February Portfolio Roundup

 PERFORMANCE

 

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CURRENT PORTFOLIO

(There are 3 tiers. Once I buy or sell to fit within a tier I let the position float for a while. The general goal is to have 9 positions total. Sometimes that's 3 in each as 3-3-3, but can be any iteration.)

Tier 1 - 42% 
(Allocation sizes: 15-25%)
25% - Datadog (DDOG)
17% - Monday.com (MNDY)

Tier 2 - 51%

(Allocation sizes: 7 - 12%)
12% - Bill.com (BILL)
12% - Upstart (UPST)

9% - ZoomInfo (ZI)

9% - Zscaler (ZS)

9% - SentinelOne (S)

Tier 3 - 4%

(Allocation sizes: 2 - 4%)
4% - MongoDB (MDB)

2.5% - Cash

8 positions, plus cash (9 last month)

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ACTIONS FROM THIS PAST MONTH 
Bought:

Made MongoDB (MDB) a Tier 3 holding

Added:

Doubled my share count in SentinelOne and took it from Tier 3 to Tier 2.

Added some to ZScaler

Trimmed:

ZoomInfo. Took it from Tier 1 to Tier 2 by selling half my shares after their ER

Sold:

Sold Amplitude (AMPL) after their ER

Sold FuboTV (FUBO) after their ER

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GENERAL THOUGHTS

February was exciting, and not totally in a good way. A couple of companies had almost perfect earnings reports and got sold aggressively by the robots and algos. Monday.com and ZScaler. Bill.com and Datadog both blew the doors off the barn and had favorable stock action. 

I think the market is trying hard to separate companies who had covid bumps, with companies that are continuing to grow post-covid. So if there was any sign whatsoever that growth might possibly be slowing down, they were sold hard. 

We have to learn to accept these macro shenanigans and stick with the companies that, to me, are still showing strong signs of growth. 

As I've said, the goal is to only own companies that are knocking it out of the park.

Often when you see people analyze an "undervalued" company they say it's got this, and that, plus that, * BUT * there's one or two things over here that, while bad, are not that important. They make excuses for why the company had churn, or why revenue fell off, or why they haven't embraced the cloud, or they downplay the CEO/founder leaving, or make excuses for why the company has low customer growth. They point out all the great bias-confirming * good * things and write off the one or two * bad * things as "the market doesn't understand".

They'll also talk about product development and how future services will kick in soon and things * SHOULD * pick up. They'll talk about how a new technology, service, or international expansion is soon to appear and drive sales. It's more like they are * hoping * those services will soon kick in. Because the truth is that no one really knows what the future will hold, not even the CxO. 

What you want to see is evidence of the new services, and the way to see that is to follow the numbers in the earnings report. Then when those things get delayed they'll say "but" the services will soon appear. Or they "should" kick in soon.

You'll also have people say things like "you can't concentrate on revenue, you have to look at ARR, or platform revenue only". Or "only look at enterprise sales". 

They'll say focus on the expand, ignore the land. Or ignore the expand, it's all about the land. They'll write long, logical, intelligent but complex pieces about all the great things "but" this or soon that "should" happen.

Or if I'm reading a report that just came out and the stock drops 15%, and I say "that was great, this was great, exactly what we want, etc, everything was great * BUT * that one or two things over there. The market doesn't understand this". That's a flag!

The problem is that the market is what makes your stocks go up. You want the market to understand what you're holding. In that sense I almost want "overvalued" companies. Trying to time when an "undervalued" stock starts to become appreciated is tough, for me at least. You basically have to decide when the turnaround is complete, but whose valuation doesn't reflect the new reality. That's much harder than it sounds, especially when you can put money into companies that are killing it today. 30 or 40 years ago information and data on companies was hard to access. So if you had some piece of information, you could buy and then sit and wait for the market to realize it. Now, information is much more available. 

You want to invest in business momentum. You want the business to already have lots of momentum plus potential for continued momentum as far as the eye can see. Business momentum precedes stock momentum.

