CloudL portfolio update Feb 26, 2021

2021 Performance:

Portfolio   Feb, 2021       YTD
CloudL          3%          12.3%
SP500          2.78%        1.73%
WCLD           -1.1%       -0.8%
Russel 2000    3.13%       7.96%

This month is brutal for growth stocks. MWK and UPST dropped substantially right after I bought it. They remind me of when I bought EXPI at the end of Dec,2020 and it dropped 20%. Deja Vu!

This drop is more severe than both the 2020 year end selloff and Jan,2021 short squeeze.
I think it has two factors:

1. Expectation of rising interest rate.
I don’t worry about high interest rates or high inflation. The world population is peaking. It can’t grow as fast as in the past when we have 7.8 Billion people on earth. The best case is static state population. Or worse, it’ll decline over the next few decades. In order to have high inflation, the population growth rate must be high like in the baby boomer time period. So high inflation is not going to happen. So the interest rate won’t go too high despite liquidity injection.

2. A second but less severe WSB short squeeze.
GME squeeze gain? Come on ! They short squeezed the hedge fund the first time to show a point. That’s fine. I showed my support. But doing it the second time while risking crashing the whole stock market? I no longer support WSB. They are a bunch of gamblers. Munger said it’s a dirty way to make money and they are gamblers. We should make money by offering people good products. The good thing is the second squeeze won’t be as severe as the first one because people are experiencing it the second time and are not caught off guard… People can be fooled once but can’t be fooled the second time. So funds either sold off winning stocks to prepare for the squeeze and short it at a high price. Since GME didn’t go as high as last time, funds probably didn’t deploy all their cash to short GME. They will buy back the growth stocks!

My portfolio was up around 26% at peak month to date Feb 16. Then it dropped to up just 3% by the end of month due to two main factors above. After watching my super concentrated portfolio of 7 stocks downed 5% to 10% a day for a few days, I was extremely stressed. I was so sick of the volatility and I wanted to go cash! Struggling with this, I woke up in the middle of night to chat with a friend and he helped me to found myself again. My strategy is working.Why panic? I am up 30% in the last 3 months.This is an amazing result. During the last 3 months, WCLD is up 11% and SP500 is up 3.7%. Why stress too much about being perfect or about short term fluctuations? Even getting 50% return a year is a good result. It reminded me of myself in March, 2020. I wanted to go in cash but resisted. I am good at analytic but I have a problem with the worst case scenario. (Over thinking) I want everything to be perfect and go according to plan. Life doesn’t always go smoothly. There will be up and down. If we do our best, the result will be very good in the end. So what do I do? I stopped checking portfolio balance every day and stopped going to Yahoo Finance. I’ll let the stock price do the dancing. Once the selling is done, they will go back up because the companies have good fundamentals.

The lesson I learned is that life is a journey not a destination. Investing is a means for the journey. We do our best. It’s okay not being perfect. It’s okay to pick the wrong stocks. If overall, we get satisfactory results, we should stick with our plan.

I also had the thought of stopping sharing on this board because I want to do whatever I want and not explain a thing. Sharing on Saul board is not about being perfect or getting the highest ROI. It’s a gathering of like minded people so we know we are not alone. Don’t quit before reaching the finish line. I will try to but not promised to share useful thoughts for a little while.

I now understand why Saul said don’t copy him exactly.
The reason is that we frequently adjust the portfolio. My turn over rate is extremely high, much higher than Saul.

I compared the result of before and after change for the past 2 months and noticed the result after adjustment performed a lot better than without adjustment. a 5% difference a month is 80% difference compounded in a year! I can’t say I’ll always get better results adjusting positions but the likelihood is high because I changed positions very quickly depending on the prospect of the company. E.g. Is it slowing down? Is it reaching market saturation? Small caps tend to have more upside than mid to big caps. Lowly valued growth stocks have more upside than the highly valued stocks etc. .

And it’s misleading if someone sees the good return and tries to copy us exactly. They won’t get the same return as I do because I frequently adjust positions in a concentrated hyper growth Peter Lynch style. When I made adjustments, I didn’t always get a better return from each individual transaction but overall, I did get better results. Even people try to follow, they’ll always be a few steps behind so they have to learn to make their own decision. So having independent thinking is the way to beat the indices.

