I posted this over on the Mongoose Chronicles a couple days ago. I had a couple people reach out to me, one saying I should have posted it here and another asking why I didn’t. I felt like there was a bit too much OT and personal stuff so I wasn’t sure if it fit over here. If it doesn’t I will keep it on the other board moving forward. There were some questions asked and answered, so I’ll link it here as well…
Here goes nothing…
I was debating on whether or not to post this here, but I figured it would be a good opportunity to introduce myself as well as give a monthly portfolio update. There’s quite a bit of background, but this will be a one time event. Mostly portfolio related in the future. Anyway, here goes…
March 2020 Portfolio Update
First some background. In 1986, I started working for a regional supermarket chain called Publix. It was one of the few places that would hire a 15 year old, so I was happy to get in. To be fair, I most likely was hired because my older brother worked there and was thankfully a good worker. Although I didn’t know anything about the benefits of working there at the time, when I decided to make it a career, I was already well aware of what my future would hold. Publix is a private company and they give shares of company stock to each associate at the end of each year, absolutely free.
When I turned 40, I set a goal for myself to be able to retire when I turned 50. I knew there were some things I needed to do if I was going to be able to make this happen. I had been following the Motley Fool long before this, but never before had the courage to invest on my own. I knew the time was right for me to begin investing in individual companies.
I started having money from my paycheck direct deposited into my brokerage account, and would invest in one company each month. Occasionally, I would just add to one of the stocks that I had the utmost conviction in. Two of the first five stocks that I purchased were Amazon (AMZN) and Apple (AAPL).
Early on, my portfolio was crushing the market and I figured this was pretty easy. (Having Amazon and Apple certainly helped.) I started to have my Publix Dividend checks direct deposited into my account and used this to buy even more stock. As my portfolio grew, I quickly learned that it wasn’t as easy as I initially thought, and all companies didn’t perform the same. Two of my biggest duds were The Container Store (TCS) and Westport Fuel Systems (WPRT). Although these two didn’t end up so well, I found them to be valuable lessons that things wouldn’t be so easy.
Eventually, my portfolio had grown to a total of 49 different companies, many of which I had invested in multiple times. Some of the top performers, (Amazon (AMZN), Apple (AAPL), General Communications (GNCMA), Crocks (CROX), ETC.) were carrying my portfolio, while others were dragging it down. At this point I noticed that my overall performance was barely staying ahead of the S&P 500 index.
One day, I was on the message board of one of the companies that I was invested in and stumbled on a post mentioning “Saul’s Board”. I had no idea what this meant, but the poster spoke very highly of it. I followed the link and spent the next couple weeks reading as much as I possibly could. I read his multi-part “Knowledgebase” numerous times, and still do from time to time.
The part that really struck home with me, was the idea of running a condensed portfolio with stock in only 8-12 different companies. I thought back to my earlier days of investing where Apple and Amazon were carrying my returns. This made perfect sense to me. It would be far easier to find 8-12 great performers than it would be to find 49.
After some further research, I started paring down the companies that I was invested in. I found it pretty easy to get down to 15, but would need to do more research if I wanted to make my portfolio as streamlined as I wanted. Due to tax implications, I had to wait 4-5 months to get it all the way down to where I wanted it.
On June 1, 2019, I married the love of my life. After returning from our Honeymoon, I revisited my plan to retire. This would be a big step and would certainly take me outside of my comfort zone. After looking things through, I felt that I was in great shape to retire in January 2021. Two months later, Publix stock went down in price. Many of my peers commented that this would delay their retirement. For me, it sped things up. After speaking with my wife, we decided that I would retire in January 2020!
A good friend of mine gave me a framed print from the television show, “The Office” It’s a picture of Michael Scott sitting in front of a white board with a quote by Wayne Gretzky, “You miss 100% of the shots you don’t take”. Wayne and I share the same birthday. This must be a sign! This was a shot I was definitely going to take. This is now hanging in my home office.
