FoolishJeff Dec 2023 Portfolio Update

2023 - up 41.0%
2022 - (-65%)
2021 – 21%
2020 - 140% (found Saul’s board in the summer of 2020)
2019 - 51%

Portfolio Breakdown

ELF - 14.8% (14.5%)
AXON - 14.1% (14.4%)
CELH - 14.0% (11.2%)
IOT - 13.3% (14.6%)
MNDY - 7.8% (10.8%)
NVDA - 7.0% (6.5%)
TTD - 6.1% (8.3%)
ZSCALER - 5.2% (6.3%)
CRWD - 4.8% (New)
RELY - 3.8% (3.8%)
TMDX - 3.2% (New)
TSLA - 3.0 (3.0%)
Cash - 3.0%

Watchlist - MELI, SNOW, DDOG

Summary: Well, another year in the books. After getting my as* kicked last year, it felt good to return over 40%. I made a few mistakes, maybe chased some shiny objects like Aehr when i probably should have just stuck with CrowdStrike and Zscaler. I definitely have regret about Nvidia, I didn’t realize we were looking at a trillion-dollar buildout of datacenters at the beginning of 2023.

A few things I noticed and/or learned in 2023.

  1. 2023 was the year of AI hype so a lot of the Saas favorites I abandoned early in the year, due to slowing growth, ended up doing much better than expected. I guess I’d rather follow the numbers than “future” hype, but it was hard not to notice.

  2. Zscaler and CrowdStrike - their topline growth slowed down a lot, but wow did they really kick in a lot of operating leverage. More than I expected. Here’s why I still own them for 2024 even at high multiples.
    a) Enterprise Spend should pick up
    b) Gov’t spending should pick up
    c) Gen AI creates more Cyberthreats
    d) Many enterprises are looking to consolidate, this is to ZS and CRWD’s advantage as they have grown into larger businesses with a broader array of offerings.

  3. Interest Rate Sensitive businesses - i could have done a better job backing out of Upstart in 2022 and Enphase in 2023. Some businesses are very interest-rate sensitive. It doesn’t take a rocket scientist to figure out folks are going to buy less solar panels at much higher interest rates. Elon made a great poker move in 2023 by lowering Tesla prices, it kept cars moving and really crushed the competition.

  4. Complicated Stories - I write this one every year and it is something that Buffett and Munger always emphasize. Stay away from complicated stories - i think BILL was one of those. It was a complicated story that was dealing with a Macro slowdown and a high interest rate environment. I should have got out earlier, too many unknowns.

2024 - I am cautiously optimistic that 2024 will be a good year for our growth stocks, barring some type of Black Swan event. Like many folks, I’ll be keeping a closer eye on multiples. How in-line are they with history? Is a stock over-stretched? Does it need some trimming?

The Portfolio

Highest Confidence Positions

ELF - 14.8%
This company is firing on all cylinders, and it was one of my biggest winners of 2023. Stats show that people actually purchase more makeup in a recession, and this is a value, knock-off brand so I’m confident that they can continue to do well, even in a tough Macro environment. Elf’s secret sauce, beside making good products and getting them to market quickly is social media. Social media platforms dominate the attention of younger demographics – especially Gen Z and Millennials. E.l.f. Beauty’s strategy to use cosmetic influencers on social media has allowed the company to engage meaningfully with the buyers and people who use the company’s products. Even with the run-up, a forward PE of 52 doesn’t seem unreasonable if they can continue to execute.

AXON - 14.1%
Another company firing on all cylinders, Axon has only penetrated 35% of the US market for Tasers and 14% for body cameras. The Saas portion should continue to grow faster than the rest of the business and this will lead to a margin expansion as well as more sustainable growth. Also, international growth is just getting going as well. Penetration in Europe is only 3% for Tasers and 1% for body cameras. A forward PE of 66 seems pretty reasonable for the type of sustainable growth Axon is offering.

