No. of Recommendations: 10
I am starting a new thread to examine the topic of this post:

We should actually maintain a running list of stocks in the dumps but how otherwise have great businesses. We should examine them for the common denominator that differs those that recover tremendously vs. those that do not:

These are but examples to the Splunkian point. That point is, is that we follow a universe of superb and disruptive businesses. Almost all of them are "outrageously overvalued" in the way of the Rule Breaker. A few got textbook cheap (Pure, Nvidia, Nutanix), others just seemed too cheap when compared to their peers (Talend), and still others are hard to grasp (Pivotal).

But those stocks that are dominating their markets (or disrupting the heck out of them) with accelerating business opportunities ahead, with large CAP, are ones to watch all the time for the Splunkian, on Nvidia or Alteryxian or the grand daddy of them all: Twilioxian type of stock crashes.

Note the common denominator, the ones that returned were dominant, and had accelerating business fundamentals. Pure and Pivotal and Talend do not demonstrate this. They also have not recovered. Nutanix clearly demonstrated this in spades, and Nvidia does as well (it just has not happened yet, but it is the perception that matters, and we know the perceived future and Nvidia's place in it all).

So follow the stocks, note if this common denominator is met, and then buy them in the pits, when such opportunities present themselves.

Further, keep buying at all times those stocks like Mongo, and many would say Trade Desk, at any time until such time as their market caps catch up with their accelerating business opportunities and CAP to achieve them.

Stay away from excellent businesses who business opportunities are no longer accelerating. Pure, Talend, least until the perception of acceleration is reignited.

I have addressed PURE before on this topic because PURE has an excellent business, high growth, etc. The problem is, is that PURE is not demonstrating that it is disrupting the market anymore or that it is taking anymore marketshare. Thus its once would disruptor to reshape the storage market (like EMC and NTAP did before them) is no longer a disruptor reshaping the storage market. It appears that competitors have adjusted well enough to cover over the pain points that would lead to them being disrupted. Thus PURE does not have accelerating business fundamentals.

But we should keep a list and identify those that do. Docusign we have discussed as much as any stock that we have ever discussed. Docusign clearly belongs on this list to determine if now is that cellar type time that is opportune to buy, just as the chart I linked to in the linked post showed how making money in Splunk all depended on when you bought.

So anyone have any such they want to discuss? This is something valuable to do on an on-going basis as this phenomenon will happen into perpetuity and it is a good practice to stay on top of these potential opportunities as they happen.

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No. of Recommendations: 1
I know we discussed DOCU to death and there are certain undesirable traits about it, but I believe it belongs on the list for one reason; their $300k+ customers is starting to show accelerating growth. I will watch that along with international as key drivers.

Another one I plan on researching more is 2u. They are about half off their highs. They started growing revenues faster recently due to increased sales in short term courses. I am not sure if that’s a short term blip or not but the ceo is saying he can see 30%+ growth for at least 5 years. He sees a billion in revenue in 3 years and it has a current market cap of $3 billion and grew revenue at over 50% last quarter. They DO have a significant moat. They are at some of the best universities and absorb all the expense of setting up courses for 60% of the course fees over 10-15 year contracts.

Roku also deserves a close look as they are also off their highs. I am not sure how crowded the streaming tv space will be; as if there will be about as many streaming services as there are antennae tv channels and they all dilute each other.
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No. of Recommendations: 8
I have a view in my watchlist to sort by % off of 52-week high. Basically what it sounds like: how far it is from where it once was.

If, and a big IF, these stocks can ever just match their previous 52-week high, there is pretty good upside. Most of us know that the % gain it would take to go back up is much greater than the % it took to go down.

For example, NVIDIA peaked at $292, then fell over 50% to $120's, but to get back to their 52-week highs, from there it would be over 100% gain.

I am excluding China ADR stocks, but if you were to include them, many would be listed here including IQ and BZUN.

From farthest off highs


everything else in my watchlist is within 10% of their 52-wk highs.

