YTD return -.005% (Flat)
Portfolio Breakdown
CRWD - 15.0%
NET - 11.1%
SE - 10.4%
ETSY - 8.5%
ROKU - 7.8%
MELI - 7.0%
TTD - 5.9%
MGNI - 5.0%
TWLO - 5.0%
FVRR - 4.6%
ZI - 4.1% (NEW)
PINS - 3.8% (NEW)
DOCU - 3.7%
BAND - 3.0%
FUBO - 2.3%
LMND - 1.3% (NEW)
DDOG - 1.1%
ACUIF - 0.50%
Sold Out: PTON
Summary: It’s been a rollercoaster of a year, after being up 25% in mid-February, the bottom fell out and my portfolio dropped to a low of -13% on Mar 29th. The last few weeks have been a bit kinder and I’m flat for the year. In my view it’s been a natural rotation out of growth - hedge funds & bots need volatility to trade on. On a relative basis, value-type stocks started to look attractive. Temporary rotations out of growth happen every year and this rotation was not surprising given the outstanding 2020 returns and the high multiples of many of our favorite stocks. The good news is our companies are performing beautifully and all the mega trends I look for are as strong as ever. Cybersecurity, Connected TV, programmatic advertising, social e-commerce, the gig economy, and the general digitization of the world are accelerating at a rapid pace. Data has been the new oil for a while now, software is king, and every company must utilize tech in order to “adapt or die” in the pandemic and post pandemic world. I’ve put in a lot of work this year with no $$ gain but I believe my patience will be rewarded. I’ve expanded my positions and have continued to add “young guns” such as Magnite, Fiverr, Bandwidth, Lemonade, and Zoom Info.
Brief Comments
CRWD (Crowdstrike) - Last month, CrowdStrike reported outstanding Q4 results and ARR crossed the $1B mark for the first time with record net new ARR of $143M. The Investor briefing in April rehashed the amazing stats of March - https://ir.crowdstrike.com/static-files/2852082c-2ce8-4d5d-9…. It continues to fire on all cylinders and has only penetrated 5% of an estimated $36B TAM. That TAM is expected to increase to $106B by FY25. Product modules have expanded from 10 at IPO to 19 today on the back of 120%+ DBNRR.
Major cyberattacks and the need for security is only accelerating. The SolarWinds and Microsoft Exchange Server hacks have dominated headlines and ramped up security spending. FireEye subsidiary Pure Secure recently reported that it is at the center of the latest international hacking incident. FireEye broadly identified the targets as “defense, government, and financial organizations around the world.” Hackers, some linked to the Chinese government, took advantage of a flaw in the Pulse Connect Secure suite of virtual private network devices to access the systems of “a very limited number of customers.”
NET (Cloudflare) - Under a new partnership with Nvidia, Cloudflare Workers gain access to easily scalable, secure machine learning and deep learning methods. The Workers platform will support Nvidia GPUs and the TensorFlow open source library and tools for machine learning, which will help customers build AI applications that run across the edge network using pre-built or custom models for inference. See the company blog for more details: https://blog.cloudflare.com/workers-ai/
The innovation of NET is hard to follow as it is so extensive and rapid but the blog has the details. https://blog.cloudflare.com/
As an Ethereum miner and NET shareholder, I was excited to see them supporting NFT’s (through streaming videos). “By permitting creators to embed their NFT claim to ownership into their video on Cloudflare Stream, we hope this will be a helpful step as acceptance of the process for minting, validating, and utilizing NFTs moves forward.” https://blog.cloudflare.com/cloudflare-stream-now-supports-n…
SE (Sea Limited) - This 3 headed monster has been strong, even with the downturn in growth stocks. It’s up 28% YTD and 303% since I first started purchasing shares on 5/12/20. This beast is very Amazon-like in how it goes after and wins in new markets and new businesses. As if dominating in Southeast Asia wasn’t enough, Shopee’s success in Latin America is case in point. The company invaded Brazil in late 2019 yet has managed to somehow overtake MELI in MAU in less than two years. Now Sea Limited is focusing on expanding Shopee into Mexico. It also announced the formation of two new platforms during its Q4 call, Sea Capital and Sea AI labs. Sea Capital will focus on future strategic investments and AI Labs will focus on the development and application of artificial intelligence. SE is also starting to expand its services for food delivery. Revenues are conservatively projected to hit $7.86 billion this year on 79% growth. SE has been increasing its cash flows consistently. Levered FCF has grown by over 100% in the last year, operating cash flow over 600% and this triple-digit growth is expected to continue into next year.