So having said all that, when companies like Monday.com and ZScaler report basically perfect earnings (IMO) and their stocks get crushed because of one or two metrics, how am I supposed to handle that? Monday.com's revenue was 15.6% QoQ and the market wanted something more like 17%. Well I have to learn when the market is being manic, and right now it's very manic toward my companies. In this instance, I do think it's being stupid and missing the point. The business momentum in Monday and ZS is just fine and still has prospects as far as the eye can see. In other words, no one is saying that the primary investment theses for these companies is that they are "undervalued". 

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PORTFOLIO THOUGHTS

I've recently come up with the 3 Tier system and stated that the goal is to have 3 companies in each. However, I've become more fluid on those rules and decided that it probably makes more sense to have most of the companies in Tier 2. 

In other words, Tier 3 should really only be one or two companies. And Tier 1, the same.

When I think about the tiers, the idea is that Tier 1 should really be driving the results. There should be one or two that really drive it home. And you only need one or two really good ideas per year.

Tier 3 are companies either about to fall out, or are new positions.

Tier 2, is the in-between, ideas on the back-burner ready to either step up to Tier 1 or step down to Tier 3. 

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I track the monthly Market caps and TTM revenue numbers because I like how it's a quick snapshot. Tracking the trailing P/Sales isn't perfect but it gives a quick and dirty comparison. Since most of my portfolio is SAAS, which has steady revenue, I don't feel the need to use a forward estimate. 

In general, for me, lower valuation is a "nice-to-have" but not a "need-to-have". 

COMPANY THOUGHTS

Datadog (DDOG)

31 Dec 2021: $178.11 (Market Cap: ~ $62b, TTM Revenue: $880m, P/S 70)

31 Jan 2022: $146.11 (Market Cap: ~ $50.7b, TTM Revenue: $880m, P/S 57)

28 Feb 2022: 161.11 (Market Cap: ~ $56b, TTM Revenue: ~ $1b, P/S 55)

I've held Datadog now for just over two years. I started to buy shares at $32 and have increased and trimmed along the way. It has really paid off to follow the company.

Datadog was my best idea of 2021. I actually made more $$ in Upstart because I trimmed it quite a bit before their Q3 ER. But Datadog has the potential to continue to be my best idea as we enter 2022 (unlike Upstart). I leaned in hard on it and it paid off, proving once again to me that it only takes one or two really good ideas per year.

The company has high revenue growth, high gross margins, mostly recurring revenue, rapidly improving operating and FCF margins, land and expand, attracting lots of customers, and is developing lots of new products. It's got everything.

From this past ER: 

Income Statement:

- Revenue grew 84% YoY and 21% QoQ to ~ 326 million. That is an acceleration in QoQ from 16% in the previous quarter and 18% in the quarter before that. Q4 tends to be their strongest quarter seasonally, but still that is great to see. 

- Finished the year with 70% YoY grow at just over $ 1 billion in revenue

- Guided for 4% QoQ growth next quarter and 49% YoY growth for the fiscal year, which we know they will easily beat.

- The company was GAAP profitable for the first time since Q1 2020.

- Adj gross margin of 80% compared to 78% last year. First time to hit 80% since Q2 of 2020. Amazing

- Adj operating margin of 22% compared to 9% last year. Truly amazing.

- Adj net margin of 22% compared to 11% last year. Again, truly amazing.

- Adj eps of 20 cents per share compared to 6 cents per share last year. Amazing

Balance sheet:

- Liquid cash of ~ $1.5 billion on the balance sheet

- Long-term debt in the form of convertible senior notes of ~ $735 million

Cash flow:

- Cash from operations was $115 million for a margin of 35%!!! Holy shit

- FCF margin of 33% by far the highest the company has ever achieved. Holy shit. That compares to 9% in the same quarter last year.

