High Potential Investments In 2021 [EN]
High Potential Investments In 2021 [EN]
My conviction list and what to do next in a turbolent market
While my portfolio is down about -30% from its all-time high, I thought it’s more productive to think about the companies and what they are doing, instead of worrying about what might happen with the stock market.
So, here is what I do from time to time when thinking about my investments.
I look at the companies I own as well as new interesting high-growth opportunities to stay up to date and to have a rough strategy in mind.
I summarized companies that don't look like covid-one-hit-wonders to me with at least 35% Revenue growth Year-over-Year.
Almost all companies mentioned should have a healthy balance sheet, cash, low debt, strong gross margins, strong revenue growth, high DBNER, and secular tailwinds (E-commerce, Connected TV, Cloud, Digital Payments, etc.)
And I grouped them into Tiers:
Tier 1: Very stable or accelerating revenue growth (above 40%), a clear path to profitability, or already profitable. "Should own companies". No brainers (if valuation ignored).
Tier 2: Very stable revenue growth, almost "must have" companies. Not 100% no-brainers.
Tier 3: Very stable or accelerating revenue growth. Not as strong as Tier 1 and Tier 2.
Worth mentioning: Still too many question marks. (could move up into Tiers)
The Headlines consist of the Company Name, Stock ticker, and the Year-over-Year revenue growth of the most recent quarter. The summary consists of Pros, Cons, my own thoughts, and my planned next steps.
The graphical summary below each headline is the product of the collaboration with my best friend, who is doing nuclear fusion research. But don’t be scared - you can be an idiot like me and still be successful on the stock market. Still, it doesn’t hurt to have some friends, right? Especially smart ones.
If you are the smartest in the room you are in the wrong room.
Here we go…
Tier 1
Crowdstrike, CRWD, 86% YoY
Pros
Accelerating Revenues YoY (from a decent base).
Solid Revenue Growth QoQ (accelerating Q3→Q4; not sure if Q3 has seasonality since Q3 QoQ was also weaker in 2019).
Trend seem not to be dependent on COVID-19
Positive trend to profitability (net margins).
Great cash flow margins since the beginning of 2020.
Gross profit continuously margin improving.
Cons
Cybersecurity has to be watched closely due to its disruptive nature.
Thoughts:
Invested since the IPO. Cybersecurity is one of the services which no company in the world is going to cut, regardless of the environment. Winners keep winning. Currently, CRWD could be put into its own "God Tier". I assume we will see blowout earnings. I could write a whole chapter about Crowdstrike. Still has to be watched constantly, things can change (in the mid-term), especially in Cybersec, that’s why the average investor with a diversified portfolio should only hold a small position.
20.44% Position, no changes planned.
Zoom, ZM, 370% YoY
Pros
Revenue growth YoY accelerating from a decent base.
Revenue growth QoQ stable (as pre covid levels).
Solid guidance, better than the broad market expected - we could see 50%-60% YoY in 2021 from a very large base.
Profitable.
Insane Cash Flow Margins, are one of the best ever seen. In some quarters ZMs Cash Flow is greater than Salesforce's.
Very strong international growth, which now became a larger share of the revenue.
Strong Customer growth.
Customers seem to like Zoom Phone.
Cons
Uncertainty about Zoom’s future.
Thoughts
I believe in “Winners keep winning”. If uncertainty about Zooms future could be removed, Zoom should sit in the “God-Tier” next to CRWD. Will it be a one trick pony or become a FAANG like company? Everything is possible.
To me this is a core holding, regardless of a diversified or concentrated portfolio. As long as the still young, hungry, billionaire - Invest with the billionaires – founder Eric Yuan keeps executing with tons of cash in his back, it's possible he will conquer the world. Zoom Meetings, Zoom Phone, OnZoom - Zoom is a platform which can be integrated into every aspect of life. This looks like a once in a lifetime investment, where one should be fine with holding it through bumpy times as long as the thesis is not broken.
Fear of Teams? The world isn’t black or white. Some companies don’t want to live in microsofts ecosystem. Many users are using both as referenced by Eric Yuan in last Earnings Report.
