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Just checked. Up 25% ytd. What it does the rest of the year and which go up the most the rest of the year I have no idea. And I’m certainly not going to trade around that mindset because the stock market does not work that way. Right now I’m just consolidating and trying to be in the best stocks. When they do what is anyone’s guess.
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Dreamer,

You being such a tremendous value to this board with your never ending re-evaluation and searching for companies.

I just wanted to point out, that in order to get your 2019 world-beatersYou should probably stop wondering if I need to side more with the "sure things" for a few months.

World beaters don’t happen in months.

But if they did, I feel that, the valuation spike would give you uncertainty that it would fall due to XYZ.

Seems like you could benefit from tiering your portfolio on risk versus and acknowledging that you are putting XX% in less risk less reward stocks (ie proven performers) and XX% in hyper growth bets.

Duma pointed out a month ago that your portfolio fundamentally opposes itself in philosophy and I tend to agree.

The “for a few months” is alarming to me as I don’t believe in or trust that I’m smart enough to time the market.

Just some critical feedback

Others not on your list for consideration that have no competition in sight

TDOC, AAXN
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World beaters don’t happen in months.

---

I should have been more clear.
Jan + Feb is about +25% total port return YTD, which is awesome and likely an eztremely unsustainable 300% annual pace. :)

The world-beating returns of ayx ttd twlo mdb and others did, actually, occur in months.

TTD was almost all from April 1st to Sept 24th, or about 6 months you went from 50 to 150 in stock price.

Ayx from may 14th to sept 10th doubled in price.

MDB went from 36 to 81 in under 6 months.

We like to think we are LTBH but if you analyze Sauls port the past 2 years it is complete turnover in stocks he owns and most currwntly are less than a year owned. Most also IPOd in past 2-3 years too.

40% of my port is ttd and twlo, which i continue to hold, despite not expecting a repeat of the multiple expansion that occurred in 2018. Zs ayx estc are also holdovers and about another 10% of port. Been in/out of ntnx but have missed out as their ERs this year will be make or break catalysts...still only 2.5% position.

I actually sold half my TTD a few weeks back and that has been my play money in the sense of figuring out what to bet on, at this moment in time, as best investment as of today. Not for 1 year or 3 years or 5 years. I already have my long term bets.

And i will buy w expectation of holding until either: something negative alters the long thesis or a truly better oppty materializes (like Slack IPO or a material dip in a core stock i own or have been watching).

Saul is modified buy and hold. Tinker is opportunistic buyer. I am my own thing, but it has a mix of both. In general i am not a TA guy. I think the algos are forever disrupting that, which is why so many cnbc/wallstreet types were shellshocked by the Dec crash and offsetting Jan rise.

I am thinking in terms of CAGR or annualized gains. Having a 10-bagger is pointless if it takes 5 yeara and majority of gains were in first 2 of those 5 years. Pointless in the sense that you likely could find better returns in other stocks the last 3 years. Tax considerations play a part here. I trade w the 401k, not my taxable account. Although i sold most of IQ in taxable and took the hit bc trade fud outlook.

I now have 20% of port in zen smar plan and now.

I have some speculative toe dips in bzun cien xlnx and apps that could be failures or be world-beating relative to the rest of my port in next few months. and rest in cash.

I am having harder time finding world-beating catalysts outside of news tied to pot and china...so may just put cash in something like wday until the next world-beaters are unearthed, with the goal being to beat the market for rest of 2019 and hopefully turn the 25% total gain YTD into 40% by end of year.

40% is a crazy number. Look at sauls historical numbers and you see 2017 and 2018 returns of 70-80% are outliers and likely not repeatable without turning over the port yet again.

Dreamer
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I guess my broader point is this,

To go from $50-$150 in TTD you have to be in the stock on two specific days.

May 11: 53-75 $22
August 10: 93-127 $34

$56 appreciation in 2 days

Timing is impossible.
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No. of Recommendations: 4
You can’t find your buys on what is most likely to grow the most over the next year. The world does not work that way. I see you’re buying Chinese stocks probably as a way to beat the market over the next year but the market does not care you own the stock, and second, China was slowing down before the tariffs. I also see you’re buying stuff for 5g with cien and xlnx, which everyone and their mother knows 5g is coming. So it’s hard to have an advantage there.

