Jason’s 2020 Port Review

2020 Investing Summary

When measuring the performance of my entire portfolio through this year, because I do not add money over the course of the year, Its easy to take the dollar amount invested as of January 1, 2020 and calculate YTD % gain from that. I’m 53 and my wife is 50 years old. We both have retirement funds at work neither of us can control. The portion of our retirement funds for which I make the investing decisions, the portfolio discussed in this year end summary, has grown to more than 90% of our total. It’s the accumulation of IRAs and Rollovers from prior employers.

I’ve been actively involved with the selection of companies in which we invest within these non-taxable accounts for 15 years. In that time, I’ve kept a portfolio of between 20 and 45 companies. I was up to 45 three years ago when I stumbled upon Saul’s Investing discussions.

Underlying the performance here are the many lessons I’ve learned over my life and the 14 years I’ve been managing my immediate families investments. In this post I’ll just stick to those lessons I learned this year.

January 1, 2020.to December 31, 2020 Investment returns as a percentage = +203%

January 1, 2020. To February 16,2020.
I was Up 29%

Alteryx 21.04% Alteryx 25.43%
CRWD. 12.88% CRWD. 12.94%
Okta. 11.58%. Datadog. 11.35%
Zoom. 11.05% Okta. 11.03%
Trade Desk10.82% COUP 10.78%
Elastic. 10.71%. Zoom 8.78%
Datadog. 10.23% Zscaler. 8.00%
Zscaler. 5.81% Elastic. 5.84%
MongoDB. 5.48% Trade Desk. 4.91%
Teleria. 0.39% RubiconProj. 0.57%
Pinterest. 0.37%

I let AYX grow because in addition to 90% margins and 65% Revenue growth, as a person who used to post a lot here, Tinker, once said, “Democratization of practical knowledge is the force that had moved history forward and data will not get locked at the top. Alteryx has a platform that enables those at the top to work as they please while keeping those at the bottom in the loop, and enabling those at the bottom to tell those at the top what they are missing on a practical basis”. No one else is doing this yet.

Then came COVID. My portfolio gains/losses from January 1,2020 to March 16,2020 were -2.08%. And I started reading Peter Offringa’s work at Softwarestackinvesting.com.
May 14,2020
CRWD 16.22%
AYX 15.22%
DDOG. 15.04%
ZM 14.23%
OKTA 12.91%
ESTC. 9.07%
FSLY. 6.83%
NET 5.37%
ENPH 3.07%
LVGO 2.06%
RUBI. 0.09%
No cash
I read everything Peter published in the prior year. I found his take on investing helpful. No where near as helpful as reading this Board and all of Saul’s available wisdom for sure; nonetheless, His investing has effected my choices and he wrote his selfstyle of investing quite clearly. I add it here:
Investment opportunities that I will follow going forward are: those that provide solutions used by software engineers and information workers to build and support modern software-driven enterprises. This is sometimes referred to as a “picks and shovels” , the software stack.
* This coverage will not include consumer-oriented offerings that have a software underpinning. Examples of these companies are Uber (UBER), Spotify (SPOT), Wayfair (W), Teledoc (TDOC), etc. Most of these end-user experiences utilize the products of covered software stack companies. Therefore, they are important to examine from that perspective. However, I will not try to cover the companies themselves, as I think that analysis requires a deep understanding of the core industry (transportation, music, furniture, health care) and success is more influenced by demand for the generic service than their technology enablement. This distinction is important as many software-enabled companies masquerade as technology plays.
* Note: I am currently invested in TTD which is not in this area and will be replaced as opportunities arise.
Peter doesn’t invest in security companies. He says they do not add to the bottom line. I believe Security Companies are essential and necessary and therefore I have always had at least one investment in this space. [Sometime in December this year Peter added a 3% position to CRWD stating cryptically, ‘they are doing something unique in the space’].

