AMS PORTFOLIO REVIEW – MARCH 2021
BACKGROUND & OVERVIEW
I run investments in both the UK (an investment legacy from my UK origins focused mainly on stable high yield income producing investments) as well as here in Singapore, (where I have been living for approaching 12 years).
My Singapore investments are split between a US portfolio and an Asia portfolio (listed equities in Singapore, Hong Kong and Australia). My US portfolio is principally a Saul style pure growth portfolio whilst my Asia portfolio is a mix of High Yield income producers (mostly REITs) and Asia located growth plays (e.g. Ali Baba, Meituan Dianping and Afterpay). This Portfolio summary will focus only on the US portfolio.
The US portfolio has produced outsized returns since discovering Saul’s board - I’m up ~300% since 2016 Year End (and that doesn’t factor in ongoing withdraws during the period whilst getting my own consulting business up and running with my business partner).
The portfolio has also gone through a considerable reconstitution. Going back 4 years I had 120+ stocks in my US portfolio and very low concentration amongst holdings, (my top 15 holdings were between 1.5% and 2.5% in value), I had a lot of long held positions with many investments under water and if I’m honest with myself a lot of equities where the investment thesis had changed and I had not acted accordingly.
As of today my US portfolio is down to below 50 positions with much more substantial investment sizes and higher overall concentration. My holding period has come down although I still own stocks for longer in duration than many on this board and will tend to stick with positions when conviction and investment theses remain strong even if there might be short term weaknesses in the share price or quarter to quarter transitions. Cloud and tech now dominate my portfolio in terms of holdings and value and I’m no longer allocating investment towards old economy plays no matter how favourable the situations or the tailwinds. I have also reduced my exposure to China considerably for a number of reasons, including; the tailing off of its hypergrowth emerging era, the delisting risk in the US and the availability of China plays on the HK market. In common with others on this board the position sizes are driven by a combination of performance and conviction – as a result positions are stratified into tiers within the portfolio. My investment selections, entries and exits are now financial/business performance driven as far as possible and there’s no room for story or narrative investing, turnaround speculation or value fishing. Key mega themes that I do pay attention to and am comfortable maintaining outsized exposure to include: eCommerce (~20%), Cybersecurity (~15%), Big Data (35%), Fintech (~5-10%) and throughout that – the Cloud. These mega themes are in part a function of secular tailwinds and in part the respective TAMs involved. I have also had exposure to Genomics although I have exited that sector for now.
The top tier ~10% positions include: Shopify, Crowdstrike, TTD and represent my highest conviction positions together with outstanding growth rates and market positions.
The second tier of 3-6% positions are high conviction strong growth plays including a mix of mature performers (MongoDB, Alteryx and Square) as well as young stars (Zoom, Teladoc, Elastic, Datadog and Palantir).
The third tier of 1-3% positions is a mix of: early stage positions (Cloudflare, ZScaler, Snowflake, Skilz and Exp World), deliberately lower exposure situations - either due to either lower conviction and/or lower growth levels (Pure Storage, Fastly and Nutanix) or sector over exposure and self enforced limits (e.g. eCommerce in the case of MercadoLibre and SEA)
Outside the top 20, other notable and/or recent positions that I am: following with interest, considering building a position in and seeing some high returns with include: Peloton, Asana, Okta, Magnite, Digital Turbine, Acuity Ads, Lightspeed and Fiverr.
Roku & Upstart and a few gene sequencing players are also on my watchlist. Snowflake, Fiverr and ZScaler are positions I am looking to build with most interest (or re-build in the case of ZScaler).
3 holdings I would mention that sit outside of my US portfolio include:
Afterpay at ~10% of my US portfolio in value (which I hold in my Asia portfolio and via an Australia listing), up over 300% in 2020 and up over 350% for me.
Ali Baba at ~5% of my US portfolio in value (which I hold in in my Asia portfolio via an HK listing) and is probably a candidate for a 2-10 trillion $ franchise.
Meituan Dianping at 1.25% of my US portfolio in value with stellar returns to date (250%) and another potential trillion $ business in the making
Buys & Sells in the Month
New positions: None
Additions: Snowflake, Palantir & Peloton
Month US Port S&P Jan +6.42% -1.1% Feb +0.16% +2.6% Mar -13.98% +4.2% YTD -8.31% +5.8%
My portfolio ended March down significantly by -14% on the month, having previously reached an all time high in February (up 20%+ for the year at that point). I ended March down 8.31% for the year to date, (accounting for withdraws) having given up all the February gains. (For the eagle eyed amongst you, you might notice that I have restated my February performance that resulted in a slight gain on the month as I had not properly accounted for a USD denominated investment I made but in my Singapore portfolio which effectively constitutes a withdraw).
