Bear's Portfolio through 06/2022

PaulWBryant · June 30, 2022, 4:36pm

WARNING: I was down roughly 54% YTD at one point this year. That means I only had about 46% remaining of what I started the year with! No one can prepare you for what it feels like losing more than half your net worth, even “on paper”…it’s not easy for most of us to tolerate. Don’t copy me or Saul or anyone – figure out what works for you.

Please don’t email me portfolio management questions. I have absolutely no idea what you should do, because only you can know how best to run your portfolio – and if you’re like I was when I was first running a concentrated portfolio, it will take months of rapt learning (including following along on this board) – and plenty of trial and error – to figure out what works for you. Here are a few answers to some questions I get frequently:

Q: Does your return percentage include the cash you hold?
A: YES, the 0% return from cash held is included in the overall return and obviously drags it down when the portfolio is up, but also drags return up when the portfolio is down. I’m constantly adding to and trimming positions, so my cash level fluctuates all the time – and I won’t be able to share my real time moves, just the monthly snapshot.

Q: Are stocks overvalued? Is that why you hold so much cash?
A: I never know when anything is overvalued. I just do what works for me.

Q: Should I hold cash to be able to buy on pullbacks?
A: Probably not if you have new money coming into your portfolio regularly (like from a paycheck), right? But when you’re retired you just have to figure out what works for you. The closest thing to advice I’ll say is this: You will never time it perfectly anyway, so just use your judgment and do what helps you sleep at night.


**Port Return**
Jan -21.2% YTD
Feb -23.8% YTD
Mar -26.0% YTD
Apr -35.5% YTD
May -49.0% YTD
Jun -47.7% YTD

Here’s what I did in June:
June was another up and down month, and on 6/16 I was close to my YTD lows, but with the S&P down around 8% in June, our stocks actually ended up doing ok, and my portfolio ended up higher than it started the month!

DDOG was only down 0.2%
MDB was up 9% (earnings 6/1)
BILL was down 7%
SNOW was up 9%
CRWD was up 5% (earnings 6/2)
NET was the outlier, down more than 20%

I sold SentinelOne this month, as I mentioned here: https://discussion.fool.com/hi-saul-sounds-like-we39re-thinking-…. I didn’t buy any new positions, but added to several (more on that below). So I now have 8 positions including cash.

One thing I’m focused on is building up positions very slowly and not to a level that outstrips my conviction in each company. It’s probably worth defining what my level of conviction is in each. Considering what I expect for long term durability of growth, and also paths to profitability, I come up with something like:

Extremely high conviction (comfortable up to 35%) – DDOG
High conviction (comfortable up to 20%) – MDB, SNOW
Moderately high conviction (comfortable up to 12%) – CRWD, BILL, NET, ZS

I would only approach these levels if I think a company is extremely cheap, like BILL now, or DDOG a couple weeks ago when I had it at 31.5%: https://discussion.fool.com/bear39s-mid-month-review-35130695.as…

But I also need to make sure not to let these positions be too small, otherwise I might have trouble staying invested in times like early 2021. Specifically, I plan to not let High conviction positions get below about 8-10%, even if they look too expensive. For example, as SNOW has gone from $118 to $140+ in the last couple weeks, I have trimmed it from ~12% to ~8%, so I don’t plan to trim it further, no matter how high it goes.

And I probably want to keep cash between 5% and 30%. Any more and I’m really limiting my portfolio’s upside. Any less and I might have to sell something at the worst possible time, just to pay the power bill.


Ticker	Curr%	Mo Ch	YTD Ch
DDOG	28.6%	-0.2%	-46.5%
MDB	13.7%	9.4%	-51.0%
BILL	11.5%	-7.0%	-55.9%
SNOW	7.7%	8.9%	-58.9%
CRWD	7.5%	5.4%	-17.7%
NET	7.5%	-21.9%	-66.7%
ZS	1.7%	-2.3%	-53.5%
cash	21.7%		

**Sold in 2022**
S	0.0%	-1.9%	-53.8%
AMPL	0.0%	-24.2%	-73.0%
MNDY	0.0%	-9.1%	-66.6%
UPST	0.0%	-37.3%	-79.1%
TWLO	0.0%	-20.3%	-68.2%

