April 2020 Portfolio Update and News
We have been on lockdown where we live for six weeks now. Hopefully we can get back to some sort of normalcy in the very near future. Everyone here is fine, I sure hope you and your family are as well. Over the past month, we have completed our backyard renovation and are extremely pleased with how it turned out. Had a new and larger deck built to replace the old one, tore down our old wooden fence, installed 15 pallets of sod, and built a new black aluminum fence. With some of my new found spare time, I planted a bed of annuals in the front of the house, as well as revamped another bed with layers of perennials. All of this was a welcome distraction to what is going on in the world.
With all of the Fear, Uncertainty and Doubt (FUD) in the world, investing during a crisis is a just as much psychological as it is analytical. I’m thankful that I find it easier to be fully invested at all times. The more I read about people building cash stockpiles, the better I think this could benefit me. At some point, people sitting on cash will redeploy it and help drive up the market. I’ve learned many lessons over the years of investing, but one I hold close is that I am not capable of timing the market. In fact, no one can perfectly time these decisions.
I think back to when Brexit hit and the markets all dropped. I had recently received a large Publix dividend check to my account and was in the process of investing it. One of the companies that I wanted to add to was Apple (AAPL). I set a limit that if it dropped down to $91.00, that I would buy more. It got as low as $92.04 before going back up. Had I just bought it at market price on the dip, it would have tripled in fewer than four years . As Howard Marks says, “The investor’s goal should be to make a large number of good buys, not just a few perfect ones.”
I have a few friends that have just started investing this month. I truly believe there is no better time than the present. I’ve been sharing information with some of them for years. If I can prevent any of them from making even one of the many mistakes I have made, it will be well worth it. I hope they find things enjoyable and successful.
Now, here is a snapshot of how my portfolio has performed over the past month, compared to the broader indexes.
Portfolio S&P DJIA Nasdaq Russell 2000 Fear and Greed April +19.45% +11.64% +9.88% +15.10% +8.93% 39 Total +32.61% +4.64% +2.10% +9.64% +1.90%
As you can see, this past month has been very good to the portfolio! We were up 19.45% in April and are now up 32.61% since the portfolio started on March 13th. All of the indexes are now in the green since the inception of this portfolio although they are greatly lagging it. The Fear and Greed Index has improved from 23 at the end of March, to 39 today. I cannot begin to guess what happens to the market from here though. Unemployment keeps rising and the virus is still continuing to spread. We could be in for more rough waters ahead. That said, with my current increase, I would be able to sustain a 24% drop and still be slightly above where I started. Hopefully we won’t run into that though.
My monthly stock updates are more akin to the Bill James’ Baseball Book, “This Time Let’s not Eat the Bones”. (Meaning, more news and narrative and less number crunching) Now onto the individual results for each company that I am invested in. They are listed by allocation from highest to lowest.
Company Allocation April % Change PTD % Change Crowdstrike (CRWD) 20.79% +22.47% +88.19% Zoom (ZM) 17.47% +4.68% +40.68% Alteryx (AYX) 17.02% +20.57% +9.99% Datadog (DDOG) 9.77% +21.01% +25.33% Roku (ROKU) 8.58% +42.74% +57.34% Okta (OKTA) 7.48% +28.34% +47.14% Coupa (COUP) 6.74% +26.71% +26.71% MongoDB (MDB) 6.60% +21.07% +38.87% Cloudflare (NET) 5.44% -4.39% -4.39%
At the beginning of April, I trimmed Alteryx, MongoDB and Okta, added to Datadog and Zoom, and started new positions in Coupa and Cloudflare. I also sold out of The Trade Desk. They are now more visibly broken into two tiers. Tier 1 which consists of the top 3 and makes up over 55% of my portfolio, and Tier two, which is the final 6 companies, and less than half of the total. Although I do not have any immediate plans to adjust after this month, four of my companies report earnings in the next few weeks. I may make changes based on information in those reports. Here are some thoughts/news on each of the companies in my portfolio:
Crowdstrike (CRWD) - I did not change the allocation here, but it moved up to first place due to trimming Alteryx, the former #1. Although up more than 88% since I purchased it, it is still more than 29% below its all-time high. There wasn’t a lot of direct news for Crowdstrike this month, however, after receiving a lot of bad press for security risks, Zoom says it’s now using intelligence services from CrowdStrike. In a month where there wasn’t much news about CRWD, this would certainly fall into the “Good News” category.
