Bear's Portfolio through 01/2024

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. We may sell a position or buy a new one at any time, so it’s impossible to follow anyway. Also, to succeed with a concentrated portfolio, you must rely on your own decisions.

Well I’m glad I trimmed Remitly in December because it has continued to slump in January. Same with Samsara. But I kinda wish I’d waited to sell NVDA! Other than that behemoth and its little brother Supermicro, January seemed kinda muted. My portfolio lost 0.1%…so it was basically flat.

In January I added 3 “new” companies: Amazon, Alphabet (which I like to call Google), and Klaviyo. Obviously there’s nothing new about those first two except that it’s been years since I’ve owned them. Skip the rest of this paragraph if you want to be spared my philosophical thoughts, but in general I am getting really tired of having my head turned by the Aehrs, Teladocs, Upstarts, Lightspeeds, Rokus, Uipaths, Magnites, 2Us, Talends, Etsys, Amplitudes, and Nutanixes of the world. These businesses, and others that have tempted me over the years, have proven they are not impressive compounders. And I’m not just talking about revenue or profits compounding. I’m talking about the business itself. You know how in like 1995 no one outside of Seattle had heard of Starbucks, and by 2005 there were 2 of them on every corner in the United States? Do you really have to even look at their numbers to know that it was a successful business?? (This logic checks out. The numbers were indeed good. The stock did well.) The business itself compounded. I want businesses where the only real question is how much they will compound. With some of these Upstart-like moonshots, the question is much more if they will compound at all, or even survive. Amazon and Google won’t compound as fast as today’s greatest compounders (like hopefully ELF and Axon and Monday), but they also aren’t priced as if they could see durable 25-30% growth or anything close.

So those two are relatively defensive holdings as I don’t think they’ll go up or down a huge amount in the short term. Klaviyo is (very) different. It is potentially much more appropriate for discussion on this board…but so far it is very, very low confidence for me. But like Remitly, I think it is being overlooked by the market…we will see in time if I’m right or if these end up in the graveyard of pretender companies (non-compounders) like the long list above.

And sorry, I know compounder seems to be my word of the day. But the concept is not new…I discussed it here: My first big lesson from Saul

And here: Enovix - Early Days for this Innovative 3D Silicon Lithium-Ion Battery Architecture - #40 by PaulWBryant

And (sorta) even way back here: Nutanix: Customers & Offerings

Most of my other positions remain about the same as at the end of January. I trimmed Monday and Samsara a bit…Monday has been up 3 months in a row. And Samsara just annoyed me: Samsara suing a C-suite of swindlers - #11 by PaulWBryant

One other development this month is that I added Treasury Bills. Before you fall asleep let me just say that with a 56.7% cash position at the end of 2023, I just felt like I was leaving guaranteed money on the table. I can always sell them if I get an opportunity to deploy the money elsewhere, but since I still have ~40% cash, I doubt that will be an issue any time soon. All of my t-bills have 3 month and 6 month terms.

Lastly in January, I also sold Aehr Test Systems, of course, after their awful report. I wish I’d trimmed more in December, but I’m glad it was a small position.

A word about the positions I own:

Axon - Their revenue is growing better than most (especially the cloud revenue at 50%+ YoY) and the multiple is lower than most, and profitability is increasing. What’s not to love? Axon shares were fairly flat in January, and net, I didn’t add or trim. Still #1 for my portfolio.

ELF - Obviously not SaaS, but this is definitely a company fueled by repeat customers. They seem to be taking share left and right and truly building a brand. I enjoy seeing what they can continue to do. Shares rose in January, and I trimmed, but only a little.

Monday - Monday is similar to other SaaS compounders we’ve loved for years (like Crowdstrike), except its valuation is palatable. Even though the share price has risen 3 months in a row, I’m happy to have this as a large-ish position.

Remitly - The market sold them off pretty harshly last quarter on what I thought was a good report. Personally I think they’ll need to show some profits to start getting any respect. We’ll see if that happens.

Amazon - Do I really need to explain this total dominant company? I’m happy to own at a reasonable price. I don’t think it will crush the market, but I think it has as good a chance as anything to beat it or at least keep pace. Happy to accumulate a mid sized position over time unless something better comes along.

Google - Ditto what I said for AMZN.

Samsara - Priciest stock I own, even after shares fell a bit in January. Kinda nowhere to go but down. If that happens I might add back slowly…but I might wait until they report. I’d love to see the court battle behind them…but I’ll settle for some awesome quarterly numbers. I can’t find fault with the numbers so far. Important for me to remember that.

Klaviyo - They’re SaaS, and IPO’d back in September, and they do something called Marketing Automation. They’re similar to Braze which hasn’t impressed me…but Klaviyo’s numbers are better. There are similarities to Amplitude (I think) and even Twilio…and so other than the numbers, I don’t really know how to make sense of this space. But Klaviyo’s faster growth and most importantly, profitability, make me hope it’s the Datadog and the others are New Relic, Dynatrace, etc. We’ll see.

Wrapping up:

I’m still not seeing much (other than Axon and ELF and Monday) that I believe merits concentrating into. And by my large cash position you can tell that I’m not finding new companies worth owning…though admittedly, I try to set the bar high.

I feel like my approach lately is not to force anything, and I feel good about that. I wish I saw a ton of compelling opportunities, but I will try to keep being patient. There’s a time to concentrate, and hopefully I’ll see it when it arrives.

Bear

“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

Dec 2023 (contains links to all 2023 monthly posts): Bear's Portfolio through 12/2023

105 Likes

Hey Bear, why Google instead of, say, Microsoft? Just as safe/defensive, but with more potential for AI related business profits.
Google has historically been a leader in AI (eg AlphaGo), but not in business profits from it.
Just a thought.

22 Likes

@Smorgasbord1 @PaulWBryant

Agree GOOGL is perhaps not the best. Not sure MSFT is a better play either though. Hard to say its multiple expansion will get bigger, further valuation gains will be driven by mostly AI narrative at this point. If AI story stock is what you want, you’re better off buying NVDA and SMCI today.

MSFT’s expected FCF growth is nowhere going to be as attractive as AMZN, as on a long term basis, I’d prefer AMZN’s exploding and long term sustainable FCF growth above the other Mag7.
As to the other “Magnificent” stocks, META still looks good even after today’s exceptional +15% gain. I would definitely would stay away from AAPL and TSLA.

36 Likes

I realize that’s a historical reference, but DT has been growing about the same as DDOG for some time. Both are taking marketshare from New Relic and Splunk, so the reference should probably replace DT with Splunk! :slightly_smiling_face:

5 Likes