Jason’s December Portfolio Decisions

December 31, 2021

Performance at the end of each year, as Trailing Twelve Month

2021 > %
2020 > +203% 
2019 > +32.9%
2018 > +38.9%
2021>.     Month.          YTD
January >. +3.6%.         +3.6%
February >(-)0.87%.       +2.7%
March >.  (-)13%.      (-)11%
April >.   +13.56%        +1.37%
May >.     +5.35%.        +6.8%
June >.    +15.2%.       +23%
July >.     +5%.         +29%
August >.  +24.3%.       +60.5%
Sept>       +2.9%        +65.22%
Oct>     . +16%.         +91.7%
Nov>.    (-)14%.         +54.38%(given in error).  Actual YTD 64.8%
Dec>     (-)11%MTD.      +46.8%YTD

           Dec 31 Nov 30  Oct 31. Sept 30.  Aug 31. July 31. June 30.  May 31  April30.
Upstart    11.28% 11.73%.  25.27%  27.52%.  22.47%.  14.76%.   0%.      0%.     0%.
Datadog.   16.60%.16.28%.  11.91%  16.39%.  16.43%.  16.42%.  16.21%.  16.63%. 16.83%
Cloudflare.13.48%.14.06%.  13.23%.  9.33%.  14.45%   17.60%.  16.48%.  18.92%. 25.12%
Monday.    14.39%.17.92%.  10.37%.  8.72%.   0%.      0%.      0%.      0%.     0%
Lightspeed. 0%.    0%.      9.75%.  8.78%.   4.40%.   0%.      0%.      0%.     0%
Zscaler.    8.99%. 8.64%.   7.06%.  6.51%.   0%.      2.75%.   0%.      0%.     0%
Snowflake. 12.69%.11.35%.   8.84%.  7.51%.  10.32%.  12.67%.  12.10%.  12.20%. 15.68%
ZoomInfo.  11.11%. 9.22%.   6.72%.  7.09%.   7.75%.   7.98%.   8.12%.  10.50%.  6.32%
Crowdstrike11.45%.10.81%.   6.84%.  8.14%.  19.12%   21.50%.  22.36%.  24.19%. 24.05%
Docusign.   0%.    0%.      0%.     0%.      0%.      6.32%.  10.88%    6.46%.  7.75%
Pinterest.  0%.    0%.      0%.     0%.      0%.      0%.      0%.      0%.     4.46%
OKTA.       0%.       0%.       0%.        0%.        0%.      0%.      0%.     0%

I feel near equal conviction that each of the businesses I hold in my portfolio, for the next 1-3 years, will continue to experience hyper growth above 50%. I do have some with greater allocations. Although I do not perform any sophisticated technical analysis, the relative increase in % allocation demonstrated above is commensurate with what I believe will be the increase in share price appreciation, also over the next 1-3 years. To fully explain my reasoning for the differences in %, please read RMTZP’s post, linked below. I completely agree with everything he wrote here: https://discussion.fool.com/an-evolving-perspective-on-valuation….
Fundamentally, I think we can at least somewhat agree that stock price movements are driven by the extent that a company is able to “surprise” the market. The more a company’s performance can surprise market participants (through its quarterly results, product releases, key metrics, etc.) the more the market rewards or punishes its stock price.
So at the end of the day, what does valuation tell us? The expression that “in the short term, the market is a voting machine” is not new, but the nuance in my interpretation is that valuation is like a “bet” that the market is making about the extent of “surprise” that a company will yield.

Thank you RMTZP.

When reading the following keep in mind that although this portfolio has now grown to be more than 99% of what we will live on in retirement, this portfolio is what is in our non-taxable Roth and Rollover IRAs only. We have not added any money to these accounts for many years. To buy something I’ve sold something else. I don’t trade options or use any leverage. I stay fully invested at all times and keep less than 1% in cash.
What I did (2 trades this month)and why during the month of December 2021.

What I did:
I sold 10% of my Datadog, bringing it down to 16% of portfolio, and bought Upstart back up to an 11% position.
Why I did it:
I called the bottom a week ago and told several friends to buy. The following week my portfolio shot up near 15% :grinning:; but, Upstart as others dropped again and Datadog after not dropping as much as the others during this latest ‘sector rotation’. I’m pretty sure Saul’s practice of consolidating around those in which he has higher conviction in his portfolio has referred to doing so near the beginning of the drop; however, since I have near equal conviction for all my positions (as I stated in my last months portfolio review) I chose to wait and re-allocate at this time.

What I did:
Still bouncing around the bottom of this sector rotation; I sold 15% of my 16% position in Monday and added it to what had become my 10% position in Cloudflare and a bit to remedy the underweight allocation I’ve had in ZoomInfo.
Why I did it:
12 quarters of rock steady ~50% growth and what I believe is going to be years of continued if ~50% growth. Monday is growing faster and has better growth in most other metrics; but, It’s just too soon for me to have substantially more conviction in Monday than Cloudflare at this time. And after Cloudflare dropping substantially more than Monday, even if considering Monday from that $400 level, it was time to top up Cloudflare.
ZoomInfo has been chuggin along in my portfolio with an underweight position for quite a while. I’ve become increasingly clear that Management is not just talking the talk. ZoomInfo numbers are great (The company growth is accelerating).