I too am up about 24% for the year but just take things as they come. You definitely cannot force returns and today could be my high mark for the year. There’s nothing I can do to “force” high returns every year. All we can do is keep buying the best stocks and see how it plays out. You certainly cannot target 40% this year. I keep seeing your posts like this wanting to buy stocks that will go up the most over the next year. You simply cannot time when stocks will go up.
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Just checked. Up 25% ytd. What it does the rest of the year and which go up the most the rest of the year I have no idea. And I’m certainly not going to trade around that mindset because the stock market does not work that way. Right now I’m just consolidating and trying to be in the best stocks. When they do what is anyone’s guess.
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I guess my broader point is this,

To go from $50-$150 in TTD you have to be in the stock on two specific days.

May 11: 53-75 $22
August 10: 93-127 $34

$56 appreciation in 2 days

Timing is impossible.

----------

We are kind of saying the same thing, but my broader point is that, in early 2018, AYX/MDB/TTD/TWLO were able to enjoy "multiple expansion" that they should not rationally/reasonably be expected to repeat from today's prices over the remainder of 2019.

In just 12 months we have gone from wondering if a P/S of 10-12 was too rich and now we tend to refer to that as "cheap" compared to P/S of 20-25-30 of AYX/ESTC/MDB/ZS type stocks.

Unless you believe the market will decide that the new normal for P/S on 50% y/y growers is 40-50 (which seems absurd) then math will tell you that the upside for those 2018 world-beaters has to be restrained to their revenue growth rate or lower. Meaning if the market says "hey...we are ok with a perpetual P/S of 20 for the time being) then the share price can stay at that P/S level by matching the revenue growth rate. If the company isn't growing revenues greater than 50%, it follows that the stock can't/won't appreciate 100-200% like it did in 2018.

So while you can't, and I can't, time the market, we can look at a stock and say "hey...it looks like, according to the current 'normal' of the marketplace, that Stock X or Stock Y appear to have the possibility of multiple expansion due to their growth rate and relative to similarly growing companies that were afforded that multiple expansion in 2018. Hard to find these companies, and sometimes we look for that "hidden growth" or "misunderstood changes" in a company that the market hasn't properly priced. Many would think of NTNX as a prime example here, and while it has risk imo due to being Infrastructure, I do agree. Many of us thought NVDA was back in this position before their Nov ER and got burned...many that was also a lesson that software truly should be treated differently than hardware.

I tend to be wordy, and that is a fault of mine for not being able to simplify my arguments I suppose, but the point is that there is an actual thought process here for me and there are a lot of variables I consider, so it is hard for me to just say my investing philosophy is X-Y-Z.

If you want world-beating stocks, it seems they have to not be:
1. fully/properly valued yet (TTD was very consistently outperforming for 18 months before stock finally exploded...probably due to "ad tech" stigma vs being considered a high-growth data/software company)
2. perhaps have hidden growth (TWLO, or NVDA finding new markets for GPUs)
3. are simply under the radar. Now in 2019, SaaS/growth/tech/cloud is hardly under the radar anymore.
4. catch a "hot" market/sector rotation wave. China ADRs, pot stocks, crispr biotech, etc...)
5. choose IPOs wisely. IQ was a mammoth winner, if you sold correctly. ZS was a winner. PVTL...not so much. I think Slack will be a winner, but wonder if it will be like ZS and simply start off at very high valuation, limiting upside early on.

So it isn't quite that I am trying to "time" something as much as trying to identify something that, in this moment in time, appears well-positioned for world-beating multiple expansion. Once I identify a stock like that and buy it, I don't know if/when exactly when it will pop, but will be content to hold on until ERs or news convinces me that it won't eventually pop.

If the rest of this year is completely sideways and flat in my port, I may simply do nothing different in 2020 because they may be well-positioned for a new round of multiple expansion having "grown into" their valuations throughout 2019. Again, this is a CAGR or annualized view for me. If revenue growth slows enough ala ANET, then the stock may get cut.

Thursday will be a big day for me...TTD reports and I hope it is a great one, plus we will have Q1 and 2019 forecasts to pick apart!


