BobbyBe's irregular portfolio update

I’m not in the habit of doing a regular portfolio update. It’s hard for me to predict when I’ll have a spare moment, so I can’t count on myself to get it done at the end of the month. But I’ve made some big adjustments since a few months ago when I described my frustration at figuring out how to build a portfolio in a way that would leave me satisfied and not constantly trading. My trading fees totaled $1300 last year and I knew that this was limiting my returns.

The wonderful news is that Schwab dropped trading fees. So I would no longer be paying as I learned how to hold on to a position.

I think I found a strategy that is going to work for me. I realized I truly don’t have the time to follow 5-10 individual companies. All I really have time for at this point is to follow one company closely. The company I’ve chosen is Alteryx. One of the reason I’m posting this today is that Alteryx’s earnings are tomorrow and I’m hoping for a big beat.

I was advised against putting 100% of my funds in Alteryx. So what I’ve done instead is split my portfolio in two. The first half is invested in Alteryx. I call this my “enterprising portfolio”. Warren Buffet (or was it Munger?) famously said that a discerning investor should be happy to find one good idea per year. Alteryx is my one idea. It’s stock that I feel I can sleep well at night holding at a high concentration. I see good things coming.

The second half of my portfolio consists of 22 stocks. I call this my “Rule Breaker” portfolio. The companies are chosen based on the collective foolish wisdom I’ve found here on this board and on the fool in general, and no allocation is so high that I need to keep very close tabs on it. Schwab’s dropping of trading fees was very helpful here as well, as it allowed me to take on smaller positions than I felt comfortable with when each trade cost $4.95. I consider my “Rule Breaker” portfolio to be my alternative to an index fund.

Thoughts on my Enterprising portfolio.

I know a lot of people would call me crazy for having a 50% (actually 54.2% at the moment) allocation to a single stock, especially a smallish company like Alteryx. I do realize that it is a bold position to take, but please consider:

A) I am 37 years old. Not as young as I’d like, but I still hope to have a long career ahead of me. My goal right now is maximizing growth, rather than capital preservation.

B) My portfolio is relatively small. My wife runs a social enterprise with people living in poverty. So it pains me to call my portfolio small. I’m grateful for the abundance that I enjoy. But nevertheless, my portfolio is only just over $40,000. My position in Alteryx is only $23,000. I know it’s uncouth to talk about the size of one’s portfolio online, but if I am going to bare my investment choices, it’s something important to understand.

C) My equity portfolio does not represent all of my assets. I do have an inheritance waiting for me when my parents pass away (ages and ages hence, god willing) and I also own an investment property with my wife. We are paying the mortgage off at the moment, and what we have paid off is about double the size of my portfolio. I also have a $10,000 cash emergency fund. The success of my equity investments will not be the determining factor as to whether or not I will be able to retire. I’m not gambling with my well-being. More like, I’m hoping to retire wealthy.

Ok…with that cleared away, here is why Alteryx is the anointed stock in my enterprising portfolio.

A) The growth is strong and consistent.
B) Gross margins are higher than any other company I’ve seen. Management is targeting very high long term operating margins.
C) The competitive landscape is favorable. Dean believes he is in a winner take all space and he believes Alteryx can be the winner.
D) The company is not well understood. This is what I believe contributes to a very favorable valuation. The valuation is low compared to comparable stocks.
E) The company seems well managed. Stock based compensation is disciplined. I get the sense that there is a serious and hard working corporate culture.
F) I trust management. Go Dean.

My average cost for Alteryx shares is $85 per share. This includes many buys and sells as I adjusted my position over the past year or so.

The Rule Breaker Portfolio

The allocations for the Rule Breaker portfolio are fairly even, though I have given a higher weight to some of Saul’s other stocks. DDOG, CRWD, ZM, and TTD are other stocks that I considered for the enterprising portfolio, but did not make the cut. I worry about competitors who may come in and displace DDOG, CRWD, and ZM in the future. And these companies are all more highly valued than Alteryx as well. I worry about valuation more with DDOG and ZM, and competition more with CRWD. I almost put DDOG in with Alteryx as a second pick in the enterprising portfolio, but decided to pass on it for the moment. TTD I think is fully valued right now, given its growth, and I do have reservations on the CEO. He seems to be a salesman for the stock, more so than other CEOs. I dislike how he talks about %growth rates of business segments without breaking out raw numbers. That said, these companies do represent the top four positions in this portfolio, so I obviously like them a lot. TTD has a hand in all the ad-trends and a way into China. DDOG and CRWD seem like killer apps, and both will benefit from the influx of 5G connected devices and IOT. Zoom is taking over the world.