Fast forward to January 2020. I retired on January 24, 2020, two days before I turned 49. After starting the retirement process with Publix, I was going to have to wait three weeks to receive my checks from cashing out my ESOP and 401k. Once they arrived, I would be rolling them into an IRA to invest and live off of the rest of my life. Two weeks later, I called the retirement department to get an update to make sure my checks were going to be sent. I was informed that I did not send in one of the forms and there was going to be a delay in getting my money.
During the delay, COVID-19 rocks the country and the stock market plummets. Due to my error, I missed the brunt of the drop up to this point. My family and friends call this, “Joe luck”. Things always seem to work out for me. I have no idea what I’ve done in life to deserve this, but I sure am thankful.
Friday, March 13th, I got fully invested with my IRA. I set up some pre-market trades so they would go through once the market opened. About five minutes before it opened, I noticed an error in my spreadsheet and canceled all of the transactions. (or so I thought) As I’m continuing to buy, I notice that I had twice as many shares of Crowdstrike that I wanted, and I ran out of money before I finished buying stock in the companies that I wanted. After looking at my audit trail, I noticed the error with Crowdstrike. No biggie, I’ll just sell the ones I didn’t want and buy what I did.
Come Monday, I get a notification from Merrill Edge, that my account is on restrictions of some sorts. Evidently it is frowned upon by the Government to make those trades in a protected retirement account. This is known as “Free Riding”. Who knew? ??? To make matters worse, I actually lost money when I sold the extra shares of Crowdstrike, so much for Joe Luck.
Most of what you have read up to this point will not be in future installments of these monthly updates. I was planning on utilizing information from the actual end of month, but I see why Saul does his on the final weekend instead. It’s much easier to get this out of the way when the market is closed. All the information that follows is as of close of market, Friday, March 27, 2020.
Here is a snapshot of how my portfolio has performed compared to the broader indexes:
Portfolio S&P DJIA NASDAQ Russell 2000 Fear and Greed
+11.02% -6.27% -7.08% -4.74% -6.45% 23
In the two weeks that I have been in the market with my IRA, I am up 11.02%. All of the other major indexes are down through this same time period. Obviously this is too short of a time period to draw any conclusions, but I sure feel better about being way ahead than I would if the results were reversed. All the way on the right you see a column noted as “Fear and Greed Index”. This is something from CNN / Money and is the result of seven indicators of investment sentiment. The index is a scale from 0 (Extreme Fear) to 100 (Extreme Greed) and can be found here: https://money.cnn.com/data/fear-and-greed/?iid=EL
Warren Buffett once said that as an investor, it is wise to be “Fearful when others are greedy and greedy when others are fearful.” The Motley Fool often quotes this and it is something that I have really take to heart. When I started this portfolio, the Index Factor was a 5! Talk about some extreme fear! I took this as an opportunity to buy. We shall see how things pan out.
Now into the individual results for each company I am invested in. I will list these and sort them from highest allocation to lowest, and show their results:
Company Allocation Gain/Loss % Change
Alteryx 26.34% -8.78%
Crowdstrike 20.02% +53.66%
Zoom 13.10% +34.39%
MongoDB 8.95% +14.71%
Okta 8.85% +14.65%
DataDog 8.56% +3.57%
Roku 7.28% +10.22%
The Trade Desk 6.38% +1.17%
As you can see, my largest holding (AYX) was the only one out of eight with a negative return. I plan on making some adjustments to the allocations this week. Due to my trading restrictions, this will take days instead of minutes. Here are some thoughts on each of the companies. Next month, there will be more information for each, I’m keeping this part brief. I will also list any potential changes:
Alteryx My #1 allocation and the one that is struggling the most. I have extremely high conviction in this company and fully expect them to continue to crush their numbers. A poster on Saul’s board simplified what they do by stating, a company pays $1 to push a button, that generates $3 for them in return. Obviously this is an oversimplification, but it seems like something that should remain strong in spite of the crisis. It is easy to get caught up in price anchoring, thinking that I can’t sell any of this at a loss, knowing it will rebound. Thankfully, I’ve overcome that fear and plan to reduce my allocation here.