Zoom (ZM) - I’m not at all worried about all of the threats of lawsuits etc. I believe that Zoom is a superior product to anything else on the market and it will continue to dominate. They are rapidly working to shut any security leaks and I think they will be fine after that. I was able to add to my position during the dip, and then I watched it shoot back up. Just this week, Zoom launched version 5.0 to address all of the privacy backlash. Eric Yuan (founder and CEO) held an Ask Me Anything (AMA) session on April 22, and announced that daily user count had gone up from 200 million to 300 million since April 1st! Keep in mind that before the virus, they only had 10 million daily users. That’s a 30x increase. Hopefully they can monetize some of this. On 4/23 Nasdaq announced that they were adding ZM to the Nasdaq 100 index. On 4/24 ZM opened on fire, reaching an all-time high of $181.50 before dropping considerably on the announcement that Facebook was offering video conferencing for free. I will keep an eye on this, but just because something is free it doesn’t mean it is better and people will switch to it. Most of Zoom’s revenue comes from enterprise customers. I don’t see them switching to Facebook all of the sudden. Besides, I only see Facebook taking Zooms unpaid traffic, pretty much doing them a favor. Side note: I love that Google banned their people from using Zoom. The fact that they were using Zoom, instead of Google Hangout, in the first place shows that Zoom really has something. There seemed to be a year’s worth of news for Zoom over the past few weeks.
Alteryx (AYX) - Although I trimmed this position last month, it has gone up 20% since then. I can’t help to think that there is still a ton of room to climb for this hyper-growth business. Most analysts seem to agree as the average price target is currently sitting at $148.25. They report earnings on May 6th and haven’t given any indication that they are nervous. Results could alter allocation plans.
Datadog (DDOG) - Recently upgraded to Zacks Rank #1 (Strong Buy). This upgrade is a reflection of the upward trend in earnings estimates. Only the top 5% of Zacks-covered stocks get a “Strong Buy” rating. On April 23rd, they announced the general availability of security monitoring. With this new product, Datadog extends its monitoring and analytics platform to security engineers, in addition to developers and IT operations teams. They will be announcing earnings at the close of business on May 11th.
Roku (ROKU) - This month, Roku announced the arrival of The Roku Channel in the UK, providing consumers with free access to to more than 10,000 movies, TV episodes and documentaries. With the lockdowns being experienced, this will be a great opportunity for increased ad revenue. There are still a large amount of people that think of Roku as a hardware company. This could not be further from the truth. At the end of last year, 63% of total revenue from Roku came from the platform itself. (CTV advertising and revenue-share) Although they will be reporting earnings on May 7th, Roku released an early update on April 13th. Spoiler Alert: People watch more TV when stuck at home! They had blockbuster results across the board, but cautioned for their numbers for the rest of the year. This sent their stock soaring in anticipation of their full release next month. It was my best performer in April with gains of more than 42%
Okta (OKTA) - During their big Octane20 Live presentation, Okta made numerous announcements. One announcement was Okta FastPass, the first truly passwordless login experience across devices, applications, and operating systems, including iOS, iPadOS, macOS, Android, and Windows. With FastPass, employees can access their applications on any device without ever needing to enter a password. They went in-depth on how this would work. I won’t rehash it all here, but I can personally attest to the fact that countless hours of productivity are wasted with employees dealing with lost or forgotten passwords.
Coupa Software (COUP) - New stock this month. Coupa Software is a cloud based platform provider of comprehensive Business Spend Management (BSM) software. Coupa offers solutions for the entire Business Spend Management cycle, including Procurement, Payment, Expensing, and Invoicing, as well as supply chain management and analytics. Mid-month, Morgan Stanley upgraded Coupa and raised their price target from $130 to $182. Their analyst cited “rapidly improving profitability”, which increased confidence in their long runway of FCF growth. This indicates the highpoint on the range, and sent the stock soaring. (Stock was up nearly 27% in April.)
MongoDB (MDB) - Was named “2019 Google Cloud Technology Partner of the Year Award for Marketplace”, by Google Cloud. MongoDB also announced new Google Cloud availability and support for its global cloud database, MongoDB Atlas. This fully managed service is now available in Google Cloud’s new Seoul Region and a free tier in Mumbai. This stock has gone up nearly 39% since I purchased it, but I’m not sure how long it will keep up this pace.
Cloudflare (NET) - New Stock this month. Cloudflare, Inc. engages in the provision of cloud-based services to secure websites. It offers various products for performance and reliability, video streaming and delivery, advanced security, insights, Cloudflare for developers, domain registration and Cloudflare marketplace. Cramer had Cloudflare’s CEO, Matthew Prince, on his show. Prince commented about how the internet was built to withstand a crisis and the public utility has seen its usage double, seemingly without a hitch. He also stated his company was able to easily scale with their customers. Shopify recently came out and said their platform is now handling Black Friday traffic everyday…with the support of Cloudflare. One other thing I found was that they are also involved with election security. Pretty big election coming up this year. They report earnings on May 7th. Although they are currently a laggard in my portfolio, I am optimistic that this will change shortly.
I feel like I have learned a lot over the past month and will continue to tweak the way I record news and make notations. I imagine this will continue to get easier as I move along and hope that you notice some improvements.
Last but not least, an update to my personal health and wellness, and weight goal. I didn’t exercise as consistently as I wanted to this past month, but I did get in a fair amount of work. In the past month, my average weight was down 3.6 pounds. This brings me to a total of 10.3 pounds lost, on a goal of 25 pounds. Hopefully I can keep it up.