Dreamer
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Dreamer,

My personal experience, even if a long-term holding period comes down to until it is something you no longer wish to hold long term due to change in valuation, fundamentals, other opportunities, etc., I always lose money if I start to invest for reasons other than my long-term desire to hold.

If you want superior returns, act on FUD events. They always arise, but unpredictably and some can be risky if the FUD is real, but that is when to pounce.

Of recent was the October and December market crashes. Other times were AYX with their Tableau threat as an example. Mongo and Amazon. Twilio had a huge opportunity post Uber (I did not like this myself, so I did not invest on this myself) but Twilio and Amazon, there was another opportunity that I considered.

Stick w quality that you want to hold long-term, don't just find the scraps that may be cheap. But play opportunities.

New opportunities of high quality companies that you want to hold long-term will surface. We are not discussing the TEAM and its smaller competitor as an example. These new wave of companies, or simply a new company burning it up will be found and become available to invest in.

But instead of going for scraps (I still consider Talend a scrap - will eat those words of course i'm sure) be patient, waiting for the FUD. Be patient, wait for the occasional new that comes along that has the quality you are looking for.

Tinker
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All we can do is keep buying the best stocks and see how it plays out. You certainly cannot target 40% this year. I keep seeing your posts like this wanting to buy stocks that will go up the most over the next year. You simply cannot time when stocks will go up.

---

The idea that I can't have my own ideas on how to approach investing is silly.
Tinker changes his "do nothing" stocks constantly. (remember when PVTL was the greatest, or TTD, or DOCU for a hot minute?) Nothing wrong with that, and it works for him.

You do what works for you and you are comfortable with.
Saul is constantly rebalancing...cutting/adding...trying out positions that he may or may not keep. Nothing wrong with that, and it works for him.

I didn't start the year targeting 40%. Like probably most on these boards I have a spreadsheet or pad of paper and pencil in some numbers and try to imagine returns out for the next 5-10-30 years and what the CAGR can do to grow my wealth and provide security in retirement or for kids school/weddings, etc...

But like most any sales company, you ask for more...you set the goals higher...you attempt to over-achieve. I am not retired, so my risk appetite is larger than others. I want to not just beat the market index, I want to crush it.

I peaked in June last year and matched it in August and finished lower than both by end of 2018, so of course I could have already peaked for the year. But my goal and hope is to get much higher so that I can absorb a pullback and still finish ahead of where I am now, because I can't time black swans or predict Trumps moves or trade war or fed, etc etc...

And if everyone and their mother knew about CIEN and XYNX, I must have missed all the commentary on NPI or Sauls about them...and the mammoth gains those stocks had either in last year or last couple months. I wish someone would have filled me in on XLNX, since it was so obvious in hindsight that the stock was going to outperform just about every stock we follow since Dec 24th. Or the 100%+ gain APPS enjoyed since start of 2019.

And by the way, don't think I don't realize my 24-25% growth is nothing special around here...everything was beaten down in Dec and everything went up practically in Jan, and I can't think of anything scarier than everyone being up that same amount. That tells me that our collective performance was no better than throwing darts. If that doesn't cause one to redouble their efforts to research and verify they have the best possible investments, at this moment in time, I am not sure what will.

Dreamer
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We are now discussing the TEAM and its smaller competitor as an example.

---

When I brought these up a month ago, duma accused me of trading too much.

I am not sure I get all the fuss.

about 65% of my port is holdovers that I like and want to hold long-term until something changes my mind.
another 20% is this new basket of Ent SW companies (NOW, SMAR, PLAN, ZEN) that I like and want to hold long-term until something changes my mind.

I am basically taking a couple moonshots on "others" and/or have Cash.

If MDB/AYX/TWLO/ESTC are unable to ramp their revenue growth rate to 100% or higher, I don't see how they can be the world-beaters they were last year. Doesn't mean I am selling them, but there will be other world-beaters out there, so why wouldn't I want to supplement my port with them?

Using AMZN or GOOGL as examples seems pointless, as they are absolute extremes. What seems more common is the SHOP or ANET or TSLA or BOFI or any stock that has an awesome run and then seems to hit a wall. Usually this is a factor of Time and Large Numbers and the impact to Growth. The smaller the hypergrowth company is, the higher the future growth could in theory be "they could be the next Amazon!!". But as a couple years of revenues kick in, you look up and realize they aren't so small anymore and have 500m or 1b in sales and/or their growth rate just can't seem to keep going up like it used to. And the P/S had been climbing and climbing and then...plateau.

