Bear's Portfolio through 10/2023

[PaulWBryant]

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.

For the second month straight, everything I own was down except Axon (and my new position, Remitly – more on that below). I added to most of my positions, and cash fell below 20% of the portfolio for most of the month – the lowest it’s been pretty much all year.

I sold out of Okta after they had another breach. To me, if the brand is in question, it seems likely the numbers won’t outperform – whether it gets harder to attract new customers, or they lose pricing power, or whatever. And to be honest, Okta needed to continue to outperform (beat and raise) to have even medium upside. And of course, lack of upside isn’t even the worst case. No reason to wait around hoping for a bounce – I’m out.

A word about the positions I own:

Axon - Their revenue is growing better than most and the multiple is lower than most and profitability is increasing. What’s not to love?

Samsara - At 43% YoY last quarter, this is our fastest growing SaaS company right now. It’s not cheap, but they sure do keep putting up the numbers. Profitable for the first time in Q2, and I expect much more will come soon.

ELF - This is the position I added to the most in October. With 76% YoY revenue growth last quarter, ELF is growing faster than any other company I own other than Celsius. And ELF is even profitable, with a trailing PE of less than 40. If things keep going like this, I think they will prove very undervalued.

Monday - Clocking in at 42% YoY growth last quarter, this is our faster SaaS grower after Samsara. Also they’ve gone from -16% FCF to +26% FCF margin in 4 quarters. That’s impressive. I don’t expect them to take over the world, but they appear to be executing really well.

Remitly - There has been some discussion of Remitly on the board, and I know Saul and a few others own it. I finally got around to looking at it a couple weeks ago, and I was impressed. They seem to be growing fast in a huge market, and margins are improving. I added a small position and I’ve already added to it a bit.

Procore - Niche SaaS (construction), and I think they’re still a little underappreciated by the market. Like with Samsara, expanding profits are imminent.

Nvidia - Remember it or not, this one was actually up to $470+ in early October. I trimmed a lot to take some small profits (and to be opportunistic), but as it has fallen back toward $400 (and briefly below), I’ve added some back. It’s hard to figure how much upside Nvidia has, but just based on next year’s expected EPS of ~$16, it’s not expensive with a fwd PE of ~25.

Celsius - How long can this torrid growth last? I really don’t know, but there seems to be a big market for energy drinks, and they seem like the “it” brand right now, taking massive share.

Aehr Test Systems - Hard to believe it was just a few weeks ago that Aehr reported earnings. The numbers were fine, but they didn’t raise guidance. I didn’t love that, but it wasn’t the end of the world. You’d think it was, though, as now Aehr’s stock price has fallen nearly 50% in October! I had to add some this week.

Wrapping up:

Just as in October Axon and Remitly did better than most stocks in the market, I hope the other stocks in my portfolio will be able to do the same (or even better) in the coming months. Perhaps through their earnings reports, they can remind the market that just like Axon and Remitly, they all have a lot of strength and growth and coming profits – that things are improving for these companies more rapidly than for most other companies. That’s the way I see it, anyway.

Here’s hoping for a better month in November!

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

Jan 2023: Bear's Portfolio through 01/2023

Feb 2023: Bear's Portfolio through 02/2023

mid-Mar 2023: Bear's Mid-March Update

Mar 2023: Bear's Portfolio through 03/2023

Apr 2023: Bear's Portfolio through 04/2023

May 2023: Bear's Portfolio through 05/2023

Jun 2023: Bear's Portfolio through 06/2023

Jul 2023: Bear's Portfolio through 07/2023 (and Aug 3)

Aug 2023: Bear's Portfolio through 08/2023

Sep 2023: Bear's Portfolio through 09/2023

[AnalogKid70]

Looks like my post with a counter-argument regarding Remitly was deleted. I assume it was because it referenced a particular technology that is off-topic. I was not promoting investment in that off-topic technology, I was only pointing out how it creates a risk for Remitly. Please tell me how I should express those thoughts without naming the off-topic technology?

[wsm007]

Hey Analog

I don’t want to get into a debate here about bitcoin but note I did not talk about bitcoin activity - there’s a lot of that, especially in criminal circles, which all countries have, developing ones too. I was talking about using bitcoin to do stuff like make payments or pay someone. Crypto as a threat is the last thing I think of when thinking about the bear case for Remitly.

I think of Paypal, Wise, Western Union, the in-country banks, Telco’s (did you know that Safaricom, the biggest Telco in Kenya, makes more money from mpesa, their payments network than they do from mobile - slide 28) in-country regulation etc. etc.

I know of no - not one - store in any country in Africa or India (or anywhere for that matter) where you can pay for groceries using bitcoin. And that is the main use-case for the money received by the recipients of Remitly. It will be many, many years before (if ever) that happens imho.

Bitcoin is simply not a consideration at all in my Remitly investment thesis.

-wsm

[AnalogKid70]

I’m not going to take the time to reply in detail for fear that my post would just be deleted again without explanation. I will simply suggest that you keep it on your radar as a potential risk. Change happens fast. Best wishes.

[AnalogKid70]

wsm - I also suggest you google South Africa’s largest grocery store, Pick-n-Pay grocery store chain, related to the topic that shall not be named.

[brittlerock]

@PaulWBryant

How long can this torrid growth last?

That is indeed the question. They’ve not really expanded to Europe yet and I don’t know hoe much opportunity there might be in other markets, i.e. Central/South America, M.E. & Africa, Asia? If I remember correctly, management has only discussed Europe. They don’t want to try and get ahead of themselves. They want to get the U.S. humming before expanding geographically.

But, I look at Celsius and ELF the same way. Unlike Remitly, there is a limit, both of these companies are going to run out of runway. We can pretty much watch CELH and gauge when they are running out of gas.

ELF is a different story. They don’t have any moat whatsoever. The rapid growth is the product of a new marketing strategy: Tik Tok influencers. There’s no shortage of those folks. They are taking share from the establishment vendors. Mostly by appealing to a younger cohort. But, IMO there’s nothing stopping another newcomer, or even an established company with a new brand from eroding ELF’s growth just as ELF is doing so now. I don’t think brand loyalty is a very strong hold on the client base. I could be wrong, but IMO women are pretty fickle when it comes to beauty products.

That being said, I’ve got positions in both CELH and ELF, combined it’s over 20% of my portfolio. But even in light of the rapid growth, it makes me a bit uncomfortable. I don’t see a long term future for either of these companies. Even though we don’t try to time the market here, there’s going to be some “timing” involved regarding when to sell these companies. CELH has another year, probably more. ELF, I can’t even make a guess.