MY COMPANIES

Datadog (DDOG)
02/26/2021: $95.41 (Market Cap Approx: $33b, TTM Revenue: $604m)
03/31/2021: $83.34 (Market Cap Approx: $29b, TTM Revenue: $604m)
04/30/2021: $85.77 (Market Cap Approx: $30b, TTM Revenue: $604m)
05/28/2021: $91.05 (Market Cap Approx: $31b, TTM Revenue: $671m)
06/30/2021: $104.08 (Market Cap Approx: $36b, TTM Revenue: $671m)
07/30/2021: $110.70 (Market Cap Approx: $38b, TTM Revenue: $671m)
08/31/2021: $137.80 (Market Cap Approx: $47b, TTM Revenue: $765m)
09/30/2021: $141.35 (Market Cap Approx: $49b, TTM Revenue: $765m)
10/29/2021: $167.05 (Market Cap Approx: $58b, TTM Revenue: $765m)
11/30/2021: $178.29 (Market Cap Approx: $62b, TTM Revenue: $880m)
12/31/2021: $178.11 (Market Cap Approx: $62b, TTM Revenue: $880m)
01/31/2022: $146.11 (Market Cap Approx: $51b, TTM Revenue: $880m)
02/28/2022: $161.11 (Market Cap Approx: $56b, TTM Revenue: $1,029m)
03/31/2022: $151.47 (Market Cap Approx: $53b, TTM Revenue: $1,029m)
04/29/2022: $120.78 (Market Cap Approx: $42b, TTM Revenue: $1,029m)
05/31/2022: $95.39 (Market Cap Approx: $33b, TTM Revenue: $1,193m)
06/30/2022: $95.24 (Market Cap Approx: $33b, TTM Revenue: $1,193m)

Datadog shares still haven’t gotten back to where they were when the company reported a very good quarter in early May. Their FCF was a blowout, and they increased FY guidance mightily. Of course it’s a huge position, but below $100 and even $90 (as low as $84 I believe), I’ve been buying. Though many companies might never again attain their 2021 highs, I believe Datadog will someday be worth much more than the $65b or so it fetched at its peak last year.

MongoDB (MDB)
04/29/2022: $354.93 (Market Cap Approx. $24b, TTM Revenue: $874m)
05/31/2022: $237.15 (Market Cap Approx. $16b, TTM Revenue: $874m)
06/30/2022: $259.50 (Market Cap Approx. $20b, TTM Revenue: $978m) I corrected the diluted share count I was using (to calculate market cap), because they turned profitable and began to publish it on the press release

After dropping 30% in May for no reason, Mongo probably had nowhere to go but up. Even though management acknowledged headwinds when they reported on 6/1, the stock has done well since. The way I see it, the bad news has been absorbed, and things should be solid from here. I love Mongo’s lock in with customers, and I love plays on the growth of data, like this and Snowflake. Mongo seems extremely mission critical, which is even better. And they’ve just started to throw some profits to the bottom line.

Bill.com (BILL)
11/30/2021: $280.85 (Market Cap Approx: $29b, TTM Revenue: $308m)
12/31/2021: $249.15 (Market Cap Approx: $26b, TTM Revenue: $308m)
01/31/2022: $188.21 (Market Cap Approx: $19b, TTM Revenue: $308m)
02/28/2022: $237.88 (Market Cap Approx. 25b, TTM Revenue: $411m)
03/31/2022: $226.79 (Market Cap Approx. 23b, TTM Revenue: $411m)
04/29/2022: $170.71 (Market Cap Approx. 18b, TTM Revenue: $411m)
05/31/2022: $118.24 (Market Cap Approx. 12b, TTM Revenue: $518m)
06/30/2022: $109.94 (Market Cap Approx. 12b, TTM Revenue: $518m) I corrected the diluted share count I was using (to calculate market cap) by adding in the 7.4 million potentially dilutive securities from the 10-Q.

As I said in my May review, this quarter for Bill.com wasn’t as explosive as the previous one had been. Everything sounded fine, and I think the explanation was simply that this is their seasonal low. Still, it bears watching. This one has as much upside potential as anything, in my opinion. We’ll just have to see what they can do.