STNE is a new one...forget who plugged it, but may be good to learn more, as the yearly and quarterly growth seems strong, and I thought Brazil was expected to eventually be a mammoth economy down the road, and stock has been beaten down (but I don't know the "why's" behind the stock drop, as I haven't had time to look into it further yet).

ZUO I think should be somewhat derisked, and while they won't set the world on fire, I do see and believe in the long-term SaaS trend, so provided they remain a leader in that space, they should see near 30% y/y growth for a long time, which is what their mgmt keeps claiming.

AAPL astonishes me with the lack of innovation since the iPad came back to Earth. Smart phones are fairly equal at the high-end, whether Android or iPhone, imo. They came up with a watch and a Pen and overly expensive ear buds. If someone finally grabs the wheel of innovation over there, I could see them ramping up again and eventually matching their ATH. But probably not an investment for me.

FB - I really dislike Zuck and FB, but admit I still use the forum just to keep up with friends a bit, and amazingly a couple people actually do post things I have interest in. Ok, it is literally about 2 people out of dozens, but I would still rather get my movie recommendations from a trusted source than deranged fanboys on rotten tomatoes. But the real growth is not in legacy FB, but in Instagram and WhatsApp, in online pay, and what if they ever figure out how to leverage Oculus VR/AR across their platforms??? But, probably also not something I will invest in.

TSLA and ILMN were great previously for me...upside from here? Meh. I dunno.
NFLX is great but the thing with content is that it seems to be the opposite of is so subjective and if they stop creating hits, the users can dwindle, especially as more streaming competition enters the fray. I absolutely will be looking at Disney for my marvel/star wars streaming. I use CBS to watch Star Trek, if only for a couple months. Amazon has maybe 2 original shows I like..they are struggling here. So Netflix is king, but what is stock upside?

GOOGL should offset declining desktop search with other things like GCP, ML/DL/AI, and Waymo. But they became utterly massive on search ads, so they may grow a ton in other areas but look like they are standing still as internet users leverage amazon or other sources for "searching" items and things. They aren't going anywhere, just not clear on the stock thesis from here.

AMZN - they are interesting. I think only govt intervention could knock them down, and/or some sort of lurid anti-bezos press emerges if his personal life goes haywire via his divorce. Their ad biz will flourish, maybe he eventually loops in Space biz and absorbs Blue Origins, AWS growth will slow, but not stop. Could we see Amazon become the new 7-Eleven and have brick and mortar all over the US...will they enter AV fray or some other mammoth market? Probably. The only thing holding me back here is the law of large numbers...I just can't see society not rebelling against them if they become a $1T, then $1.5T company and destroying businesses (and their employee's paychecks along the way). If Trump has 2nd term, anti-AMZN govt views could become a real thing.

TTD is hardly beaten down at this point, and when you consider they were outperformed in past 12 months by maybe MDB and TWLO and not much else, it is hard to look at them as a buy-low stock here. I included them more to show that of the stock universe across NPI and Sauls, most of the stocks are doing really well right now.

So out of all that, I have NVDA, ZUO, and I want to learn more about STNE.
Already have a toe-dip on DOCU, and a bunch has been said on them, so didn't elaborate there.

My watchlist used to be a lot bigger, but I pared it down considerably, so maybe there are stocks like ALGN or AAXN or other 2017 or early 2018 favorites like ANET that would stand out too.

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No. of Recommendations: 4
I don't know 2U other than it has been positively discussed here before. Just not my thing. However, I do know Roku.

Roku is the #1 streaming media platform when you count in smart TVs as well. Fire TV has more streaming players (a few million but maybe 10%), Apple TV is much more expensive and thus well behind Roku in total users.

The risk with Roku is that they get disrupted, like TiVo was, or AOL was. What will do that, I don't know. Roku needs to get itself embedded into smart TVs and any other technology that will be used as a material driver of TV viewing. If they can do this, and become a media platform that is not dependent upon a particularly technological device (like its Roku streaming players) then Roku is building a powerful media platform that it may grow to 30, 40, 50 million viewers. That is very valuable.