Just show examples of what the difference positions adjustment will make:

Jan, 2021 return:
No position change(return based on end of last month positions):1.94%
With position change(actual return):9%
Difference: 7.06%

Feb, 2021 return:
No position change(return based on end of last month positions):-2.46%
With position change(actual return): 3%
Difference: 5.46%

Current holdings and weight(%) and price change:

Ticker   Weight     Monthly Change                           
 MWK     21.63%        -10.45%(new)   
 UPST    21.02%        -23.21%(new)   
 EXPI    20.29%        13.3%   
 SLBG    14.39%        13.07%  (new) 
 CRWD    11.8%         0.09%   
 FUTU    7.33%         53.7% 
 LMND    3.54%         -13.4%   

Sold out positions:

New positions:

February transactions:

2/4/2021 Sold PTON added to EXPI, LPRO, FUTU
2/5/2021 Sold some EXPI, LPRO Bought SLBG
2/10/2021 Sold LPRO Bought UPST
2/16/2021 Sold SNOW Bought 15% MWK,
2/24/2021 Sold 7% CRWD, 7% FUTU Added 7% to MWK, 7% to UPST

Positions comments:
I sold PTON on Feb 4 because of the guidance of almost flat revenue for the next 2 quarters and ongoing shipping issue. I used most of PTON’s funds to buy Singer Bag(SLBG). SLBG is an early stage company making tennis ball launchers. It has more kickstarters funding and backers than PTON did. While I don’t think SLBG’s addressable market will be as huge as PTON, I think there’s a decent market for SLBG and there’s substantial upside. First year revenue is 11m with 50% gross margin. It initially focuses on tennis launchers but will expand into other ball launchers. Since this is a microcap, it’s not suitable for a big portfolio.
I removed 7% of CRWD leaving 10% and 7% of FUTU leaving 7% and added to MWK, UPST.
No major issues with CRWD and FUTU. it’s just that part of my strategy is to focus on smaller caps stocks.
During COVID, the stock trading activity has increased. I know many people traded more stocks in 2020 due to COVID. I am not sure it’ll continue. While FUTU’s recent acceleration of revenue may slow down in the future due the COVID is going away, FUTU”s revenue growth should still be decent due to more chinese buying US/HK stocks.
No changes.
EXPI stock got some headwinds probably due to fear of rising interest rate. I will watch the revenue growth rate instead of interest rate speculation.
I have to admit. I made a mistake on Snow which I paid too high of a price. I averaged up from $270 all the way to $380 without looking into valuation! Huge mistake! It was a case of FOMO when I bought at $380. My average cost ended up at $330! Snow is the worst performing position in my portfolio. If I bought at the low of $217, the return will be decent so valuation and price do matter for our return.
I can wait for the stock price to go up. I am sure I will be doing alright if I hold it longer. However, there’s opportunity cost. Many of my other holdings performed so much better than SNOW. For example: EXPI. I bought EXPI at the end of December, 2020. It generated a 100% return in little more than 1 month. The lesson I learned here is that price matters! It doesn’t matter how great the company is. If we pay too much for the stock, our return will be mediocre or at worst a loss.
Next time, I will be more patient to obtain a good price. Don’t let FOMO takes control. It’s okay to miss one opportunity. There will be more opportunities coming up. Find good companies but pay a fair or good price !
I took a second look at MWK and decided to sell Snowflake and buy MWK with a 13% position. SNOWFLAKE revenue growth rate is impressive. However the valuation is insane at Market cap/annual gross profit = 200% ! while revenue growth rate is 100%. and SNOW’s market cap is almost 100B ! MWK growth rate is between 50% to 90% and valuation is very cheap. With a market cap of 1.2B, low price to sales ratio, the upside for MWK is much larger than SNOW.
MWK’s revenue shows a similar seasonality to Shopify. It’s okay its revenue doesn’t go up smoothly every quarter. There’s a similarity between MWK and shopify’s. Shopify offers a platform for others to create a product brand rather than reply on amazon. MWK derives most of its revenue from its own products brands with their own retail websites. MWK also buys other product brands and offers its AI platform for third party sellers. The total market size for e-commerce is massive and continues to grow and there’s room for many players to co-exist.
MWK’s next year revenue is forecast to go up 90% from this year. It’s a decent growth and matches its historical growth rate from past few years.
I’ve decided to sell Open Lending and buy UPSTART. My reasoning is Open Lending focuses on just car loans. UPSTART offers many types of loans. UPSTART also seems to be signing up more banks than Open Lending. Both of them are in the same market and both derive most revenue form fees charged to the banks. They don’t have loan credit risk. I don’t know why it dropped so much recently. Maybe fear of interest rate change? Or because it went up too much in the last 2 months without reporting first earnings? I looked at the price to sales ratio, the valuation is on the low side. With Open Lending as an example, I have confidence in Upstart(AI + more products) This stock is volatile. When it goes up, it’ll go up fast. BTW: I don’t think Upstart is a turn around stock. It’s a startup disrupted by COVID.