July 31, 2020
Zoom. 15.05%
Fastly. 10.40%
Datadog. 10.19%
Okta. 8.68%
Alteryx. 8.65%
Cloudflare. 7.45%
MongoDB. 6.77%
Elastic. 5.67%
Twilio. 5.45%
Slack. 5.13%
BluePrism. 2.07%
Up 110% YTD
Peter Offringa keeps a concentrated portfolio of 8-10. He owns MDB, ESTC,TWLO, NET, FSLY and Docusign of note. I owned Twilio, MongoDB and Elasitc for most of 2018 and 2019. But I repurchased them again following his reasoning. Spoiler: I end up selling them later for mine.

It was 3 years ago I began reading everything on Saul’s Board and being invested purely in Saas. I’m now close to retirement, so the dollars are getting serious. I not only keep a daily journal, listen to Earnings reports and read everyday. Now I have prepared notes written prior to each Call. It wasn’t until this year, I started posting here at least weekly (posting here really forces clarity of thought in my own mind.).
I’d brought my 45 stocks in and whittled them down to 10-12 within a month of beginning to read Saul’s board; I did it mostly because of the clarity of thinking in everything else that was being suggested by Saul. Three years later, now August 2020, I was keeping my portfolio down to 10-12; but, I had been doing this without taking on the responsibility. I think I was borrowing the confidence of others here up until this point.

Alteryx hit the skids (IMO Retirementdough explained it best: https://discussion.fool.com/MessagePrint.aspx?mid=34587255 ). And then non-company specific news brought prices down and I was more prepared mentally to take responsibility. By August 11th my portfolio fell 27.5%, up 82.5% for the year.
August 11, 2020
Crowdstrike 19.12%
Zoom. 16.85%
Datadog. 11.88%
Cloudflare 11.68%
Okta. 9.02%
Fastly. 7.17%
Mongo. DB 6.59%
Slack. 6.39%
Elastic. 5.68%
Twilio. 5.62%
Up 82.6% YTD
At this point in the year, I didn’t consolidate around high confidence positions in part because I wanted to act as if I didn’t know any better, relieving me of the responsibility if/when prices dropped more. I did dig in more than usual and eventually I did start practicing one of the more obvious cornerstone principles of investing here, concentration/focus. This is followed here by a lot of people but I don’t feel I fully appreciate it in the past.

Slowly I’ve begun to concentrate around those companies in which I have the most confidence for the right reasons, my reasons. I begun selling Twilio, MongoDB and Elastic. I know I feel much more focused on quantitative realities and the important qualitative measures used in valuing a company (See Saul’s Knowledge Base and selected posted in side panel on the right) instead of just the story and hope or someone else’s thesis.
It didn’t happen all of a sudden; but, it was at this time in 2020 when I felt a real change toward taking more responsibility for my choices.

September 1, 2020. Zoom reported Q2😉!
I trimmed Zm 14% @$463.57 when it got to 28% (not feeling comfortable at that %)of portfolio and bought 25% more DDOG @$83.88and 10% more FSLY @$92.23 to rebalance (increasing DDOG to 14% of port here because I sold out of ESTC and I see the observability space as criticle infrastructure and I reviewed all the numbers going back to IPO. Wow! The main reason I added to FSLY again was for their inorganic add to Secure@edge (bringing FSLY back up to 10% of port).
Good times!

I sold Twilio on Sept 1 for $273.30 and now it’s $320; but, having Twilio in my portfolio was distracting for me and I’m happier with it gone.Maybe when I retire I’ll take the time to track more closely. For now, I don’t know if what I bought with the money from Twilio had a greater or lesser return. It’s not the current share price that gives me confidence in my future returns. What gives me confidence in my future returns is how well the businesses are executing our shared vision.

