All results are YTD through January 31st, 2019 brought to you by Interactive Brokers(Interactive Brokers, please call my agent for sponsorship offers).
Returns:
YTD (Through Jan 31st): 19.95%
3 Month: (Nov 18 - Jan 19): 19.68%
1 Year: 74.75%
3 Year: 219.21%
Since Inception (Nov 14 - Jan 19): 166.88%
Annual Returns:
2018: 66%
2017: 32% (BS – Before Saul)
2016: 9%
2015: -6% (ouch)
Best Month (Aug 18): 41%
Worst Month (Oct 18): -15%
S&P500 Comparison:
SPX Return YTD (Through Jan 31st): 8%
SPX Return Since Inception (Nov 14 - Jan 19): 44.66%
This is the only comparison that really matters to me. I manage my own investments because I enjoy it and I believe I can significantly outperform the S&P500 which is what I would be invested in if I changed to passive, set it and forget it index investing. Until I found this board and started investing this way, I was seriously doubting whether or not I could crack the nut on how to beat the market.
After 1 year, this board has changed that. Granted, that is not a long time frame, but I’m confident that the lessons and methodology learned here will serve me (and us) well for many years.
Time will tell.
Top 5 Holdings: 72%
TWLO: 19.21%
AYX: 15.77%
TTD: 15.39%
MDB: 14.69%
NTNX: 7.15%
The Rest: 28%
OKTA: 5%
TDOC: 5%
ZS: 4%
ESTC: 3%
TWOU: 3%
PSTG: 3%
GH: 1%
ABMD: 1%
I do have some small options positions which I won’t go into detail on. Only about 3% of my portfolio. I’m highlighting that, because it may cause more volatility in my portfolio than expected from the allocations above.
Position Summary:
Why my top 5 are my top 5:
Every one of them has posted excellent operating results for 1 year +. They’re all founder-led so management has major skin in the game. They ALL have competition from some very, very large companies and each of them entered the industries they are in knowing they had that competition. They didn’t just know they had the competition, I would argue, these companies were founded BECAUSE of that competition. These founders in many cases came from the companies (or at least the industry) they are now disrupting. They ave somewhat of a chip on their shoulders and wanted to do it better.
TWLO:
Position Size: 19.21%
Return: 107%
How Twilio doubles from here:
I believe Twilio is building the communications platform of the future. They have a strategy to disrupt the communications sector which made up 40% of the $3.5T in IT spending in 2017 according to Gartner. They’ve broken the sector into bite-sized chunks which they are tackling one by one.
They have been successful so far and as long as they continue, I can see Twilio being the AWS of communications.
What I’m watching:
-
Flex adoption
-
Customer Growth post SendGrid acquisition
-
Dollar-Based Net Expansion Rate post Flex adoption and post SendGrid acquisition
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International Expansion
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Continued innovation - Flex was their first platform developed from the insights they gathered from their Engagement Cloud, what will be the next?
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Competitive landscape - do they continue to take market share in the Cloud Based Contact Center Infrastructure market?
AYX:
Position Size: 15.77%
Return: 100%
How AYX Doubles from here:
Basically, just continued rising demand of Data Analytics. As more companies begin to want to leverage all this great data they are collecting, they’ll look for a solution of how to easily pull all of that data from many different places and create automated workflows to make use of that data.
As long as that demand continues to rise and AYX is able to continue offering a solution that works, the company will continue to grow.
What I’m watching:
1.Dollar-Based Net Expansion Rate is probably the most important metric followed by sales growth, followed by customer growth. We need to see customers continue to spend more with Alteryx because their strategy relies heavily on the land/expand model.
2.Competitive landscape: I think Alteryx is in a very competitive industry and although no one does exactly what they do, people will continue trying to catch up.
TTD:
Position Size: 15.39%
Return: 13%
How TTD Doubles From Here:
TTD runs neck and neck with Twilio in my opinion of the company that’s most likely to become the next Amazon or AWS of ……something. For TTD, it’s advertising. As CTV continues to grow and TTD continues to get more and more people on their “Next Wave” platform giving them more and more insights/data points to compare, I only see their opportunities widening.
