Friday File: Buying Growth, Selling Mistakes… a Wild Week in the Real Money Portfolio
by Travis Johnson, Stock Gumshoe | November 9, 2018 2:37 pm
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Source URL: https://www.stockgumshoe.com/2018/11/friday-file-buying-growth-selling-mistakes-a-wild-week-in-the-real-money-portfolio/
Travis, in your last Friday File, you mentioned about Activision Blizzard (ATVI) being tempting. It is down ~13% today. Any comments you can share about it?
thanks
Abi
Haven’t looked through the filing yet, but ATVI is on my list to follow up — thanks for the reminder.
Thanks Travis. I really liked your insight on TTD. I was following the earnings call and couldn’t find anything negative so surprised with the move. This lead me to find how to value SAAS company. There may be either re-rating of multiples or with rising interest scenario discounting at higher rate. That means all stocks should go down but I was also following TWLO earning and that was up 35% after earnings. I still couldn’t understand if TWLO was up 35% then why not TTD. How to determine fair value of SAAS stocks is still a big puzzle. Would appreciate if you can share your thoughts on different models to determine fair value of cloud/saas stocks will be very useful.
@Shahbijalj, I suspect that the difference in market reaction is mostly timing – report came out on a good market day. TTD is likely to pop in coming days too. The other reason for the relative positive performance of TWLO is the significant outperformance if it’s revenue relative to expectation , about 10%, coupled with successive higher quarterly growth rate. However, I will be surprised if it gets much higher from its current price given that its EV/S (Enterprise Value to Sales) ratio is now about 14.5 while that for TTD is about 9.8. A number greater than 8 can be considered pricey unless the growth rate is significantly above the standard of 40% for SaaS.
@Travis, I agree mostly with your comments and conclusions on TTD. However, I disagree with the assessment of their profit as being small. The profit for this year will be over $2 and probably close to $4 next year. This gives it a forward PE of about 30. Given that it grows revenue by about 50% and profit by about 90%, I believe that the stock is undervalued. This singular quality differentiates it from other hyper growths like TWLO and ROKU, and is the reason why I agree with your decision to buy more shares and I will be adding to mine too.
Hi Travis
I’ve been holding ATUSF for a couple of years now, adding a bit when it bottoms and reinvesting the divs. I’m pretty satisfied with their model and execution and I’m willing to wait a few years for the stock to really appreciate. At the same time I’ve been holding MPW and added more when it went down in February. With the nice rise they’ve seen lately, are you thinking of trimming the position or even exiting it now? They pay a great dividend but they seem pretty well valued today. I know you wrote how good you have done with this stock just letting the dividends reinvest. I also like the fact that in less than 2 years, I have about 10% more stock in the company than what I purchased but a 40%+ gain gets me thinking I might want to lock in that gain.
Can you look at Katusa’s latest picthes?
Great read! (as usual)…
With $AAPL taking such a hit, how come BRK.B isnt getting hammered along with that. Its a major part of Berkshire (as you point out)?
Berkshire’s position in Apple is not that high to affect it’s share price.
Berkshire (as of last quarter) owns about 252 million shares of Apple, their largest holding (by far), so that portfolio holding is about $15 billion less valuable today than it was at the peak a couple months ago. Combined with the big slug of financials that Berkshire owns, that goes a long way to explaining why Berkshire is down about $50 billion from its valuation peak.
I’m not worried about it in the long run, but in the short run Berkshire will certainly move down if its major portfolio companies drop in value.