Historical Performance:

Last 12 months: monthly
2021 Feb: +3%
2021 Jan: +9%
2020 Dec: +16.4%

2021 Year To Date: +12.3%
2020: +71%
2013 to 2019: 12% per year (Dividend stocks)
I started growth stocks investing at the end of 2019.
As you can see, dividend stocks return is very close or just slightly better than index return. Dividend yield is pennies. My portfolio went parabolic once I switched from dividend stocks to hyper growth stocks.

Some quotes:

-By careful pruning and rotation based on fundamentals, you can improve your results
-When stocks are out of line with reality and better alternatives exist, sell them and switch into something else
-Keep an open mind to new ideas
-Peter Lynch


Hi. Curious what you think on EXPI vs RDFN revenue. Focusing on brokerage commission revenue only (core business for both), how would you compare revenue between the two companies and which company is capturing more brokerage commissions? For example, maybe using 3Q2020 data since EXPI has not yet reported 4Q2020.

Hi MostlyLong,
My first screening hurdle is historical and current revenue growth rate. If a company failed the revenue growth test vs alternatives, I won’t look further into other details because it’ll be waste of time. It’s like IF Loop in programming: If revenue growth rate satisfied, do further research, else: pass.

I wrote a thread on EXPI at the end of December shortly after I bought EXPI.

Here’s some quote of what I wrote:
“I see it’ll continue to sign up new agents rapidly for the next few years.
EXPI grew revenue faster than ZILLOW, REDFIN both historically and currently.
Redfin was growing at 30% and accelerated to 60% and plateaued recently.
Zillow was growing at 20% to 30%. From 2018 to 2019, Zillow grew 100%. It seems plateaued and revenue declined 3 quarters in a row.
Realogy: declining for a few years.”

You can read the whole thread:…

Interesting thing is EXPI dropped 25% after a bought it in Dec, 2020. After two months, It’s now up 53% from my cost. The current correction on EXPI seems severe. It’s a 25% drop,same as December’s drop. It’s typical of EXPI stock behavior. After 2 months owning EXPI, I think the most important metric to watch out for EXPI is agent number growth. Agent number is the indicator of revenue growth, not real estate market condition, not interest rate. EXPI market cap is still small so EXPI is still one of my top positions.


My question here is, what revenue figure to use when comparing RDFN and EXPI? One way to compare is to focus on revenue from brokerage commissions, which is the core business for each company. Below is brokerage commission revenue taken from 3Q20 10-Q using below assumptions:
rdfn [gross profit] line for “Real estate services” segment from p. 10
expi ( [Revenue] - [Commissions and other agent-related costs] ) from p. 5

rdfn expi
mkt cap (2/26/21) $7.8b $8.4b
3Q20 brkg comm rev (% of rev) $91.9m (40.0%) $46.8m (8.3%)
3Q19 brkg comm rev (% of rev) $54.1m (35.1%) $23.0m (8.2%)
3Q20 vs 3Q19 rev gth % 70% $103%

Observations from above:
revenue growth both companies grew brokerage revenue fast yoy in 3Q, but rdfn from more than twice the base of expi
operating leverage rdfn increased gross profit margin by incremental ~5% yoy, while expi shows no change in margin
valuation companies have similar market cap, but rdfn has about 2x brokerage commission revenue of expi

4Q for EXPI will be interesting. In 4Q, rdfn brokerage gross profit was $81m, +93% yoy, and gross margin was 41%.

I own both companies and both are interesting for disrupting real estate, but have somewhat different models, especially pertaining to how agents are compensated. I definitely could be missing something, but above is part of how I have been looking at these two companies (obvious caveat is above is just one quarter and only one aspect of financial performance). Curious on your thoughts.

1 Like

Redfin Q3 revenue growth was -1% YoY. EXPI Q3 revenue growth was +100% YoY.

Redfin just reported Q4 revenue growth last week. It was 5% YoY. In a hot real estate market where values of homes sold have risen 20% YoY, it did 5%??

I really have not researched Redfin but what I just pointed out would worry me.


The whole point of my post is what revenue figure to focus on. Data I provided above is specifically revenue from brokerage commissions - the core business of both rdfn and expi - for the most recent comparable quarter (expi has not yet released Q4 financials).

Focusing on brokerage commissions, as stated above, in 4Q20, rdfn brokerage gross profit was $81m, +93% yoy, and gross margin was 41%.

Curious on people’s thoughts specifically on net revenue from brokerage commissions for rdfn and expi.