Overall portfolio allocation rankings, theme & YTD returns
**# Holding Portfolio(%) Previous Mth (%) Mega-Theme 2021 YTD-SP-Growth(%)** 1 Shopify 16.8% 16.7% eCommerce/Fintech/Cloud -2.2% 2 Crowdstrike 11.4% 11.6% Cybersecurity/Cloud -13.8% 3 The Trade Desk 8.2% 8.7% Digital -18.6% 4 Zoom 5.9% 5.9% Cloud -4.8% 5 DataDog 5.0% 4.9% Big Data/Cloud -15.3% 6 Square 4.5% 3.9% Fintech/eCommerce/Cloud +4.3% 7 Palantir 4.0% 3.3% Big Data/Cloud -21.2% 8 Teladoc 3.4% 3.6% Cloud -9.1% 9 MongoDB 3.1% 3.8% Big Data/Cloud -25.5% 10 Elastic 3.0% 3.5% Big Data/Cybersecurity -23.9% 11 Cloudflare 2.8% 2.5% Big Data/Cloud -7.5% 12 Fastly 2.6% 3.1% Big Data/Cloud -23.0% 13 MercadoLibre 2.6% 2.5% eCommerce/Fintech -12.1% 14 Pure Storage 2.6% 3.4% Big Data/Cloud -4.7% 15 Sea 2.4% 2.2% eCommerce/Fintech/Cloud +12.1% 16 Alteryx 2.2% 2.2% Big Data -31.9% 17 Snowflake 2.2% 1.9% Big Data/Cloud -18.5% 18 Nutanix 1.9% 1.9% Big Data/Cloud -16.7% 19 Exp World 1.8% 1.5% Cloud +44.3% 20 ZScaler 1.5% 1.6% Cybersecurity/Cloud -14%
NB 2021 YTD Gains are share price gains not portfolio position gains
Total % gain rankings
**# Holding % Thesis Check Conviction** 1 Shopify 1736% On Track High 2 The Trade Desk 887% On Track High 3 MercadoLibre 459% On Track High 4 Square 439% On Track High 5 MongoDB 216% On Track Medium 6 Crowdstrike 214% On Track High 7 Zoom 205% On Watch Medium 8 Teladoc 160% On Track High 9 Magnite 127% On Track Medium 10 Cloudflare 120% On Track High 11 Digital Turbine 117% On Track Medium 12 Exp World 99% On Watch Medium 13 Alteryx 80% On Watch Medium 14 Elastic 58% On Track Medium 15 Datadog 77% On Track High 16 Palantir 47% On Track High 17 Sea 31% On Track High 18 Asana 21% On Watch Medium 19 Pure Storage 21% On Watch Medium 20 Peloton 12% On Watch Medium
NB Gains are actual gains of investment holdings not % change since beginning of the year
INVESTMENT BUSINESS PRFORMANCE AND POTENTIAL
TAM & Penetration Rates for Top Holdings
**# Holding YOY Rev Growth(%) TTM ($bn) TAM ($bn) Penetration (%) Comment** 1 Shopify 93.6% $2.929bn $250bn 1.2% Calculated as 5% take rate of $5trn eCommerce mkt 2 Crowdstrike 74.2% $0.874bn $36.5bn 2.4% 3 The Trade Desk 48.2% $0.836bn $725bn 0.1% 4 Zoom 369% $2.651bn $30bn 8.8% Combining V/C & unified CAAS market 5 DataDog 56.2% $0.604bn $24bn 2.5% Unified monitoring = $8bn 6 Square 141% $9.498bn $160bn 5.9% TTM includes Bitcoin revs 7 Palantir 40.4% $1.1bn $119bn 0.9% 8 Teladoc 79.0% $1.094bn $121bn 0.9% 9 MongoDB 38.4% $0.590bn $63bn 0.9% 10 Elastic 38.8% $0.555bn $53bn 1.0% 11 Cloudflare 50.0% $0.431bn $35bn 1.2% 12 Fastly 40.2% $0.291bn $35bn 0.8% 13 MercadoLibre 96.9% $3.973bn $35bn 11.4% 5% take rate of 5% ecommerce penetration of a $5trn retail market + consumer banking 14 Pure Storage 2.2% $1.684bn $50bn 3.4% 15 Sea 101.6$ $4.40bn $150bn 2.4% PC download and mobile gaming $97bn SE Asia ecommerce & payments $30bn 16 Alteryx 2.61% $0.495bn $50bn 1.0% 17 Snowflake 117% $0.592bn $84bn 0.7% 18 Nutanix -0.1% $1.31bn $90bn 1.5% 19 Exp World 122% $1.798bn $17bn 10.6% 1% of US, 1% of EU & 1 % of LatAM housing transaction markets & entering commercial real estate 20 ZScaler 55.0% $0.536m $72bn 0.7% SAM
Comments & Notes
Shopify – cornerstone investment in a top class business with the largest TAM in the world, supported by substantial tailwinds and expecting a future $1 trillion potential, watching for post covid new normal in eCommerce and 2021 laps with pandemic growth in 2020
Crowdstrike – One of the fastest growing companies in a rock solid sector with an expanding TAM, watching for competition from ZScaler and others
The Trade Desk – A disruptor in a massive TAM with a strong moat, watching for dynamics between DSP and SSP, CTV progress and browser/device privacy measures
Zoom – a disruptor in the making with ultra high growth rates, looking for post pandemic new normal growth and laps with pandemic growth peak in 2020 and the emergence of Zoom phone which doubles its TAM and additional Zoom platform innovation
