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.
Doesn’t seem like my disclaimer above is really necessary now, since my portfolio isn’t super concentrated. I guess I’ve become quite boring…and it seems (even to me sometimes) like nothing exciting will happen to my portfolio, especially with my large cash position…however, remember that I had a large cash position in late 2021, and it certainly didn’t stop me from losing roughly half my portfolio in 2022, so things can change fast. Stocks are volatile…that’s worth remembering even if it hasn’t been the case for me so far in 2024.
It might not feel like it after the last few days, but May was a great month for the market, with the S&P up about 4%…and get this, the 3rd largest company on the market, Nvidia, was up 27% for the MONTH. It’s also up 121% for the year and we’re only 5 months in! A great month means…yes, I did a lot of selling/trimming. Why do I trim a lot when a stock is up 20% or 30% or 40%+ in a single month? Because I don’t interpret the stock price action as confirmation of anything. And also because the market gives opportunities to trim and to add all the time, so I want to always be willing to do either.
We used to talk about “finding the best companies.” That was probably some distorted simplification of a brilliant insight by Saul and/or others here many years ago, but for me it always meant the companies with the best trends. And by trends I mean numbers: customer growth, ARR, NRR, margins, etc. What I didn’t mean is that the companies in my portfolio would be dominant forever, or that I could deeply understand what makes them special or could give them a moat. Most companies of a certain size are very impressive, perhaps technologically or operationally, but that’s not enough. But what’s worked for me is finding companies on the cusp of rapid improvements in sales and profits…especially if said company is undervalued by the market. It doesn’t matter if it’s Transmedics or Shopify or ELF or Axon or Zoom or Samsara or The Trade Desk. I want exploding growth, the cleaner and more organic, the better. But exploding growth isn’t enough, because for many companies growth explodes but then disappears and/or reverses. Think about Peloton, GoPro, Upstart, and Aehr. So I really want recurring revenue. But even a subscription business isn’t enough. Look at Docusign, or Twilio, or Okta, and even Snowflake, as well as many others that are lower than they were a few years ago. Therefore, I conclude that every business is a “sell” at some price. So I try to have an idea what companies are worth, within wide error bars of course, and outside those bars I’m willing to load up, or trim a position to a stub. I know many people successfully do things very differently, but this is what works for me.
This month Transmedics was up ~45% (after being up 25% in April!) I trimmed and trimmed on the way up and eventually trimmed it to 0. Now I think it’s overvalued as a ~4.7b company. It’s a small market (even though they’re helping make it a little bigger).
I also got out of Remitly. It was a total dog for me despite being “cheap.” Cheap is never a thesis…I thought Remitly had the potential to get profitable, but they aren’t doing it fast enough for the market, or for me. I’m out.
I had a short-lived daliance with DuoLingo this month too: Could Duolingo be in the portfolio? - #47 by PaulWBryant
So I’m down to 7 individual companies and 2 ETFs.
The companies I’m invested in:
Axon Axon reported an excellent quarter on May 6. It then proceeded to sell off about 10% this month. The market can react in surprising ways sometimes. That said, this isn’t a cheap stock. The company seems fairly valued or maybe slightly undervalued if we believe growth can stay this high for a long time (or margins can expand). I added some this month but I didn’t go crazy.
Zscaler ZS reported on May 30. In my eyes this quarter was better than expected. I had no inkling they’d grow billings 30% YoY, so that was great. The guidance raises were great too, and they keep churning out more EPS each quarter…here are the last 9.
I trimmed a bit as it rose to ~$185 after hours and in the premarket, but when it plummeted back to the mid 160’s yesterday morning, I added back. It recovered a bit but still ended the month down 2%. I see this as quite the opportunity. ZScaler 2024 Q3 beats and CEO disses competition - #3 by PaulWBryant
ELF ELF reported on May 22. The market had beaten it down badly before the report, so it got a nice relief bump (it ended the month up 15%). I thought the quarter was solid, although I wish their profits weren’t so lumpy. Seasonality makes sense with a beauty company, though, and so all seems well. That said, it’s hard for a tiny makeup and skincare company, especially a discount one, to become an $11b company in the first place! I probably don’t want this as a very large position. But I’m more than fine with it being mid to high single digits, and one of my top 3.
Nu Holdings NU reported on May 14 and it was tremendous. I am so glad I overcame my fear of both foreign companies and banking to invest here. I just had a tiny 1% position since my understanding is so lacking. After Q1 I built it up to 3% and have added a couple times since. I don’t think I will let it get to 5% or above…I would start taking gains at that point. But wow, they are growing really fast and recording a ton of profit. Impressive. The stock was up 9.4% this month, so it still seems very reasonably priced.
MercadoLibre Amazingly I understand MELI even less than NU (but only because I’ve spent so much time on NU). Still, it seems like a battleship and I’m happy to hold a smallish position. Won’t let this get above 5% either, I don’t think. But the market liked its May 2 earnings (I honestly didn’t understand the Q enough to comment much), and the stock was up 18% this month – bouncing back after the fear & doubt selloff before they reported (which is when I got the chance to buy).
Monday Monday had a very fine quarter, and the best part was the guide for next quarter and the rest of the year. It’s partially because of price increases they’re implementing, but they should actually accelerate a bit QoQ. That’s probably what drove the price up to at one point around $250. I trimmed a ton as it rose so high. I’ve added some back, but I’m taking it slow. Monday was up 19% in May.
Samsara What a wild month! On almost no news, Samsara got above $41 and then came all the way back to under $33. In the end they were down 3% in May! It was a great opportunity for lots of adding and trimming.
Cash and ETFs So last month I had 30.5% in ETFs and 25.7% cash. This month I cut the ETFs to just 6.6% and cash is up to 52.1%. That’s not because the market did well this month – it’s because I am seeing some opportunities to add to individual companies! For example, if Axon and Zscaler and Monday are weak in coming weeks, I would add even more. Maybe even Samsara too.
Wrapping up
Is all my adding and trimming worth it? I mean I did a ton this month and was “only” up 4.8% – a lot of people did better without all the hassle! Well it’s worth it to me because I actually enjoy it. I’ve got a good job. 
But also, in down months, it can really save me some $$.
Happy June!
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
Jan 2024: Bear's Portfolio through 01/2024
Feb 2024: Bear's Portfolio through 02/2024
Mar 2024: Bear's Portfolio through 03/2024
Apr 2024: Bear's Portfolio through 04/2024