Crowdstrike - My #2 position and the biggest gainer in the portfolio. They released their earnings report this month and absolutely destroyed every metric imaginable. Their investor relations website simply states, “We are on a mission to protect our customers from breaches”. They set out to reinvent cybersecurity by utilizing a multi-tenant, cloud native, intelligent security solution. With the increase of people being quarantined and working from home, cybersecurity is as important as ever. Many companies that don’t traditionally allow working from home will have to protect the devices of their employees. This sounds to me like they will have even better results moving forward. I’m happy with my 20% allocation and do not intend to make changes in April.
Zoom (ZM) - First of all, if you don’t already own stock in Zoom and intend to get some, please, please, please do not buy the wrong one. Zoom’s stock symbol is ZM. Do not confuse this with the other Zoom that is stock symbol ZOOM. What can we say about Zoom? Holy moly, I don’t think you can read or watch anything during this crisis without someone mentioning Zoom. Zoom provides a cloud-based communications platform that concentrates on making the video conference experience better. This was designed as a video first interface, and from what most people says, it is by far the best interface on the market. I read something recently that stated that Zoom downloads have sky rocketed and they are gaining as many new users every two days, as they did in their entire last quarter. I will be adding to this position.
MongoDB - I’ve held this stock in my taxable account for a couple years now. It has been a great performer and very resilient. They are the unquestioned leader in noSQL database. Amazon tried to mimic their open source code, but it just doesn’t compare to MDB’s proprietary platform. Still a hyper growth company, but their increases are tapering off a bit. I don’t really see them benefiting from this crisis, so I will be trimming my position.
Okta - This is another stock that i’ve held for quite a while and it keeps performing very well. Okta uses cloud-based software to manage companies’ digital access rights, making work simpler for employees and helping employers keep track of who’s who on their networks. This also allows them to securely integrate internal and third-party cloud applications. Think, single sign on. This is an obvious beneficiary from the increased work-from-home crowds. Although a competitor, Microsoft is their most important partner. The #1 use for Okta clients is with Office 365 and it keeps growing. I’m planning to slice a wee bit off of here.
Datadog - Although this portfolio is just starting out, I have holdings in all of the previously listed companies in my taxable account. This is the only newcomer. Simply put, Datadog operates a fast-growing software platform that monitors customers’ cloud activity and mines it for business insights. They have an ever increasing umbrella of tools that they are using in an attempt to be a one-stop shop for their customers. They currently cover Infrastructure monitoring, Application Performance Management (APM), Log Management and user experience management. They have also announced that they will be releasing a cybersecurity tool. All that sounds swell, but the biggest selling point is that they have a 90% growth rate year over year! I will be increasing this position.
Roku - Roku is the leading platform for video-streaming services. The recent ad fraud using the Roku platform, could actually benefit then. The fraud was perpetrated from outside companies that exploited screensavers and other non active channels. Roku made a statement that if the ads are purchased directly through them, they will ensure the ads are properly executed. Personally, we have six Roku televisions in our house. We built a sports bar in the basement and really enjoy our time down there. Well, we used to when there were still sports. I do think with the quarantine there will be a spike in usage throughout the platform. I expect this to benefit Roku in their next earnings release. I will not be changing the allocation here.
The Trade Desk - The Trade Desk operates a cloud-based technology platform that lets ad buyers optimize their spending, getting the right ads in front of the right shoppers at the right time. This was my #1 performer in 2019 and was up 123.83%! Sadly, the current state of affairs does not favor them right now. I can see companies cutting back on ad spending. Although I do believe it has a lot of room to grow, I think there are better places for me to put my money therefore I will be exiting this position.
I’ve already mentioned a few spots where I will be adding and trimming. I also plan to start new positions in Coupa Software (COUP) as well as well as Cloudflare (NET). I’ll have more on these in next month’s update.
?Writing this update took a bit more time than I was expecting. I feel like it was very valuable to me because it really made me think about the decisions I am making and why I am doing it. They will not always have the best results, but I feel confident that I am at least putting some critical thought into making these decisions.
One last thing to add. I set a personal health goal to exercise more frequently and to lose 25 pounds in 2020. Two months in and my average weight over the past month is down 6.69 pounds from my starting point. Hopefully I will see continued progress.
If you’ve made it this far, I appreciate you sticking it out. Any feedback is appreciated.