Hi Everyone,
Here’s my irregularly posted portfolio review. I have had a tremendous year. If you told me when I started seriously investing, 21 years ago, that my best year would be during a trade war and a pandemic, I would not have believed it. Despite algorithmic trading, high frequency trading, and the liquidity pumped into the market, the market remains as unpredictable as ever. However, companies that provide valuable services and reduce costs for their customers are flourishing, which is not new. I know that I am preaching to the choir when I say, that technology such as SaaS, fits this bill, and we truly are in the middle of a technological revolution. To illustrate the shift from basic industries to technology between 1998 and 2018, I have attached this 5 minute link that shows how the 10 highest market cap companies shift position. I think it’s fun and provides good perspective as to what has happened over most of my investing lifetime. I find it surprising that only in the last few years have tech companies dominated the corporate landscape. It seems like technology has been with us forever.
https://www.youtube.com/watch?v=fobx4wIS6W0
My returns have been a little lower than what’s been reported many by the stalwarts of this board, so I thought I would do a comparison of my portfolio and behaviors to Saul, Bear, and GauchoChris to see if I can learn a little bit. I know there are several other portfolio write ups, which are much appreciated, but I only had so many hours, so I had to limited this writeup.
Here’s the Cumulative Returns
Month bulwnkl Saul GauchoChris Bear
Jan 13.4% 21.3% 25.7% 23.8%
Feb 18.0% 22.9% 27.7% 26.9%
Mar -5.1% 13.4% -2.9% 10.1%
Apr 15.2% 33.3% 16.7% 31.5%
May 61.0% 73.6% 64.7% 62.1%
Jun 89.5% 115.9% 110.3% 118.3%
And here’s the Allocations
Stocks Saul bulwnkl GauchoChris Bear
Zoom 22.9% 4.8% 11.5% 17.5%
Datadog 21.8% 22.2% 17.8% 0.0%
CRWD 19.8% 20.1% 21.4% 13.7%
Okta 11.5% 4.9% 7.5% 0.0%
Fastly 10.4% 0.0% 6.6% 18.6%
Alteryx 9.9% 12.9% 26.0% 9.1%
Coupa 2.1% 8.8% 0.0% 0.0%
Livongo 0.0% 8.9% 5.0% 5.5%
Roku 0.0% 0.0% 0.0% 8.9%
Gold 0.0% 0.0% 2.6% 0.0%
DOCU 0.0% 0.0% 0.0% 3.8%
LLNW 0.0% 0.0% 0.0% 4.3%
Tricida 0.0% 2.8% 0.0% 0.0%
Here’s a few Strategic Differences:
bulwnkl Saul GauchoChris Bear
Growth Stocks Yes Yes Yes Yes
Concentrated Portfolio Yes Yes Yes Yes
Options Some No Yes Yes
Cash No No No Yes
Gold No No Yes No
And finally, a few notes on unique interests:
Saul bulwnkl Bear GauchoChris
Growth Tricida Docusign Gold
Stocks Mercadolibre Limelight Netw.
Only Cash
We all trounced the S&P 500 return of -4.9% during this time. Even though there are significant differences in approach, the common denominators drive the performance.
- Invest in high quality growth companies.
- Concentrate money on your best ideas.
- Options aren’t required for great performance.
My performance is unique to me because I don’t blindly copy anyone’s portfolio. I think I am on the right track, but here’s how I will try to improve:
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Sometimes I get too caught up in valuation metrics and miss the big picture. I just recently invested in Zoom, enough said.
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I tend to hold stocks too long when their performance wanes. Even though I believe my selling criteria was correct, it bothers me that I sold Shopify after a mere 400% return. I tend to wait 2 quarters with slowing revenues to confirm that it’s not a blip or that management is not low balling the numbers yet again. I really would like to capture more of the next Shopify’s return. This will bite me sometimes and benefit me other. Unless I see clear indication that Altyerx’s decline in revenue growth is not correctable, I will continue to hold quite a bit, though I did trim 40%.
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Adjust to better opportunities more rapidly. I planned to get into Fastly, but struggled with what I want to sell. I have to tell myself, “no purchase or sale has to be carved in stone. If I make an allocation error, I can always correct it later.” So after a Fastly increases a 100% in a month, I’m ready to jump right in :o( This I will correct.
So I don’t think that I have far to go to emulate Saul, Chris, and Bear’s returns.