What is Zooms Moat? I am certain this question was asked about every single FAANG company, when they were in their early innings. If one wants to see a clear moat in a company, he/she should invest into one of the Megacaps, which had many years or decades to build them - but should also expect less upside compared to a young company like Zoom.
Zoom Phone and Internationalization will be the main growth driver of the future.
9.16% Position, no changes planned.
Pinterest, PINS, 77% YoY
Pros
Accelerating Revenues YoY (from a strong base).
Accelerating Revenues QoQ.
Trends seem not to be dependent on COVID-19.
Strong Metrics like ARPU, MAUs etc.
Cons
Not really a con, but Profitability doesn't look consistent. Currently PINS is profitable.
Thoughts
Not much to dislike about PINS, thinking about restarting a position. If International monetization takes off (and it will), we can expect good numbers. Almost a No-Brainer for any type of portfolio.
No Position yet. Starter Position possible.
Snowflake, SNOW, 116% YoY
Pros
Very strong and stable revenue growth from a decent base.
Same with Revenue QoQ.
Cash Flow positive.
Insanely high NER of 168%.
Cons
Gross Margins could be higher (57%) (not really a con, but since this is a SaaS company...).
Net Margins didn't improve, yet.
Thoughts
Lockup Period finally ended. Not much to dislike but also not a pure no-brainer due to a) no clear path to profitability, b) gross margins are okayish for SaaS and c) extremely high valuation. With lower valuations a must own. Will sit on my 2.5% position for now until either metrics stay strong/improve or valuation decreases. Perhaps better in Tier 2 right now.
2.5% Position. Will add over time. Target: 10%.
Cloudflare, NET, 50% YoY
Pros
Revenue growth YoY stable, might slightly accelerate next Quarter (not from a huge base).
Revenue growth QoQ stable.
Strong customer growth, especially compared to Fastly.
Cons
Trend to profitability going into the wrong direction.
Not clear if Revenue growth will stay strong in the midterm.
Thoughts
Overall I like the development. Still, I can’t get a decent feel for the company. Like how sustainable is the growth and how volatile is the customer base which is also filled with many small customers. Must re-evaluate if this company deserves a 10% allocation. Might feel better with a slightly lower allocation. Almost feels like a Tier 2 company. Only the revenue growth at 50% holds NET in Tier 1.
9.89% Position. Ambivalent about trimming.
Datadog, DDOG, 56% YoY
Pros
Revenue growth should accelerate in the upcoming quarters.
Revenue growth QoQ strong again.
Not COVID-19 dependent.
Cash Flow positive.
Trend to profitability visible (although last 2 quarters had negative net margins).
Cons
Revenue growth from last quarters was slowing, but this was a one time issue due to COVID.
Not clear if Revenue growth will stay strong in the midterm.
Thoughts
Feeling good with a 10% allocation. If DDOG keeps delivering in the upcoming quarters, there is not much to dislike.
10.38% Position. No Changes planned. Might rather add, not reduce.
Tier 2
Etsy, ETSY, 129% YoY
Pros
Revenue growth accelerating since COVID-19 from a large base.
Revenue growth QoQ looks solid.
Very profitable since years.
Cash Flow positive (with ZM-like Cash Flow Margin the last quarters).
High Gross Margin for Non-SaaS (76%).
Cons
Not clear if Revenue growth is just a COVID-19 one hit wonder.
Thought
Looks like a Tier 1 company. Not sure about the future of ETSY. If ETSY keeps delivering in the upcoming quarters, this is a great company to own.
No Position. Plan to start one. Target: 5%.
Docusign, DOCU, 53% YoY
Pros
Revenue Growth YoY accelerated from a strong base.
Revenue growth QoQ strong.
Cash Flow positive.
Positive trend to profitability.
Cons
Net Margins still negative.
Thoughts
Don't think this is a COVID-19 play. No one is going back to paper. Not much to dislike, other than a wish list about better net margins and to know if DOCU keeps delivering in the upcoming quarters.
7% Position. No changes planned.