ROKU - The big news with Roku is the battle with Google over YouTube TV. Google failed to come to a distribution agreement with Roku amid claims that the tech behemoth made anti-competitive demands. https://www.axios.com/roku-youtube-tv-removed-google-5580ffd…
Roku argues that Google is threatening the removal of YouTube TV in order to get preferential access to consumer data in the future - including asking for a dedicated search results row in the smart TV interface and giving YouTube search results more prominence. This is scary news, they both need each other and I’ll have to rethink my position if the two companies can’t come to an agreement.
On a positive note, Roku has rebranded the content it acquired from failed venture Quibi as “Roku Originals,” which will also serve as the brand for its original programming. That means at least 75 new programs for its free, ad-supported channel - including a dozen that had yet to be released when Quibi shut down last year. The programs feature Hollywood talent including Anna Kendrick, Chrissy Teigen, Idris Elba, Kevin Hart, and Liam Hemsworth. This new content should increase the revenue and stickiness of the very successful Roku Channel, which is even available on frenemy Amazon Fire.
MELI (MercadoLibre) - MercadoLibre plans to invest $1.1B to expand its warehouse space in Mexico in a bid to keep up with demand and compete directly with Amazon (and eventually Sea Limited). https://finance.yahoo.com/news/1-mercadolibre-almost-triple-… MercadoLibre recently opened up a fourth distribution center in Mexico and boosted its delivery network. Last year, the company invested about $420M in Mexico as the market outgrew even its home base of Argentina. MercadoLibre’s 3 most important geographic segments are Brazil, Argentina and Mexico. They respectively accounted for about 55%, 25% and 15% of total revenue in FY 2020. Of the three, Mexico is the only region that is not profitable, although it is getting close and hopefully these investments get it over the hump.
ETSY - Not a lot of news flashed across my feed but I still love Etsy. Etsy’s moat and niche status have never been stronger than it is now. I even wrote a formal article about it last month with 4 main points.
- It is one of the most recognized U.S. e-commerce brands
- Etsy’s growth story just isn’t about masks anymore
- Etsy is expanding its International reach
- Etsy is showing strong operational leverage as it scales up its revenue base
- This massive market opportunity is worth the price
https://discussion.fool.com/etsy-article-by-foolishjeff-34776134…
TTD (The Trade Desk) - Not a lot of news. I did read a nice article on Seeking Alpha.
Summary
-The Trade Desk has a platform for marketers to provide digital advertising services.
-The technology play boasts an impressive financial health.
-Most importantly, it is spearheading UID 2.0, the replacement for third-party cookies used by Google’s Chrome browser.
-With traction for the new user identification system, product strength and strong finances, the company is a buy.
-UID 2.0 has sky-high growth prospects, but it is important to adopt a dose of realism as to valuations amid the global market uncertainty.
https://seekingalpha.com/article/4422784-trade-desk-skys-lim…
MGNI - Magnite closed its acquisition of SpotX from RTL Group. That establishes the largest independent connected TV and video advertising platform. The transaction comes in at $640M in cash and 12.37M shares of Magnite stock, amounting to about $1.14B. Magnite is still targeting more than $35M in run-rate operating cost synergies, with more than half of those realized in the first year of the combination. “Two-thirds of our revenue is now concentrated in the fastest-growing segments of the market, and as linear TV dollars move to CTV, the greatest opportunity is still ahead of us,” Magnite CEO/President Michael Barrett said.
FVRR (Fiverr) - Fiverr started to get covered by Needham and they announced it as a Buy. “FVRR has carved out a leadership position in the nascent offline to online shift happening in the freelancer market, and is putting the mechanisms in place to move upmarket and convert higher dollar price multi-stage/multi-user projects. We think the company’s efforts will drive higher spend per buyer and support our above-Street estimates,” said analyst Bernie McTernan.
ZI (Zoom Info) - I took my PTON shares and bought Zoom Info after reading Bert’s article and Saul’s recommendation of the company. The Rule of 40 score over 100 and the FCF margin of 55% really convinced me that this was a stock that I should consider purchasing. I also recommend this deep dive from MF that I posted.
https://discussion.fool.com/mf-deep-dive-into-zoominfo-34810679…
PINS (Pinterest) - I took up a position last month after finally giving in to the chorus of likes from The Motley Fool folks and some of the people on this boards as well. Social e-commerce is expected to grow at a CAGR of close to 30% a year over the next several years and with nearly half a billion eye balls, I think the future is bright for Pinterest. I also like the non-political nature of the site and the “buy” mindset of most of its users.
The earnings report was very strong and revenue is on the rise.
-Revenue up 78% YoY to $485 million (vs $474 million forecast by Refinitiv)
-MAU grew 30% to 478 million (vs 480.5 million forecast by FactSet)
-Net loss of only 22 million vs 141 million YoY
-Average revenue per user - $1.04 (vs $.99 forecast by FactSet) Up 97% internationally and 50% in the US.
