Ben's avatar
$17.8m follower assets
DOCU earnings

21% revenue growth yoy
Net income - 45 mil, compared to - 26 mil

expects between $2.41 billion and $2.42 billion in subscription revenue and between $2.55 billion and $2.57 billion in billings for the year ending Jan. 31. It previously forecast $2.39 billion to $2.41 billion in subscription revenue and $2.52 billion to $2.54 billion in billings.

PS 4.6 currently.

I have been building up my $DOCU position since May. I added some last week in the 50s. It’s still a buy under $75 a share for me.
Penalty Box Stocks
While I try to consistently dollar cost average into my Core 34 positions over time, I currently have six of them relegated to a type of " penalty box."

This designation doesn't necessarily imply a broken thesis but means that something has gone sideways far enough that I want to slow down my DCA'ing on them.

Here are those six and what got them there:

  • $TDOC - Goodwill of $4.8B, a market cap of $4.8B -- even after the writedowns.
  • $TWLO - Stock-based compensation over 20% of revenue, -7% free cash flow margin, even with this SBC boosting the figures. Management is pointing towards streamlined profits over the next year, but I'll wait to see it.
  • $DOCU - Profit margin improving (almost positive), but FCF of $500M gets buoyed by SBC of $440M. Instead, I would add to my other core holding in $ADBE for now.
  • $U - Too big of a position in my portfolio to be as volatile as it is -- waiting for more certainty regarding M&A before I add any more.
  • $SE - I'm throwing a temper tantrum over Sea's use of its "adjusted EBITDA before HQ costs" metric. These "HQ costs" are just expenses that it backs off EBITDA. Worse yet, even after pencil-whipping these earnings to hell and back, this adjusted EBITDA was still -$500M in Q2.
  • $UPST - Much like Unity, I have too much exposure to Upstart's volatility. Furthermore, management seems to have reversed course by admitting that it would like to keep some loans on its books, which is a direct contrast to my original investment thesis.

There are fundamental issues underlying each as well, but I wanted to keep things concise and point out my least favorite thing here.

Curious what you think as to why these are in the penalty box -- do you agree or disagree with them?
What do you do with "penalty box" stocks like these?
25%Liquidate my position.
20%Sell a portion.
54%Hold, stop adding.
0%Buy when it feels the worst.
24 VotesPoll ended on: 09/07/22
Lol at $SE not being able to make triple adjusted earnings to look good

I completely ignore most companies goodwill. Net cash and share count are more important. $TDOC has a similar share price today is it did in 2018. But it’s revenue is 4x higher. Op margins better -15 to -9%. And most important think that’s changed is the 95 modifier. This changed in 2020. It allows doctors to charge regular in office billing codes for telemedicine visits. Prior to this change you could only bill telemedicine codes which paid 80% less.

I hope $UPST management will figure out what they want to do with the business aspects. Bc if the algorithm keeps out performing credit scores, they have a golden ticket
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Ben's avatar
$17.8m follower assets
Aug Update
Pretty slow Aug. didn’t add much new cash.
Had that month where everything in your house breaks. Lightning strike, AC repairs, rock through the window.

Sells:none

Plan for the end of year. If markets keep giving me sales I’ll keep adding to the above names. Also plan on initiating a new position in $TREX at some point.
If markets go up, I’ll slow buying and build a cash pile for the next market down turn. Currently less than 1% cash.
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Emmet Barta's avatar
$16.6m follower assets
DOCU trade
how high do any of you think $DOCU can hit this week looking for it to hit the 70$ braking point and looking for an out for profit. any idea
Ben's avatar
$17.8m follower assets
My portfolio
I like how people post monthly or quarterly portfolio updates. I’m learning a lot about what people are actually putting their hard earned money into by reading these.

My current mindset is, this is a top 10 bear market all time, as long as your buying companies without near term bankruptcy risk and with a long enough time horizon, it’s easy to buy great stocks a low multiples right now. With that said now that I’ve mostly finished building my new positions in $YETI and $DOCU. This month I’m looking to add more to my existing positions. Mostly $GOOGL, $ASML, $MELI, $PYPL, and $WRBY. I also started a small position in $UPST and I’ll cont to add to that as well.
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Nice, most are solid names in my book (the once that are not solid is because I don’t know much about them 😅)
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Ben's avatar
$17.8m follower assets
DOCU

The other new position I’ve started during this down turn is $DOCU

Gross margin improvement 72 to 78 (last 3 yrs)
Op margin improvement neg 60 to neg 2
I still worry about having 61% of revenue in SGA and the fact that I can’t find their LTV/CAC. However this has been coming down from 106% of revenue in 2019
Net revenue retention 115% in ‘18 to 119% in ‘PE to 125% in ‘21
4 year compounded 42% revenue growth. A 4x for those keeping track. And yet despite the above improvements to the business the stock price is about the sam__e from 4 years ago.
Neg 80 mil net cash
Has been free cash flow positive since IPO
500 mil free cash flow in TTM
Only 14% of cash flow goes to capex
Competitive advantage
They are a V**E**R**B**
Net promoter score 66
I haven’t met anyone say DOCU was hard to use
The old way of buying things driving somewhere with a pen and dead trees seems very 2019

Competition
Previously: Ink pens and random business that have a notary
Currently: Adobe and a few small players
DOCU 70-80% market. Adobe 12%
And with DOCU’s expanding net revenue retention (+10% over 3 years) I don’t see them losing significant market share

Future growth
Growing agreement cloud
Expanding notary
AI document analyzer sounds awesome if it works, scales and picks up adoption

Risk/Negatives
CEO was let go abruptly
High stock based compensation
Projections
Great scenario
Revenue growth slows by DOCU historical standards, but still 20% a year. Achievable with their expanding net revenue retention
81% gross margin, decrease SGA spend as % revenue by 5% a year to 38%. maintain 18% R&D spend.
Leaves us with 5.2 bil revenue. 1.3 bil op and 1.04 bil net. Market cap of 20 bil @20 PE and 40 bil @40 PE
Bad scenario revenue slows to some analysis projections of 20% this year then to low teens. And they are unable to decrease SGA at their historical rate. SGA 52%. R&D 20%
3.9 bil revenue. 470 mil op. 375 mil net. Which is 7.5B @20 PE and 15 B @40
Current price to cash flow 21

With new CEO hoping for less stock based comp or to buy back 100% vs 80% which they have been buying back per year over last 3.

I’ve been DCA since April.
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