Bear,
Great report. Much to say on many of your holdings. But will limit myself to Square. I no longer use Square, but once did. There are many payment processors. I don’t know which one is better than any other. As a vendor I just want to get paid. In the last three days I’ve had new clients just pay me by going to my website, or sending me a credit card authorization form. My average sale is much larger than a typical vendor, but it is a great time to be a vendor in regard. Payments just come in, and you can invoice, and in your invoice they can simply click the “Pay Now” button and money comes your way.
In this scheme of things, does Square stand out? I personally cannot say. However, at least one group of analysts thinks they do. Calls Square the Tesla of payment processors. A term that you likely won’t appreciate so much 
But here is a link to the article:
http://www.barrons.com/articles/why-this-fintech-firm-remind…
Tinker
3 Likes
Bear,
Thanks for sharing. I have some observations.
-
Like Saul, you are very concentrated in technology companies. Yes, volatility has spike recently, but more specifically volatility of technology stocks has increased to a larger degree.
-
Not only are you heavily weighted toward technology, but you also have an additional risk that you may not have considered. A large portion of your holdings are headquartered in San Francisco. I looked up the headquarters locations for your companies:
SHOP 16.0% Toronto, Canada
HDP 9.4% Santa Clara (SF Bay Area)
SQ 9.2% San Francisco
TWLO 9.2% San Francisco
SPLK 8.4% San Francisco
TLND 8.1% Suresnes, France
HUBS 7.8% Cambridge, MA
WIX 7.7% Tel Aviv, Israel
TTD 7.2% Ventura, CA
MULE 6.9% San Francisco
MELI 5.0% Buenos Aires, Argentina
NEWR 4.9% San Francisco
So if you count HDP which is about 30 miles South of San Francisco, you have 49.2% of your companies in the SF Bay Area. SQ, TWLO, and SPLK are just blocks apart. Also, Talend has people in Redwood City which is about 20 miles South of San Francisco. Shopify also staffs some of their technical people in San Francisco.
There is added risk when a large part of your portfolio is located in the same geographic area. As most know, San Francisco is especially prone to earthquakes and occasionally there is a big one. There are several faults that run through the region. One fault, the Hayward Fault, is on the other side of the Bay and it runs through Oakland and right under the UC Berkeley football stadium. The last big earthquake, a 7.0 quake, hit the Hayward fault in 1868 (149 years ago). The previous major earthquakes on the fault were in 1315, 1470, 1630, 1725, and 1868 which were separated by 155, 160, 95, and 143 years. Probably the biggest risk from a major earthquake is the security of the water supply which comes down by gravity through an extensive network of pipelines and tunnels from Hetch Hetchy, near the Yosemite Valley, into 11 reservoirs. The population of the San Francisco Bay Area is more than 7 million and many/most rely of this water supply. A major earthquake could also disrupt other utilities and wreak havoc on the transportation system on which many high tech workers rely to get to work. So there is a real risk to your portfolio from a major earthquake which is already overdue by about 10 years (considering the average interval of last 5 major events). The real risk is to business disruption of 49.2% of your portfolio. If there is a big one then these companies may not be able to operate for an extended period from their San Francisco Bay Area offices and this is where their management teams and most employees are located.
Chris
27 Likes
Chris,
You have a point about an earthquake but all companies big enough like the ones Bear holds would have a COOP. Continuity of Operations Plan.
It would be outstandingly ridiculous for these companies not to have perceived that risk already.
I can tell you this much, should Menlo Park and surrounding areas become a quarantine zone, FB would have no problem, count ORCL, GOOG and a few others.
A lower case fool that doesn’t perceive mother nature as a risk is a fool indeed.
1 Like
Bear, you write great reviews. Thanks!
Saul
5 Likes
*SHOP 16.0% Toronto, Canada*
*HDP 9.4% Santa Clara (SF Bay Area)*
*SQ 9.2% San Francisco*
*TWLO 9.2% San Francisco*
*SPLK 8.4% San Francisco*
_TLND 8.1% Suresnes, France **(Redwood City, CA)**_
*HUBS 7.8% Cambridge, MA*
*WIX 7.7% Tel Aviv, Israel*
*TTD 7.2% Ventura, CA*
*MULE 6.9% San Francisco*
*MELI 5.0% Buenos Aires, Argentina*
*NEWR 4.9% San Francisco*
BTW, I’ve been researching TLND and they are essentially headquartered in Redwood City, CA which is about 20 miles South of San Francisco. The management team is there. They are also partnered with Google which is based a few miles from Redwood City, CA. They have worked with Hortonworks on delivering joint solutions to customers; HDP is about 10 miles from TLND.
