HugoStocklitz's End-of-Month Portfolio

This is my 1st monthly portfolio summary. I was very fortunate to find Saul’s Investing Discussions in March 2020 and it has been a gold mine of wisdom and information.

November was a wild ride for the portfolio. In the first week of the month, the portfolio hit an all time high (up 91% YTD). As of today’s close it is down 29% from that all time high and up 35.5% YTD. Much of this decline was caused by the fall in Upstart’s share price (and call options which equated to 3% of my portfolio. There has also been a market wide sell-off of software and growth stocks. The market seems to do this once or twice a year for whatever reason is popular at the moment; inflation, tapering, rising interest rates, new COVID variants.

In May of this year my portfolio was down 20% YTD. From there it climbed 139% in a matter of six months. I have to say I am becoming increasingly numb to these sell-offs and have recognized that volatility is a part of the process. I continue to stay focused on the fundamentals of the underlying businesses of the stocks I own. This gives me the conviction to hold and even add when we experience these sell-offs.

YTD performance at end of month:
Jan 2021: +12.2%
Feb 2021: +5.2%
Mar 2021: -5.4%
Apr 2021: -4%
May 2021: +6.6%
June 2021: +20.1%
July 2021: +17.1%
Aug 2021: +35.5%
Sep 2021: +37.7%
Oct 2021: +76.6%
Nov 2021: +35.5% (as of 11/26/2021)

YTD: +35.5%
YTD high: +91% (1st week of November)
YTD low: -20% (2nd week of May)

2020 Cumulative Return: +195%

Cumulative Return since January 2020: +295% (This means that $100 invested in my portfolio in January 2020 would be worth $395, nearly a quadruple (4x). In the same time period, the Nasdaq is up 75% and the S&P 500 is up 45%.

Positions by Size of Portfolio Allocation
(current month, last month)
Datadog (DDOG): 22%, 15.3%
Affirm (AFRM): 10%, 9.3%
Nvidia (NVDA): 9.5%, 9% (MNDY): 9.2%, 0%
Sea Limited (SE): 9%, 7.9%
Upstart (UPST): 8%, 29% (3% in January call options)
Crowdstrike (CRWD): 8%, 8.9%
Cloudflare (NET): 7.6%, 4%
Snowflake (SNOW): 6.9%, 0%
Tesla (TSLA): 6.1%, 0%
Confluent (CFLT): 4.6%, 0%
Marqeta (MQ): 1.7%, 3%

Lightspeed (LSPD): 0%, 5%
Celsius (CELH): 0%, 5.5%

Watchlist: AMPL

Datadog provides an observability platform that allows engineers to monitor systems and databases, allowing them to improve performance based on data. Datadog remains my #1 conviction position. In Q3’21, Datadog reported a third consecutive quarter of revenue acceleration coming out of last year’s COVID slowdown (YoY Revenue Growth for the last three quarters: +52%, +67%, +75%). I suspect that they will report another acceleration in Q4.

Link to Datadog deep-dive by Muji (@hhhypergrowth)

Link to Datadog deep-dive by Peter Offringa of Software Stack Investing (@StackInvesting)…

Q3’21 Highlights:
Revenue: 270.5M +16% QoQ, +75% YoY (acceleration)
Adjusted operating margin: 16% (continued improvement)
Operating cash flow: 67M (continued improvement)
Free cash flow: 57M (21% of revenue)(continued improvement)
DBNRR: >130%

Affirm offers a Buy Now, Pay Later (BNPL) service that gives consumers the option to finance purchases (often with 0% interest). Affirm also improves the average order value (AOV) for merchants. As of Q1’22, Affirm has >102,000 active merchants including major partnerships with Amazon, Shopify, Apple, Target, and Walmart. Affirm will be the exclusive BNPL service for Amazon through January 2023.

Link to Affirm deep-dive by Francis (@InvestiAnalyst)…

In Q1’22, GMV improved 8% QoQ and revenue showed slight acceleration: 269M (+3% QoQ, +55% YoY). However, for Q2’22 (calendar Q4’22) management gave a much stronger forecast for GMV: 3.65B (+35% QoQ, +74% YoY) and revenue guidance of 330M (+23% QoQ, +62% YoY). Q4 is the holiday shopping season after all and with 102K vs 6.5K active merchants a year ago, Affirm should see a strong Q2’22.

*Shopify said 2021 Black Friday sales were +21% YoY and PayPal reported BNPL on their platform was +400% on Black Friday.

Nvidia is a GPU and software producer involved in visual graphics as well as compute and networking. Nvidia has experienced rapid growth as the processing power of GPUs has progressed and they have tailwinds from the Metaverse narrative. Nvidia is now a huge company with a Market Cap >$800B, but they are still growing revenue rapidly with operational efficiency and profitability.

Nvidia quickly became my #3 position in November. I’ve been tracking Nvidia’s results for the past several quarters and even own shares in my retirement accounts. I finally decided to pull the trigger on November 4th when the share price moved higher on large volume.

Nvidia reported Q3’22 earnings on November 17th and results were strong. Total revenue grew 9% sequentially and 50% YoY to 7103M. Gaming revenue remained strong, growing 5% sequentially and 42% YoY to 3220M. Data Center revenue continued to accelerate, growing 24% sequentially and 55% YoY to 2940M. Since Q1’22, Nvidia’s data center segment has shown sequential growth of 8%, 16%, and 24%. Professional Visualization revenue was also strong growing 11% sequentially and 144% YoY. Gross margin remained high at 65% and adjusted operating margin was a record 48%. Adjusted net income margin reached a record 42% and free cash flow was 18% of total revenue.

