Here goes - my monthly update.
Portfolio end May
| Company | % of port | 30/4 | 31/3 | 28/2 |
|---|---|---|---|---|
| Bill | 15.7% | - | 5.3% | 16.40% |
| SentinelOne | 15.3% | 11.9% | 11.4% | 11.3% |
| Crowdstrike | 11.5% | 10.8% | 3.0% | 0.6% |
| Celcius Holdings | 10.3% | 11.8% | 10.2% | - |
| Zscaler | 11.1% | - | - | - |
| AEHR Test | 8.1% | - | - | - |
| Pure Storage | 7.1% | - | - | - |
| Digital Ocean | 6.4% | - | - | - |
| Monday | 3.7% | 12.1% | 10.0% | - |
| Enphase | 3.6% | 8.1% | 11.5% | - |
| Transmedics | 3.0% | 3.9% | 14.1% | 12.1% |
| Samsara | - | 2.2% | 10.4% | |
| Snowflake | - | 12.1% | 6.2% | 24.3% |
| Cloudflare | - | 15.1% | 10.4% | 8.3% |
| The Trade Desk | - | - | - | 3.60% |
| Datadog | - | - | - | 5.8% |
| Global e-online | - | 10.4% | 16.3% | |
| Cash | 2.6% | 1.9% | -8.8% | 17.7% |
| YTD Return | 23.4% | 2.1% | 15.1% | 17.3% |
Bill
I retook a position in BILL after their results surprised me on the upside. I should arguably just have stayed in, as I missed the bump after the positive results this quarter and took the knock after being in last Q when they surprised a bit on the downside. However I wasn’t comfortable that customer growth would keep up, but was surprised when it did - they clocked in the biggest BILL customer growth of 15.2k in their history.
The key number that I liked in addition to the customer adds was subscription revenues, which looked like this:
| Sub revs $m | Q1 | Q2 | Q3 | Q4 | QoQ | ||||
|---|---|---|---|---|---|---|---|---|---|
| 2021 | 25.9 | 26.6 | 29.3 | 31.2 | 2021 | 9.7% | 2.7% | 10.2% | 6.5% |
| 2022 | 37.0 | 49.2 | 52.2 | 55.2 | 2022 | 18.6% | 33.0% | 6.1% | 5.7% |
| 2023 | 58.1 | 61.5 | 66.7 | 2023 | 5.3% | 5.9% | 8.5% |
Note the sequential growth there which was 8.5% (yoy was a rather paltry 28%) which annualises to 38.5% and is a clear acceleration from the previous 4 quarters.
Given the valuation, I felt very comfortable to bump it to first place in my portfolio (BILL is the only company in my portfolio except for Enphase that has not appreciated YTD).
SentinelOne
I’ve been on both sides of the fence here but am now a firm believer. Still, I hedged my bets a bit going into earnings later today, given the recent run-up (it’s up 30% this month). My thesis is that they will continue to gain market share while continuing to demonstrate operating leverage and eventually FCF late this year or early next year.
Crowdstrike
Crowdstrike delivered the goods in their ER yesterday - FCF was strong and just about everything came in above expectations. Revenue grew by a respectable 42% yoy and they managed to maintain fcf% at 32.8%. But they did not inspire much confidence as far as leading indicators go, and the deceleration in growth was the fastest it’s ever been. ARR slowed down, they stopped reporting customer growth (moving to only giving this annually), RPO was down. For the first time - from $3,369m to $3,315m. Also, the US was relatively weak, clocking in at 7.8% growth sequentially, which was slower than the overall growth (of 8.6% sequentially) and also a similar low point as Q3 2023. Without the conference call commentary, it would seem that Q4 last year was a slight bump in an otherwise steadily declining story. Not even the fact that they reported their first positive GAAP net income (of +$491k but still) helped the after-hours drop, but today that all reversed as people seemed to focus on the positive commentary around sales momentum picking up and that they see things improving towards H2 of this year. For me the jury is out until after ZS and S reports later today.
Celcius Holdings
All guns blazing on this one. It’s a very fast-growing, highly valued energy drink company following in the footsteps of Monster. They are currently valued at $9.5bn; Monster is valued at $60bn. They just grew at 95% last Q and are bottom-line profitable. Their after tax net profit margin (after sbc) was 13% last quarter. And they haven’t even started with international expansion. If they can continue to deliver on their growth playbook then there should be lots of appreciation ahead. For a fuller overview of the details of this company, have a look at last months’ write-up
Zscaler
Zscaler is back in the portfolio after their pre-announcement of earnings combined with Cloudflare’s relatively abysmal showing proved that they are not a second-rate Cloudflare, quite the opposite.