Here’s my thoughts on my companies:
Alteryx: I ambivalent about Alteryx. The deceleration of revenue growth from 75.6 to 43.2% turned my stomach. They said that COVID hit them especially hard in Europe , and the revenue growth problem sounds correctable. I was excited about their Analytics Hub and Intelligence Suite, then Muji, who actually knows something about the data business, was enthusiastic too. I like being in a business that doesn’t have any real competitors, and Alteryx seems to meet that criteria.
Datadog: Business results support the utility of their monitoring business. I’ve never worked in a business that grew revenue by 83%. It’s fabulous. My concern, since I am not a software or IT professional, is how big a moat do they really have. So far, it seems good, so I will stay the course.
Crowdstrike: I love this concept, and despite not being a software or IT professional, it seems self-evident that network effects combined with AI, likely give Crowdstrike a nice moat and a long term growth story. 85.3% revenue growth, mixed with consistent margin expansion to 77% over the las 5 quarters, and cash flow rising from $16.1M to $87.0M in a year is unbelievably nice.
Mercadolibre: Incredible growth in all aspects of the business. It’s payment system Mercadopago (Paypal of Latin America) grew revenue at an 82.2% FX neutral basis. Mercardolibre Marketplace (Amazon/Shopify of Latin America) Gross Merchandise Volume up 34.2%. Net revenues up 70.5% on FX neutral basis. Revenues are only up 43.5% on a USD basis. For those of you gold bugs out there, if you’re concerned about the strength of the dollar, this could be an option for you. Over time, the currency situation will swing back to Mercadolibre’s favor, when it does, Katie bar the door, you will see Mercadolibre explode. Even with the currency head winds, MELI has returned 73% ytd.
Livongo Health: I think most of us know of someone who has a chronic condition like diabetes. It’s corrosive the their bodies, their wallets, and our healthcare system. Although most people can’t bring themselves to manage diabetes care well, about 40% do seem to benefit from feedback from Livongo’s technology. The American Diabetes Association claims about $327B are spent per year on this disease. Livongo claims on their website that 5.8% decreased medical spending for client companies. That’s all medical spending, not just spending directly linked to diabetes. This would seem to be a no brainer to enroll any company in this system. My only concern is whether or not someone, like Amazon, or one of the large insurance companies, could use their data in a similar way to get a similar result. That said, I think that it would be easier to buy Livongo than replicate their services. I love the business, but will likely trim this down to provide some cash to purchase FAST. With 328,000 out 0f 100,000,000 potential clients, despite the 115% revendue growth rate and a 100% membership growth rate, I don’t see anything slowing Livongo down yet, but a competitor could rear its ugly head at any time.
Coupa Software: I love the network effect of knowing who is having payment issues to determine how a company does business. It seems like a procurement version of Crowdstrike in a way. Coupa identifies companies that are in financial trouble so that you don’t sell to or place an order with a question customer/vendor who is likely going out of business. Revenue is ONLY growing at 46.6%, but non-GAAP earnings have gone up 224%. Earnings are coming off a small base, but the business is scalable. That said, I think Muji is correct. Bolt on acquisitions are usually a bad sign, and I like FAST much better, so I will be largely reducing this holding.
Okta: I only recently invested in OKTA. It’s a great company, but I got caught up with companies that were sexier to me like GH. Wished I’d got in long ago for reasons that have been gone over ad nauseum on this board.
Zoom: The reason that I did not invest in Zoom was it’s valuation seemed way too high to me until I saw last quarter’s results. Yes, I read many of the Zoom posts. No one bats 1.000 (sigh).
Tricida: I have discussed this several times on the board. I probably should have waited to purchase this a little closer to the 8/22 estimate for FDA approval of their NDA for the treatment of Chronic Kidney Disease. There’s a lot of people who will likely benefit from,
- Improved quality of life from self-reported responses.
- Significantly better strength as measured by sit down/up testing.
- Lower serum bicarbonate levels dropped to normal range.
- Lower death rate.
- Fewer patients loosing more than 50% of kidney function.
- Fewer patients needing kidney transplants.
https://www.tricida.com/veverimer/
I think this a very good time to buy Tricida, but I am not willing to put in more than 3% myself.
A story sums up my thoughts about Saul and this board:
There was a farmer that entered his mule in the Kentucky Derby each year. All the people laughed at him and said “Don’t you know that mule won’t ever win the race?” The farmer answered, “I know, but I figured the association would do him some good.”
Thanks to all that contribute. Your association has done me good.
Best,
bulwnkl