January 2023 Portfolio Review

Total Return: +5.2% YTD (-1.0% vs S&P)

Meh, I’ll take that…

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2023 Results:

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January Portfolio and Results:

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2023 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 reports)

December 2022 (contains links to all 2022 monthly reports)

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Stock Comments:

With no January earnings reports our news was mostly superficial. That will certainly change in February with over half our firms reporting. Good luck to all holders no matter what you own.

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BILL 0.00%↑ – After a quiet couple of months, Bill’s February 2 earnings report is our portfolio’s first of the season. Recent interest rate hikes should help float revenue, but I’m more interested in how quickly all those new customers the last few quarters are ramping on Bill’s platform. Here’s hoping for continued strong numbers.

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CRWD 0.00%↑ – CrowdStrike gave us a smattering of updates this month. The first was a tech-heavy blog post highlighting its effectiveness against Scattered Spider, an attack exploiting vulnerabilities in Microsoft Windows. The write up includes specifics on the attack along with the CrowdStrike platform settings for preventing it. While this update does nothing to limit the macro risk of customers reducing headcount (and likely endpoints), it certainly helps support CRWD ‘s best-in-class reputation.

Next were two posts detailing CrowdStrike’s offerings for small and medium-sized business (SMB) customers (here and here). CRWD has long stated its intention to add more SMB customers to its current enterprise mix. These articles lists the key reasons SMB customers are choosing CrowdStrike.

Along those same lines, CRWD announced the addition of two executives from rival SentinelOne. Daniel Bernard will be moving from SentinelOne’s Chief Marketing Officer to Chief Business Officer at CrowdStrike reporting directly to CEO George Kurtz. Ray Rajamani will be CRWD’s new Chief Product Officer after holding the same role at SentinelOne. Rajamani will report to CrowdStrike’s current Chief Product & Engineering Officer. While there’s been quite a bit of speculation as to why the two left SentinelOne, it’s almost certain they bring knowledge which should prove useful as CRWD tries to further penetrate the SMB market. I doubt it’s a coincidence we’re seeing SMB messaging hit CrowdStrike’s blog in conjunction with these hirings.

Lastly, CrowdStrike added Johanna Flower to its Board of Directors. What’s notable here is Flower also served as CRWD’s first chief marketing officer and played a key role in helping take the company public. Whatever institutional knowledge she took with her upon leaving now returns as CrowdStrike enters its next phase.

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DDOG – Datadog had a quiet January. Earnings are pre-market February 16.

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ENPH – January was an admittedly tough month for Enphase’s stock, but I didn’t see anything to be upset about in the news. In fact, Enphase seems to be slowly and steadily expanding its business. It recently expanded deployments in Arizona, New Hampshire, and Puerto Rico. Internationally, it announced expansions in the Netherlands and Brazil.

Additionally, Enphase announced a partnership with German energy firm Enerix. Under this arrangement, Enerix will offer Enphase’s solar microinverters and battery systems through more than 100 partners across Germany and Austria. ENPH has seen tremendous growth in Europe recently including 70% sequentially last quarter. This deal hopefully keeps that trend alive. Our next earnings update is February 7.

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NET – Cloudflare has had a busy January. First it kicked off CIO Week. Highlights included:

• Additional monitoring tools for NET’s Zero Trust users

• Upgrades making it easier to connect and secure corporate networks through Cloudflare’s global platform

• Stronger Zero Trust email security tools

• An expanded relationship with Microsoft making it easier for Azure cloud customers to integrate Cloudflare’s Zero Trust tools.

Outside CIO Week, I saw two other updates worth noting. First, Palantir announced a partnership with Cloudflare to “help organizations cut cloud costs, increase control, and improve predictability over multi-cloud workloads.” Given Palantir’s government roots, this deal should be a useful selling point with potential public sector customers.

Speaking of public sector customers, Cloudflare also landed a $7.2M US government contract providing protection services for the “.gov” domain name. Investors have waited patiently for NET to obtain the FedRAMP approvals needed for these types of deals. With that approval now in place, this contract is hopefully the first of many.

Finally, Q4 earnings are February 9. This is an important update since we’ll receive management’s initial roadmap for the new fiscal year. Fingers crossed everybody.

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S – Our top watch list name, SentinelOne provided a couple interesting updates. First was third-party recognition from Gartner Research. Gartner listed S’s platform in multiple categories of its recent Hype Cycle report. This report acknowledges firms whose innovative products help customers protect themselves from attacks and breaches.  