If a stock is $30 and it goes to $120 in one year, the CAGR is otherworldly. But if the stock does another "7-bagger" over the next 7 years to $330, the CAGR plummets, despite you being able to say "I got a 6-bagger! Whoo!".

Saul can barely keep a stock for 1 year. Of the Fortune 500 from 1955 only 60 remained in business in 2017. And of the top companies in the world or the Fortune 500, about 50% are expected to be surpassed and replaced with new companies over the next 10 years. The average age of an S&P 500 company is now 20 years down from 60 years in the 1950's.

Software, Cloud, Technology, are eating the world. Adapt or die. Transform or die.
The idea I should hang onto, or expect to hang onto, all these stocks for a decade is silly. If it happens, and they are the "next Amazon" that is fantastic. My guess is they all pull an NVDA on us at some point and we head for the exits and move onto the next hyper-growth stock we feel has the best upside at that moment.

Dreamer
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If you want world-beating stocks, it seems they have to not be:
1. fully/properly valued yet (TTD was very consistently outperforming for 18 months before stock finally exploded...probably due to "ad tech" stigma vs being considered a high-growth data/software company)
2. perhaps have hidden growth (TWLO, or NVDA finding new markets for GPUs)
3. are simply under the radar. Now in 2019, SaaS/growth/tech/cloud is hardly under the radar anymore.
4. catch a "hot" market/sector rotation wave. China ADRs, pot stocks, crispr biotech, etc...)
5. choose IPOs wisely. IQ was a mammoth winner, if you sold correctly. ZS was a winner. PVTL...not so much. I think Slack will be a winner, but wonder if it will be like ZS and simply start off at very high valuation, limiting upside early on.


Dreamer:

Criteria like these are a very good place to start to build a portfolio that remains consistent with your goals....not that I agree with them all. But we all have criteria that we rely on from experience or data that support what we do. Tinker has his criteria that he has mentioned time and again like founder led, never buying cheap/beaten down stocks or developing a previously unknown market.

In your above criteria, tell me how CRM and NOW fit them again....this again is not to suggest that these are not good investments under the right scenario (especially CRM that seems like the GOOG equivelent of this next decade.....more mature and less likely as violatile).

But these types of lists probably have a place as its own thread because I think compiling some thoughts from all of us can be very effective at getting a few hundred years of combined investment experience all wrapped into the NPI investment thesis.

Neither you nor Saul will ever have a 10 bagger the way you trade and I get that most your trades are in a tax free account but there ar me nay stocks that lay around gathering dust and then all of a sudden spring into action,......look at TEAM just prior to 2017.....Saul owned the year before a dumped it....missed a 4 multiple.

IMO, when the NPI with its “dog on a bone” tenacity gives credence to a stock/company, I rarely let those stocks be forgotten. I can’t tell you how many times I have traded these stocks for amazing returns because the NPI was right though timing or macroeconomic events were wrong. So while I am not presently in ESTC for example or ZS.....they stay on the radar always.

But I digress.....I think it would be very interesting to start a thread and give everyone no more than 2 pearls of investing (one for buying and one for selling) and compile that list to see what we get.

Anyway.....carry on.
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In your above criteria, tell me how CRM and NOW fit them again....this again is not to suggest that these are not good investments under the right scenario (especially CRM that seems like the GOOG equivelent of this next decade.....more mature and less likely as violatile).

---

They specifically are NOT the world-beating variety.
They are market-beating. Same as I view TTD, TWLO, and NTNX etc.. from today's prices.
I just am not sure if NOW/ZEN/PLAN/SMAR will outperform AYX/ESTC/ZS/TWLO from Feb 17th thru the rest of 2019, but I like them all highly for different reasons, so keeping all.

I think TTD still can beat all of them, thus the higher allocation. But I also don't think TTD can be "world-beating" this year either.

So you were correct in viewing that they don't seem to match that criteria, as I am having a tough time finding anything right now that does.

