Upcoming Earnings Dates for Q4:
ZM 3/4/2020
OKTA 3/5/2020
COUP 3/16/2020
MDB 3/17/2020
SMAR 3/17/2020
CRWD 3/19/2020
It will be a busy and volatile month in many ways! While I expect these companies to report great internal fundamental growth and financials, Covid-19 may continue to wreak havoc and impossible to tell how much is already priced into from the recent drop. Fundamentally, though, I believe the portfolio of companies are all solid and growing.
I heard a great analogy today for investing in this atmosphere long term: If someone told you your house would be devalued by 10-15% next week or next month, would you go sell it tomorrow?? VERY unlikely and probably NOT, because you know over time it will eventually over time come back and exceed the value today. If I am investing and holding fundamentally solid companies and have multiple years to wait (don’t need the cash) it is almost always prudent NOT to try to time the market and stay invested in great companies that continue to perform. I have the cash I need and want to have set aside, will continue to hold my core 10 companies and am waiting patiently for the opportunity to put a little more cash back to work (likely in those 10 companies) when the unknown beta (external market) risk factor subsides and the tide starts to roll back in our favor.
QUESTION: Is the portfolio diversified, though? Well, it depends on your perspective. They are all tech companies for sure. But consider that most are SaaS (Software as a Service) technology companies AND that they have penetrated the majority of the Fortune 1000 companies already, are continuing to upsell new services in those companies, and many are doubling their customer count every year. These are customers of our companies that produce everything from toilet paper, to automobiles, to technology to real estate to commodities and everything in between. In a downturn, these customers are locked into 1-3 year contracts with the deferred revenue recognized monthly or quarterly as the service is provided. Most of the portfolio companies are critical to the day to day operations (Security, sales, HR, procurement, analytics, data storage) of every customer these companies service. These customers (of our companies) are NOT going to go bankrupt and fold up shop; and they are NOT going to go back to traditional servers and teams of IT people hired internally to provide these SaaS services…WAY to capital intensive, expensive and slow. It would be something akin to a human deciding not to eat. They simply must have these services to survive and the SaaS platform services are now offered and managed seamlessly in the cloud at a fraction of the cost that they used to cost internally. If anything, I would argue in a downturn that MORE customers will turn to these superior, less expensive solutions. Just my perspective and thoughts on it, which along with $5 bucks will get you a cup of coffee at Starbucks!! -Cheers!
