Friday File: Annual Review Part Five

More Real Money Portfolio re-analysis, including thoughts on Okta, DocuSign, Fastly, Elekta, Wrap and more... plus a new one to watch

By Travis Johnson, Stock Gumshoe, February 21, 2020


Earnings season is winding down, with only a few of my larger holdings yet to report, and so is my Annual Review of all of the stocks in my Real Money Portfolio — so I’ve got another installment of that for you today, sharing my updated opinion on a bunch of holdings (including a few buys and sells along the way), as well as a new stock for consideration and some updates from the week that was. We’ll start with the crazy expensive “cloud” stocks, since those are all sort of connected by their valuation.

Okta (OKTA) 1.6% position, $42.50 cost basis. I’ve taken some profits in mid-$130s today (and have sold off about 40% of the position over the past year), but will hold most of my shares going into earnings. Rapid growth in the sales backlog (RPO) could boost the shares sharply higher as they sell more to large customers, but at 30X sales I think it will have to be a spectacular quarter (March 5) to justify the valuation.

Okta (OKTA) is a cybersecurity/”Identity as a Service” stock that I’ve held for almost two years now, buying gradually during 2018 and taking profits on about 40% of my position during the past year (including this week). Like all of the cloud software stocks, it’s trading at a nutty valuation — and has traded at a nutty valuation for essentially its entire life as a public company. Analysts generally remain positive about the growth and the potential to continue dramatically growing their market, and about their increasing sales to their largest customers, but sentiment about all of the cloud software stocks is at least as important to Okta’s share price as is their specific performance right now. The group tends to travel together, and you need look no further than Zscaler (ZS) and it’s disappointing report last night to see what happens when there’s a little weakness in revenue (ZS is down 14% on the day as I type).

The company has shown steady growth but no real improvement on the books yet, they don’t make a profit and the current estimate is that they won’t be profitable until the revenue hits about a billion dollars a year, roughly doubling from what they did over the past four quarters, and that will likely come in 2022 or 2023), but that’s still all quite theoretical because the ...

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