Guidance = Q2 revenue expected to grow around 105% YoY but management noted slowing engagement and growth.
The main investment thesis going forward is this in my opinion
- Slowdown in user growth is temporary & seasonal
- Ad market is coming back
- Revenue and ARPU is on the rise due to new features
- Monetization of Int’l users is the key for future growth
PTON (Peloton)- Sold - I detailed the reasons in a recent post.
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The brand took a hit. The short to medium term uncertainty surrounding the Tred is concerning. This is the next big revenue driver for Peloton and the bad press hurts the company and could delay or hurt tred sales. I believe Peloton is the Apple of fitness and will do well in the long run but don’t feel like waiting it out.
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It’s not the typical asset light stock I like to own. I was already getting annoyed with the issues of owning a company that makes “widgets” rather a company that mines data or software. The 100 million dollar hit due to supply chain issues and the manufacturing constraints come to mine. Also, the lower margins (~40 gross margins) due it being mainly a hardware play were also annoying. It’s a great company but owning a “widget” maker has its downsides.
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Expectations - Although the company showed no sign of slowing last quarter, the tough covid comps and the perception of the stock as only a WFH play don’t bode well over the short to medium term.
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Opportunity Cost - After reading about Zoom Info (starting with Bert and Saul)and its amazing FCF margins of 55% as well as its strong growth rates and strong value prop, I felt this company was a better one to own and swapped all my shares of Peloton for Zoom Info (ZI).
TWLO (Twilio) - No news but some Bullish talk from BofA that was nice to hear.
Citing “the never ending growth story,” BofA reinstated Twilio with a Buy rating and a $480 price target. Analyst Daniel Bartus says the communications platform as a service company is positioned for sustainable 30%+ revenue growth for 5+ years. The analyst says Twilio’s growth profile is supported by increased usage during the digital transformation shift and more mainstream adoption of CPaaS solutions. The strong growth story justifies a premium valuation for Twilio, says Bartus.
DOCU (Docusign) - No news but some bullish sentiment from management that CLM could start to move the needle later this year.
FUBO (FuboTV) - The big news was that fuboTV signed an exclusive deal to show the qualifying matches for the 2022 Qatar World Cup. The agreement, a partnership with the 10 South American teams’ rights holders, strengthens fuboTV’s leading position as a sports-first live TV streaming platform. To bolster its Qatar World Cup 2022 Qualifiers coverage, fuboTV will produce original programming, including pre, half-time and post match shows, to air throughout the season.
Also, Fubo was called “The Netflix of Live Sport and More” in a seeking alpha article. https://seekingalpha.com/article/4418930-fubo-netflix-of-liv…
BAND (Bandwidth) Looking forward to earnings next week.
LMND (Lemonade) - I finally took a small sip of the Lemonade last month after seeing the price chopped in half from January highs. Banks and Insurance aren’t normally my bag. However, because they are generally old school, slow to innovate industries, they are ripe for disruption. Lemonade uses blockchain and AI to process applications and claims at record speed. Millennials are flocking and they just announced they are adding car insurance later this year (they already offer Homeowners, Renters, Pet, and Life Insurance). Customers can buy insurance from Lemonade with a 90-120 seconds chat with Lemonade’s AI-bot, Maya. Customer claims can be filed by chatting to another AI-bot, Jim, which can settle claims in as little as three seconds. Lemonade provides a seamless insurance experience that millennials come to expect from their businesses of choice. Lemonade gets a lot of its revenue through re-insurance and this seems like a good strategy. It helps expand margins and stabilize cash flow. This is a long term play that could really pan out.
DDOG (Datadog) - I’ve been keeping my position very small until the comps get better in another quarter or two. The next earnings call may prompt me to start adding back, we’ll see. I think the stock has been over-valued since the initial Covid slow down and I feel ok about my decision to keep it small. The stock still hasn’t come off the highs of last summer and is trading at the same price as last June. Datadog completed the acquisition of SaaS-based security platform Sqreen, which will bolster Datadog’s existing APM functionality and move the company closer to providing a robust, full-stack security monitoring solution. https://seekingalpha.com/pr/18267702-datadog-completes-acqui…
ACUIF (AcuityAds Holdings) - AcuityAds is a programmatic DSP (Demand Side Platform) for online display ads. It has been called the “next trade desk” by some at The Motley Fool. We’ll see how it all plays out.
Previous Posts
https://discussion.fool.com/foolishjeff-january-portfolio-update……
https://discussion.fool.com/foolishjeff-portfolio-at-the-end-of-…
No update in March (I had the COVID)
-FoolishJeff