CELH - 14.0%
Wow, I really love Celsius. The more I learn the more I love it! They are expanding the energy market by bringing in new customers, including fitness enthusiasts and females. And they are just getting going as they start to expand internationally in 2024 via Pepsi distribution. The stock has been pretty flat for the past few months, and I think this one has the most upside of any of my holdings. The stock has likely been flat due to the DeSantis estate liquidation. I took advantage and acquired a lot of shares under 50 bucks. With a forward PE of 58.9, and a forward PS of 7.3, it is very reasonably valued given the growth prospects. If Jonah Lupton is anywhere close to being right and they hit 57% growth in 2024, the stock could go crazy. The consensus estimate is 38.5% growth for next year.

IOT - 13.3%
Another great company that is kicking a lot of you know what. I love how they are expanding into other industries such as airlines. The valuation is quite stretched at this point, Forward PS is 17. I do think they are going to keep executing but I am trying to be a bit cautious given the high valuation.

Mid-Sized Positions

MNDY - 7.8%
I trimmed a little this month, the valuation has become a bit stretched, and it is a lower confidence position for me. I don’t see it becoming as big as some of my favorites. The forward PS is 10. That being said, Monday is beginning to realize significant operating leverage as it scales; revenue last quarter grew 38% year over year to $189 million, this was its third straight quarter of positive (non-GAAP) operating income at $24.1 million, or 13% of revenue. Even looking at (GAAP),’s march toward sustained profitability has never been clearer.

NVDA - 7.0% (6.5%)
Nvidia has 90% market share and a strong MOAT with CUDA as it takes advantage of a trillion-dollar buildout of AI data centers over the next several years. It’s gaming business also looks strong. Did i mention they grew over 200% last quarter? And on top of it all, the company is cheap. It trades at a Forward PE of 27.6. No wonder this stock is a top pick for so many in 2024. It might be tricky getting around some of the regulations in China, so I’ll be keeping an eye on that.

TTD - 6.1% (8.3%)
The thesis here is that they can keep growing at 20% plus for years to come as they dominate the demand side of digital advertising. As more streaming services go ad-supported and with 2024 being a big election year, I see good things ahead for the trade desk.

Small Positions

ZSCALER - 5.2%
They are still growing at a fast past and kicking down a lot of leverage. For the reasons I outlined above, I see cybersecurity as a must own in 2024. Yes, the valuation is stretched at a forward PS of 15.4, so I’m looking to add if there is a major stumble. There was some weakness in the secondary metrics (customer adds, rpo) in their last report, so it is something to keep an eye on.

CRWD - 4.8%
I got back in this one in early November, wish I never sold. :slight_smile: For the reasons I outlined above, I am bullish on cybersecurity in 2024. The valuation is even more stretched than Zscaler with a forward PS of 17.4. Again, I might add if there is a major drawdown. I love the operating leverage they are showing, and we could be due for re-acceleration in 2024.

RELY - 3.8%
Keeping it small due to the large losses but I’m hopeful they can show some operating leverage in 2024.

TMDX - 3.2%
This is a new position for me. I’ve sat on the sidelines for a long-time on this one, but I’m really impressed with their execution and MOAT. This one has a long runway and I like the mission as well.

TSLA - 3.0
The Cybertruck is going to be a big hit and is an engineering marvel. Watching glowing review after glowing review, I think Cybertruck is taking Tesla to the next level. If interest rates keep coming down and they keep making meaningful progress on FSD, robots, and a 25K vehicle, I’m likely to add. There is a good chance they will be a 10 trillion-dollar company by 2030 or sooner and the biggest company on the planet.

Shout out to Saul and everyone on the board who makes meaningful contributions. Here is to a safe, happy, healthy, and profitable 2024!


Previous Posts 2023:
FoolishJeff Nov 2023 Portfolio Update - Investment Analysis Clubs / Saul’s Investing Discussions - Motley Fool Community

FoolishJeff October Portfolio Update - Investment Analysis Clubs / Saul’s Investing Discussions - Motley Fool Community

FoolishJeff Mid-October Portfolio Update - Investment Analysis Clubs / Saul’s Investing Discussions - Motley Fool Community