9/16/20- SNOW IPO’d. Couldn’t get my a head around the SNOW value proposition. Instead I put what cash I had set aside, 4.5%, into Docu - it’s currently down 30% from ATH for no reason IMO. And it’s SSI’s #2 at 17% of his port due to the Agreement Cloud Products with 25B greenfield and Adobe ramping up its eSignatures product that will likely utilize Docu’s Agreement’s Cloud Product. Electronic-Sig 25B TAM only 4% penetrated by all players Docu one of them.
Docusign . RevGr. Total Cust Billings Gr GM.
Q4FY20. 37.6%. +27k. +40% 78%.
FCF margin. 11%
Q1FY21. 39%. +68k +59%. 30%y/y. 79%.
FCF margin. 32.8m14%
Q2FY21. 45%. +88k +55%y/y. +61% 78%.
FCF. 100m
I trimmed Fastly 20% to add to Docu after I put together that review of Docusign’s quarterly reports, above. But after another read of one of Saul’s monthly port reviews and his stating again, but me feeling like I’m only taking it in for the first time, that “we buy shares only in companies that provide what Every Enterprise Must Have”. My finally taking this to heart was another reason for buying even more DOCU.

Me in reply to Bear, after he showed me how analysis could be done better. This thread I started, below, made me feel like I was getting my Black Belt in Investing (functionalizing the information). I know I’m still 10degrees/20yrs away from the Master level; but damn if this didn’t feel right!
TLDWR: DocuSign Announcing Analyzer. When considering that every enterprise in the world must not only sign contracts; but, they must prepare them, do analyses, follow (Up-Selling being just one benefit here), and renewing contracts as needed. Looks like Docusign now has all these bases covered with their AI/ML enabled offerings.
Zoom. 23.45%
CRWD. 19.03%
Docusign. 17.51%
Cloudflare. 17.10%
Datadog. 14.85%
Slack. 8.06%
Up 186% YTD

Slack was purchased by Salesforce and the next day Muji wrote a Deep Dive into Sea Limited. Here https://discussion.fool.com/notes-on-sea-ltd-34677656.aspx?resul…. When I first found Saul’s Board, my largest holding among the 45 was Shopify and my third largest was Mercado Libre. Among the 45 were BIDU and Tencent. So learning that the Parliamentary Rebublic of Singapore, with it’s strict set of accounting principles, is where Sea is domiciled, I was happy to be familiar with the synergies inherent in their business model. This and my appreciation for the rise of FinTech, I took a small position. After reading all the links in Muji’s post and going through TMF Premium Board posts for Sea and finding that Starrob is posting regularly on the Sea Premium Board at TMF, his notes on Sea Q3 numbers here https://discussion.fool.com/MessagePrint.aspx?mid=34670860 and his notes onQ3 CC here https://discussion.fool.com/MessagePrint.aspx?mid=34674627 , he also made notes on theCC Q3Q&A here https://discussion.fool.com/MessagePrint.aspx?mid=34681351, this position has grown with my confidence.
December 7, 2020
Crowdstrike 21.32%
Zoom 20.33%
Cloudflare. 18.62%
Docusign 17.22%
Datadog. 15.82%
Sea. 5.35%
Nutanix 1.34%
Up 194% YTDs
Bert had a nice write up on Nutanix. Here’s just a little from that.
. I would point out the outsize growth in the company’s newer products, which achieved an 87% increase in year over year increase in ACV. The total ACV balance grew by 29% and ACV billings, despite a headwind from duration grew by 10%. The guidance was p0robably prudent; last quarter was quite linear, i.e. there were no end of quarter heroics.
In addition to the company’s strong revenue performance, I was quite impressed by the diminution of the free cash flow burn to $16 million. I think Nutanix is well on its way to achieving consistent headline growth of 25%-35% depending on the cadence of new product success. I am currently estimating that the company will achieve a 3 year CAGR of 28%. It EV/S is about half average for that growth rate.
Bert, above, and a few others here reminded me why I held the name for over a year, not that long ago. IMO, Bert Hotchfield, Tickertarget.com, has the best Deep Dives on NTNXI. I guess I haven’t yet learned to completely stay away from ‘broken stocks’; albeit my position in NTNX is a much smaller amount than the 8% I had in Slack.

Despite my goal of narrowing the theme of this Annual Review, I must admit there are many themes that run through it. I might be able now to functionalize the information I get. With continued help of Saul and many others here, I will always have opportunities to learn and grow in my abilities to invest thoughtfully. It doesn’t matter that the journey toward Mastery could take 20 more years . It is possible for me to climb higher peaks. Taking on more responsibility in this way is a blessing.