Next, SentinelOne was added to the US government’s Joint Cyber Defense collaborative for securing the country’s cyber ecosystem and critical infrastructure. If nothing else, this gives SentinelOne a seat at an influential table with some much larger names. In that respect, SentinelOne continues to gain interesting exposure. Of course, the key is converting that exposure into enough new business to offset recent slowdowns. I’ll be watching.

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SNOW – Snowflake started January with the acquisition of Myst. Myst specializes in time series forecasting, a technique used extensively for planning, forecasts, goal setting, and mitigating risk. This looks like a smart little tuck-in that should strengthen SNOW’s offerings in multiple verticals.

Next it announced the purchase of SnowConvert, a suite of tools designed by Mobilize.Net for migrating databases to Snowflake. SnowConvert makes it easier for customers to “ensure that all legacy database functionality can be moved to the cloud with minimal time and effort.” Easier migrations are a win-win for both SNOW and its customers, so this looks like a smart add as well.

I’d anticipate earnings sometime in early March.

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TMDX – TransMedics presented this month at the JP Morgan Healthcare Conference. The CEO clearly described what he considers the “widest and deepest” moat in the transplant industry. TMDX not only possesses “the only FDA multi-organ platform perfusion technology that is portable” but is creating a sizable lead in relationships with doctors and transplant centers. He confirmed expanded capacity plans remain on track while once again reiterating TMDX’s intention to “replicate” 2022’s triple-digit growth the next two years. It was a confident presentation with positive comments across the board. If interested in the transcript, I got mine here. It’s free but might require setting up an account.

TransMedics’ last earnings was November 3, so I’d anticipate a date for the Q4 report very soon.

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TTD – The Trade Desk recently added a new Galileo service. Galileo makes it easier for clients to incorporate first-party data into planning and executing targeted ad campaigns on TTD’s platform. Features include:

• Seamless and direct onboarding integrations with all major customer relationship management (CRM), customer data platform (CDP), and other data and clean room providers, allowing advertisers to instantly begin matching audiences using UID2.

• Audience matching across all publishers, platforms, devices, and channels — including connected TV — which provides a true omnichannel identity environment.

• Objective reporting and measurement of identity matching and advertising performance.

As I’ve written before, TTD’s current thesis includes gaining market share and improving targeting capabilities while waiting for the advertising cycle to come back around. In that respect, things appear to be all systems go. We’ll get a more detailed update when The Trade Desk reports pre-market February 15.

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ZS – Zscaler issued two January blog posts detailing its view of the 2023 cybersecurity landscape. First was 13 reasons cybercrime won’t slow any time soon. Next was an outline explaining why the move to a hybrid workforce will keep cloud security at the forefront for most executives and government officials. Being honest, there’s not much here that cybersecurity investors aren’t already banking on. The question, of course, is how much bank ZS can make by leveraging this info into sales.

Earnings likely early to mid-March.

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My current watch list…

…includes SentinelOne (S), Aehr Systems (AEHR), Clearfield (CLFD), Gitlab (GTLB), monday.com (MNDY), and MongoDB (MDB). So, a few holdovers with a couple of new names as I’m trying to expand this stable.

I wrote a little on Clearfield last month. Aehr Systems is a tiny company providing systems for testing and burning silicon carbide wafers in the semiconductor space. Its products make it both faster and cheaper for companies needing these chips at scale. These chips are common in electric vehicles and battery chargers, which are certainly getting a lot of attention lately. AEHR currently has an outsized reliance on its biggest customer but recently landed at least two more contracts which have a chance to be just as large. This could put AEHR at the very early stages of an interesting trajectory. The stock has soared after its last report, likely due more to the announcement of those contracts than the actual numbers. The CEO believes this puts Aehr “right in the middle of this electric vehicle tsunami.” I can’t say I’m jumping in now but do find this interesting enough to put it near the top of our watch list.

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And there you have it.

Off we go into another earnings season. Given the current environment, Mr. Market has unsurprisingly spent just as much time examining management’s words as the company numbers in our first few reports (MSFT, TSLA, NOW). I’d describe the early consensus as reasonable execution with mostly underwhelming outlooks. On one hand, I don’t view this much differently than last quarter. On the other, it’s nice to see the market has at least temporarily stopped treating “underwhelming” as “disappointing” by hammering the stocks. Maybe, just maybe, this long downdraft is finding its base. Hey, a man can dream, can’t he?

Thanks for reading, and I hope everyone’s 2023 is off to a good start.