Here are all of my allocations:

DataDog…6.60%
Zoom…5.41%
The Trade Desk…4.31%
CrowdStrike…3.37%
Roku…2.28%
Coupa…1.95%
Tesla…1.81%
MercadoLibre…1.65%
Square…1.51%
Enphase…1.47%
Docusign…1.44%
Salesforce…1.34%
Microsoft…1.31%
Pinterest…1.30%
Okta…1.30%
Amazon…1.27% (fractional shares)
Alphabet…1.25% (fractional shares)
Shopify…1.25%
MongoDB…1.21%
ZScaler…1.14%
Yext…1.05%
Apple…0.79%
Paycom…0.70%

Last year showed me that large caps can also do well, so I added Salesforce, Amazon, Google, Apple, and Microsoft to represent some big tech bullies. I’d also like to add a little AliBaba, but will wait a little bit for the coronavirus impact to be more factored in.

I added Yext because I found the thesis in this article to be compelling: https://www.fool.com/investing/2020/01/05/my-top-growth-stoc…

The valuations for Shopify, Tesla, and Paycom all have me shaking my head. But Amazon had me shaking my head for a long time to, and I saw how that worked out. So I’m paying a little bit to participate.
They’ve both worked out so far.

I have no idea how to value Enphase, but I like the idea of investing in solar and it seems like a good pick.

MercadoLibre I LOVE, and it was another contender for the enterprising portfolio. But I think it’s fully valued right now. I’d like to accumulate on pullbacks.

Coupa I think is THE leader, but I don’t understand the financials and the divergence between GAAP and non-GAAP.

ZScaler and Okta seem like a winners, but I don’t like the competition in cybersecurity. I like Crowdstrike best because I think endpoints are going to explode in number with 5g.

Pinterest is fun. My wife uses it. It’s the only social media where I’m actually looking for ads instead of trying to avoid them.

Docusign is being used as a verb in some companies - 'Nuff said.

I think mobile wallets are the future and Square is poised to benefit from that immensely. I also think it’s had a nice bit of time to consolidate before the next leg up.

I had a fraction of an Apple share in my account before, and I decided to add to it because I couldn’t sell it. I now own 1.25 Apple shares. Yay. Lol.

A lot of people here are very confident that MongoDB will be very successful long term. The financials worry me, and I don’t understand databases, but I’m willing to trust seeming very well informed strangers on the internet enough to take a small position.

Beth Kindig has me convinced that Roku most likely has a very successful future ahead of it. The Fool likes it too.

Did I miss anything?

In short, I like all these companies. I’ve been following this board for almost two years and gotten a sense of the ebb and flow. I’ve seen stocks discarded by Saul and the concensus, only to make a resurgence later, and this has given me the idea that I don’t need to strain too hard to ferret out the winners. I’m sure all of these picks won’t do well, but the idea is that I don’t want to pay too much attention to them. I think on the whole, this portfolio will destroy the averages.

Watch List

Aside from AliBaba, I’m interested in a couple medical device stocks, Avita and Novocure. If I can get a nice dip, I’d be tempted to grab a few shares.

How have I done so far?

I have been shifting everything over to this mix since about Mid-January, so my results so far in 2020 do not exactly match the performance of my holdings since January 1st. A lot of my trades have been fortuitous, with the exception of my DataDog holding, which I decreased significantly at $40 per share, right before it shot up.

My return for this year so far is 28.75%. My performance last year was 33.59%. I believe Alteryx will go higher than $200 per share this year, and I’m feeling like everything is off to a good start.

Thanks for reading!

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It’s an interesting way of allocating a portfolio and you may be tempting criticism from the stalwarts of this board.

I do like AYX and that is always my go-to stock for the beginning of the calendar year when I invest, and I usually allocate 25% to it.

The problem that most people will point out, validly, is that the rest of your portfolio is scattered over a number of companies that are usually analysed frequently here (except for one) and that you would need to do some more research to try and determine which of those are high conviction vs low conviction.

After this earnings season is over then I’d suggest that you trim your losers and add to your winners in order to reduce the number of stocks you hold.

If they all win then great, but I think that the most cursory of analysis will indicate which should be your highest conviction stocks, so sell your lowest conviction stocks and add to those.

We’re getting into a portfolio allocation conversation here and that’s not what this board is about, but at the moment you seem to be over-diversified but can correct that after all your stocks have reported.

Best of luck, PB.

