The “melt up” continues today in the market and I took the opportunity to rebalance the portfolio and wanted to advise you of a few changes. First, I decided to sell my entire ESTC position and the rest of my ZS position. I have written about ZS above and am happy that it recovered 35% since December, but just was not comfortable with the slowdown in revenue growth, increased competition and their relative dropped ball. I also have very large positions in OKTA and CRWD, both of which are in the security space and are crushing it growth wise. I just did not need three players in that space.
The one new position I initiated this morning is a small 3% position in GH. Guardant Health is a precision oncology company. The Company is focused on helping conquer cancer through the use of its blood tests, data sets and analytics. It provides an Oncology Platform, as well as liquid biopsy tests, such as Guardant360 and GuardantOMNI, for advanced stage cancer. After crunching the numbers this morning from their recent and past “Q’s”, they are benefiting from explosive growth of small numbers that will likely continue for several quarters, at least. To give you a small taste, their Q/Q revenue growth the past four quarters is an astounding and accelerating 64.3%, 119.6%, 178.5%, 180.5%. I spent a fair part of my professional life working in biotech with Genentech and later serving as CFO for a small molecule oncology company, so I am comfortable (and probably drawn even) to companies like GH making strides in conquering cancer. Over the next few days and weeks, I will explore their product offerings on a more scientific level and speak to former colleagues who know the science much better than me; though the incredible growth over the past 8 quarters already speaks for itself.
Worth noting, in case you had not noticed:
AYX on Jan 1, 2020: $99/share.
AYX today: $140+/share (after hours).
YTD Return = 41% on the largest holding in the SaaS portfolio. And by YTD I mean the past 3 weeks. I feel AYX can still double from here…IMHO.
S&P500 YTD is +1.8%. Portfolio YTD +26%. Clearly a “sector rotation reversal”!! No clue how long it will continue, but the portfolio is well above the highs of last year on July 26 (the high) overall. Quarterly calls and earnings releases (Q’s) will start in two weeks. Based on just a few early announcements like APPL, I suspect they will be quite good. Often in the portfolio of high growth companies, I have seen a really nice run up in anticipation of earnings announcements and an initial “sell the news” mentality when the company actually announces. We will see if that continues.
Regardless, investing in really fast growing companies, with very little or no debt, plenty of cash, solid fundamentals, incredible ARR and Gross margins in the 70-90% range has been hard to argue with over the past 4 years and I suspect will continue to outperform the overall market for the foreseeable future.
User comment: It’s been a wild January. Looking good 👀
