I was recently reviewing the current average market cap of my portfolio last year to where it stands today and it is pretty shocking to see. Our companies have imploded in value over the last 12 or so months. Sure, companies have reported incredible growth but their multiples are expanding along with them. As Chris Mayer describes in his book 100 Baggers, these are the two twin engines needed for huge returns in the stock market - revenue/earnings growth coupled with multiple expansion. We’ve been lucky to see this unfold for our stocks recently.
Upon comparing my portfolio side by side from July 31, 2020 to today, I have gone from 16 stocks to 12. The average market cap in my portfolio last year was $30B. Today, the average market cap for my entire portfolio is $66B. I have been wrestling with this fact lately. Of the 16 stocks I owned last year, ten are still with me. I have only added two new stocks YoY - Upstart and Snowflake - one small and one large business.
Here’s a look at how those ten have grown over the last year. They are listed beginning with the largest position in my portfolio to the smallest.
Crowdstrike - CRWD
July 2020 MC: 24B
July 2021 MC: 58B
Sea Limited - SE
July 2020 MC: 57B
July 2021 MC: 142B
The Trade Desk - TTD
July 2020 MC: 21B
July 2021 MC: 39B
Roku - ROKU
July 2020 MC: 19B
July 2021 MC: 61B
Cloudflare - NET
July 2020 MC: 13B
July 2021 MC: 36B
Zoom - ZM
July 2020 MC: 72B
July 2021 MC: 108B
Peloton - PTON
July 2020 MC: 19B
July 2021 MC: 34B
Square - SQ
July 2020 MC: 57B
July 2021 MC: 115B
Datadog - DDOG
July 2020 MC: 28B
July 2021 MC: 34B
MercadoLibre - MELI
July 2020 MC: 56B
July 2021 MC: 79B
I found it pretty insightful to compare their market caps as it is tough to get a full grasp of the business if you simply look at their stock price return YoY. Looking at their market cap helps me better understand their growth runway, for the business and the stock. It also makes me wonder why I did not buy more Roku or Cloudflare at those prices! And also, maybe that I will be saying the same thing next July about Datadog considering its value has not increased nearly as much as the other businesses, yet the actual underlying business has been performing quite strongly.
Normally, when I go shopping to deploy cash in the stock market, I generally buy more of something I already own. However, recently I have not felt like there is a big opportunity at these prices within my portfolio aside from Upstart which I have been buying heavily the last few months. In addition to this, I am having a hard time finding new businesses I find very appealing that I think are trading at a reasonable valuation. I initiated a small position in Snowflake, but am having a hard time growing it from a small position because I think one of its two engines (multiple expansion) are down.
Bear, last year you posted the question "Do you have any companies that you feel could be a lot larger in the next few years? Please tell us about them. Why do you feel that they could be larger? For instance, are they growing revenue extremely rapidly? At the time, I responded with Peloton which turned out well. Now, fast forward a year later, and I would like to ask the board the same question. I have reviewed several companies but apart from Upstart, I am stumped. Any thoughts?
Rex