%, but the valuation is undemanding at under 5X RR revenue if the acceleration does indeed play out.
AEHR Test
Much has been written about this company on the board. It is the smallest company of all of my holdings; the company has less than 100 employees and is almost as old as me…so why invest in this company now? I think that the current CEO, who took the helm from the founder in 2012, had a more compelling and accurate vision for the company, which is now playing out. This enabled them to successfully build products a couple of years ahead of the current demand for EV’s. He built for where he thought the puck would go, and it did. It feels to me like we are at the exact moment in time when his vision is going to be validated. Their products are ready to capitalise of what will be a massive and generational shift in how we commute. They are the go to place for testing the SiC chips that will go into most EV’s in the next decade (in addition to other markets which others have discussed). The potential is not in the current numbers, but in what is coming down the line. They only grew revenue 10% yoy last Q. But their in quarter bookings was $33.3m - about double the $17.2m in quarter revenue. Bookings was up from $6m a year ago and $10.8m a quarter ago. And that was before all of the recently announced bookings and before any of their 3 relatively new SiC customers have really started to ramp up. I think their biggest challenge is going to be keeping up with demand. I may increase this one too.
Enphase
Enphase had strong results, but got clobbered for their qoq revenue slowdown and relatively lacklustre guidance. Still, they just grew 65% yoy and guided for 41% next Q. They sport a rule of 40 of 97% and are set to increasingly benefit from the IRA benefit in quarters to come. The punishment meted out seems overdone. The stock is actually down 34% YTD which doesn’t sound right for these types of results.
Axon
I added a position in Axon this month. They have a new version of their Tazer product out - the Tazer 10, and this seems so successful that it is pulling forward some of the replacement cycle orders, in addition to landing new orders. They also have a number of other products including a fleet and sensor business which is growing very fast - dashcams in cars, sensors, drones and of course the body cams with all of the data pulled together, visualised and managed via proprietary software. Rule of 40 of 42%, revenue growth of 34% most recently but importantly ARR growth of 50%, with subscription revenue making up an ever larger part of total revenue. The subscription revenue feels very much like a Samsara-type IoT business but then growing even faster (Samsara ARR grew 41% in the most recent quarter vs Axon’s 50%) and with a virtual monopoly for law enforcement customers. But whereas Samsara is for sale at just under 18 times RR revenue, Axon can be bought for less than 11.
Samsara
I’m back in Samsara having missed the big run-up. However I’m worried that the IOT fever may be a bit high on this one, so I don’t want to have too large of a position. It now has the dubious honour of being the 4th most expensive stock on Jamin Ball’s list of top valued SaaS stocks. Samsara is essentially a tracking business done right with workflow automation and other asset monitoring thrown in. I know I’m over-simplifying, but they’re doing all of the things that 27 year old competitor Mix Telematics is also doing, but then much much better, without all the legacy tech and at much bigger scale. Perhaps I’m being too cautious, but still, 5% is a decent size position. Revenue growth was 43% with a 36% guide, rule of 40 was only 32%, but the company is on the cusp of turning op margin and fcf positive, which will boost this metric. And as @PaulWBryant pointed out, the real excitement is in the rapid pace of large customer additions - which came in at 53% yoy/11% qoq. Whereas other SaaS business seem to be slowing down, their customer adoption is certainly not.
Other small positions
Transmedics, Enovix and Monday are positions which I may expand or close, but I want to think about them a bit more. Transmedics has a capex heavy business model heading their way which I don’t like. Enovix is extremely exciting, but there are very few numbers to go by and Monday…well maybe it’s once bitten twice shy here for me on this one.
Finishing up
It’s been a good month and first half of the year. The NASDAQ 100 is up 39% for goodness sake! More than many on this board including me. Let’s hope the second half of the year is equally good.
-WSM