April 2022 Portfolio Review

Total Return: -41.7% YTD (-28.4% vs S&P)

Thank you, sir. May I have another?

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2022 Results:

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April Portfolio and Results:

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2022 Monthly Allocations:

Key:

• darker green: started during month

• lighter green: added during month

• yellow: trimmed during month

• blue: bought and sold during month

• red: position exits

• positions >10% in bold

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Past recaps:

December 2018 (the one that got things started)

December 2019 (contains links to all 2019 monthly reports)

December 2020 (contains links to all 2020 monthly reports)

December 2021 (contains links to all 2021 monthly report)

January 2022

February 2022

March 2022

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Stock Comments:

There’s not much to say in what was a relatively quiet month for company updates. I redeployed some cash around the edges but otherwise stood pat. Hopefully, it’s a no-news-is-good-news situation as we head into another earnings season.

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CRWD – CrowdStrike was probably our most active company in April. Its major announcement was achieving provisional Impact Level 4 security authorization with the US Department of Defense (DoD) for unclassified information. This designation expands CRWD’s potential market not only by the DoD’s internal agencies but also the many partner vendors approved to work with it. The release also states “CrowdStrike is proud to share that it has been working with DISA and our DoD sponsor towards a DoD Impact Level 5.” These authorizations are a big deal for accessing US government business. It’s nice to see CRWD adding these certifications at the same time more attention is being paid to public sector cybersecurity.

Next came a partnership with Mandiant. The release describes it as “a strategic partnership that will enable organizations of all sizes to leverage both the CrowdStrike Falcon endpoint technology and Mandiant’s leading incident response and consulting expertise.” With Mandiant being owned by Google, Falcon indirectly becomes a preferred protection option with one of the major cloud providers. Nice.

Third was a designation as a recommended partner by Germany's Federal Office for Information Security. This agency helps Germany’s “companies, critical infrastructure operators, and government institutions find qualified security service providers to defend against ongoing attacks or prevent reinfection of their IT infrastructures.” With just 28% of last quarter’s revenue originating outside the US, CrowdStrike has considerable room for international growth. This listing should definitely help.

Lastly, just this week CrowdStrike released a set of additional cloud protection capabilities. Analyst firm Gartner predicts “more than 85% of organizations will embrace a cloud-first principle by 2025.” That no doubt means hackers will follow. It’s nice to see CrowdStrike skating to where the puck is obviously going.

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BILL – Boy, Bill.com sure has taken this quiet period thing very seriously. When it does speak, here’s hoping the market is just as enthusiastic about BILL’s May 5 report as it was last quarter.

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DDOG – Datadog gave us a couple updates this month. The first involved two upgrades to its monitoring services: Log Anomaly Detection and Root Cause Analysis. These new features will help customers better detect abnormalities and direct response staff to the precise area of concern.

Next it launched a new Application Security Monitoring (ASM) product. According to the release, “as software architectures become more and more complex, the need for application security solutions that remove silos between security, development and operations teams grows exponentially.” ASM is designed to address this issue by scanning for anomalies and attacks all the way down to the code level.

Both these enhancements will improve Datadog’s end-to-end monitoring capability. Management deserves a ton of credit for innovating and expanding at such a rapid pace while still churning out quarter after quarter of stellar execution. I’m hopeful that trend continues when DDOG reports May 5.

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MNDY – There were no monday.com updates this month other than locking in a May 16 earnings date. That makes May 16 a big day since I believe MNDY has as much to prove this quarter as any company in our portfolio. It will be on a short leash, so here’s hoping it delivers.

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NET – As usual, Cloudflare provided a slew of updates. First was the completion of its Area 1 Security purchase. The acquired tech will greatly enhance NET’s protection against email breaches and phishing attacks.

Next was a blog post detailing Cloudflare's work to keep internet access open in Russia while also preventing attacks from getting out. While it’s unfortunate this effort is even necessary, the article does a nice job of illustrating just how involved Cloudflare is in directing and monitoring the world’s internet traffic.

The most recent and in my opinion most relevant news was a VPN integration with Microsoft. Given the breadth of Microsoft’s offerings and its often-unyielding preference for internal solutions, I view this as tremendous validation of Cloudflare’s network and service. Cloudflare has long touted its capacity and reliability as competitive advantages. Deals like this are a strong indication that is indeed the case.

We’ll get our next earnings update May 5. I fully expect NET’s quarterly performance metronome to keep on ticking.

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S – April saw SentinelOne (S1) announce yet another partnership, this one with FTI Consulting. FTI has 6,700+ employees in 29 countries and generated $2.8B in revenue its last fiscal year. While I can’t say FTI is as recognizable as some other partners, $2.8B is certainly nothing to sneeze at. I look forward to whatever cut of future FTI business heads S1’s way.

SentinelOne also added three more companies to its Singularity Marketplace for prevention, detection and response services. The new offerings will further expand S1’s options for collecting data, streamlining operations, and better managing security assets. The more the merrier as far as I’m concerned.

S1 likely doesn’t report until June, but as we end April everything seems to be right on track.

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ZS – The only piece of ZScaler news this month was a company study showing a 29% annual increase in global phishing attacks. I know, I know…we needed a formal report to tell us online attacks have gone up over the last year? Like I said, it was a pretty slow month.

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My current watch list…

…is Snowflake (SNOW) and MongoDB (MDB) with Upstart (UPST) a distant third. At this point, I doubt any finds its way into our portfolio before the next earnings update. I’ll be paying especially close attention to UPST since it faces macro and/or consumer risks that do not have as large an effect on the other two.

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And there you have it.

This ended up being one of my shorter recaps, but certainly not for a lack of effort. It’s just hard to keep an investment journal when there’s not much to journal about. In fact, here’s a behind-the-scenes peek at my creative process for most of April:

That will change in a hurry with BILL, DDOG, and NET all reporting May 5. I can’t say I’m excited about three releases the same day, but the cloud earnings we’ve seen so far have me cautiously optimistic good vibes are on the way. That would be a welcome development, so fingers crossed. 🤞

As for our portfolio, April was yet another ugly month in an awful 2022. In some respects, investors have literally nowhere to hide right now. For most it’s simply a matter of whether your portfolio is light red, medium red, or dark red on the year. As this drawdown deepens – including the Nasdaq and Russell 2000 falling firmly below the official -20% bear market threshold – it gets tougher to remember both indexes contain companies which outperformed for multiple years before this brutal 6-month slide. But I swear it’s true. It’s also true the best of those firms are just as likely to lead the way once the worm finally turns. Like you though, I just wish that stubborn-assed worm would hurry up and figure it out already. In the meantime, hang in there.

Thanks for reading, and I hope everyone has a great May.

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