KPI's:

- As of December 31, 2021, we had 216 customers with ARR of $1 million or more, an increase of 114% from 101 as of December 31, 2020. Really unbelievable here. This bodes well for continued out-performance from the company

- As of December 31, 2021, we had about 2,010 customers with ARR of $100,000 or more, an increase of 63% from 1,228 as of December 31, 2020. Continued with 12% QoQ growth from the 3 previous quarters. Fantastic

Monday.com (MNDY)

31 Dec 2021: $308.72 (Market cap: ~ 13.6b, TTM revenue: $262m, P/S 52)

31 Jan 2022: $209.32 (Market cap: ~ 9.2b, TTM revenue: $262m, P/S 35)

28 Feb 2022: $158.87 (Market cap: ~ $7.1b, TTM revenue: $308m, P/S 23)

Last time I said:

I bought Monday.com in October. After their last report I immediately said "from a high level, this is exactly what I want: high revenue growth and rapidly improving margins." 

My reaction was to take it from about a 6% position to 14%. Then as the stock continued to fall with the market overall, I eventually got aggressive and took it to 20%+, which is where it is today.

It's got many of the same attributes as Datadog (verbatim): high revenue growth, high gross margins, mostly recurring revenue, rapidly improving operating and FCF margins, land and expand, attracting lots of customers.

Perhaps it isn't as necessary of a product as Datadog because it's more a nice to have than a need to have. But given it's a much smaller company and slightly less "overvalued", it has potential to become my best idea of 2022.

And so far in 2022 Monday.com has become my worst idea because of the stock action. They delivered a solid ER in my opinion but the stock sold off 25% (after already having fallen a bunch.)

I didn't buy nor sell any shares. I'm leaving where it is at the moment and will give them another quarter. I might trim it to Tier 2 if I feel the need, but for now I'm going to sit and see what Q1 delivers. The market was concerned with "weak" forward guidance and the slowing of revenue to 15% QoQ. Those are valid to some degree, but there seems to be so much business momentum in every other metric that I'm willing to give the company the benefit of the doubt.

From the last ER:

Income Statement:

- Revenue was up 91% YoY and 15% QoQ to ~ $95.5 million
- They beat YoY guidance by 9%. 

- They had guided for 6% QoQ guidance

- They guided for 7% QoQ next quarter. A similar 9% YoY beat would give them 88% growth. a deceleration for sure, but not terrible.

- Adj gross margin of 90% vs 89% last year

- Adj operating margin of minus 10% vs minus 47% last year. This is a huge improvement. Exactly what we need. The question is, is the revenue growth enough? Is it durable enough? That's the doubt

- Adj net margin of minus 12% vs minus 50% last year. GReat!

- Adj eps of minus 26 cents vs minus 64 cents last year. Great

Balance Sheet:

- Cash of ~ $887 million

- No debt

- Current deferred revenue increased 15% QoQ to ~ $134 million (on $95 million of revenue)

Cash Flow:

- Cash from operations margin was 14% vs minus 22% last year. That might be what saves this report

- FCF margin of 11% vs minus 24% last year. Big improvement

KPI's:

- Number of paid customers with more than $50,000 in annual recurring revenue (“ARR”) was 793, up 200% from 264 as of December 31, 2020. Amazing. That's up 29% QoQ. 

- Net dollar retention rate for customers with more than 10 users was over 135%. That's up from "130%+" last quarter Q3, and "125%" + in Q2.

- The total number of paid customers was 152,048, up 34% from 113,888 as of December 31, 2020. This number is actually pretty disappointing.

ZoomInfo (ZI)

31 Dec 2021: $64.20 (Market cap: ~ 26b, TTM revenue: $653m, P/S 40)

31 Jan 2022: $52.86 (Market cap: ~ 21.5b, TTM revenue: $653m, P/S 33)

28 Feb 2022: $54.69 (Market cap: ~ $22b, TTM revenue: $747m, P/S 30)

ZoomInfo doesn't get a whole lotta love compared to other SAAS companies but it's revenue growth, operating and free cash flow margins are so bizarrely good I almost want to hold the stock as an experiment to see if the market goes berserk for it at some point. 

I sold half my shares after the report. 

It seems the only real black mark is the weak forward guidance. That said, it wasn't a jaw-dropping report. And so it can't be a Tier 1 holding. It's that simple. So I had to drop it to Tier 2. 

