ALieberman's October Portfolio Update

Here’s my update for October.

During the month of October I was down 15%.

Through October 31st I am up 66%

Reflections on the month:

It was a volatile month for the stock market and especially for our stocks. I was down significantly more until the last two days of the month where my stocks rebounded strongly.

My big takeaway from the month is to trust and stick to the process.

However, in order to do that, we have to understand our own emotions, control our emotions, understand market history, understand the businesses we are invested in (or at least understand the demand for what they are doing), and ignore so much noise. There are ALWAYS reasons not to invest, but I believe not investing is far riskier than investing in businesses we believe in with a calculated approach.

I looked at the stock market and my portfolio far too much this month. I also let if affect me and how I felt. I want to get better about this. If I would have looked at my portfolio returns once a week, it would not have negatively impacted my returns. This doesn’t mean I won’t pay attention to important events for my companies, but I want to start by looking at my portfolio half as much as I do now, then continually cut that in half until it’s once a month – crazy I know.

What I’m proud of is that I didn’t panic. I’m also proud that I tried (with many others on this board) to be a voice of reason and focus people on the fact that these companies did not show any slowing growth. In fact I believe, we’ve seen nothing but signs of strength from cloud and enterprise software divisions of other companies like Microsoft, Amazon, Arista, then IBM came along and showed us these businesses are worth FAR MORE than their current share prices (at least some of them are).

I’m most excited to see results from Nutanix, The Trade Desk, Twilio, Mongo DB, Pure Storage, and Nvidia which I don’t own. I believe we are set to see strong earnings which will surprise Wall Street thanks to all the negative sentiment flying around.

My focus continues to be to find the greatest companies for the next 10-15 years who will create new products and revenue streams we can’t even imagine right now. Revenue from these new products will make these “crazy valuations” seem obnoxiously cheap when we look back in 5-10 years. We will read stories about “if you would have invested $10,000 in these companies 10 years ago it will be worth…” and instead of thinking “wow I wish I would have done that” we will be able to be proud we had the fortitude to invest in individual stocks and stay invested in them through all the noise.

Will we be wrong about some? OH YES! Probably very wrong. But that’s fine. We aren’t tied to them and even if we were, 1 mega winner will make up for 5-6 stocks going to 0. David G’s 200 Stock Advisor pick review is a prime example of this power.

I also started writing for The Motley Fool and I love it so far. I should focus less on my portfolio returns and more on writing.

Here’s my first article on Nutanix: https://www.fool.com/investing/2018/10/23/heres-what-the-mar…

I’m currently working on #2 which highlights TTD’s opportunity with the privacy issues FB, GOOGL, and others are dealing with

and #3 will be next which is on what I believe to be Alteryx and Mongo Databases moats; the thriving community of fans and developers they have built to support their services. Salesforce is a wonderful example of this power and I think community and developer mindshare is a real, sustainable moat for cloud companies (that’s one reason MSFT bought Github and why TWLO bought Sendgrid).

Okay enough ranting, onto my portfolio size:

Common stock and Long Calls Combined (I do about 3%-10% of my holding for each stock in long calls)
Twillio - 22%
Mongo DB - 17%
Alteryx - 14%
The Trade Desk - 12%
Pure Storage - 10%
Nutanix - 8%
Okta - 8%
Square - 6%
ZScaler - 4%
Elastic - 1%

Wild prediction - Pure Storage and Okta will be acquired in 2019. By Nvidia and Salesforce respectively.

I do have about 3% in cash. I sold off some Nutanix, NVDA (owned for a short period), and SQ because I had losses in them in my taxable account. I had a lot of realized capital gains from the beginning of the year when I restructured my portfolio from 60ish SA/RB style stocks down to my 10-11 core stocks and from my decision to sell a significant amount of stock in September (happened to be timed perfectly before all the mayhem…but accidentally) in order to have money for a down payment on a house next year. I immediately reinvested the cash into Twilio, Mongo, Alteryx, and TTD.

I feel great about my core positions. If I make a change, it would probably be to add NVDA. If I added NVDA I would need to sell something. I’m not sure what that would be at this point. I guess judging by my %s I’m least confident in SQ, ZS, and ESTC…but I feel PSTG and NVDA are most closely linked, so maybe I would swap them.

I think I’ll wait till PSTGs earnings report and see how I feel about the direction of their business at that point.

I also did something different this month and opened a small basket of long calls on some Bio/Pharma stocks. I put about 4-5% total of my capital into these knowing they will likely go to 0, but one or two could become mega-winners.

ARNA - Down 58%
CRSP - Down 19%
EDIT - Down 24%
NTLA - Down 73%
NKTR - Down 94% (held on to this because it’s in an IRA and there’s no Tax benefit to selling)

As you can see… this bio bet is working out SWIMMINGLY so far. These all expire in 2020 or 2021 so we have some time and in all honestly, I bought them knowing how volatile they are. It’s the nature of these types of stocks and I would never put a singificant amount of money into them. If one grows to be a significant position, great. I’ll take the money and put it into a core position I’m much more comfortable with.