Link to Nvidia Full Q3’22 Business Highlights…

Q3’21 Highlights:
Revenue: 7103M +9% QoQ, +50% YoY
Adjusted operating margin: 48% (continued improvement)
Adjusted net income margin: 42% (continued improvement) is a workflow, collaboration, and productivity platform that IPOd on June 10th.

Link to deep-dive by MT Capital (@MT_Capital1)

Q3’21 Highlights:Revenue: 83M +17% QoQ, +95% YoY (acceleration)
Adjusted operating margin: -11% (continued improvement)
Adjusted net income: -11M (improvement)
Operating cash flow: 4M (continued improvement)
Adjusted free cash flow: 3M (continued improvement)
DBNRR: 130% (improvement)

Upstart developed an AI-powered lending platform that allows higher approval rates and lower interest rates for borrowers while decreasing loan loss rates for lenders. They first entered the personal loan market (81B market) and are now expanding into auto loans (672B market). Mortgages (4.5T market) would be a natural progression.

Upstart reported Q3’21 earnings on November 9th (a day that will live in infamy…JK). Revenue came in at 228M +17.5% QoQ, +250% YoY (great by any means). However, Q2’21 was a tough act to follow with revenue of 194M +60% QoQ, +1308% YoY (easy COVID comp).

Upstart is still a top idea. This is a business that will grow revenue >245% in 2021 and who currently has a forward price to sales multiple of less than 15. Q4’21 revenue guidance is 265M +16% QoQ, +206% YoY. If they beat guidance by 6% (last quarter’s beat) revenue will be 281M +23% QoQ (run rate of 129%), +224% YoY.

Crowdstrike provides an AI-powered, cloud endpoint security platform. YoY revenue growth was >80% last year, but has slowed to 70% in the most recent two quarters. Q3’22 revenue looks like it could be in the 60% range. Is the law of large numbers starting to take effect? We’ll find out on 12/1 when Crowdstrike reports Q3’22 earnings.

Link to CRWD Q3’22 Revenue Forecast…

Cloudflare is in essence making the internet faster, more reliable, cheaper, and safer through edge networks and zero trust security. This is an oversimplification of what they do, but to fully explain would take hours. Muji (@hhhypergrowth) has done just that…

Link to Cloudflare deep-dive by Muji (@hhhypergrowth)

Saul also started a great discussion on what we were missing and why the market was valuing Cloudflare so highly.…

Q3’21 Highlights:
Enterprise customer additions: 1260 (acceleration)
Revenue: 172M +13% QoQ, +51% YoY (acceleration)
Adjusted operating margin: 1.3% (positive for the 1st time)
Adjusted net income: 1.4M (profitable for the 1st time)

Confluent IPOd on June 24th. The creators of Confluent created an open-sourced data platform called Kafka that allows data from interconnected systems and applications to come together in one central flow of data. Confluent monetizes Kafka by offering an upgraded enterprise version with additional security and managed hosting across the three major cloud providers (Google Cloud, Microsoft Azure, and AWS).

Link to Kafka deep-dive by Muji (@hhhypergrowth)

Confluent revenue has shown impressive YoY growth over the last several quarters (51%, 64%, 66%). However, operational leverage has yet to kick in. Furthermore, in Q3’21 total customer and enterprise customer additions showed a considerable slowdown. These will be important metrics to watch when Confluent reports Q4 earnings in February. Management guided for Q4’21 revenue of 110M (+8% QoQ, +56% YoY). In Q3’21 they beat guidance by 13%. A conservative 8% beat would = 119M (+16% QoQ, +70% YoY).

Snowflake provides a cloud-based data storage and analytics platform (Data Warehouse as a Service). Snowflake’s revenue model is usage-based and scales as a customer’s need for storage and analytics increases.

Link to Snowflake deep-dive 1 by Muji (@hhhypergrowth)

Link to Snowflake deep-dive 2 by Muji (@hhhypergrowth)

Snowflake revenue has been growing >100% YoY for the last several quarters though it has been steadily slowing down (116%, 110%, 103%). On a positive note, operating loss continues to improve and adjusted FCF has been positive for the last 3 quarters. At the rate that operational leverage is improving, Snowflake should show profitability in the upcoming quarters.

In Q1’22, RPO was 1432M +7% QoQ (a considerable slowdown from Q4’21: 1333M +44% QoQ. In Q2’22 RPO growth was 1529M +7% QoQ again . Snowflake management has said that initial customer contracts can be smaller until individual need for analytics scale, requiring a larger renewal contract. RPO will be an important metric to watch when Snowflake reports Q3’22 earnings on 12/1.

Monday, November 29th update:

Since writing this, I’ve tinkered with my portfolio a bit and am pretty happy with where it sits as we await the CRWD and SNOW earnings reports. Depending on the results of these reports I may tinker a bit more.

Positions by Size of Portfolio Allocation
Datadog (DDOG): 22%
Nvidia (NVDA): 10% (MNDY): 9.7%
Affirm (AFRM): 8.4%
Upstart (UPST): 8%
Cloudflare (NET): 7.9%
Crowdstrike (CRWD): 6.7%
Sea Limited (SE): 6.7%
Tesla (TSLA): 6.4%
Snowflake(SNOW): 5.5%
Amplitude (AMPL): 5.5% (new position)
Confluent (CFLT): 4.8%
Marqeta (MQ): 0%