The revenue didn't accelerate further as I had thought it would. And simply the revenue growth isn't high enough for this to be a Tier 1 holding.

And maybe more importantly, I need to be honest with myself and realize that I don't fully understand the business or the importance of the product it's offering. The company still has incredible operating and FCF margins, but it will need to continue high revenue growth (and preferably accelerating) for the stock to continue to climb.

From the last ER:

Income Statement:

- Revenue increased 59% YoY and 12.5% QoQ to ~ $222 million

- Revenue guidance was only for 2.6% QoQ but Q1 is seasonally their slowest quarter

- Adj operating margin of 39% vs 45% last year

- Adj net margin of 33% vs 35% last year

Balance sheet:

- Cash of ~ $326 million

- Debt of ~ $1.2 billion. 

This is where they are vulnerable

Cash flow:
- Cash from operations margin of 32% vs what I think is 48% last year. 

- uFCF margin of 38% vs 55% last year. It's still ridiculously high, but has fallen substantially relative to last year.

KPI's:

- NRR of 116% vs 108% last year

- Closed the quarter with 1,452 customers with $100,000 or greater in annual contract value. which is up 71% YoY and 16% QoQ

Bill.com (BILL)

31 Dec 2021: $249.15 (MC ~ $25b, TTM Rev $308m, P/S 83)

31 Jan 2022: $188.21 (MC ~ $19b, TTM Rev $308m, P/S 62)

28 Feb 2022: $237.88 (MC ~ $24.6b, TTM Rev $411m, P/S 60)

Bill.com had the most surprising ER of all my companies. Datadog probably had the strongest in terms of execution at scale, but Bill.com blew everyone away and the stock was up about 30% the next day. 

Initially, after the ER I thought that this could become a Tier 1 Company, but after thinking it through, I think this has to remain Tier 2 because the transaction-based revenue means it has less consistency. Only 31% of revenue is subscription based. It means there's relatively higher probability the company could miss. It also means there's a higher probability they could over-deliver. But either way there's a chance for inconsistency. Also the acquisitions make it a bit harder to figure out overall. This could remain a very strong Tier 2 company though. 

From the last ER:

Income statement:

- Organic core revenue (which doesn't include the 2 recent acquisitions) increased 85% YoY and 20% QoQ to ~ $97 million. That was an acceleration from 77% / 16% last Q and 73% / 15% the Q before that. Amazing!

- Total revenue which includes the 2 recent acquisitions increased 190% YoY and 34% QoQ to ~ $156 million. 

- They beat the high end of their guidance by 19%!! That is really something!!

- Revenue guidance was for $158 million or 164% YoY

- Adj gross margin improved to 85% compared to 77% last year, and 83% last quarter. Amazing improvement. The acquisitions have improved their margins!!

- Adj op margin improved to 2% compared to minus 3% last year, and minus 10% last quarter. That's exactly what we wanted to see.

- Adj net margin was breakeven compared to minus 2% last year, and minus 5% last quarter. Great!

- Adj EPS was breakeven compared to minus 1 cent last year and minus 15 cents last quarter. Amazing!

- This is what a huge beat on revenue does for companies like this. It makes everything below revenue look really great.

Balance sheet:

- Cash of ~ $2.7 billion

- Debt of about ~ 1.6 billion. $1.1 billion of which is current. I'm not sure of what the implications of this are.

- Current deferred revenue of ~ $30 million which is up 43% QoQ.

Cash flow:

- Cash from operations was minus ~ $13 million. That's a minus 8% margin, but is an improvement of minus 18% last quarter and minus 17% in the same quarter last year. 

- FCF margin was minus 10% vs minus 32% last year. And minus 22% last quarter

KPI's:

- Transaction fees were $106.3 million, up 313% year-over year. This is what is really driving the growth.  IT'S NOW 68% OF REVENUE. It's sort of like consumption based revenue similar to Snowflake and Datadog.

