BobbyBe's portfolio August 2019

My last post was very popular, but it was against the rules of the board. What Saul has done here to create this community is incredible and truly does exemplify the mission of the Motley Fool to amuse, enrich, and educate. I do respect his rules and encourage everyone to do the same. I think they are well considered and are instrumental in keeping this community thriving.

To atone for my portfolio management post folly, I think it’s only fair for me to write a portfolio update. Iit has been encouraged for more people to take part in this exercise, and I’d like to contribute.

Since my last post I have sold four positions to create a more focused portfolio. The four positions I have sold are:

Omeros

This is a company that isn’t talked about too much on this board. They are a small biotech company. They have one project on the market, Omidria, which is an eye drop used in cataract surgery. They do their own sales and marketing and use their revenue to finance their pipeline. They are developing Narsoplimab for several indications involving the complement pathway. While Omidria is a niche product, Naroplimab could be a blockbuster. It has breakthrough designation and is in phase 2 and phase 3 for several indications. There is a lot of confusion about this drug. Omeros sold off last year because it only showed a tiny advantage over placebo treatment in a trial of one indication. Normally this would be a big deal, but in this case the placebo was not a sugar pill, but the existing standard of care. However, the existing standard of care is a steroid treatment with awful side effects and by equaling the efficacy of this treatment with a better safety profile, the results were actually quite good.

I still believe that Omeros is a promising biotech pic, but I sold in order to add to Novocure which I think has a bigger market opportunity and is closer to realizing the opportunity.

Paycom

Oh! It was hard to sell Paycom just because it has gone up so much this year. But I look at the HCM space as one that is very competitive, and it’s hard to know if they will continue to eat up the market share of their competitors as the space evolves. But they are priced as if that is in the bag. So I’ll pass for now. I may be making a mistake and their share price might continue to skyrocket, especially since they are profitable and already buying back stock. If there is a pullback I may look to buy back in.

Smartsheets

Concerned about the fact that they are making acquisitions this early in their growth cycle. Also, that they are no longer founder led. Would rather allocate the funds too a higher confidence position.

Elastic

Concerned about operating losses. Not sure of the business model. It seems to require a lot of resources on Elastic’s part to facilitate a customer’s ability to integrate the offering. As such, I am afraid costs won’t decrease satisfactorily as the company scales. I’m also concerned about the troubles competitors such as New Relic have had in the spaces that it operates in. I might be able to assuage these fears if I better understood what they do, but I don’t, so I can’t

Enphase

Valuation concerns and poor glassdoor reviews make me question management and the company’s transition. Apparently they have done a huge reorganization and it seems as if the new management doesn’t understand the company. If it wasn’t for the fact that the company also seems overvalued, I might have held on to my shares as I look more deeply into management concerns. But the two things together make me want to step aside while I do that research.

These sales represented about 10% of my portfolio. I allocated the proceeds to Charlotte’s Web, Novocure, and IAC.

Here are my current holdings:

The Trade Desk 20%
Alteryx 9.74%
Mongo DB 9.22%
Roku 8.35%
Shopify 8%
Twilio 7.3%
ZScaler 7.25%
Pinterest 4.77%
Interactive Corp 4.58%
Square 4.31%
Novocure 4.23%
Mercado Libre 4.06%
Baozun 3.96%
Charlotte’s Web 3.88%

The Trade Desk

I have made The Trade Desk the core of my portfolio. It is very highly concentrated, but I’m young and am still very early on in the accumulation phase of my career. So it makes sense to me for me to have a concentrated position in my highest conviction company.

We all know the revenue growth story. It’s awesome. The question is, can they keep it up? I believe so. China and Connected TV will ultimately be huge markets and I believe they will contribute to hypergrowth for the trade desk for a long time. I believe this will easily be a 100 billion dollar company in the future. Just look at the name…”The Trade Desk”. It’s utterly aspirational. What do they aspire to be? Nothing short of a global advertising marketplace. I think they are well on their way.

Alteryx

I believe Alteryx is to data analysis what Adobe was to digital art. There are other, lesser, cheaper offerings, but Alteryx is the gold standard and what any serious enterprise is going to want to use. There was a recent Seeking Alpha post about Alteryx’s competition from free alternatives. Seriously??? Alteryx is not a staid titan begging to be disrupted. It is a young agile company. There is no way that a competitor would ever offer something for free if they could get thousands of dollars per head for it the way Alteryx can. To hear Jim Cramer say it they other day, “with Alteryx, 1 person could do a job that used to need 10 people”. Think about how much that money that is saving companies! If anyone, Alteryx has leverage to raise their prices. No need to worry about lowering them.

MongoDB

The fool is bullish and I have a hunch that Steppenwulf is right about this company dominating the NoSQL database space for a long time.

Roku

Seems to be gaining momentum in the streaming space. I think this company will be a big deal as more people move beyond netflix and need to manage multiple subscriptions. Their platform seems like the best and has a lot of fans. The fool has said that the connected TV ad market should surpass 210 billion eventually. If Roku is able to grab 30% of streamed hours and monetizes 10% of the ad dollars streaming through it’s platform, we’re looking at over $6 billion dollars of revenue at scale. Not bad but not as big as I think some of these other companies can get, so I may be trimming Roku in the future.

Shopify

Tom Gardner’s top pick for the next ten years. I just feel like they have a massive market opportunity and there is no way I am not along for the ride.

Twilio

I have liked them for a while based on their financials but have to admit I am not sure what they actually sell. So I’ve trimmed their position a bit. I generally understand that they facilitate the integration of communication services into apps and enterprises. But in terms of the nitty gritty, I’m a bit confused. I feel like they have a massive market opportunity, but it’s hard for me to pin down what is underlying their growth.

Zscaler

Innovative Disruptive Category Crusher. I’m just not sure about the ultimate size of the category they are in and how big they can get. So I have them a little lower down the list.

Pinterest

There was a fantastic write up posted recently by Ethan and supplemented by Brian. This is a social platform that I feel actually does some good in the world and I think it has a bright future. This is my Peter Lynch, “buy what you use” choice.

Interactive Corp

A huge stake in Match group. I met my wife on TInder, so maybe another Peter Lynch choice. They are worth more than the sum of their parts and should be doing a spin off or two soon to fix that. I’m hoping for at least a 30% gain in the next twelve months.

Square

Similar to Shopify. Massive TAM. Disrupting the payments space. I can see lots of parents downloading cash app on their kids phones, creating a new paradigm for a new generation. I also like the growth numbers and Bert’s recent writeup.

Novocure

Their product seems to work great and they are expanding into multiple indications, currently in phase three. They have a great opportunity.

MercadoLibre

Early innings in fintech and ecommerce in Latin America. They are the leader. I’m just a little worried about the stability of Argentina. So I have half of what I would otherwise like to have as a position.

Baozun

GARP play. Cheap is cheap for a reason. But I feel like this reason may evaporate over time as trade with China normalizes.

Charlotte’s Web

They hired an experienced CEO to make their brand last and they have a head start on the competition in this new, massive market.

In summary, I plan to be patient with these holdings. I don’t want to trade much as I feel that it is a bad habit for me and I need to develop trading discipline. I also haven’t analyzed the finances of my bottom companies in detail and plan delve more heavily into them before I decide to build out the position. I’ve tried to keep positions at around 4% minimum, so I don’t feel as if any of my holdings don’t matter.

Well, that’s all for now.

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Alteryx was founded in 1997 so not too young.