AEHR Test
The thesis for this company is that they are going to blow everyone’s socks off in the coming quarters with their systems that burn in chips for the EV market. They already have record bookings to back that up, but that is not the whole story - the CEO alluded to multiple additional tailwinds. Hence one should really listen to the conference call to get a sense of the CEO’s excitement, as @SaulR80683 suggested in his write up on the company. And today they had some more news with a notable new customer win which sent the stock up nicely.
Pure Storage
Pure Storage is (was?) a left for dead leader in supplying fast, efficient storage to replace hard drives in data centers. And on yesterday’s call the gist of the CEO’s story was the the days of hard drives have now finally come to an end as Pure are now, for the first time, price competitive in all segments of the market. Now their flash storage solutions are faster, more reliable, cheaper, more energy efficient, smaller, easier to install and with a lower TCO than hard discs in all segments of the market. A pretty big deal imo. He compared it to vynil vs CD’s, Betamax vs VHS, etc. Basically the end of hard disks and with them supplying the replacement solution. And the stock promptly popped today.
For those unfamiliar with the company, Bert Hochfeld wrote if up extensively on SA here, and this is the revenue progression:
| Revenue $m | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 367 | 404 | 411 | 503 | 10.0% | 1.8% | 22.4% | |||||
| 2022 | 413 | 497 | 563 | 709 | -17.9% | 20.3% | 13.3% | 25.9% | 13% | 23% | 37% | 41% |
| 2023 | 620 | 647 | 676 | 810 | -12.4% | 4.3% | 4.5% | 19.9% | 50% | 30% | 20% | 14% |
| 2024 | 589 | -27.3% | -5% |
Note the -5% yoy “growth”. Yikes. Still, that was a revenue beat vs guidance. And they are nicely cash generative: FCF was above 20% last year and came in at 20.7% this q. And the guidance, which calls for mid to high single digit revenue growth for the full year, actually implies a very sharp acceleration in the next three months of >15% qoq by my quick math. And then there’s the guidance subtext which implies more. Their new FlashBlade//E - launched only in April - orders are “off the charts” according to the CEO and “our first sales of FlashBlade//E, which is experiencing the fastest first quarter pipeline growth for any new pure product.” And yet the guide kept the same expectation as last Q of only modest second half growth in FlashBlade//E. Also they kept their assumption of no new orders from Meta. So with this type of acceleration and a bit of AI pixiedust added this one could rerate even further. Not sure I’ll keep such a large allocation for the ride, though.
Digital Ocean
Digital Ocean is another seemingly left for dead company with some relatively strong fundamentals and a consumption-based revenue model, which @anthonyms wrote up here. I took a position after listening to the conf call mainly based on the stock feeling way too cheap. I will evaluate whether to keep a position after all my companies have reported.
Other
Transmedics, Monday and Enphase are well known around these parts. I will reassess my positions in them once all of my companies have reported.
I sold out of Snowflake and Cloudflare because I didn’t like their reports; Cloudflare I explained my reasoning in detail last month.
On Snowflake here is the gist of my reasoning. I thought that this progression of guides for revenue for this year was poor. In only a few months, the CFO said that they would grow by 48%, then 40% and now 34% this year. That’s just not ok for the most expensive software company that I know of. But wait, there’s more. I’ve been wondering about their sales efficiency for a while and have written about it previously. Basically I was saying that they need to keep adding customers in order to grow, and there were question marks about the pace of new customer additions going back a couple of years imo. But then they got these massive, massive customers that ramped up like there was no tomorrow, and the customer addition argument seemed to go away as it got blown away by NRR. But this could not go on forever and I think the relative lack of customer growth has caught up with them this quarter as their NRR slowed. In Q1 2021 they added 328 customers and had 1082 sales & marketing employees. This last Q they added 339 customers with 2866 s&m employees. For companies with valuations like Cloudflare and Snowflake, I don’t feel that slips/question marks like these are worth it, so I sold out.
Samsara is easier. I like the company but I was worried that the valuation was getting out of line with the performance. The dog has wondered too far ahead imo…so I sold. We’ll see later today if I was right though.
Finishing up
I’ve been more careful this year than last. Now a cynic (such as me) would say I should have done that the other way round 
I’m just happy that I’m solidly in the green again and I hope to stay there.
Onward and upward!
-WSM