Important context for my portfolio reviews: I run a concentrated portfolio and WARNING the swings can be huge. From the 2021 high to the 2022 low, my portfolio fell more than 60%. For every $100 I had at the top I had just $40 left! Staggering. So, before trying this style, even with a small portion of your total net worth, please understand the downside – it’s much steeper than if you own an index, or a bunch of megacaps. Also, don’t follow or copy me, Saul, or anyone. To succeed with a concentrated portfolio, you must rely on your own decisions.
In January the market saw some buying for a change, though I would call it somewhat indiscriminate. The indices are up, with the Nasdaq rising a little more than my portfolio. That in itself was unusual – my stocks typically move (up or down) more than the Nasdaq. Blue chips (AMZN, GOOG,AAPL) did well, but we also saw a lot of troubled companies get a bounce (UPST, CVNA, PTON). Looks like both some flight to quality and some bargain shopping.
Seems a distant memory, but in the first 3 trading days this year my portfolio dropped almost 10%. I plowed money into most of my positions, letting SNOW and NET get above 15% each and letting cash drop from 30% to 5%, which worked out well as most days since have been green. I have trimmed throughout the month, right back up to now over 30% cash. I always try not to push positions higher than I am comfortable with. I like this plan because I get to just allocate as much as I want and leave the rest in cash, which is great on its own. But in crazy sell offs, having that cash available is an extra reward.
Datadog and BILL account for almost half my portfolio. I increased my allocation to BILL in January. Neither of these is perfect, but to me they stand out from the pack. I increased Snowflake as well. If it were not so expensive relative to the rest, I would probably have it near the size of DDOG and BILL. But 10% is plenty for me at these prices. No need to get FOMO.
I’ve got Cloudflare just a bit lower now after the shares jumped 17% in January. But also, I don’t feel as good about Cloudflare long term as any of the top 3, and one reason is simple: I’m not sure how profitable they will become. Though they have great gross margins, I’m not clear on how much they’ll have to spend on CapEx as they scale (which is somewhat unique vs the 3 above). Their long term target is a 20% operating margin, while we’ve seen others get to 30% and beyond. Another reason is that I simply haven’t ever been able to get comfortable with their growth drivers. I know they are a leader in CDN/DDoS (whatever those are), but Cloudflare One and R2 are much much smaller parts of their total revenue. Therefore, I really feel like this is our most speculative company. Sure, I believe they will continue to do well in all their segments, but I don’t know how to begin to quantify that. And they don’t even give us any visibility into growth rates by segment. I’d just be uncomfortable if this one got too big, and I’d be fine with it getting down to maybe a 5% position if it gets too expensive relative to others. I will likely trim more if it bounces up when they report earnings next week.
I sold almost all my shares in The Trade Desk because I just can’t get excited about advertising. I think they’re great long term. No idea what they’ll do short term. But mainly, I didn’t see myself holding for the long haul, so I trimmed since it was up a bit. I just have a few taxable shares left, much the same situation as Crowdstrike.
I closed Axon for a small gain – might add it back if the price falls too low again, but I don’t see massive upside there. I also got rid of the last bit of SentinelOne for probably obvious reasons given my repeated concerns about endpoint security (and really anything with mostly seat-based revenue).
ZScaler is the company I’m most interested in, but I’d like to see where Billings goes next month before buying back in.
Okta seems like it might be rising from the dead, but it’s hard to get a handle on what profitability looks like for them. It’s not a TWLO-like disaster where they have hundreds of millions of costs to cut, but it’s not a history of consistency either…also growth has slowed to something like 20%. Twenty percentish growth is kind of a hard sell until it proves that it’s not going to slow to zero or negative (a la Zoom)…Docusign is in that boat too.
Transmedics and other tiny supergrowth biotech – interesting, but they would just be tiny positions because I don’t know what healthcare growth curves will look like. Same with cyclicals or any widget-maker, although ENPH and CLFD are interesting. Saul will probably say I’m too picky, but I’m just sticking to rule number one, the goal I close with each month:
As always, the goal remains the same: pick the best companies.
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” - Attributed to Albert Einstein
Previous Month Summaries
Dec 2016 (contains links to all 2016 monthly posts): Bear's Portfolio at the end of 2016 - Saul’s Investing Discussions - Motley Fool Community
Dec 2017 (contains links to all 2017 monthly posts): Bear's Portfolio through Dec 2017 - Saul’s Investing Discussions - Motley Fool Community
Dec 2018 (contains links to all 2018 monthly posts): Bear's Portfolio through Dec 2018 - Saul’s Investing Discussions - Motley Fool Community
Dec 2019 (contains links to all 2019 monthly posts): Bear's Portfolio through Dec 2019 - Saul’s Investing Discussions - Motley Fool Community
Dec 2020 (contains links to all 2020 monthly posts): Bear's Portfolio through Dec 2020 - Saul’s Investing Discussions - Motley Fool Community
Dec 2021 (contains links to all 2021 monthly posts): Bear's Portfolio through 12/2021 - Saul’s Investing Discussions - Motley Fool Community
Dec 2022 (contains links to all 2022 monthly posts): Bear's Portfolio through 12/2022