My last portfolio updates were on 9/30/17 and 11/21/17:
I was in 10 stocks when I last posted my portfolio. I have since made a number of changes including the addition of 1 position. Below is a comparison of my portfolio
9/30/17 11/20/17 1/3/18 cash 4.3% 2.5% 2.3% SHOP 20.9% (o) 17.7% (o) 15.3% (o) ANET 10.4% (o) 11.9% (o) 14.8% (o) NVDA 15.1% (o) 14.6% (o) 10.0% (o) SQ 10.3% (o) 13.2% (o) 8.6% (o) NTNX 6.8% (o) 7.3% (o) 8.7% (o) TLND 8.8% 8.2% 8.8% AYX 0% 0% 8.2% (o) HUBS 4.6% 8.3% 7.5% NKTR 1.9% 3.0% 3.6% JUNO 3.3% 3.5% 3.3% WIX 3.3% 6.7% 1.8% Options 5.1% (ITM value) Options 3.9% (time value) UBNT 0% (o) 0% (o) bought back short puts LGIH 6.6% 0% TWLO 5.0% 0%
- (o) indicates options positions in the underlying security but the percentages next to the stock is only the share value percentage
Since the last portfolio post in November, I’ve added the amount of my portfolio that’s being held in options. The total current value in options positions is 9% and of that value 57% is in-the money value and 43% is time value. The time value will decay over time but most of the decay will be very slow because most of the time value is due to the long calls that expire in January 2019 or January 2020. I will add that the 9% includes the negative value contribution from short put positions, but there is not very much negative time value from these short put positions. The only options positions that I hold are in the stocks that are designated by an “(o)” and I hold these because I believe that these stocks offer a multiyear secular bull opportunity. I might also have added HUBS and TLND options if the kind of options that I wanted were available. There are no options available for TLND and HUBS does not have leaps available.
Since November 2017, I’ve made the following changes:
- Sold a bunch of NVDA to buy a bunch of ANET.
- Trimmed some SHOP to buy AYX
- Sold about 20% of my SQ shares
- Trimmed SQ to buy AYX
- Sold a bunch of WIX to buy AYX
- Trimmed NVDA to buy AYX
In my November 2017 portfolio post, I wrote about my thoughts about SHOP, NVDA, SQ, ANET, HUBS, TLND, NTNX, WIX, JUNO, and NKTR. My thoughts on these have not really changed in the past 6-7 weeks so I won’t repeat what I wrote then. I still own all of the same stocks (plus I added AYX). I will spend a little time explaining the reasons for selling substantial portions of my WIX and SQ positions. I like WIX but I now like AYX more so I had to find something to sell. It’s as simple as that. I cut about 20% of my SQ position for 2 reasons. First, it had grown in market cap so I think the upside might be more like 5x than 10x now. Second, I think that the recent runup in price (to around $50) was at least partially fuelled by Bitcoin mania. Therefore, I wanted to reduce my exposure to SQ. My trimmings of my positions in SHOP, NVDA, and SQ (this was done today) was to purchase AYX. Of all of my 10 positions, why did I choose to trim SHOP, NVDA, and SQ. My SHOP position was large and I also hold significant upside in SHOP long calls. My NVDA position is also pretty large and I hold some long call positions; however, my reason for trimming NVDA has more to do with long term upside potential. Can NVDA go up 10x? This is a question that I like to ask as I like to own stocks that I think can increase in share price by 10x or more. NVDA’s market cap is $130B so a 10x increase would make NVDA the world’s largest company by market cap. Can it achieve this? I think it might but it would be quite an achievement. I think it’s really hard to predict how big AI will get. So I cut a bit of my NVDA position to buy a company (AYX) that has captured only a small fraction of its TAM….and it’s market cap is only about $1.6B. I trimmed SQ for the same reason that I cut a big chuck in December. I added AYX after Saul’s enthusiastic recommendations and after doing some additional due diligence. I couldn’t disagree with Saul’s and Bert’s assessments and conclusions.
2017 was a phenomenal year. Some people say this can’t be repeated in 2018. I wouldn’t go so far to make that statement. Will 2018 be a repeat performance for the stocks that we have picked? I really have no idea. But I think it’s feasible and I think it’s certainly possible. It might even be somewhat likely. I know that I tend to be optimistic, but here are some things to consider:
If you look at my stock picks, you will see that 9 of 11 are in tech (or at least related to tech). The other 2 are biotechs that have some pretty interesting pivot events likely in 2018. Techs were sold off in December 2017. I think that a bunch of institutional investors rotated out of tech. I think it’s highly likely that there will be (maybe it’s already started in the first 2 trading days of 2018) a rotation back into tech. Investors will look for growth and growth is in these companies.
Tax reform has passed and the analysts (and the companies) have not yet have time to revise their earnings forecasts. This will happen soon. Cramer also said this today, and I agree with him. I think it’s highly likely that we will see a rally into earnings and during the earnings reports (late January through February).
The Fed raised rates in December. Will they raise 3-4 times in 2018? The real question is whether there will be evidence of inflation. Maybe we will see some movement there or maybe it will be less than the Fed and economists think (due to the deflationary pressure of technology). I’ve posted about my view of inflation and how people over estimate inflation and underestimate the speed with which technology advances. Technology advancement is happening faster and faster every day and it continues to accelerate. This is difficult to observe. Yes, the Fed has increased rates a few times….the pressure on the gas pedal has been lighted but with current rates the gas is still being pressed and the brakes have not been applied. Monetary policy is still VERY favorable to stocks and to growth stocks specifically. Now, with tax reform, fiscal policy will give stocks a very big boost in 2018.
Will there be additional fiscal policy that will favor large corporations? That might be infrastructure spending. I think it will be more difficult to get through than the tax reform. However, an infrastructure bill would further fuel growth.
2018 should be really interesting. I’m excited to see what happens. Good luck to everybody!
PS: Since starting my new job in October, I have not had as much time to write on this board. Also, during the holidays, I went a vacation. I didn’t take my laptop and I went to a place where there was not good connectively (sometimes zero connectivity).