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!).
Shopify (SHOP) Ticker Guide
For information on all of my current holdings view my profile here: http://my.fool.com/profile/CMFAleeb/info.aspx