Previous Month Summaries
January: I didn’t start doing this until February
This Month My Portfolio -5.21% S&P -1.94% Nasdaq -2.31% Russell 2000 -4.60% YTD My Portfolio -16.74% S&P +4.02% Nasdaq +3.63% Russell 2000 +5.22%
The difficult year continues, but I think there are some silver linings this month. 1) Even with my biggest position (SKX) falling, and with another large position (SEDG) dropping 20%, I’ve remained pretty close to the Russell 2000 for the month (5.2% vs 4.6%). Which means that the rest of my portfolio overall is doing much better than the market, a couple outliers notwithstanding.
For stocks losing ~20% or more this month…I continue to believe in SEDG and MITK and YELP, and am tempted to add to them at these prices, although I have not in the last couple weeks. I don’t think the businesses are in trouble…I think these are just the fluctuations of the market.
Changes this month, and why I made them
Sold out of 3, bought 3 new ones, so I remain at 16 stocks in my portfolio, although a few of the positions are tiny.
VEEV - I wanted to lock in my gains and redeploy (namely, into HUBS). This just isn’t growing as fast as some others. It has a P/S of about 12 and is growing revenue at 34%. Compare to HUBS with a P/S of around 8 and growing at 51%.
CRM - Still a great business model but just starting to stagnate a little in terms of organic growth. I just feel there are better options.
WATT - I just wanted to lock in my gains and put the money elsewhere. I’m not sure how to value a company that’s entirely speculation. I also learned of some others trying to do similar things. Obviously not something I feel I could ever understand enough about to be confident in.
SKX - Trimmed a little before earnings just in case. Turned out to be the right call. Definitely want to buy it back now but can’t figure out what to sell.
SHOP - I’ve actually still been buying on dips, but I sold a bunch to raise cash to buy other things, and to limit my exposure ahead of their quarterly report. But it’s still my second largest position.
TWTR - Well after watching a couple NFL games and all the debates on Twitter, I just couldn’t help but get back in. Unfortunately I did it at an average price of $20.40. So I was a little early…stupid merger mania. But I’m planning to keep this position mid-sized and just go along for the ride. I don’t know if they’ll eventually get acquired or not, but I continue to believe that the network is quite valuable.
HUBS - I’ve been wanting to own this. This month provided some good opportunities.
WSM - Not a big growth stock, but more of a value play. That’s rare for me, but this one just had too much going for it to pass up. First, they’re trading at a very low PE for such a steadfast company – I don’t think there’s much downside risk at all, as expectations are for very little growth. Upside abounds, though, IMO. Also, I like the e-commerce growth, which doesn’t seem to run up against the brick wall that is Amazon. They have a solid dividend that is easily covered and a very nice share buy-back program, wherein they have bought back nearly 15% of shares in the last few years.
SEDG - Last bought around $15.50. Been cautious since. But it’s soooooo cheap…I just think the fear is overblown. Also, some institutions have recently taken large stakes. I’m waiting for now.
PAYC - I’ve been buying opportunistically. I really like the product, the revenue is growing as fast as HUBS, and it’s now recommended by TMF (I’m not a member of any paid services, but I noticed the disclosure on a public-side article.)
My Current Allocations
To model Saul’s summaries, I’d like to say a little about the other companies I own – the ones I haven’t already touched on above.
SUNW - Even without me buying a share, this position grew from 7.9% of my portfolio in September to 10.2% now. Shares are up from 2.57 to 3.17. That’s almost 25% appreciation in a month! But I’m not adding…this position is plenty large considering how tiny the company is. But I love the revenue growth, and their business model doesn’t seem as susceptible to pricing pressure as SEDG or many other solar companies.
SSNI - It may be hard to predict the impact of the large contracts they’ve won…but they look significantly undervalued to me.
XPO - They are at an inflection point, going from negative EPS to positive. With net margin last quarter just over 1%, they’ve got plenty of room to grow that EPS.
AMN (formerly AHS – ticker changed today) - Demand for nurses and doctors will not be slowing down anytime soon, so this company should always be in demand.
SPLK - another fast grower, but it ain’t cheap. Looking forward to learning more with the quarterly report.
MITK - growing like a weed, but incredibly tiny. Seems like a great bargain now, but there’s just no news, so I’m waiting to learn more.
FIT - Growing really fast…definitely a lot of fear built into the share price. I keep waiting, but I’m definitely more likely to add than to sell.
YELP - Wild stock, but cheaper than most that are growing this fast. It’s come down more than 20% in October for no obvious reason. Definitely getting into a realm where I’m considering adding more.
PERI - I just don’t understand this one. Haven’t touched it in a while. Would love to learn more.
Skechers 13.5% Shopify 11.8% Solaredge 11.5% Sunworks 10.2% Paycom 9.2% Silver Spring Networks 8.5% XPO Logistics 5.9% Twitter 5.6% AMN Health 4.7% Splunk 4.3% Hubspot 3.7% Mitek Systems 3.6% Williams Sonoma 3.0% Fitbit 2.2% Yelp 1.2% Perion 0.7%
Random Thoughts and Conclusions
I don’t know how to make money by saying “hey this seems to be going up” and trying to get in for some of the gains. So I’m trying to price companies – to figure out what they’re worth and buy when they’re selling for less than that. I look for companies that I believe have some short term potential, but I avoid companies that I wouldn’t want to hold long term.
In the short term stocks often don’t do what I expect them to. Sometimes they seem to trade at prices that have no relation to the company’s performance. That’s why I don’t want to own companies that aren’t worth holding for the long term. If a company gets 20% or 25% cheaper, I don’t want to worry that its demand has dried up or that it can’t maintain its margins. I want to be buying more.
I also believe that just because a stock has gone up doesn’t mean that it’s expensive. If SHOP keeps growing like it has for the last couple of years, we might well look back a couple years from now and marvel at how cheap it was at 3B or whatever.
That brings up another thing: I ALWAYS keep market cap in mind. Did you know SKX and SHOP have about the same market cap? Yet SKX makes around $1B each quarter while SHOP’s revenue is less than a tenth of that. You could buy every share of SUNW for less than $100M. TWTR is around $13B. AMZN and FB, around $380B each. In looking at PE and EPS and even PS ratios, we can lose sight of the size of the company. I think SUNW could be a billion dollar company eventually. Not saying it will happen in the next couple years, or at all, but the opportunity is there. I don’t think AMZN will grow to 10x its size anytime soon. But obviously AMZN is worlds safer.
These thoughts have been somewhat more random even than usual, but that’s what I’m pondering. I’d love to hear thoughts, comments, etc.
My best to all,