Out of all of these markets, advertising is probably the one that’s been around the longest and will never go away. I simply believe TTD is creating the platform that everyone is going to want to use (including FB, Google, etc) for advertising in the future.
What I’m watching:
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Continued growth of CTV
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Continued growth of ad-subsidized models (Hulu/Spotify style) versus pay only (NFLX).
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Continued partnership growth
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International Growth
Much of my TTD exposure last year was through call options, which I sold after some of you helping me see how risky that was. So I sold those options and bought shares which is why the return here is significantly lower than TTD’s performance.
MDB:
Position Size: 14.69%
Return: 78%
How MDB doubles from here:
Continued adoption of NoSQL and Atlas demand continuing to grow.
What I’m watching:
We’ve discussed MDB a ton lately. I have no idea who’s tech is the best and how fast the world is or is not going to move to NoSQL. All I know is that MDB has been the answer for a lot of really complicated database requirements and the initial Atlas rollout was very successful. I’m not smart enough to know how it will all turn out and I’ll be ready to sell if MDB’s operating results show weakness.
I do think MSFT, GOOGL, and AWS coming up with their own NoSQL offerings is a good sign for the industry as a whole and now the market is at least aware that there’s clearly competition in the space. All of these companies have offered competitive products/services in many other markets and many small, focused, innovative companies in those other markets are still thriving. I don’t see why MDB would be any different.
NTNX:
Position Size: 7.15%
Return: (.15%)
How NTNX doubles from here:
I said this in my December post (or some previous post) and I’m sticking with it. I think NTNX will be my strongest performer in 2019 and I expect it to double or more during the year. I believe a Cloud/on-prem combo is what businesses will prefer and NTNX makes that very intuitive and cost-effective. They’re going to face some pretty easy YoY comparisons in terms of revenue this year because of their transition to a software model so I think NTNX will “surprise” wall street.
What I’m watching:
-
NPS stays consistent
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NTNX continues to lead in market share over VMWare.
-
Federal sales.
The Rest: 28%
OKTA:5%
User Identity is going to continue to be important. I don’t know why, but I’ve shied away from making this a bigger position. I guess because of P/S ratio?
TDOC:5%
Telemedicine is here to stay and I believe TDOC is a leader in the industry. I also think they are a very likely acquisition target as other companies (Like AAPL) try to find avenues for revenue growth.
ZS: 4%
As applications move to Private and Public Clouds and users no longer all work in the same place, the need for application and network security in the cloud is only going to grow. Again, I’ve struggled to make this a larger position…probably due to P/S ratio.
ESTC: 3%
Internal search is only going to grow in demand as more things like Uber connect customers to the best-matched service providers and dating sites continue to match love-birds. Again, small position due to P/S.
TWOU: 3%
I think higher ed is being disrupted and TWOU has the model of the future. They also have very very long contracts with more and more institutions to help them offer the same experience (or close to it) online as on campus.
PSTG: 3%
Most likely to sell pending next ER. I’ve been a cheerleader for PSTG for all of 2018. I think what they’re doing with storage is important and I think they have a profitable/innovative model. But what I think only matters so much. After next ER, I may sell and add more to ZS, OKTA, or ESTC.
GH: 1%
Small medical bet. Risking 1% for a potential big gain.
ABMD: 1%
Small medical bet. Risking 1% for a potential big gain.
YTD Gain by each company:
Okta: 31%
TDOC: 28%
TWLO: 26%
TTD: 25%
NTNX: 24%
ZS: 23%
ESTC: 23%
AYX: 19%
TWOU: 14%
PSTG: 13%
MDB: 11%
ABMD: 8%
GH: 7%
Most likely to Sell:
- PSTG
Most likely to add to:
- ZS
- OKTA
- ESTC
Contenders not in portfolio:
- TEAM
- DOMO
- PLAN