Snowflake (SNOW)
03/31/2021: $229.28 (Market Cap Approx: $68b, TTM Revenue: $592m)
04/30/2021: $231.59 (Market Cap Approx: $68b, TTM Revenue: $592m)
05/28/2021: $238.03 (Market Cap Approx: $71b, TTM Revenue: $712m)
06/30/2021: $241.80 (Market Cap Approx: $72b, TTM Revenue: $712m)
07/30/2021: $265.72 (Market Cap Approx: $79b, TTM Revenue: $712m)
08/31/2021: $304.35 (Market Cap Approx: $92b, TTM Revenue: $851)
09/30/2021: $302.43 (Market Cap Approx: $92b, TTM Revenue: $851m)
10/29/2021: $353.84 (Market Cap Approx: $107b, TTM Revenue: $851m)
11/30/2021: $340.15 (Market Cap Approx: $103b, TTM Revenue: $851m)
12/31/2021: $338.75 (Market Cap Approx: $121b, TTM Revenue: $1,026m) I corrected the diluted share count I was using (to calculate market cap), because they turned profitable and began to publish it on the press release
01/31/2022: $275.90 (Market Cap Approx: $99b, TTM Revenue: $1,026m)
02/28/2022: $265.66 (Market Cap Approx. $95b, TTM Revenue: $1,026m)
03/31/2022: $229.44 (Market Cap Approx. $83b, TTM Revenue: $1,219m)
04/29/2022: $171.44 (Market Cap Approx: $62b, TTM Revenue: $1,219m)
05/31/2022: $127.65 (Market Cap Approx: $46b, TTM Revenue: $1,413m)
06/30/2022: $139.06 (Market Cap Approx: $50b, TTM Revenue: $1,413m)

It’s the long term vs the short term here. This is what I said in May, and it hasn’t really changed: Snowflake made some progress this quarter, especially with cash flow, but they beat by a tiny amount and did not raise the FY revenue guide. I just think other companies are thriving more than Snowflake in the short term. In the long term I still believe they will be a big winner, so I will keep a small position and think about whether or not it makes sense to add. I wish I understood their potential better myself, but every techie I know assures me their TAM is enormous.

Crowdstrike (CRWD)
05/31/2022: $159.99 (Market Cap Approx: $39b, TTM Revenue: $1,452m)
06/30/2022: $168.56 (Market Cap Approx: $41b, TTM Revenue: $1,637m)

Crowdstrike had a fantastic “business as usual” quarter, reported on 6/2. Growth rate seems to have stabilized around 60%, and profits are soaring. EPS was 31 cents this quarter vs 10 cents in the same quarter last year. Look for more of that.

Cloudflare (NET)
05/31/2022: $56.00 (Market Cap Approx: $19b, TTM Revenue: $731m)
06/30/2022: $43.75 (Market Cap Approx: $15b, TTM Revenue: $731m)

Cloudflare has always been on my radar. I can’t claim to understand the business as well as my techie friends, but they have always put up rock steady numbers. They’ve dropped as much or more than anything, and that might be because they were getting too much of a premium. But there’s always a chance that someday they will again. Until then, it’s probably a smallish position for me, though I admit my conviction is somewhat second-hand.

ZScaler (ZS) – A tiny position that I’m mainly keeping because it’s in a taxable account and I feel no rush to take the loss. I explained why my conviction has dropped here: https://discussion.fool.com/maybe-zscaler39s-billings-slow-down-…

CLOSING THOUGHTS

I believe we are at our best as investors when we are relentlessly pursuing the best companies, and more and more – to me – that means SaaS businesses with durable growth. The trick is figuring out which companies have growth that will be very durable.

Valuation matters of course, but if a company will 5x or 10x its revenue in a few years, we have some serious room for error regarding what we pay for shares today. If a company might only grow 5% or 10% or not at all, the price you pay for the shares matters a lot more, because there is less room for error.

I’ve seen this play out over the years. Even with all my mistakes and changing my mind a lot, and even with the storms the market throws at us (like the last several months), my portfolio’s growth over the last several years has amazed me. There are scary times, though, and you should figure out what works for you!

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