I find Roku, at present, to be the best streaming device. I have now removed Apple TV from my TVs and have all Rokus now. Thus, if the streaming box becomes the never ending non-disrupted enablement device of choice, then Roku will succeed. Even more so if they can manage to be the leading technology built into smart TVs.

However, I don't use Roku because I want Roku. I use Roku because I want to watch streaming channels like Netflix, Hulu, AWS, DirectTV Now, CW, etc. Any software that will do this for me in a convenient fashion will serve in the end. I do not need Roku.

Therefore, the biggest weakness Roku has, unlike say a media platform like Google or Netflix, is that you use Roku because you want to access other media (not Roku media), unlike Google where you use it to use Google, or Netflix where you use Netflix to watch Netflix.

Roku has built its Roku channel, I believe, to try to make Roku more of the destination people want to go and not just a media enablement box.

Thus why I am not investing in Roku at this point in time. Roku has a leading market platform but its platform does not necessarily create a networking power for it because no one is using Roku to use Roku. Roku's future depends on this changing. People going to Roku because they want to go to Roku.

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No. of Recommendations: 2

As you know, several people including you and Denny made some serious money buying into fallen hero’s like ISRG and ARMHY. I owned ISRG 3 times and twice on ARMHY and had incredible returns as did you.

When we have throughly discussed stocks and agreed on their new paradigm investment thesis, even when they have fallen, we have been able to see opportunity....but these have been very selective.

I really dont think a laundry list is the best way to go about this.....there are likely just a few fallen soldiers that are worthy of the recovery risk. You have commonly said that it is unwise to invest in recoveries and I agree with that....these are much harder investments than riding momentum.

So IMO, choosing these down in the dump stocks are harder than riding the wave of buyers.....they may be down for a very good reason.

There is one stock that I have been watching that could be such an opportunity because I believe its customer base has reaccelerated (even though low numbers) and I have determined that the revenue growth lags that customer growth by 6-12 months.

But we have had some many great investments and returns these past few years, there hasn’t seem to be a need to look for bottom feeders.
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No. of Recommendations: 1
My list is

Arista P/S of 8.5 - I have posted before that it could grow rev 25-30% for the next 5 years based on 100 G (2019) and 400 Gig from 2020. Plus new market in routers and campus which can add some incremental rev. The next earnings call should be interesting.

MELI p/s of 10 - The last Q saw big growth in payments. This company put huge growth numbers (50%+) for overall rev in local currency but <20% in USD. So, if we see LATAM currency doing a little better then we should see growth. Company has lower ecommerce growth in recent terms but non marketplace rev has taken off. Perhaps Denny can offer a perspective.

IQ p/s of 4.4 - Should see good subscriber growth. ARPU is a challenge for a long term investment. But from these depressed levels a double is possible. Depends on Chinese ad market growth
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No. of Recommendations: 3
We should actually maintain a running list of stocks in the dumps but how otherwise have great businesses.

My wish list, updated daily, does that. But you also need free cash to take action.

Two I bought recently: DOCU 1/11/19 $43.49, MDB 1/16/19 $74.50.

This morning I set up my trades for the coming week, likely take profit on MDB and add DOCU. Rotate up some calls.

Calculating options with a spreadsheet is tedious and time consuming. I'm planing on downloading options chains and automating the process somewhat with my Portfolio web-app:

CBOE - Option Chain:
CBOE - Chain Download:

Denny Schlesinger

Maduro's gift to Venezuela

Video: Maracaibo, the story of Venezuela's collapse
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No. of Recommendations: 0
You have commonly said that it is unwise to invest in recoveries and I agree with that....these are much harder investments than riding momentum.

I don't invest in turn-arounds, very difficult. I invest in fallen prices, not the same thing! In ARM I invested in a 60% one day drop.

And NOT falling knives either.

