GauchoChris portfolio update 8/7/2020

I wanted to wait to post a portfolio update until the portfolio companies reported results this week. FSLY, AYX, LVGO, DDOG, and NET have now reported their results. This update is through August 7, 2020.

PORTFOLIO PERFORMANCE


YTD Performance
	**GC port	S&P500TR**
Jan     +25.7%	  0.0%
Feb     +27.7%	 -8.3%
Mar      -2.9%	-19.6%
Apr     +16.7%	 -9.3%
May     +64.7%	 -5.0%
Jun    +110.3%	 -3.1%
**Jul    +144.7%	 +2.4%**
**Aug7   +108.3%	 +4.9%**

Below are I’ve appended new portfolio highs onto the table that I posted in my last update. The entries from 02/18/20 through 06/25/20 are reposted and the entries after that (bolded) are new.


02/18/20	+40.7% <<< YTD high prior to lockdowns
03/06/20	+21.9% <<< portfolio down 10% on the day
03/09/20	 +3.6% <<< portfolio down 15% on the day; Fear index=3
03/11/20	 +0.6% <<< portfolio down 8.8% on the day; Fear index=4 
03/12/20	-11.0% <<< portfolio down 11.4% on the day; Fear index=2 (1 intraday)
03/16/20	-22.8% <<< portfolio down 18.9% on the day; Fear index=3
05/22/20	+61.0% <<< new all-time high (ATH)
05/27/20	+47.5% <<< portfolio dropped 15% (intraday 5/27) in 3 trading days
05/29/20	+64.7% <<< new ATH (end of May 2020)
06/03/20	+78.8% <<< another ATH; day after CRWD and ZM earnings
06/10/20	+79.4% <<< another ATH
06/15/20	+84.6% <<< another ATH
06/16/20	+89.4% <<< another ATH
06/17/20	+92.1% <<< another ATH
06/18/20	+101.7% <<< another ATH
06/19/20	+103.3% <<< another ATH
06/22/20	+111.4% <<< another ATH
06/25/20	+114.6% <<< another ATH
**07/01/20	+119.7% <<< another ATH**
**07/02/20	+121.4% <<< another ATH**
**07/07/20	+125.7% <<< another ATH**
**07/08/20	+139.9% <<< another ATH**
**07/09/20	+147.0% <<< another ATH**
**07/13/20	+118.6% <<< portfolio down 10.5% on the day (biggest $ drop ever)**
**07/16/20	+113.1% <<< July trough**
**08/03/20	+156.9% <<< another ATH**
**08/04/20	+158.7% <<< another ATH**
**08/05/20	+158.8% <<< another ATH (current ATH)**
**08/07/20	+108.3% <<< OUCH! Biggest dollar drop ever (and -19.5% in 2 days!)**

In early July, the stocks continued to rise and the portfolio hit several new all-time highs before pulling back. The month of July 2020 had 5 new ATHs, half as many as in June. The first week of August had 3 all-time highs before a very steep decline on August 6th and 7th. The year through August 7th 2020 had 24 new ATHs. By comparison, the prior year (2019) had 28 new ATH with the last one being on July 26, 2019.

Below is the weekly portfolio YTD performance.


                   **GC           S&P     Delta**
01/03/20	    4.5%	  0.1%	 4.4%
01/10/20	   14.8%	  1.1%	13.7%
01/17/20	   19.6%	  3.1%	16.5%
01/24/20	   22.1%	  2.1%	20.0%
01/31/20	   25.7%	  0.0%	25.8%
02/07/20	   28.1%	  3.2%	25.0%
02/14/20	   39.8%	  4.9%	34.9%
02/21/20	   29.1%	  3.6%	25.5%
02/28/20	   27.7%	 -8.3%	35.9%
03/06/20	   21.9%	 -7.7%	29.5%
03/13/20	   -4.8%	-15.7%	10.9%
03/20/20	   -6.8%	-28.3%	21.6%
03/27/20	   -2.4%	-21.0%	18.5%
04/03/20	  -12.5%	-22.6%	10.0%
04/10/20	    3.1%	-13.2%	16.2%
04/17/20	   18.7%	-10.5%	29.2%
04/24/20	   20.5%	-11.7%	32.1%
05/01/20	   13.8%	-11.8%	25.6%
05/08/20	   37.7%	 -8.7%	46.4%
05/15/20	   47.8%	-10.7%	58.5%
05/22/20	   61.0%	 -7.8%	68.8%
05/29/20	   64.7%	 -5.0%	69.7%
06/05/20	   67.4%	 -0.3%	67.7%
06/12/20	   74.8%	 -5.0%	79.8%
06/19/20	  103.3%	 -3.2% 106.5%
06/26/20	  107.8%	 -6.0% 113.7%
07/02/20	  121.4%	 -2.1% 123.5%
07/10/20	  144.2%	 -0.4% 144.6%
07/17/20	  115.4%	  0.9% 114.5%
07/24/20	  113.2%	  0.6% 113.5%
07/31/20	  144.7%	  2.4% 142.3%
08/07/20	  108.3%          4.9% 103.3%                             