- Total RPO was approx $154 million, which only 1.0 on the RPO / Quarterly Revenue. This is the one number I see that isn't great. It's quite low. But that is perhaps because of the fact that their customers are SMB. Not great

- Served 135,000 Bill.com customers as of the end of the second quarter. Which was a net gain of 8200 customers QoQ, 6% growth. Bill had added around 5,600 customers 4 of the last 5 quarters. So we can see that they are already upselling!!!!

- Processed $56.4 billion in total payment volume (TPV) for Bill.com customers in the second quarter, an increase of 62% year-over-year, and 20% QoQ.

- NDRR of 124%

UPSTART (UPST)

31 Dec 2021: $151.30 (MC ~ $14.6b, TTM Rev $630m, P/S 23)

31 Jan 2022: $109.01 (MC ~ $10.5b, TTM Rev $630m, P/S 17)

28 Feb 2022: $157.99 (MC ~ $15b, TTM Rev $848m, P/S 18)

Notice how much lower the P/S is for Upstart vs SaaS companies. Does this make it "cheaper"? The market knows that their growth has far less visibility.

The stock of 2021 was Upstart, no doubt. I made more absolute realized gains off Upstart than any stock I've ever owned and did it in fewer than 3 months. That said, even after I sold half my position I'm also now sitting on a sizable unrealized loss because the stock has fallen so much since the last ER. 

I had Upstart at about 18% going into Q421 earnings. It had grown to as high as 26% but I trimmed several times. The day after earnings the stock fell 20%, and has trended down since then (to say the least).

After I looked at the numbers, I sold 2/3 of my shares then bought some back.

What can I say? The numbers they reported were stellar. But everyone, myself included, was expecting (hoping for?) something truly out of this world. After the company reported 60% QoQ growth in Q2 it got everyone thinking they could continue on an asymptotic trajectory. In retrospect it wasn't tenable. 

I still have high hopes for the company but it's a reminder of what it's like to invest in non-SAAS companies. The growth is lumpy, and therefore warrants a lower allocation within the portfolio. I can't have a Tier 1 position fall 20% in a day. I just can't. 

And I might grow tired of the volatility and uncertainty of Upstart. Will they completely blow the doors off earnings reports? Or disappoint greatly? It's hard to know. 

They are extraordinarily profitable given their growth rate. But the growth is lumpy Q to Q, so we have to be able to stomach the wild swings, and it will be difficult to update in real time. I may grow tired of it. Either way, I can leave at Tier 2 for now and probably trim if it runs up.

Big opportunity ahead for the company but wild swings in business momentum = wild swings in stock price. 

Avg loan size is decreasing slightly but number of loans is growing exponentially. Auto will be a big market, and who knows, maybe mortgages in the future. Unlikely that I'll be able to gauge correctly where the business is going quarter to quarter. So like I said I may just get tired of it. 

All that said, Q4 was a stellar report and the guidance was strong for 2022.

Income Statement:

Guided for $1.4 billion FY 2022, which is 65% YoY. That's pretty strong guidance. But it compares to 264% this year. That's a big slowdown

Revenue was ~ $305 million which was up 252% YoY and 33% QoQ. That was a 15% beat above the high end of guidance Incredible!

They guided for 0% QoQ growth for Q1 but Q1 is seasonally their lowest. $305 million in Q1 was above consensus 

Fee revenue increased 37% QoQ and 240% YoY to ~ $287 million

They have a 19% GAAP net margin. Wow!

Adj Net Margin of 29% vs 6% last year and 25% last quarter. Incredible

Adj EPS of 89 cents vs 7 cents last year and 60 cents last quarter. Incredible

Profitability:

Contribution Margin of 52% vs 48% last year and 46% last quarter

Adj EBITDA margin of 30% vs 18% last year and 13% last quarter

Balance Sheet:

Cash of ~ $987 million


Cash Flow:

Cash from Operations fell substantially to a minus 4% margin vs minus 18% margin last year. And minus 19% last quarter. 

And FCF margin fell to minus 5% from minus 12% last year. 

KPI's:

Number of loans transacted was ~ 495,000 up 37% QoQ and 301% YoY. 

