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:
The Trade Desk…4.31%
Amazon…1.27% (fractional shares)
Alphabet…1.25% (fractional shares)
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.
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!