ALLOCATIONS


	8/7/20	7/31/20	6/30/20
CRWD	20.0%	19.8%	21.4%
DDOG	16.2%	17.2%	17.8%
ZM	15.0%	12.5%	11.5%
FSLY	11.9%	 9.8%	 6.6%
NET	 9.4%	 3.6%	 3.5%
AYX	 7.2%	25.2%	26.0%
GOLD	 4.8%	 3.1%	 2.6%
OKTA	 2.7%	 2.4%	 7.5%
BPRMF	 1.6%	 1.1%	 ---
LVGO	 ---	 7.8%	 5.0%
Cash	13.4%	-1.7%	-0.9%

The above allocations include my options positions. I still hold 2022 calls on AYX, CRWD, FSLY, and NET (added today).
For AYX, 65% of the value (in dollar terms) of the position is held in shares and 35% of the value is in options. For AYX, 43% of the controlled shares is shares and 57% of the “shares” are controlled by $90 January 2022 calls.
For CRWD, I was more aggressive after the Q4 2019 earnings report. Shares comprise 20% of the controlled shares and the LEAPs comprise the remaining 80%. The strike prices on these options are $50 and $60 with January 2022 expirations. The value of shares comprise 33% of the position’s value and the remaining 67% of the value is in the form of the LEAPs. Here is an example that explains how owning LEAPs (compared with shares) alters the payoff/return at difference stock prices:
https://discussion.fool.com/i-think-that-what-you-are-missing-is…

PORTFOLIO CHANGES

I made a number of portfolio changes since my last portfolio update on 6/30/20. The bulk of the changes were made during the first week of August as a result of the LVGO merger and the AYX results.

Sold more OKTA. It’s a slower grower and management claims that the business is experiencing pandemic headwinds. Thus, I wanted to move those funds into faster growers. I had already been reducing OKTA in May and June (at the end of April OKTA was almost a 15% position). OKTA is now a 2.7% position.

I bought about a 3% position in Blue Prism (BPRMF). For me, this is a speculative position, and I’m not sure that I will hold it going forward. I already sold 2/3 of my position when FSLY gave me an opportunity to buy more below $80 (this was in July).

I added to FSLY when it dropped below $80 before earnings, and I added more to FSLY after the Aug 5th earnings result. I thought that the result was excellent, and I believe that the Q3 guidance is conservative with TikTok risk built in. I think that the 12% TikTok revenue will not be lost and that the stock price is currently building in that risk. Perhaps, we will see a nice stock price reversal when it becomes clear that TikTok will continue to be allowed to operate in the US.

I added to my position in GOLD. I promised Saul that I would not discuss my reasons for holding GOLD as it is off-topic. I prefer to keep my GauchoChris user name in favor of a name change to TheAlchemist. :wink:

I completely sold out of LVGO immediately after the merger with TDOC was announced this past Wednesday. The reason is that I decided that I did not want to own TDOC.

I added significantly to my NET position. I bought a nice chunk on Wednesday (the day before the NET earnings date) and then I bought more today (August 7th) after they reported a great quarter. While their guidance is only for 40% for the September 2020 quarter, I believe that this figure is sandbagged. In addition, NET has a bunch of “phantom” revenue (i.e. users are using some products and features for free; they will be charged going forward so I expect revenue growth to accelerate sharply in the next 6-12 months).