It's not TA proper. Stocks go up and down, you try to catch the rhythm. If you do, you trade in and out, if not you hold or wait because these are trusted businesses. GTC limit orders are very useful for this.

Denny Schlesinger
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Sad situation in Venezuela.

So they are still fishing, crabbing those oil polluted lakes....looks like a health hazard for sure.

Sure hope the Madura situation resolves peacefully and soon Denny.
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No. of Recommendations: 3
In Caracas they ration water. Water flows freely in the streets from broken mains. Streetlights are on 24/7. 3.5 million refugees have left.

A majority of LatAm countries, US, Canada, the EU, Germany, UK, Poland, France, Belgium among others back Guaidó. Caribbean Islands, Suriname, and several African countries that spoke at the UN back Maduro. Funny thing, the Russian representative gives his speeches in Russian and speaks perfect English with Reporters. The representative of Antigua and Barbuda is blind and reads his speeches in braille, amazing!

Denny Schlesinger
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No. of Recommendations: 2
I don't know if any of these are in the dumps, but the less outrageous valuation companies that I have are...

Cloudera is down because nobody liked the merger. Bert seems to think there is synergy to be had.

ANET is relatively cheap, should see an acceleration as 400g ramps up.


PVTL might surprise if momentum builds. The long sales cycle to enterprises may start yielding higher customer growth soon.

NTNX is recovering

Large businesses wont be one just one cloud provider. This benefits ZS, MDB, NTNX, PVTL.

"Enterprises are not relying solely on a single cloud platform but are utilizing a mix of both private and public cloud as well as the services of multi-vendor cloud environments like AWS and Google Cloud. According to the 2018 State of the Cloud Survey by RightScale, multi-cloud is the preferred strategy with 81 % of enterprises adopting a multi-cloud strategy for running their operations." -
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No. of Recommendations: 2
Last week I initiated a position in CBLK

Once very much over priced and over hyped. Currently markedly underpriced with approx 40% gain to normalise its valuation imho. The technicals suggest it is breaking out of a descending wedge. Still far below 200dma however.

Transitioning from on prem toa cloud based big data predictive cloud platform which is increasing their TAM. Hidden growth in cloud ttansition - from 0 to $65 million run rate or approx 30% of annual recurring revs in under 3 years

From Q3 2018

We generated total revenue of $53.4 million, representing 29% year-over-year growth. Recurring revenue of $49.3 million, representing 34% year-over-year growth. Cloud revenue of $16.1 million, representing a 126% year-over-year growth. And we ended the quarter with 4,625 customers and 2,450 cloud customers, which represented 39% and 109% growth respectively

We made significant progress in the third quarter and throughout 2018 and rapidly transitioning Carbon Black into a cloud platform security company. A year ago, our product portfolio consisted of one product, Cb Defense that was available on the Predictive Security Cloud or the PSC, our multi-tenant cloud platform. And two, on-premise products, Cb Protection and Cb Response with the latter also being available in the single-tenant cloud configuration.

Today, I am pleased to say we know have five products on the PSC, all available through a single agent and a single console on a common cloud platform leveraging our unfiltered endpoint data and our streaming analytics

PSC enables faster innovation on a consolidated cloud platform. The combination of our unfiltered data and our multi-tenant cloud allows us to innovate faster. In just the past ten months, we've delivered four new products on the PSC. We can innovate so quickly because we are deploying new services or new products on a multi-tenant cloud platform leveraging the same agent and same console. We anticipate that we will continue to rapidly innovate with new products in the coming quarters

PSC provides faster time to value. It is incredibly simple to deploy products on the predictive security cloud into a customer's environment. As an example, we recently had a customer deploy Cb Defense to more than 100,000 endpoints in less than a week. The ability to deploy quickly increases our ally for customers and helps to simplify future sales cycles for additional products.