Nivida, NVDA, 57% YoY
Pros
Accelerating Revenues YoY from a huge base.
Accelerating Revenues QoQ.
Strong profitability.
Cons
Already a Large Cap, still Beth thinks will be one of the most valuable company in 10 years.
Thoughts
I really want to own NVDA. Not sure if the big market cap should hold me back, when looking at the phenomenal fundamentals. Huge tailwinds from datacenters. No-Brainer stock for a diversified portfolio. Could be Tier 1.
No Position. Might open a position and make it a core holding.
Hubspot, HUBS, 35% YoY
Pros
Accelerating Revenues YoY (from a decent base).
Accelerating Revenues QoQ.
Generating more Revenue in absolute numbers than Okta and is accelerating, while Okta is decelerating.
Trend seem not to be dependent on COVID-19.
Cons
Revenue Growth still below 40%, will be at ~38% next quarter.
Thoughts
Really interested to invest into HUBS. Working with the software on a daily basis. If Rev growth continues to accelerate above 40%, this might become a no brainer. Currently HUBS is on the edge to Tier 1.
No Position. Might open a position – definitely watching next earnings.
Roku, ROKU, 58% YoY
Pros
Accelerating Revenues YoY (from a strong base).
Accelerating Revenues QoQ (strong).
Trend seem not to be dependent on COVID-19.
Visible trend to profitability.
Huge tailwinds from Trend to streaming.
Important metrics like ARPU and streaming hours are all strong.
Cons
Gross margin < 50%.
Not a easy to understand story as some of the other companies.
Thoughts
Definitely a great company to own, perhaps it should even belong to Tier 1. Wouldn't feel comfortable with a oversized position though, as the story is not clear enough to me. I think once internationalization becomes reality, it should become a Tier 1.
6.6% Position. Might increase to 7%.
Twilio, TWLO, 66% YoY
Pros
Accelerating Revenues YoY (from a decent base).
Accelerating Revenues QoQ (strong).
Trend seem not to be dependent on COVID-19.
Visible trend to profitability.
Cash Flow around 0 since 3 years.
Cons
Gross Margins slowly decreasing now at 51% from 53% last year.
Net Margin not improving since 3 years.
Part of last quarters revenue was coming from politics and acquisition.
Thoughts
Great company to own. Huge potential Market. Twilio basically benefits indirectly from the digital transformation as it is part of many applications. Don't like lower gross margins and negative net margins. Happy with a standard sized position.
6.15% Position. No changes planned.
Tier 3
Zscaler, ZS, 52% YoY
Pros
Accelerating Revenues YoY from a decent base.
Accelerating Revenues QoQ.
Solid positive cash flow.
Cons
Net Margins not improving.
Thoughts
Not much to dislike about ZS. Depending on the rev growth this year this looks like a very solid company. Owned it before the slowdown in 2019 - unfortunately sold out, but back then it looked like the right decision. Definitely worth building a standard position now and act accordingly depending on the upcoming quarters. Could be Tier 2.
1.43% Position. Plan to increase to 3%.
Square, SQ, 52% YoY (Gross Profit Growth)
Pros
Accelerated Gross Profit Growth YoY.
Solid Gross Margins >50%.
Profitable.
BTC Share of Gross Profit only 5%.
Cons
Gross Profit Growth QoQ Flat, not sure why.
Thoughts
Strong company, no brainer for a diversified portfolio to participate in the trend "war on cash". Not a no brainer for a concentrated portfolio. Not sure why QoQ GP Growth is flat. Reopening should boost seller gross profit. Still Cash App is the main growth driver in the future. I see SQ as a tiny, indirect investment into BTC as well. Could be Tier 2.
4.61% Position, No changes planned.
The Trade Desk, TTD, 48% YoY
Pros
Accelerated Rev Growth YoY.
Accelerated Rev Growth QoQ.
Great Gross Margins for Non-SaaS 84%.
Extremely Profitable since a long time.
Very strong Cash Flow Margins.
Cons
We need better visibility into how rev share of CTV is growing. For some reason Jeff holds it back.
Ongoing regulations in data privacy is creating unknown issues.