This brings Bear’s exposure to the San Francisco Bay Area to 56.1% of the total portfolio!
1 Like
OT: if you had to open a position / add to a position today, where would it be and why…
Just looking for ideas on what to buy next, current port is sweda, googl,cgnx,nda,fb,dis
All the best!
1 Like
Chris, Do you avoid investing in any companies in the San Francisco area? Just wondering. Do you live anywhere near San Francisco? I believe that there are also risks in the Seattle area (home to Amazon). You can’t avoid everything because of earthquake danger, but a big one would really be devastating, and probably with effects throughout the economy.
Saul
Do you avoid investing in any companies in the San Francisco area? Just wondering. Do you live anywhere near San Francisco? I believe that there are also risks in the Seattle area (home to Amazon). You can’t avoid everything because of earthquake danger, but a big one would really be devastating, and probably with effects throughout the economy.
I live on the 4th floor of a 4 story old building in San Francisco. I think it was built in the 1920s after the 1906 earthquake.
I don’t avoid investing in companies in San Francisco, in fact, I also have a heavy concentration of investments based in the SF area. I am aware of the risk and I thought I would post about it because I think most investors who don’t live in SF would not even consider this risk.
I agree that a Katrina-like disaster in the SF area would have an effect on the global markets. Some companies that are based in the area:
Google
Apple
Facebook
Uber
Twitter
Gilead
Arista
Nvidia
HP
Agilent
Genentech
Wells Fargo
Charles Schwab
Ebay
Paypal
Tesla
McKesson
Adobe
Salesforce.com
Oracle
Chevron
Clorox
Bio-Rad
Square
and many, many others including several thousand start-ups (BTW, a huge fraction of the world’s venture capital is based here; I heard recently that 50% of the global VC funding went to companies in the SF area)
The paralysis of a major earthquake due to infrastructure damage would certainly have global repercussions.
7 Likes
OT: if you had to open a position / add to a position today, where would it be and why…
As always, the first companies I’d recommend to anyone are the companies I own. And even in the order to which I’ve allocated my own money to them.
So…have you considered Shopify?
Bear
Wow, that’s a lot…I forgot Gilead and Square were out there when I mentally reviewed my own portfolio’s geography. Visa’s HQ is in San Francisco too, I believe.
Matt
Long GILD, SQ
Thanks Bear, assumed as much, shopify is now firmly on my radar!
have you considered Shopify?
I also like SHOP – I bought it a couple of months ago, mostly for the dividend.
OTT
I also like SHOP – I bought it a couple of months ago, mostly for the dividend.
As far as I know, SHOP does not pay a dividend…
I also like SHOP – I bought it a couple of months ago, mostly for the dividend.
As far as I know, SHOP does not pay a dividend…
Hence his name offtopictom 
Andy
SHOP does not pay a dividend
I was misinformed:
https://www.youtube.com/watch?v=u2inLcR_1jc
OTT
2 Likes
So happy I could set you up for that punchline, OTT!
1 Like
how did you get SHOP only down by 5.4% in June? it was close to triple that- down 15%.
I may be missing something but in all those concentrated portfolios spoken about here, all seems to show a slight gain this month. Considering the composition, I cannot square they were all up slightly. What is the stock that pull the rest up? are trading and edging kept you up? in that case that is a lot of work and a lot of skillful work.
tj
5 Likes
SHOP:
May 31 close: $91.86
June 30 close: $86.90
Difference: $4.96
4.96 / 91.86 = 5.39%
TJ,
It seems like you post in quite a bit of a hurry. I for one would appreciate it if you would look a little more carefully before filling up the board with things you could easily look up.
Bear
11 Likes
The other thing that gets me is when people look at a stock, “see see, SHOP is down 15%, NVDA is down 12%…” yeah, but each are up more than 200% since we bought them in the last two years, 6 months, etc.
I hate cynics and nit pickers. I love honest and good faith critics. That is what this board is about. Not cynics and nit pickers.
People put themselves out there on this board. They get $0 in compensation for it. they don’t necessarily want cheerleaders. What they want, and what they are owed is honest and good-faith critics, and honest and good-faith supporters. That is what makes this board great.
Tinker
29 Likes