Nice report, Dave. Congrats. Question about valuations - how do you look at or consider valuation levels for your companies? Any particular valuation metric(s) that you like more than others?
Hey @RutaMgmt and @IanM, I mostly don't consider valuation as a rule of thumb, with some exceptions. There isn't a good way to value hypergrowth companies. For example, what's the value of Cloudflare, which has pretty much always grown its revenues at 50% annually with no signs of stopping? Its value would be heavily dependent on when its revenue growth slows down and to what extent it slows down.
You *can* look at p/s, p/e etc to get an idea of how it is being valued relative to its peers and see if it makes sense or not. Certainly, if you are a growth investor, you would be more interested in p/s than p/e. But businesses are heavily multi-dimensional, and a lot of people, when given a metric like p/s, they tend to over fixate on that one metric. Perhaps they even make the entire decision on whether to invest or not based on it, which in my experience usually is a big mistake.
You'd be amazed at how much cheaper a "cheap" p/s company can get! Or how much more expensive an expensive company can get.
One question, do you think MNDY already took all low hanging fruit away because of Covid? It seems like the Street judge workflow as WFH stocks and punish her like DOCU ZM.
Hey Rick, I see ZM and DOCU as big time covid stocks. ZM and DOCU went from nice to have to absolutely critical because of the pandemic. MNDY, on the other hand, has always been a nice to have and still is nice to have. I don't see MNDY as a stock that benefitted enormously from covid like ZM and DOCU.
Hi Dave, thanks for the nice report as usual. Just curious for your allocation. Since MDB is in the second tier, which means you should have more confidence in MDB than ZI and MNDY. So I could not figure out why you have less position in MDB? It's appreciated if you could explain for me why you make this allocation.
Hey Sean, good question. Although MDB is a new position, I very rarely buy a boat load of a stock all at once. I intend to slowly add to it over time, probably by taking from MNDY and ZI.
Nice report, Dave. Congrats. Question about valuations - how do you look at or consider valuation levels for your companies? Any particular valuation metric(s) that you like more than others?
Hey @RutaMgmt and @IanM, I mostly don't consider valuation as a rule of thumb, with some exceptions. There isn't a good way to value hypergrowth companies. For example, what's the value of Cloudflare, which has pretty much always grown its revenues at 50% annually with no signs of stopping? Its value would be heavily dependent on when its revenue growth slows down and to what extent it slows down.
You *can* look at p/s, p/e etc to get an idea of how it is being valued relative to its peers and see if it makes sense or not. Certainly, if you are a growth investor, you would be more interested in p/s than p/e. But businesses are heavily multi-dimensional, and a lot of people, when given a metric like p/s, they tend to over fixate on that one metric. Perhaps they even make the entire decision on whether to invest or not based on it, which in my experience usually is a big mistake.
You'd be amazed at how much cheaper a "cheap" p/s company can get! Or how much more expensive an expensive company can get.
Great question! I am always wondering how people choose which metric to use - P/E, P/S, EV/S and so on…Does it depend on the style of investing?
Great report, Dave! I’m always enjoying them!
Great article Dave,
One question, do you think MNDY already took all low hanging fruit away because of Covid? It seems like the Street judge workflow as WFH stocks and punish her like DOCU ZM.
Hey Rick, I see ZM and DOCU as big time covid stocks. ZM and DOCU went from nice to have to absolutely critical because of the pandemic. MNDY, on the other hand, has always been a nice to have and still is nice to have. I don't see MNDY as a stock that benefitted enormously from covid like ZM and DOCU.
Hi Dave, thanks for the nice report as usual. Just curious for your allocation. Since MDB is in the second tier, which means you should have more confidence in MDB than ZI and MNDY. So I could not figure out why you have less position in MDB? It's appreciated if you could explain for me why you make this allocation.
Hey Sean, good question. Although MDB is a new position, I very rarely buy a boat load of a stock all at once. I intend to slowly add to it over time, probably by taking from MNDY and ZI.