A BIG down day today for the entire portfolio. No idea why, except possibly a rotation to safety?? TWLO earnings are after close of market today. It is Now my second smallest holding and will determine if I sell the remaining % or hold firm. AYX and DDOG are reporting next Thursday. These company earnings release are the numbers I pay attention to over the up or down of the stock price on any given day. Today, ALL our portfolio stocks are down, which tells me it’s not the news or results of any one company dropping the ball, but the overall sector and market. Clearly this can be concerning as we saw in last July’s overall downturn, but it’s not a reason for me to sell any one company’s stock. Today is a tough day to be in stocks, but I’ll take the downs with the ups.
On Tuesday this week, I sold 4% of my AYX position. I know….this could be viewed as blasphemous…even sacrilegious, but rest assured it leaves me with about a 23% allocation amongst my 12 stocks. It was more luck than timing that I sold just below the high at around $143, and it was a struggle then, and even now in hindsight, to resolve in my mind. Why would I sell my highest conviction investment. The position had grown larger than any allocation I’d ever had in a single stock…except perhaps way back in the early 90’s when I owned two unknown names picked more or less at random out of the Wall Street Journal Europe edition while attending B-School…at the time I had to call a broker to execute the trade and probably paid some ridiculous commission around $49. I say “struggle” above because I LOVE AYX…the growth, the dominance, the product, the team, the moat, the GM’s…did I mention the growth?!! The last 8 quarter have been unimaginable. I have my own set of “general investing” criteria and a separate set of “company” criteria for investing. One of the “general investing” criteria for me is not to own more than 15% in any one company. This is easily disregarded, morphed and cheated on when times are good and, frankly, when I grow overconfident and believe a company is infallible. I’ve paid my dues and taken a few lashings for this mistake a few times over the past 30 years. My 15% maximum allocation rule was revised up from 10% at some point about a decade ago as I fine tuned my company selections and spent more time understanding each and every company I own…and as I reduced the number of stock positions down to around a dozen or less. Only in the last 18 months, as AYX stock price has continued to surge did I allow the allocation to go over 20%… and then even above 25% this YTD in January!!(organically without additional purchases). I’m sure no one missed the 45%+ stock surge since Jan 1!! The Needham conference was extremely positive and when the CEO of AYX was asked about hitting $1b, “Dean stated that Alteryx has less than 1% of the market currently. He sees a path to $1B as being fairly straightforward by 2022. It will require strong execution, but is achievable. He went further and talked about how leadership is already thinking beyond $1B as “Act 2 & 3”, to $3B or $5B in revenue.” I love that they are already setting the bar higher and looking to much larger ambitions. This is a company that can triple in size in the next 2 years. When I look at the last 8 quarters of accelerating revenue growth (most recently 65% q/q), I suspect they may surprise even the most optimistic and hit their $1b run rate several quarters earlier than 2022 and continue to refocus on becoming a much bigger powerhouse. I am fully prepared and expect to have to uncomfortably reduce my allocation again in the next 12 months as this company continues to execute on all cylinders and outpace the compet…..wait…what competition!? Cheers!