I also opened short positions with less than 5% of my portfolio in a few, big slow companies that I believe are being out innovated. I’m very very very careful to make sure I am not at risk of getting anywhere close to margin calls. My portfolio would have to drop around 70% to be at risk. My thought here is they are not positions with expensive borrowing fees, they likely aren’t companies that will double in a short period of time, and I believe re-investing this money into my core positions will allow me to increase returns. We will see how this goes, and if it makes me too uncomfortable, I’ll stop.

These companies are:

GE - I’m up 34%
HNI - I’m up 7%
K - I’m up 5%
KO - I’m down 3%
MUSA - I’m down 2%
PEP - I’m up 1%
PG - I’m down 6%
SBH - I’m down 5%
SEAS - I’m up 8%
SPY - I’m down 1%
WING - I’m down 13%

Again, is this worth the risk or the time? I’m not sure. I really don’t put much time into thinking about these because several are part of a Short basket from TMF Pro service (great service!).

  • Austin

Shopify (SHOP) Ticker Guide

For information on all of my current holdings view my profile here: http://my.fool.com/profile/CMFAleeb/info.aspx

51 Likes

The list of stocks in your portfolio is very similar to mine but I do not own pstg. I also have shop, SPLK, hubs and Nktr. The last one I added to recently for an outright gamble on positive results next week. Had it not been beaten down so much I’d probably not have bought.

There was a lot of interest in Gene therapy and editing stocks earlier this year with companies like edit doubling or more. I held edit and Crsp for a while but sold luckily with good timing. It just seemed they kept going up despite years from even being in phase 1. So while the stock prices kept going up I did not see what could sustain it. Who knows what will happen. Now they’re pushing out their NDA submission timelines.

You can either buy stock in companies growing at 40%+ a year or play the biotech roulette wheel. Seems cloud related companies offer better risk reward right now than gene therapy companies with a lot of buzz and high share prices. And the space is changing so fast.

2 Likes

Good write-up, Austin!
The three biggest concerns for me are:
1: Pivotal in which I have a very small position because my confidence in the CEO is very low. If their ER is disappointing then that will be sold.
2: Nutanix in which I have a medium sized position and I have more confidence in but the analysts might slam it because of their transition away from the hardware business which will dampen their revenue growth. May add if their ER is interpreted as good news.
3: Pure Storage in which I have a medium sized position but can’t see the moat. Will sell if their ER disappoints.
All the other popular stocks here I’m happy to carry on adding to as they move up, and since my largest position is Amazon then I’ve done better than OK this year, but have made some very big bets on The Trade Desk, Alteryx, Square and Twilio which I’m confident will pay off over the coming years.
Best of luck to everyone!
Cheers, PB.

2 Likes

If I would have looked at my portfolio returns once a week, it would not have negatively impacted my returns. This doesn’t mean I won’t pay attention to important events for my companies, but I want to start by looking at my portfolio half as much as I do now, then continually cut that in half until it’s once a month – crazy I know.

Austin, to make the kind of profits that we make with a very concentrated portfolio, it requires really knowing what is going on with our ten or a dozen companies. I don’t think looking at your portfolio just once a month will be feasible, when the market swings the way it does. If you get down to once a week it will be admirable!
Saul

12 Likes

Great point Saul and thanks for taking the time to reply.

I hope you know how much of an inspiration you are. Also, an incredible coach.

I think you’re right. I need to find the right balance…I’ll get there!

9 Likes

Wild prediction - Pure Storage and Okta will be acquired in 2019. By Nvidia and Salesforce respectively

What are your thoughts behind the prediction? The way I see is, I don’t see any reason why NVDA will be interested in a storage company and likewise Salesforce getting into identity business, except that both are in cloud space.

2 Likes

Having been through this before made it much easier to stay the course. I even sold a couple large caps to make additional room for more TWLO, AYX and TTD. and I kept ANET which will jump significantlybon their earnings. Some pain in the drip, but believed in the comeback of these great companies.

John

1 Like

Wild prediction - Pure Storage and Okta will be acquired in 2019. By Nvidia and Salesforce respectively

What are your thoughts behind the prediction? The way I see is, I don’t see any reason why NVDA will be interested in a storage company and likewise Salesforce getting into identity business, except that both are in cloud space.

I am also curious about this wild prediction as NVDA is my #1 holding and PSTG is in my top-8.

Is it simply due to the AIRI collaboration? Does NVDA have a strategic need to start pairing storage directly to their processors? Would being able to provide an all-inclusive AI machine be that much of a strategic benefit? This type of technical discussion might be better undertaken on the NPI board, so I’m going to cross-post it over there too.

-volfan84
long NVDA & PSTG

Shorting is difficult, especially famous companies held by a lot of institutions. Probably easier to short more obsucre companies where you notice some questionable accounting that others might miss.

I would not short SPY, which is the S&P 500 trust, on the ground it is being out-innovated. Personally I would stick with long only picks.

To short SPY seems a bearish bet on the market as a whole.

The S&P 500 will do just fine if the economy/market does fine.