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Thanks for the comment. My conviction is to put everything into Alteryx. 50% of my portfolio is based on believing in my own conviction. The other half is based on the idea that my conviction may be wrong.

I’m Saul’s advice to his daughter, he said to start off with 50% in an index fund. My rule breaker portfolio is intended to be an approximation of an index fund -albeit with a mega trend edge. I’ve looked at different funds such as those offered by Ark invest, and every fund I look at has stocks that I don’t like at all. Better to make my own.

With only one stock in my enterprising portfolio, I have enough time to pour over the earnings calls and press releases in detail and become more of an expert.

Eventually I would like to move towards a more focused portfolio. I’m looking out for the next stock that might be up for addition to the enterprising portfolio. In that sense, my rule breaker portfolio is also functioning as a watch list.

I’ve got to move at my own speed. I’ve given way more than a cursory glance at all of the companies I own, and it’s still not at all obvious to me which have greater merit. I’ve got to follow my own learning curve

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You’re gonna hear this from the Board Rules Committee…

Portfolio management is not a subject for this board, and questions about it should be answered off-board if at all. A board which welcomes this subject tis the Portfolio Management board

Good luck with your AYX bet.

🆁🅶🅱
For not in my bow do I trust, nor can my sword save me.

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Thanks for the candor and insight. I guess we can’t reply about portfolio management, so I’ll just say I hope you’re right about AYX hitting the $200+ mark.

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BB,

That’s quite the portfolio allocation! I’m not saying it’s wrong or bad, just very different, as you’ve taken the 2 extremes and combined them, half the portfolio in just one stock, and the other half in a whole lot of really small allocation stocks. Most people lean either one way or the other, not a little of both extremes.

Regarding this comment, I think on the whole, this portfolio will destroy the averages. How your portfolio will do will be 100% dependent on how AYX does, it won’t matter at all what the 1-5% allocation stocks do. And I’m with you, AYX is my largest holding (although nowhere near 50%).

Good luck to us all!

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“The company I’ve chosen is Alteryx.”

I think it’s fine to be highly concentrated given the limited size of your portfolio and your relative youth. I manage little accounts for a few of my grandchildren, and two of them with balances of about 5K are 100% in AYX.

Alteryx is also my #1 hyper growth stock and i wish i had been bold enough to be so concentrated as you. But i am twice your age and my stock portfolio is about 80X yours at the moment. So, AYX and my other hypergrowth favorite RNG amount to 12% each.

I have had a funny allocation for several years also. Not sure it was planned, but 38% of my current portfolio is in BRKA and MSFT. BRKA has done great since i bought 29 years ago but has been simply a market performer since 2009. MSFT, OTOH, has been an 8+ bagger since i bought 10 or 11 years ago. Half my portfolio is in hyper growth so you can say AYX and RNG are really 24% each of my hypergrowth stocks.

Don’t know if the math makes sense, but about 62% of my total portfolio is in those 4 high conviction stocks (BRKA, MSFT, AYX, and RNG), RNG returning a beautiful 15X since my 2014 acquisition.

My sine qua non for buying a stock, above all is exceptionally capable leadership. All the numbers and technology trends discussed here matter also, but i think companies tend to grow or shrink to the size of leadership and that is where my research time is focused. TAM has little meaning to me because great leaders who have the capacity to handle larger companies will move to where the TAM is going.

My next tier of holdings in the SAAS/cloud/subscription space include, LVGO, ROKU, TTD, ADBE, and PEGA. I have a valuation instinct which keeps positions in CRWD, DDOG, and ZM to starter levels. All have top tier CEOs, IMO.

I’m wrong a lot.

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This thread now has 7 posts on it and most of them are Off-Topic, focussing on portfolio management. NO MORE PORTFOLIO MANAGEMENT POSTS PLEASE.

Thanks for your cooperation,

Saul

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you should definitely change your broker. I’m with IB and typically pay around $0.30-0.35 per trade. Unless you have a daytrading habit, your fees should be 10% of what you paid last year, at the most.

Schwab,Vanguard and Fidelity(I think) offer trades to brokerage accounts which are commission free.

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Schwab,Vanguard and Fidelity(I think) offer trades to brokerage accounts which are commission free.

True, $0 commission, for Schwab and Fidelity I know for sure.

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Vanguard does!

You can add E*Trade to the list too.

I been using Merrill Edge for several decades for a CMA account and trades have been free all along.

Have never understood why more traders did not use them when they were the only ones offering zero commissions. Plus they paid me $2000 bucks the first time i transferred $1 million IRA to them out of TD 3 years ago.

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