Due to the popularity of Saul’s board, I know that many people look at my portfolio and others’ who post here. Please remember that I’m not here to advise. You have to decide whether to invest in growth stocks and whether or not to run a concentrated portfolio, and if so, with what percentage of your net worth. If someone who was retired, or on the verge, suddenly decided to put 100% of their net worth into a portfolio like mine in mid-2021, it absolutely would have messed up their plans. At the lows this year my portfolio was down more than 60% from its 2021 high. If you haven’t been through that, take some time to do the math. Staggering.
As bad as this year has been, if you widen the lens, you see a very different picture. Cumulatively since January 2017, my portfolio has gained over 1,200% even after falling so much this year. I think this style has worked for me for a few main reasons:
- It fits my mentality. I can change companies often, but I’m committed to investing for the long haul.
- When I started, I had a solid job and was adding money to my portfolio regularly.
- I had some great luck early after adopting this style, in that 2017-2020 (especially 2020) was an incredibly good run for growth and especially SaaS.
Saul and many, many others have successfully run a concentrated portfolio for decades. But that doesn’t mean it’s for everyone. And before trying this style, please understand the downside (2022 is a good reminder). If you want to read about my path, there are links to every monthly review (starting Feb 2016) at the bottom of this post.
I wouldn’t go so far as to call October spooky, but it was pretty strange. The indexes rebounded quite a bit. Beaten down companies like Peloton and Twilio were up as well. Our favorite companies (and many other high-growth companies) did not fare as well.
I could be wrong, but my interpretation is that whatever was down the most found a bottom. In my eyes, it seems like this is happening irrespective of the merits of each company. That’s fine with me, because eventually quality wins out. In the short term, macro and sentiment drive returns. In the long run company performance drives returns.
Comments on each company
Mostly I just added and trimmed and added and trimmed all month. I did increase my stake in Datadog and Cloudflare slightly, and in Snowflake and SentinelOne substantially.
Just like I said last month, I consider Datadog, Bill.com, Crowdstrike, and Snowflake my core positions, and they are all very high confidence companies. That means if the price falls, I’m probably adding. I would be willing to go to 25% Datadog, but the others I’ll probably keep closer to 15% or less. I’ll likely only get to these limits when I feel the stocks are drastically undervalued. Bill.com is pretty close to 15% now, so that tells you I feel they’re looking pretty undervalued. I bumped Snowflake a lot too, as the share price fell this month. Basically, these positions are in the range where I want them, so I’ll just be opportunistic as their stock prices fluctuate, adding and trimming.
Cloudflare and SentinelOne and The Trade Desk are not as high confidence as the top group, so I’m fine with them as mid single digit positions. I wouldn’t feel comfortable building them to double digit positions just yet. In October I felt like the time was right to add, but I think about 8% for SentinelOne and Cloudflare is as much as I’m comfortable holding. I didn’t add to The Trade Desk because it still feels outside my wheelhouse. Also I just think there’s more upside with SentinelOne and Cloudflare.
I trimmed Peloton when it rose a bunch early in the month, but it’s a tiny 1.5% position, so we can all just ignore it. It’s interesting to me, but my conviction is low, so I’m holding such a small amount that it’s not really moving the needle much.
So that’s 7 real positions, or 8 total if you count tiny Peloton.
I’ll be making sure I can hold on if this mess continues into 2023, but at the same time hoping for a good November for all of us.
“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): TMF: Bear's Portfolio at the end of 2016 / Saul’s Investing Discussions
Dec 2017 (contains links to all 2017 monthly posts): TMF: Bear's Portfolio through Dec 2017 / Saul’s Investing Discussions
Dec 2018 (contains links to all 2018 monthly posts): TMF: Bear's Portfolio through Dec 2018 / Saul’s Investing Discussions
Dec 2019 (contains links to all 2019 monthly posts): TMF: Bear's Portfolio through Dec 2019 / Saul’s Investing Discussions
Dec 2020 (contains links to all 2020 monthly posts): TMF: Bear's Portfolio through Dec 2020 / Saul’s Investing Discussions
Dec 2021 (contains links to all 2020 monthly posts): TMF: Bear's Portfolio through 12/2021 / Saul’s Investing Discussions
Mid-June 2022: TMF: Bear's Mid-Month Review / Saul’s Investing Discussions
Sep 2022: Bear's Portfolio through 09/2022