Thoughts
Strong company, no brainer for a diversified portfolio to participate in the trend "CTV". Not a no brainer for a concentrated portfolio. Uncertainty about CTV Rev Share and data privacy development has to be clarified. TTD always feels borderline between great numbers and too much story. Profitability and Cash Flows are outstanding, which is next to accelerating revenue the reason why I continue to hold a standard sized position. Could definitely be Tier 2.
4.97% Position. No changes planned.
Peloton, PTON 129% YoY
Pros
Revenue growth YoY strong, slowly decelerating (from a large base, still over 100% YoY).
Revenue growth QoQ accelerating.
Profitable.
Solid Gross Margins for Non-Saas (40%).
Cons
Uncertainty about post-covid growth.
Lower gross margin than SaaS companies, still a hardware company.
Logistic issues.
Thoughts
Great company to own but doesn't deserve a big allocation as long as subscription revenue stays low. Main plus is the huge revenue growth. Need more visibility into the developments in the upcoming quarter how strong PTON stays over the mid-term. Lower multiple than pure SaaS justified, won't have the same upside at the current state. Could be Tier 2/1 if less hardware dependent.
3.66% Position. No changes planned.
Teladoc Health, TDOC 145% YoY
Pros
Accelerating revenue growth from a decent base (partly due to acquisition).
Same with Revenue Growth QoQ.
Cash flow positive.
Trend to profitability (if current quarter is not included).
Great gross margins for non-SaaS (68%).
Huge Market.
Cons
Current quarters trend of net margin going into the wrong direction, still overall trend looked good.
Growth influenced by acquisition.
Complex story.
Thoughts
Great company to own, no-brainer for diversified portfolios. Have to admin other Investors confidence made me hold TDOC since the acquisition. Would love to get ongoing updates from them. Overall the future looks bright with huge tailwinds in the telemedicine market. Still I don't want to invest into stories, but as long as numbers look solid, I will keep this as a standard sized position. Could be Tier 2.
5.36% Position. Might trim to 5%.
Shopify, SHOP, 94% YoY
Pros
Accelerated Revenue since COVID, stable since then from a large base.
Same with Revenue QoQ.
Solid Gross Margins >50%.
Profitable.
Cons
Not much to dislike, other than tough comps?
Thoughts
Don't think this is a Covid play, it's the same with ZM "the old Shopify and the new Shopify", Solid, consistent years to come for SHOPs growth. No brainer for a diversified portfolio. Could be Tier 2 or even 1.
No Position. Might open a position.
Okta, OKTA, 40% YoY
Pros
Revenue growth stable YoY (from a decent base).
Revenue growth stable QoQ.
Huge RPO.
Cons
Trend to profitability going into the direction since acquisition of Auth0.
Slowly becoming a <40% YoY Grower.
Gartner downgraded Okta from the top leader to sit below MSFT and next to Ping Identity.
I would have expected Okta will benefit from COVID; but obviously they didn't.
Thoughts
I like the stable revenue growth. Also, the acquisition might make really sense. Dislike the negative development in the Gartner Quadrant. Profitability will take a hit. Still a good investment, but if there are clear winners, money should shift away from Okta. Okta becoming a bit complicated right now. Thinking about trimming.
3.57% Position. Might trim or sell.
Elastic, ESTC, 39% YoY
Pros
Solid Growth, but decelerating.
Trend to profitability still bumpy but slowly going into the right direction.
Cons
Slowly approaching 35% growth, which is my threshold.
Very small number of Net Adds of Customers >$100k (20 QoQ).
Thoughts
Don't like the slowing growth and very small number of Net Adds of Customers >$100k (20 QoQ). Too many question marks. There seem to be easier to understand and clear winners out there to put the money into. If low valuation to invest into ESTC is the main reason: ESTC was always cheap, why should that change, especially when looking at that development? Thinking about selling my 3% position.
2.69% Position. Going to sell the position.
Worth mentioning (could move up into Tiers)
Chegg, CHGG, 63% YoY
Pros
Revenue growth YOY accelerated since COVID from a decent base.