Conversion rate was back to 24% compared to 17.4% last year. 

 
Zscaler (ZS)
31 Dec 2021: $321.32 (MC ~ $48b, TTM Rev $761m, P/S 63)

31 Jan 2022: $257.11 (MC ~ $38.5b, TTM Rev $761m, P/S 51)

28 Feb 2022: $239.15 (MC ~ $35.8b, TTM Rev $860m, P/S 42)

Zscaler casually knocked the cover off the ball with their last report, which was Q1 22. The topline growth was 17% QoQ, which was their biggest sequential gain in 11 quarters.

So perhaps the market was expecting a similar QoQ growth for Q2 because the stock sold off about 16% the next day, which seemed really stupid to me because the ER was pretty incredible. Sure enough the stock has retraced most of that drop in the past few days.

Perhaps with the "weak" billings of Q2 it means that Q1 was a bit of a pull forward in this environment. However, they explained on the call that govt spending was unexpectedaly in the "low single digits because of budget constraints." Given the current state of the world I think it makes sense to hold ZScaler and even add. 

One thing about ZS that gives me confidence (especially after Monday.com and Amplitude fiascos) is that they are mission critical.

From their ER:

Income Statement:

Revenue grew 11% QoQ and 63% YoY to ~ $256 million. They beat guidance by 6%. Not a complete blowout of revenue but still very good. The acceleration of revenue continues and as the CEO said "with our year-over-year revenue growth rate reaching its highest level in three years, even as we surpassed $1 billion in annualized revenue,”

Guidance is for 6% next quarter. 

They also raised FY guidance from 50% YoY to 56%. Fantastic

Adj gross margin of 80% vs 81% last year and last quarter. Very slight ding

Adj op margin of 9% vs 9% last year. and 9% last quarter. Here's our stabilization of operating margin from last quarter.

Adj net margin of 8% vs 9% last year. And 9% last quarter. Not great but at least the deterioration of margin stabilized.

However adj EPS improved to 13 cents vs 10 cents last year. Fantastic!

Balance Sheet:

Cash of ~ $1.6 billion

Long term debt of ~ $940 million

Current Deferred Revenue up 18% QoQ to ~ $ 688 million (on $256 million in revenue)

Cash Flow:

Cash from operations took a big hit looks like. Op cash flow margin of 19% vs 19% last year. BUT Q2 is seasonally low. 

FCF margin of 12% vs 11% last year. but same as the op cash flow margin, vs 36% last quarter. 


KPI's:

Calculated billings increased 59% YoY and 48% QoQ (what?!!). This is the number the market didn't like. 

$100k+ customers increased 48% YoY and 8% Qoq to 1751. That's a bit of a slowdown

$1M+ customers increased 85% YoY and 12% QoQ to 251. Those big sequential adds from the past year were in Q3 and Q4 of last year. So that has slowed down some too. Although maybe there is some cyclicality in that

Remaining performance obligations, or RPO, were $1.95 billion as of January 31st, growing 90% from one year ago. The current RPO is 50% of the total RPO.  RPO / Quarterly revenue is 7.6 even bigger than last quarter's 7.4. Should really support valuation as this is almost 2 years worth of current revenue

Our strong customer retention rate and our ability to upsell the broader platform have resulted in a high dollar-based net retention rate, which was again above 125%. 

SentinelOne (S)

31 Dec 2021: $50.49 (MC ~ $13b, TTM Rev $169m, P/S 79)

31 Jan 2022: $44.75 (MC ~ $11.7b, TTM Rev $169m, P/S 70)

28 Feb 2022: $41.50 (MC ~ $10.9b, TTM Rev $169m, P/S 65)

SentinelOne reports in March and I'll more to say after that.

I can't pretend to understand any technical advantage SentinelOne might have in cyber security. But I can look at the numbers from their ER. From a high level, the YoY improvement in operating margin was the crux of it for me. Previously they had high revenue growth. But the most recent ER showed that same high revenue growth with a meaningful improvement in operating margin. It's still very negative, along with the FCF margin. But if the company can continue to improve meaningfully while maintaining 100%+ top line growth, the stock could really move, and this $12 billion company with a P/sales of 75 could stay "expensive" as it grows into a $24 billion or even $48 billion company (like Crowdstrike). 