We believe our results in the cloud speak for themselves. In two and a half years, we have scaled a cloud business from zero to $65 million revenue run rate, which is growing more than a 100% a year. We see strong pipeline and sales growth in the cloud and we remain in the very early stages of this market. The product available on the PSC will be key long term growth drivers for Carbon Black and we're confident in our ability to be a primary winner in the next generation endpoint security market.

Total revenue in the quarter was $53.4 million, up 29% year-over-year. Subscription license and support revenue was $50.8 million, up 32% year-over-year and services revenue was $2.6 million, which was down 17% year-over -year.

The decline in services revenue is directly attributable to the growing mix of cloud solutions in our business. Our cloud solutions on the PSC are easier to deploy and have a lower services attach rates as compared to our on-premise products.

Recurring revenue which excludes our services and perpetual revenue was $49.3 million, up 34% year-over-year. Recurring revenue comprised 92% of total revenue in the quarter as compared to 88% in the same quarter last year

Sales and marketing expense was $34.3 million, which represented 64% of revenue. The growth in our sales and marketing spend reflects planned investments and our go-to-market organizations primarily in the form of headcount additions, as we build out our sales organization to take advantage of our market opportunity and address adjacent security use cases with our PSC. It will take some time for our sales organization to optimize the selling process for the much broader footprint now available on the PSC, but we believe that the staffing investments to expand our global market coverage will position us to generate sustain strong growth over the long term and drive shareholder value.

R&D expense was $15.4 million, which represented 29% of revenue. Investing in the R&D organization is an ongoing focus area for us as we work to build out our PSC platform and accelerate the speed of innovation and new service delivery.

Declining services as a percentage of revenues (8% or so)

Operating margins looks a bit horrible, but due to sales (64% of revs and R&D (29%) which seems reasonable for the phase of growth.

S-1 analysis here “Carbon Black S-1 Analysis — Not the Endpoint, Just the Beginning” by Astasia Myers

2016 VC round post money valuation of $609 M

Current enterprise value of $866M

Ev/Sales of 4.16 for 2018, 3.5 for 2019

I think they can do over 400M revenue by end 2021. A modest EV/S of 5 would give a EV of 2B by then, i like those odds
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No. of Recommendations: 2
I looked at this company CBLK and am concerned about this “hidden growth in cloud” philosophy. It reminds me of Talend.

If you notice their on premise sales are up 11% yoy last quarter. All customers are doing, after they make the decision to go with cblk, is decide how they will pay for it. CBLK is now pushing Saas.

I don’t see this much different than a fast food restaurant putting a drive through window in and having “big growth in drive through sales from 0 to $1 million” while the restaurant overall had little change in revenue. It’s just how customers are getting it that’s different. That’s my concern on these “cloud transition companies.” It give a false impression of growth.

Having said that their customer count went up 39%. So they should convert this to higher overall revenue growth.

Their service revenues are down. Service revenues are zero or negative margin anyways and no longer needed since the cloud is easier for these customers to set up. So that’s hidden growth for sure.
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No. of Recommendations: 1
Hi 12x

I understood why you would be skeptical after Talend

To me, a difference is that CBLK have always been honest about what base the cloud revs are working from, whereas i had the sense that TLND were being evasive about it. -

this is from June 2018

Carbon Black (CBLK) Presents At William Blair 2018 Growth Stock Conference - Slideshow $CBLK

This isn't a perfect company by any metric, but it fits my GARP (growth at a reasonable price) criteria and doesn't need to perform stunningly, just solidly to provide a decent return over a 3-5 yr period imho.

Imho the derisking is largely done and i think it offers a reasonably asymmetrical risk/reward profile at $13 (Not so much at its 52 week high of $35), so i have initiated a position.

My other GARP candidate is MIME.
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Sentiment on CBLK is turning positive this week. It has a new PT of $24 from Raymond James (who have also done a hit job on SQ)

It still has a p/s of 3.53 for this new year and circa 30% rev growth. It may not be a fully new paradigm security company compared to ZS, but GARP shouldn't be dismissed imho

How Will Carbon Black Differentiate? $CBLK
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