Revenue growth QoQ looks solid.
Trend to profitability looks good.
Decent positive free cash flow margin.
Cons
Gross Margins decreasing since 2020.
Thoughts
Not sure what CHGG does and if it's a covid-one-hit-wonder. Worth watching.
Asana, ASAN, 55% YoY
Pros
Solid QoQ Revenue Growth (but from a small base).
Solid YoY Revenue Growth (but from a small base).
Great Gross Margin (88%).
Cons
Revenue Growth decreasing from last quarters 71%, 58%, 55%.
Trend to profitability looks aweful (net margin and cashflow).
Thoughts
Working with the product on a daily basis. I like the product. If the stock is cheap, then perhaps for a reason. Need a visible path to profitability and sustainable YoY growth rates to make it compelling.
Lightspeed, LSPD, 81% YoY
Pros
Accelerating Revenues YoY.
Accelerating Revenues YoY.
Cons
Gross margin decreasing.
Trend seem not to be dependent on COVID-19.
Trend to profitability going into the wrong direction (might be due to acquisitions).
Thoughts
Overall looks very interesting, but trend to profitability looks aweful. This puts LSPD into Tier 3 or below.
Fiver, FVRR, 87% YoY
Pros
Accelerating Revenues YoY (but small base $30 Mio).
Trend to profitability.
Cons
Revenue Growth QoQ not strong enough, looks almost like this company benefited from COVID, will it be sustainable?
Thoughts
Not a no brainer. Looks like a short term momentum play. Worth keeping on the watchlist longterm, if strong growth is sustainable.
Sea Limited, SE, 102% YoY
Pros
Strong, stable Revenues YoY (from a large base).
Strong, stable Revenues QoQ (from a large base).
Cash flow positive.
Cons
No clear trend to profitability looking at net margins.
Low Gross margins (34%).
Not a US company.
Thoughts
I prefer US companies. Rev growth is very strong, but not accelerating. Not a no brainer, but a great company for a diversified portfolio.
Snapchat, SNAP, 62% YoY
Pros
Strong, stable Revenues YoY (from a large base).
Strong, stable Revenues QoQ (from a large base).
Trend to profitability visible.
Solid Gross Margins > 50% for non-SaaS.
Cons
No recurring revenue.
Thoughts
Worth keeping on the Watchlist to see if strong growth is sustainable. Looks interesting. Didn't have it really on the radar.
Magnite, MGNI, 71% YoY
Pros
Accelerating Revenues YoY.
Accelerating Revenues YoY.
Cons
Profitability not consistent.
Thoughts
Huge CTV-Story, but complicated. Can't gain confidence (Pro Forma Revenues etc.). Feels fishy.
Unity, U, 39% YoY
Rev Growth inconsistent varying from 36%, 43%, 53%, 39% this year. Profitability not clear enough. QoQ Rev growth improved since last year. Not sure if COVID play. Numbers not compelling enough to look deeper for now. Complicated.
Veeva, VEEV, 35% YoY
Solid Revenue growth, great profitability, cash flow and gross margins. Looks like a great stock for a diversified portfolio, not a concentrated one.
Atlassian, TEAM, 22% YoY
Only 22% Rev Growth YoY, but extremely strong Cash flow margins. Accelerating Revenues to >40% would propel TEAM into Tier 1.
More on the Bench: MDB, AYX, FSLY.
Portfolio March 2021
Important: Do not copy my portfolio blindly. Positions might change over time. This is not a diversified fire & forget, buy & hold strategy. Take it as pure inspiration.
Volatility drives returns. Embrace it.
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*Disclaimer: This text is for entertainment purposes only and does not represent any investment advice, stock buying or selling recommendation, or any other financial advice. Please see our disclaimer for more details.
Starker Artikel - danke fürs Teilen deiner Einschätzungen. Spielen valuation multiples für dich überhaupt gar keine Rolle bei einer Investitionsentscheidung? Der Risikohinweis für High Growth Aktien scheint mir angebracht. Bin sehr gespannt, wie sich deine Performance in den nächsten Jahren entwickelt. All the best!