All that said, I'll be watching it closely, and if the operating margin goes the other way or if the growth slows down noticeably, I'll quickly sell and move on. 

MongoDB (MDB)

28 Feb 2022: $$381.99 (MC ~ $25.4b, TTM Rev $778m, P/S 33)

MongoDB is a new position this month. I've loosely followed the company for 2-3 years and had owned it previously. I sold because they struggled with profitability and their growth really slowed during the pandemic. However, it's all about Atlas now going forward. We've known for some time that Atlas would really drive revenue and I think we've reached a tipping point. I'm not fully convinced on it so will wait for earnings in March

Amplitude (AMPL)

31 Dec 2021: $52.94 (MC ~ $5.7b, TTM Rev $148m, P/S 39)

31 Jan 2022: $39.31 (MC ~ $4.2b, TTM Rev $148m, P/S 29)

28 Feb 2022: $21.50 (MC ~ $2.3b, TTM Rev $167m, P/S 14)

I sold out of Amplitude after their ER in Feb.

After their first report as a public company I wrote:

From a high level, everything looks pretty standard SAAS. Except the guidance for next quarter is only 3% QoQ. 

"Pretty standard SAAS" is a loaded term but what I meant is that it had high revenue growth and rapidly improving margins along with land-and-expand.

However after their ER we see that it's it's "pretty standard SAAS" but that the revenue growth is not high enough. I'm sure it'll be a good company. But it's going to get there at a 40% growth rate ... that's not enough. Especially when they IPO'ed at 72% YoY growth. The expectations were too high. It's quickly decelerating. The growth is slowing too quickly. It might plateau but that rerating is painful. And I don't need to hold a company growing at 40%. 

It's "pretty standard SAAS" except the margins are going the wrong way and the revenue growth is not high enough. This is NOT what I want to own.

In retrospect, I should have kept Amplitude Tier 3 until their next ER because they were a recent IPO.

Fubo TV (FUBO)

31 Dec 2021: $15.52 (MC ~ $2.2b, TTM Rev $512m, P/S 4.4)

31 Jan 2022: $10.74 (MC ~ $1.5b, TTM Rev $512m, P/S 3.0)

28 Feb 2022: $8.55 (MC ~ $1.4b, TTM Rev $638m, P/S 2.1)

Look at that P/sales! It shows that despite high revenue growth (100%+ organic), the market really pays attention to margins. Fubo has really terrible margins. 

It's now a stock I've held for over a year albeit at a ~ 2% allocation. It's a stock the market loved at first and has since completely hated. 

After so many quarters of high growth but failure to improve profitability meaningfully. I'm out. 

Lesson learned: revenue growth is not everything

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MACRO THOUGHTS

The Macro is so convoluted at the moment that I couldn't possibly come up with a thesis that would help me invest. We've got the Russia-Ukraine war combined with GDP growth and inflation both decelerating in Q2 combined with a tightening cycle. All of those things augur terrible for stocks in general. However, my "high growth" portfolio has sold off so aggressively the past few months that I have to wonder how much fear is "baked in". I'm guessing a lot.

*****

NEW LINEUP GOING FORWARD

The same. 

Watchlist:
Braze (BRZE)

Samsara (IOT)

CrowdStrike (CRWD)

Snowflake (SNOW)

*****

ACTIONS FOR NEXT MONTH

- Trim Datadog if it goes above 25%

- Consider adding to ZScaler

- Trim Upstart if it gets above 12%. 

- I need to think about trimming Upstart and Monday.com. It's tough because I'm sitting on some unrealized losses in those right now. But I need to forget about the psychological impact of that and instead focus on positioning sizes so that they drive the overall portfolio. In other words, I want Upstart and Monday.com to get back to "breakeven" or better from my cost basis. But should I allow Monday.com to be 18% of the portfolio? Or Upstart 12%? I think the answer is no.