I am an individual investor doing research into the hypergrowth stocks that interest me, and am then sharing that research. As stated in my Welcome post, I was a software architect that designs and explains complex data systems for a living, as well as a technologist that studies where the future trends head. This gives me a unique perspective when it comes to investment & tech platform research, as you have probably discovered in following this blog. I hope to help anyone interested in these same companies, to give you a leg up in understanding what it is, technology-wise, that you are investing in. As I pour over earnings reports, announcements, and customer conferences (the vision we have into the company), I keep notes on the financials, the operational execution, and the product highlights. I then like to bring it all together (the narrative), to explain and correlate what I'm seeing between the numbers and the platform, and where it can all go next.
I maintain a highly concentrated portfolio, which allows me to keep a constant watch over the technologies and execution of every company I own. This typically means focusing on cloud-based SaaS companies, as that provides an architecture that really lends itself to rapid innovation, coupled with the ability to scale. I typically own 6-12 positions – fluctuating based on how many newer positions I'm toying with versus how much I concentrate into the top convictions. Being so concentrated has my highest convictions driving my success. I tend to hold enterprise-focused companies, but also keep a small number of consumer-focused companies (especially platform-focused ones). I also usually watch a small handful of other companies as possible replacements for my lower convictions.
I don’t want to own “cheap” companies -- I want the best of the best hypergrowth companies that are crushing it in their category and will continue to. If a stock seems expensive, look into the reasons why. If its execution continues, it will remain expensive. If it looks cheap, there are reasons for that, too. You can determine on your own if you feel a company is expensive and what valuation you want assign, and whether you want to buy it or not at that particular moment in time. I personally don't portend signals from charts; I don't watch technicals - I watch the technologies. If the company is performing across all factors of my investment strategy, and technology is alluring, I generally just buy.
Valuation is not a heavy factor in my thesis. It is helpful to me in isolation, comparing “how expensive is this stock now to what it was last year”. But what does a cross comparison of valuation across a landscape of stocks actually tell you about any individual one? Typical valuation calcs completely omit factors that are extremely important to me: state of competition, stickiness of product, optionality of platform, and expandability of TAM. I like to look at overall trends in the movement of the company within the financials. Is the top line growth rising, steady or dropping? If dropping - is it fast, or slow & steady? If top line growth is waning, do I see signs of operating leverage kicking in? Are margins rising and costs being contained? Is the company swinging towards profitability? The quick valuation calcs like EV/LTM Sales tend to capture moments in time, losing all the nuance of the motion of the company (much less anything about the underlying platform & technologies).
As mentioned, I'm a technologist and investor sharing research – I'm not an advisory service. While I may occasionally share my portfolio movements, I will not answer questions about portfolio decisions. I instead try to make clear why I like these companies and what puzzle pieces of their strategy movements I am excited about most, or, alternately, highlighting what is concerning me, or causing me to exit. You, however, are the person in charge of your own destiny, and have your own criteria and portfolio needs. I am just telling you my thoughts; your moves are up to you.