Yesterday was a very impressive day for SAAS companies in particular as the market started to digest and reflect on the phenomenal growth shown in the past 3 weeks of quarterly earnings calls. It is common for “traders” to sell the news and you saw a few stock prices go down initially to be followed by several up days in a row and big gains as long term investors start to buy these high growth companies. I have strong conviction in my top 5 holdings and I don’t invest in stocks I don’t think can 5X-10X themselves. Yes, that means go from $5b market cap to $50 or $100b market cap. Of course, that means the price of the stock goes with it. Market cap is simply the total number of shares outstanding times the price of the stock. I don’t invest in Apple because it’s already a $1 trillion market cap and the biggest in the world. I don’t feel they can even double, much less 10x themselves.
A few of you have asked for my updated company positions and allocation…they are as follows in order of my conviction…i.e. I allocate more to the companies I am most impressed by, however, yesterday after 30% increase in MDB stock price it surged to my second highest position where it stands today:
I would also add that I have held 7 of these stocks for a year or more. I’m not a day trader, so you won’t see this stock portfolio changing quickly. If I do not think a company can continue to grow and accelerate, I divest and put the funds elsewhere, as I have recently done with NTNX which was a 9% holding (now only 3%) and dropped significantly in price a few weeks ago on a poor earnings call. As soon as I listened to the call, I realized they would need 9-12 months to get back on track and transferred the funds to other faster growing companies which are executing extremely well right now…like MDB, OKTA, and TTD, which I wanted to increase to larger positions in the portfolio. I hope this helps to clarify. Note: MDB is adding to yesterday’s gains and up another 2% today. Cheers!
It’s not unusual for the investment banks to come out 2-3 weeks after earnings with upgrades on the company and stock.
Here are two: TWLO and OKTA
I took some time over the weekend to analyze my companies now that earnings are all out and to reassess how I want to move forward. No drastic changes. As stated prior, I have further reduced my NTNX to a 3% position. I also took the opportunity today to reduce my SQ position. It is not because I don’t like SQ (I do!), but I don’t feel like they have the opportunity for as much growth as quickly as some of the other stocks. To 10x themselves they would have to grow larger than Visa or Mastercard (SQ is currently at a $35 billion market cap) and I’ve participated in 400% return already and think they are going to need some time to digest those gains. I could be wrong. In such, I took some NTNX and SQ profits and redeployed the gains into OKTA and ZS today. ZS is now 10% of my portfolio and OKTA is now 8% of my portfolio, while I have slightly decreased my SQ position to only 7% of my portfolio. For those new to the group, I rank my 10 stocks and hold larger positions in those that I have the most confidence.
I would only add for those new to this text (and anyone else also: e have been in a bull market (up) for over 10 years and one of the longest in history. If/when the market corrects, the stocks I hold have a high beta factor, which means they tend to correct more (even 2x-3x more) than the market. This means they could conceivable go down 50%. Keep in mind that a 50% correction in your stock requires a 100% follow up return to get back to where you were. Many of my stocks are up 100-300% the past 18 months. I do not invest what I can’t lose and usually keep a sizable amount of cash on the side to cover living expenses for up to a year and pay short term bills. While learning how to invest in GREAT companies is well worth the investment, I would never encourage anyone to risk everything or anything you can’t afford to hold for the long term. Time is our friend. Over the past century, the stock market has gone up on average 9% per year…but if you were unlucky to hold stocks (and have to sell them) in 2000 or 2008, then you might have experienced a 50% reduction in value. That said, if you did not sell, you would have gotten it ALL back in 2009/2010. I invest prudently with what I can and make sure I give myself a 2-10 year horizon. Indeed, 7 out of the 10 stocks I now have already owned more than 1 year. [Which also means when you sell them, they are taxed at a lower rate than those investments sold before 1-year…..Long term capital gains vs. Short term capital gains = More than 1 year vs Less than 1 year invested)
MDB Is surging by 4% today again and just surpassed TWLO as my largest holdings at 14.72%. Personally, I don’t like any holding to get larger than around 17 or 18% of the overall portfolio. Also Of note today is AYX Which is also surging 4% and, is at an all-time high today, and just exceeded a $5 billion market cap. It is still the smallest company I own from a market cap size, but is still my largest gains and The stock I am most optimistic about right now.
AYX or Alteryx is a SAAS (Software As A Service) Company that provides data preparation and predictive analytics for. companies on a subscription basis. The great thing about subscriptions is recurring revenue that is known upfront and reliable. Many of these companies I invest in have this model. Basically, in this digital revolution in which we have more data than we ever have had in history combined, AYX helps make sense of it, organize it, and help companies to make intelligent decisions based on it. Basically, I don’t think any company today can survive long term without having this themselves (AWS, google, etc) or paying someone like AYX to do it for them. It gives AYX and its customers a huge advantage. Data analytics is still in its infancy stage an the TAM (Total Addressable Market) has barely been scratched. In their earnings call, the management of the company stated there is virtually no competition and “open green-field opportunities”. Their margins are over 90% with less than 900 employees and over $200m in revenues…and 57% revenue growth quarter over quarter for the past 12 quarters! Customer growth is 40% year-over-year. IMHO, AYX has the potential For many more years of HYPER-growth. I could be wrong, but I am optimistic and excited about their incredible potential. I have owned this stock for 14 months now, with 200% growth already, and expect at least another 200%. Is that asking too much?!? 😜. Cheers!!