I welcome any comments,
Thanks for your consideration,


Epilog, since I finished Annual Review on 12/9/20
Me: Never fight Saul’s logic.
Saul, heavily redacted-
Docusign and Zoom got enormous pushes from Covid, with huge increases in adoption of their base products Docusign-ing and Zoom-ing, but where does their growth go from here?

Zoom has the same problem in an exaggerated form. What do you do for an encore after you have conquered the world?

After reading that I felt my continued confidence for remaining overweight in Zoom wane. When I discussed my reasons with GouchoRico here https://discussion.fool.com/hi-chris-thank-you-for-posting-your-… . Having read what I wrote I felt I’d talked myself out of overweight confidence in Zoom.

I continued to cut Zoom again to add a little to Sea. I developed more confidence in Sea after reading about Gardena (Sea’s game licensing division and how it pays for the growth in the eSales and Fin-tech divisions. I wrote about it here https://discussion.fool.com/a-little-from-how-sea39s-garena-fuel… .

I cut a great deal more from Zoom to build up a quick 5% position in Asana. I did this when a few posters here reminded me of a Deep Dive I’d read by Bert in October and Asana’s first Q results after their IPO was a beat and raise.
Asana Q3 Revenues were $58.9 million, an increase of 55% YoY; nonGAAP GM 87%. Ended the quarter with over 89,000 paying customers.The number of customers spending $5,000 or more on an annualized basis grew to 8,938, an increase of 58% year over year.The number of customers spending +$50,000 or more on an annualized basis grew to 318, an increase of 104% YoY
Overall dollar-based net retention rate was over 115%.
Dollar-based net retention rate for customers with $5,000 or more in annualized spend was over 125%.Dollar-based net retention rate for customers NRR with +$50,000 or more in annualized spend was over 140%
I had sold a lot more of Zoom to make this purchase explaining my reasoning for the shift in confidence here https://discussion.fool.com/thanks-for-the-heads-up-post-regardi…

I cut Docu by 30% still leaving 12.5%. With the $ from Docusign I added more to Sea and Asana and added a 2% position in SNOW. Reading Muji and PeterO on how SNOW is likely to take market share from Elastic, in Addition to MDB, AYX, TLND etc. Although it won’t be quick it does explain the share price IMO. With some of the locked up expiring I got a 25% discount from the ATH.

I still believe in Zoom and Docusign and think we’re presently either in the trough of disillusionment or a post-COVID Wall of Worry.

per The Captain-
Peak of Inflated Expectations October 19, 2020

Trough of Disillusionment Late 2020, early 2021

Slope of Enlightenment starting in 2021 and going forward should produce very nice Saul level returns until it reaches the Plateau of Productivity which is likely five to ten years in the future.
I do believe the hype cycle for both these companies have been compressed by COVID/work from anywhere. I don’t know how long the market will take to climb a Wall Of Worry with a current climate of distrust in American institutions. I’m keeping 12% in DOCU and an 8% position in Zm for now and looking to add back to these two great companies at some point.

ATH total portfolio up 233% YTD.
CRWD. 25.46%
NET. 19.69%
DDOG. 15.33%
DOCU. 12.65%
SE. 10.08%
Zm. 7.72%
Asan. 5.71%
SNOW. 1.96%
NTNX. 1.40%

Sector drop on IMO no news, NTNX didn’t drop as much as Cloudflare and I have so much more confidence in NET. I sold some NTNX to buy more Cloudflare.

At the end of 12/30/20 up YTD 203%
CRWD. 25.88%
NET. 20.34%
DDOG. 15.03%
DOCU. 12.43%
SE. 10.83%
Zm. 7.28%
Asan. 5.99%
SNOW. 1.86%
NTNX. 0.37%

Perhaps this was too much portfolio management, if so please delete or let me know,




if you told me you went for bike ride today, i would not believe you - , jim. - thanks for sharing - i to like NET for many reasons. big night on thursday- in bed by 9 pm…