No. of Recommendations: 28
That even category killing SaaS disruptive companies will slow to just above average growth and will face more competition.

That is clearly what the market is assuming across the board for the most part.


Honestly, a 15 P/S or 20 P/S or even 12 P/S is not what average companies even get to.
We simply allowed undervalued SaaS/cloud/growth companies from 2017 to explode up in 2018, and then started convincing ourselves with faulty rationalization that multiple expansion should just, like, keep going up!

SHOP was crazy expensive at 24 P/S or something like that. Now we think "okta down to 24 P/S? Cheap...buying!!" which is simply the result of being reconditioned to think that 30 P/S for MDB or ZS or AYX was the new normal.

I knew it was all insanity in July, and I was trying to get off the crazy train and was looking at value/dividend stocks, but I didn't commit. Oh well...that is on me. But I was lucky enough to keep trimming and build up cash over July and August, so while this collapse sucks, it sucks a bit less at least.

At this point, fully invested and running out of ways to horse trade from one stock to another, as they are all falling about the same.

Just because CRWD ZM DDOG are growing faster today doesn't mean it would last for another 4-6 Q's...they will trend down in growth rate eventually. So why would you immediately pay a double P/S and essentially a double mkt cap? Makes zero sense, and I have been saying that since ZM debuted. It was a jump-the-shark moment, in hindsight.

I think ZS will have just an "ok" next ER, so their stock may languish a bit longer, so I have put more into TTD and ESTC which I feel have strong beat-and-raise opptys in front of them, and great secular tailwinds behind them, and they no longer have obscenely high P/S ratios, while still having great growth rates.

I always asked why we could/should/would expect to continue to see gains via multiple expansion vs just having stock price gains be more in-line and reflective of actual rev/FCF/profit growth rates.

from ZS debuting high in IPO, then ESTC later, and then ZM/CRWD/DDOG, it is overly apparent this group of stocks became a momentum trade. Pure and simple. Great companies, but unsustainable stock prices in a world where they are being valued for being disruptive yet we are pricing them as if they themselves could never be disrupted in the next 3-4 years.

I feel quite lucky to still be up a decent amount...and it was just pure gut feeling and luck, because I was also buying into the momentum trade.

Que sera sera. All to do now is wait for them to bounce back and/or simply grow in-line with their growth rates moving forward, starting with this next round of ERs.

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