Datadog – best in class in the unified monitoring space. Maintaining strong growth rates but dropping, watching for leadership position and declines in growth
Square – strong fundamentals, very high growth rates operating in multiple significant opportunities. Bitcoin and fintech payment wallets offer massive potential upside. Watching for continued Cash App expansion and adoption.
Palantir – AI disruptor and potential leader in commercial and military/govt space. If Palantir can genuinely become either the de-facto operating system for the organisation or the de-facto AI operating system this might have previously un-imaginable potential. Top quality visionary leaders with a strong track record.
Teladoc – leader in telehealth with the combined Teledoc and Livongo offerings with strong underlying growth with solid tailwinds irrespective of Covid. Looking for additional disease management solutions and geographic expansion together with threats from changes within the US healthcare system
MongoDB – disrupting a sizeable space against an established player, benefitting from strong big data tailwinds. Watching for declining growth rates, penetration of Atlas and competition from native AWS DB solutions
Elastic – undervalued but proven track record in a sweet spot of multiple optionalities including security, application monitoring and big data.
Cloudflare – strong CDN player with high growth rates, improving competitive position, strong customer acquisition count and new solution/offerings emerging. Watching for continued growth, edge computing adoption and potential competition from Fastly.
Fastly – former strong growing CDN player working through headwinds of TikTok bans in India and US and threatening interference. Looking out for client retention/expansion metrics and growth resumption
MercadoLibre – the Amazon of LatAm with a strong moat and fintech business driving massive growth in a highly unbanked region. Watching for competition from Stone, Amazon and Sea as well as local market challenges in LatAm.
Pure Storage – storage market disruptor with strong underlying fundamentals having passed through a business model transition. Supported by strong tailwinds. Looking for product set expansion and growth re-acceleration.
Sea – in the sweetspot of eCommerce, mobile gaming and fintech and increasingly dominating SE Asia. Obtaining digital banking licenses and ramping up offsite & physical retail payment wallet/payment processing services. Expanding into India, MEA and LatAm. Backed by Tencent. Looking for continued triple digit growth and achieving profitability
Alteryx – former growth star with a pandemic growth challenge and accounting model transition together with a shift to cloud from on prem/hybrid solution. Looking for growth resumption, successful partnership outcomes and new product launch.
Snowflake – Incredible technology supported by the big data mega theme of our time. Has potentially the greatest sales efficiency of any business model with expansion coming from underlying data storage and usage growth. Extraordinary leadership and cornerstone investors. Triple digit RPO/revenue growth rates. Looking out for potential emerging competition and growth rate declines vs ultra high valuation.
Nutanix – under valued, under respected disruptor with a large TAM supported by strong tailwinds negotiating multiple business model transitions. Looking for growth re-ignition.
Exp World – operating in a massive market (housing transactions) offering a cloud solution and supported by a ZIRP environment. Very fast growing and penetrating global housing market plus commercial real estate but concerned by market penetration and also the use of company stock for the basis of the sales incentive system.
ZScaler – vying with Cloudstrike for the premier cybersecurity player. Represents the next generation of fully cloud based security. Growth reaccelerating and positive operational metrics looking stronger by the quarter. Elite management calibre.