I had an oversized position in AYX. I was completely surprised by the results that were reported yesterday. Not only was the growth rate in Q2 MUCH lower than I had expected, but also the business appears that it will be in slow growth mode for at least 2 more quarters. Management said as much. In addition, while other companies like DDOG, NET, and others are leaning in by increasing spending to take advantage of tailwinds, AYX is experiencing headwinds and is cutting back. I really didn’t like hearing this. Today, I sold 56% of my shares and 47% of my options. The tax bill will be enormous, but, on the bright side, gains are all long term and I recently moved to a zero income tax state! AYX is now a 7.1% position, down from about 25% two days ago. Unfortunately, a large oprtion of the reduced allocation is from the stock price decline. I am still optimistic about AYX in the long run, and I’m confident that the business and the stock will recover at some point. But at this point, I don’t think the recovery will come soon. While it hurts to pay the taxman, I have realized that my position was too large given the new reality that was revealed yesterday. I am betting that the proceeds (that aren’t eaten up by tax payments) will fare better in FSLY and NET for the coming months.

My cash position is quite high now at 13.4%. About 75% of this cash will go to Uncle Sam on September 15th so my true cash position is about 3%. I may be inclined to further increase my cash and/or gold position in the coming weeks.

THREE MORE EARNINGS COMING

OKTA (8/27), ZM (8/31), and CRWD (9/2) will be reporting their results in a few weeks. I’m somewhat concerned about OKTA, and I may be tempted to sell more shares ahead of earnings should I see some compelling prices in my other stocks. Conversely, I am quite optimistic about ZM and CRWD going into earnings; both ZM and CRWD are clearly benefiting from COVID while OKTA is saying they are seeing headwinds.

ADDITIONAL THOUGHTS

Since March, I have, in my portfolio updates, expressed strong optimism for our stocks. In the past months, I have been very aggressive with my allocations, my portfolio concentration, use of some margin, and use of options to juice returns. My portfolio has benefited greatly from my previous aggressive stance and actions. However, as you see from my recent actions, I have now tempered my optimism somewhat. I really don’t know what the next months will bring, but I see some increased risk compared to what I saw in March, April, May, and June. Our stocks have also roared ahead quite a lot. Despite taking a 20% hit to my portfolio in the last 2 days, I am a bit more cautious. I am no longer on margin, I’ve reduced my exposure to downside from my options trading, I’ve increased my cash position, and I’ve increased my gold (sorry Saul) position. It is possible that our stocks will continue to roar ahead, and I believe that in the long run they have a VERY high probability to beat the market. However, I’m being a bit more cautious for the following reasons:

  • Our stocks have gained a lot in short about of time.

  • There is the possibility of another sector rotation. I would expect our stocks to get hit pretty hard when it becomes clear that the economy is recovering and things are returning to relative normalcy.

  • While the FED will continue to stimulate as needed with almost no limit (my opinion), the fiscal spending is more uncertain in my opinion. I think that the upcoming election is making the actions of the legislative and executive branches of the US government more uncertain and unstable. Will they play politics with the economy?

  • I can say the same with geopolitics. Tensions are heating up and I do not know to what lengths some people or a person will go to stay in power. In my mind, this adds to risk and adds to the possibility that something could go very wrong. I think the risk is much higher today that it was during the trade war with China. Hopefully not.

Chris

129 Likes

Hi Chris, and Bear too, and everyone else!

Chris, we seem to be investing twins again. You are currently up 108.3%. I am up 108.4%. We can’t get any closer than that. But as I said before, it seems to me that you have to work twice as hard as me to get there, as you have to keep track of both stocks and options, while I only have to worry about the stocks. :grinning:

As far as Alteryx, you have cut to 7.2% and I have cut all the way to 3.5%. It seems to me that while our other companies have adapted to Covid and work from home, Alteryx just hasn’t managed to grasp it and make the transition. It’s hard to explain, but it is what is is, and must be due to some rigidity by management. Let’s face it, we were fooled, or we fooled ourselves, knowing that Alteryx can start with just one or two seats in an enterprise. It’s not a C-level decision. But Alteryx stalled out, and it’s not going to get better in the next two to three quarters.