This reminded me that, for fun (and I have a weird idea of "fun" I guess) I was thinking of reporting my port results, whether monthly or quarterly this year, as if I was a Company and would classify them in product segments to more easily compare from one time period to the next.

1. Data; AYX ESTC, arguably TTD
2. Ent Productivity Software; NOW, SMAR, ZEN, PLAN (and WDAY if I wind up adding it back)
3. Infrastructure; NTNX, arguably TWLO (Twilio fits in a couple buckets, I guess)
4. Other Bets ala Alphabet; CIEN, XLNX, APPS
5. International; BZUN
6. Security; ZS (arguably could be "infrastructure" I guess)
7. Consumables; (if I get back into ACRGF or other pot stocks)

I could show the % growth of each segment plus their contribution to the other "revenue growth" of my company aka my port.

Dreamer
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I believe I understand what Dreamer is saying.

He is saying that some stocks have outperformed because their P/S has expanded to the top of the class. Once there, he doesn’t seem them expanding more, rather, performance will follow closer to actually company performance.

So now, how to look for emerging stocks that will both grow based on actually actual company performance and win market love for valuation.

Did I capture this?

Please don’t stop having ideas. I also tend to pick around the edges of core discussions.

TRHC and CLDR are on my watch list. TRHC being most intriguing from a story I can understand and CLDR coming from a general bet that HDP+CLdR can make traction.

I’ll hope to get to putting numbers on paper.
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He is saying that some stocks have outperformed because their P/S has expanded to the top of the class. Once there, he doesn’t seem them expanding more, rather, performance will follow closer to actually company performance.

So now, how to look for emerging stocks that will both grow based on actually actual company performance and win market love for valuation.

Did I capture this?

---

Correct. And in about 1000 less words too!


Dreamer

Ps...tabula rasa is a cool name. Shy on biotech but willcheck it out.
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The idea that I can't have my own ideas on how to approach investing is silly.

First off I apologize if I'm coming across as some person who has no business doing so giving you lectures. It's not my place to say "this is the right way to invest." I'm guessing it was because you have been posting your trades and basically asking how to allocate positions. Not everyone posts their trades. When you made the announcement you bought CRM for example, my thought was "let's see how long that lasts." It was not surprising to me you sold it and I'd be surprised if you have NOW much longer. So when you talk about your trades, and what you're trying to do, it just sort of opens up the opportunity for talking about ideas on investment philosophy. I'm not trying to build animosity so hope I'm not doing that and I'm definitely not trying to tell you how it "must" be done. It's possible I came up with a belief I hold true and may come across as saying "you're wrong" if it goes against my belief when I could be wrong myself or it's something I do to keep from making bad investment decisions due to psychology, so if I did that I apologize.


I spent a great deal of time researching the psychological aspect of investing because I believe it's key to superior returns. By no means am I perfect and if I posted all my trades on here \I'm sure I'd be opening myself to all sorts of constructive criticism. It would also probably be very beneficial to me.

I am not sure if everyone who visits this board is up 25%. When you posted your portfolio at the beginning of this year, it had about the same names as mine, although I did not buy pot stocks. Only the allocation was different. So it would make sense we'd be up about the same.

When we had the NPI Portfolio years ago, I'd routinely pick ILMN for the year. It did quite well, and that very well could have been luck. Just like beating the S&P this year I'm sure has an element of luck in it. It's only 1 1/2 month after all. When we had the NPI Portfolio I found the performance of the portfolio was just that it was high beta, not necessarily superior returns. And people picked all sorts of stuff that had nothing to do with "New Paradigm." ATP Oil and Gas for example which went bankrupt and had nothing to do with NPI and was so debt laden it was completely irresponsible for a company to run like that let alone invest in it. The guy that picked it basically said he had the balls to invest in it and if I didn't that's my fault. So from previous experience people who visit this board have all sorts of strategies and buys different things. So I have no idea if "everyone" is up 25% this year but I'm sure if they have a high allocation of SaaS stocks, I'm sure they're up about that much. So if I'm up 25% this year is a sign you need to look harder I'm glad I gave you inspiration. Please do share your findings with the board:) I will be looking too. I actually enjoy this so it's not a problem for me. I haven't read the Saul board lately but I'm sure they're all up about the same, because last I saw his portfolio was very similar to mine except NEWR. I've never had NEWR. This is just a big bull market for SaaS and anyone in it has been doing well. Not sure what to make of that, but I don't plan on changing course at this time, even if it is a "crowded trade." I just don't know of a better one at this time.

