My friend John Rogers, CEO of Ariel Investments, used to write an investment column for Forbes on small cap. stocks.  Forbes had a great tradition that at the end of each year, the columnists had to recap the performance of their picks relative to the market.

While I do not generally tout stocks,  I do feel that B2B Industry Cloud providers have unique economics and therefore can be unique investments.  As a result, I thought it would be interesting to go back over my posts over the past 2.5 years and assess how the public IC companies I had mentioned had fared since I wrote about them.  In each case, I’ll provide a comparison of how the market performed during the same time frame.  Take all of this with a huge grain of kosher salt.  Two years is a laughably short time period, especially when anything with the word “cloud” in it did well!  Still, behavioral finance experts recommend we look at all of our past decisions and non-decisions to better understand our biases.

1.  My first post was July 6, 2011.  This post simply described the concept of Industry Cloud providers and provided a few examples.  No stock advice was given (and none was requested!)  For the companies mentioned in that post, I’ve provided below their annualized rate of return since that day, as well as the annualized rate of return of the Russell 2500 Growth Index.  This is a relevant and relatively exacting index for comparison.

Company/Index Industry Symbol       CAGR Return          (7/6/2011-         12/4/2013) Notes
Concur Travel CNQR 29.09%
Emdeon Healthcare EM 98.27% Bought out in November 2011
iTradenetwork Foodservice NA                    NA Was already private.
Ebix Insurance EBIX -13.36% I noted in a post on 8/11 and 11/30/2011 that I thought the company’s books might be cooked!
Real Page Property Management RP -7.01%
Descartes Logistics DSGX 27.56%
GXS EDI NA                    NA Was already private, since bought by EMC.
Blackboard Education BBBB 7.45% Bought out in October 2011.
Russell 2500 Growth Index All NA 14.11%

Bottom line:   if you had bought all the examples, less the one I called out as a possible fraud, you would have accomplished two things:  a) made good money and b) proven yourself to be overly suggestible.  (By the way, at the time, I owned only DSGX and still do.)

2.  Between July 6, 2011 and August 11, 2011 the Russell 2500 Growth Index fell about 17.4% and on this latter date I wrote a mealy-mouthed post about the decline in Industry Cloud provider valuations and the possible opportunities to buy.  Below is how the stocks I called that out day have performed since then, again relative to the index:

Company/Index Industry Symbol     CAGR Return       (8/11/2011-        12/5/2013) Notes
Concur Travel CNQR 49.25% I did not buy, even though I noted it was at a 52 week low.
Descartes Logistics DSGX 34.50% I own and still do
Medidata Clinical Trials MDSO 139.80% I owned and gave to charity way too early.  Best stock I have ever owned.
Real Page Property Management RP -4.47% Never bought.
Bottomline Technologies Payment/Legal EPAY 23.93% I suggested the valuation was still in the stratosphere!
SPS Commerce EDI SPSC 72.70% I said I was not sure if it was a true IC provider!
Russell 2500 Growth Index All NA 27.15%

We can draw three conclusions from this:

  1. The IC stocks generally outperformed the market during this period
  2. I have no cajones when it comes to investing, and
  3. It was a really good time to buy growth stocks generally.

3. On September 14, 2011, I wrote that I was likely to buy a stock recommended by Peter Goldmacher at Cowen, DealerTrack (TRAK) an Industry Cloud provider in the auto retail market.  That stock has had an annualized gain of 59.10% since that day, while the market returned 25.37% on annualized basis during the same time frame.  (I, unfortunately, gave the stock away to charity a year too early.)

4.  On September 19, 2011 I wrote about Liquidity Services (LQDT) which is an IC in surplus merchandise.  Its stock was in the middle of a rapid run-up, so I did not buy–there’s always a reason!  It’s annualized return since then is -14.53%, while the market has had an annualized increase of 23.73% during the same time.  One “bad” pick avoided  (Though the stock actually doubled between the endpoints!!).  I’m going to need to re-look at this one.

5.  I took a break for a year from blogging to get a real job, and then returned to blogging this past September 2013, when I noted that valuations were in the stratosphere again.  Since then, I have mentioned several public stocks:

  • Covisint (COVS), which I did not buy and is still near its offer price
  • Veeva (VEEV) which I knew would be too hot to handle (it was priced at $20 and closed its first day at $38 and is still in that range),
  • TXTR which I think is overvalued and worth shorting (though this is the first time I have done it) and
  • Premier (PINC) which I said I would buy and is up about 15%
  • Avista (AVA) which I said I would buy is up about 4%

After this lengthy review, I’ve concluded:

  • that a trained monkey would have made money investing in cloud-related stocks during this period
  • it is way too short a period in which to evaluate performance, though it was fun
  • I trust the investment advice of John Rogers at Ariel, Eric Kuby at North Star, and Peter Goldmacher at Cowen.  They have been doing this a lot longer than me and have some major cajones.
  • When I write about public IC companies, I’ll write with a little more conviction about the ones I like and let you decide how to time the market!

Caveat Emptor.

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