I don’t understand you feeling that Okta is having Covid headwinds. Sure they talked about “possible” Covid headwinds, but we already have a quarter reported with all of March and all of April (full fledged epidemic), and they accelerated revenue growth sequentially in the quarter, as well as subscription revenue growth. Their RPO was up 57% yoy, and current RPO, which is contracted subscription revenue that will be recognized in the next 12 months, was $619 million, up 49% yoy. Note that this is already well more than the entire $553 million in subscription revenue they had in all of last year!!! Operating Cash Flow and Free Cash Flow doubled from a year ago, adjusted EPS was minus 7 cents, improved from minus 19 cents a year ago, etc. This is a totally different picture than Alteryx. Totally. They went immediately to 100% work from home, etc. Different mind set.

As far as Fastly and Datadog, here’s the way I see it:

Datadog was implying in their conference call that they are an 80% plus grower, but they just had an anomalous quarter in which they “only” grew 68%, but they saw improvement in June, and more in July (current quarter), and they believe that they are on their way back up to the 70’s or more, but they are guiding to 50% out of an excess of caution.

Fastly was implying in their conference call that they are basically a 40% plus grower, but they just had an anomalous quarter with much more usage than usual, in which they were up 62%, but they have seen usage growth already slowing, so they are guiding to 50% for the next quarter, and are probably hoping for 56%. And their largest customer is in danger. If that’s not complicated I don’t know what is.

Datadog said they added a record number of enterprise customers (over $100,000) in the quarter, and their total number of enterprise customers was up 71% yoy.

Fastly added 7 new net enterprise customers, from 297 to 304. Seven new enterprise customers??? Seven!!! They excused that by saying that their enterprise customers use more and more over time, but that is obviously true for Datadog also.

So while you added to Fastly when it fell, I trimmed about 10% of my Fastly shares and added about 10% more more shares to Datadog, which was also down. I’m not giving up on Fastly which is still an 11.6% position, even with the drop in price, but I’d rather add to Datadog which seems like a way much more straightforward and less complicated story just now.

Best,

Saul

109 Likes

Saul says:
As far as Alteryx, you have cut to 7.2% and I have cut all the way to 3.5%. It seems to me that while our other companies have adapted to Covid and work from home, Alteryx just hasn’t managed to grasp it and make the transition. It’s hard to explain, but it is what is is, and must be due to some rigidity by management. Let’s face it, we were fooled, or we fooled ourselves, knowing that Alteryx can start with just one or two seats in an enterprise.

I don’t think it’s difficult to explain why Alteryx didn’t make the transition. I explained it on this board in early April:

https://discussion.fool.com/so-my-take-on-why-ayx-is-suffering-i…

Like, if you were the VP in charge of the technology budget, would you really be spending your time and money right now thinking about the ROI on data analytics? Or would you care much more about ensuring that your workforce can function effectively and securely away from the office?

If your workforce is running at half efficiency because you don’t have the remote access and communications tools deployed that can securely scale to your whole workforce, why would “try out some new data analytics tools” rank as one of your top ten priorities today?

23 Likes

You are currently up 108.3%. I am up 108.4%. We can’t get any closer than that. But as I said before, it seems to me that you have to work twice as hard as me to get there, as you have to keep track of both stocks and options, while I only have to worry about the stocks.

While my options trades are informed by my understanding of the companies (I believe this gives me a big advantage of run of the mill options traders who just look at technicals), the options trading is independent of the stock investing. This means that without options trading my portfolio would only be up about 92% as I would have done the same thing with my investing regardless of any options trading activity. So apparently my extra hard work on options is required by me just to keep up with you!

Chris

18 Likes

Chris,

Does this factor in the tax impact of options?

1 Like

Could not agree more. Same may be the case for Coupa.

If your workforce is running at half efficiency because you don’t have the remote access and communications tools deployed that can securely scale to your whole workforce, why would “try out some new data analytics tools” rank as one of your top ten priorities today?

Not just that. The point of Alteryx is making data harvest easier to accomplish. But if they don’t have that, they can pay their software people to write code that accomplishes the same thing. It isn’t hard. Show me the location of the data you need collected, a sample of its format, and a sample of the format you want it in. Deposit coffee in this cup and money in this drawer, come back tomorrow.

1 Like