I too have been overtrading but I believe it's FOMO. I could very well miss 20% upside while I'm researching before buying. But going forward that's what I will do. And that FOMO is a direct result of a bull market, as is me being up 25% this year. So that should reduce trading for me. Just researching in more detail before placing a buy. But yes, any monkey who limited themselves to high growth, leader in their space SaaS stocks is probably up like 25% this year. It's certainly easier to get 25% returns in high growth tech stocks than POST Cereal type investments which is where I concentrated on in recent years until recently. I felt that after the recession there would be big opportunities in buying banks that recovered. So I stuck with that path for years, leaving a lot of money on the table. Compared to cereal or banks, there are so many high growth stocks to invest in when it comes to tech. I'm having to find ways to disqualify investments other than growth rates. I don't have them.

I honestly don't know if overtrading is such a bad thing anymore. Commissions are $7 or less, sometimes free, and I'm not sure but it's possible the spread has come down in recent years. But if it's due to psychological pitfalls I do believe it's important to address.
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Of the Fortune 500 from 1955 only 60 remained in business in 2017. And of the top companies in the world or the Fortune 500, about 50% are expected to be surpassed and replaced with new companies over the next 10 years. The average age of an S&P 500 company is now 20 years down from 60 years in the 1950's.


In his book "Future For Investors", Jeremy Siegel actually told his students the idea of holding the same stocks permanently was preposterous, for the reasons you describe. However, when he went back and researched the original S&P 500, he found that it actually outperformed the updated version. Most companies were acquired, not bankrupted. I believe only 1 or 2 went bankrupt. I don't have the book anymore. The pickers for the S&P 500 have the same emotional pitfalls investors do, adding stocks when they're hot at the expense of long term returns.

Most companies get bought. Most of the companies we talk about on this board today won't be around in 5-10 years because they will have been bought out. One more thing to stop you from getting that 10-bagger.
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I take it back. 30 of the original S&p 500 went bankrupt or were nationalized.
The original version still outperformed the updated S&P 500 however.

Study can be found here
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.421...
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Great post.
Fairly sure Saul is currently


Alteryx 20.6%
Twilio 20.3%
Zscaler 12.9%
Okta 11.8%
Nutanix 9.2%
Elastic 6.1%
The Trade Desk 5.6%
Square 4.7%
Zuora 2.8%
DocuSign 2.6%
Guardant Health 2.0%
Anaplan 1.5%


The above was his end of Jan update.

But then he dumped GH and added back 3% MDB.

I own most but currently not in; mdb sq zuo docu and okta.

My allocations (convictions) are quite different except for twlo.

I have TTD on top w 25% then twlo at 15% and only 4% zs 3% ayx and 2.5% ntnx as an example.

Dreamer
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In the end who cares as long as you make returns.

However, I do caution the counterside to returns are negative returns. In-between are opportunity costs and tax costs. There is always a cost. And the cost hits if you do nothing or if you do something, just depends.

E.g. I waited a month too long to sell off my ANET, SHOP and NVDA. Tax concerns, so I held them a month longer than I wanted. Still sold them near their tops, but I missed some run-ups, that outran these stocks that I wanted to buy earlier. Opportunity cost.

So have a sell strategy for those “do nothing” stocks in the end. And that is usually, they ain’t quite what they were because the market is now on to them in regard to now expecting too much vs. what they will deliver. Or things that may be quite more material (see Nvidia lately, even at the same time as Nvidia is restructuring the entire entertainment industry and enabling a conversion of media with real time ray tracing...business, is about money, not just changing the world. Often they coincide, but for now not so for Nvidia).

But the opportunity costs that hurt most are the ones when you know you hold a great company, I mean one of the greats, with a marketcap to opportunity still small, and yet you let it go in order to trade into something else. There comes a time to do so. I mean of course the Great Bubble of 2000 teaches us this. But that is the exception to the rule.

Let’s see what 10x revenues really means. If a company has a 30% operating margin, 10x revenues means that, using the. Hypothetical margin (as you expect the company to grow into, or produce cash flow similar to)...well, lets use an example.

Revenues are $100. So valuation is $1,000. Of that $100 in revenues $30 is operating margin. The company is therefore selling at 33x hypothetical earnings that you are quite confident it will grow into over time.

20x is of course 66x. Paycom currently, according to Yahoo! TTM is 78x.

Zscaler (Elastic may be the better case as is growing even faster, but I have not taken the time to learn more about it for now) is right at 19-20x this year’s revenues. Is it a 20% or 30% operating margin company? Does make a big difference. AT 20% operating margins you get at 20x for $100 in revenues, $2000 valuation/$20 or 100 virtual p/e. That is less palatable as we are talking mature margins.

Go into the next year however and shocker, your back to 30-40x territory again. With my current estimates (and they can be dashed with the stroke of a pen somewhere in the world who decides to do something nefarious or stupid) is 12-13x. Call it 12.5. $100 of revenue = $1250 marketcap, with $30 of operating margin/free cash flow with high CAP = 41x. I think almost anyone here would pay 41x earnings for ZS, with our present perception of it. That is one year forward.

So it is as Bert states, outright expensive now, particularly if you use TTM, pricey (but within historical (and we are talking long historical w many examples) reasonable bounds on current revenues, and becoming reasonable one year out from there...and still at <$500 million in revenues.

So it creates an anxiety creating circumstance. Do you suffer opportunity costs by holding and seeing something else go up, or do you suffer opportunity costs by thinking other things will go up faster and selling, only to see the presently perceived “great” one continue out-performing?

As you can see by what I did in early 2018 I had to deal with all of these costs (except negative ones). Tax, and both sides of the opportunity cost equation. Of course we all dealt with the loss portion later in the year (fortunately was transitory).

Thus, why until it is time to sell like it became earlier in 2018 when I expressly said nothing wrong with what I am holding per se, but I gotta charge up my port more, I think erring towards doing nothing beats erring by doing too much.

I don’t currently need to charge up my port like I needed to earlier last year. It does create some anxiety however understanding (1) the volatility one will have to live through and smile at, up or down, and (2) knowing that we are taking entrepreneurial risks (that is what we are taking) that the CAP and the growth will indeed follow what I will call the Rule of Bert or we can say of David Gardner, the best investments that they can systematically find look expensive at first glance to the ordinary person, but are cheap to the person who can look ahead 6 to 18 months (which are a privileged few).

There will always be error, just as there is always error trying to buy cheap stocks as well, or trying to buy something that may do what they did, but I think that margin of error is less if you lean towards a bias of doing nothing over doing more (it is a bias, not an absolute).

Btw/ Selling SHOP, in the end, really did not do me all that well. It is what happens with companies like SHOP...you move out of them too quickly and try to be too smart.

I am sure TTD is that for you (although you did take some substantial profits on TTD).

Tinker
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TRHC and CLDR are on my watch list. TRHC being most intriguing from a story I can understand and CLDR coming from a general bet that HDP+CLdR can make traction.

Agree - I was in HDP and think the new combined Cloudera is very undervalued and fundamentals are performing very well. My only concern is longevity and whether Hadoop is a dying breed.

A
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I got out of SHOP last year, but when I look at the price and numbers again, it's actually not really expensive. Just goes to show how fast a stock can become cheap if it continues to grow and share price is at least halfway stagnant. It's Price/Sales is around 16. The tricky part is what kind of growth will they continue to have.
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I got out of SHOP last year, but when I look at the price and numbers again, it's actually not really expensive. Just goes to show how fast a stock can become cheap if it continues to grow and share price is at least halfway stagnant. It's Price/Sales is around 16. The tricky part is what kind of growth will they continue to have.

Exactly - I stuck with them as I didn't think 50%+ growth was a disaster. The SP is making new all time highs and they have traded their way into a reasonable P/S valuation given that they are at a $1bn run rate. At the same time they have also demonstrated massive earnings leverage whilst trying not to make a profit - they just can't help it! (Although their SBC is ridiculously high).

I think they could keep their growth up to 50% mark or at least 45%. If they do and their SP treads water then they get to P/S of 12.5 for end of the year (factoring in some SBC dilution).

A
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