Year end wrap up:

In 2021 I struggled in my ability to keep up with our companies due to the fact they are all using and supporting exponential technologies. Oh sure, we can train our brains to think exponentially; but, thinking about compounding exponentials and…when we also consider just one of our, what are built in, biases (eg: the past is prolog so this time is never gonna be different), I’m thinking I may not be alone in this struggle. This has been the main reason I rely on this Board as much as I do. One of our advantages here is that we help each other see past what any individual can’t see. This time is different. The indicators for sustainability of growth within a company, those that worked in the past, are effected by these factors.

What I’ve learned this year, as an investor is to try and leverage the advantages in our crowdsourcing. Many of you have made mention of growth-endurance. IMO, no one, save Diablito, has given it its due. So, the following may be off topic (skip unless interested in Growth-Edurance); but, it is the primary reason for why I hold the companies that I do.

I believe each of my companies have yet to peak in Crushing their Cloud Categories. My belief in this, for all but Upstart, is partly due to what Bessemer Venture Partners stated here about Saas being under appreciated in their ability to Scale here https://www.bvp.com/atlas/six-product-strategies-to-catalyze…… . This was brought to this Board by CompoundingCed , where in his TLDR version of the Bessemer article here https://discussion.fool.com/signs-of-saas-companies-entering-sca…. Cedric has captured all the main points extremely well, IMO.

I believe every company in my portfolio has an under appreciated long road of dominance in regards to Scale and ability to innovate, including their ability to move into adjacent markets. This is due,IMO, in part due to the fact that they all use AI to some extent. Harvard Business Review, in their Special edition, AI in the Workplace, pointed to AI’s inherent ability to further extend Scale, Scope, and Learning. The entire purpose of the Special Edition appeared to be to illuminate their readers to the fact that all three of these inherent abilities, afforded by AI, are currently vastly under appreciated.

Peter Offringa at Softwarestackinvesting.com makes a slew of additional points as to why Growth-Endurance May remain at~100% for a few special companies. He makes the argument that due to the ability of some companies to accelerate production of what they offer, within their massive and growing Total Addressable Market, as a platform, their growth-endurance will remain elevated (what is ~100% now). He’s talking about Cloudflare here with one example of why; but, he explicitly states he includes along with Cloudflare, Datadog and Snowflake.
At some point, the market will determine a fair valuation multiple for Cloudflare stock. Once that bottom is hit, then the stock price would grow proportionally to revenue. This is where durability of revenue growth becomes important. If Cloudflare can maintain its range of 50% revenue growth on average over many years, the effect of compounding becomes significant. Over 5 years, this is a 7.5X increase. Over 10 years, it expands to more than 50x. While this kind of growth sounds inconceivable, the hyperscalers grew roughly this fast in Q3 at run rates of $20B to $64B. Cloudflare should deliver around $660M in revenue for 2021. This is about 1/100 of AWS, which just grew by 39% annually.

I believe Muji’s been making complimentary arguments on his service, closely related to what Peter has been making on his. Muji does come out and say it as explicitly as Peter. However, i find his arguments very compelling. Thanks Muji.

How’s about the time if I was reading this far for the first time, I’d be asking so why be near a full position in Crowdstrike when their Growth-Endurance is steadily declining. I posted the answer to this here https://discussion.fool.com/hi-rmtzp-i-agree-with-everything-you….

That just leaves me to keep a close look for signs of ~100% growth-endurance playing out as expected, or not. I wrote with this very same sentiment here, just before Snowflakes re-acceleration in this last Q. I’m sure with all your help, we’ll see more accurately when the end of hyper-growth does happen. Definitely more accurately than me alone😁.

Heartfelt thanks to those following the rules of this great Board! I’m proud to be one in a group of individuals who’ve come together with these rules as an agreed upon standard.

Special thanks to Saul and all the Board Managers for insisting on these rules and the work they do to keeping this Forum going

2020 Portfolio Summary here: https://discussion.fool.com/jason8217s-2020-port-review-34708368…
January Porfolio Summary here: https://discussion.fool.com/jason8217s-jan-port-summary-34738748…
February Portfolio Summary https://discussion.fool.com/jason8217s-feb-portfolio-summary-347…
March Portfolio Summary here: https://discussion.fool.com/jason8217s-march-portfolio-review-34…
April Portfolio Summary here: https://discussion.fool.com/jason8217s-april-portolio-review-348…
May Portfolio Summary here: https://discussion.fool.com/jason8217s-may-investing-decisions-3…
June Portfolio Summary here: https://discussion.fool.com/willo2006-june-investing-decisions-3…
July Portfolio Summary here: https://discussion.fool.com/jason8217s-july-portfolio-summary-34…
August Portfolio Summary here: https://discussion.fool.com/jason8217s-august-investing-decision…
September Portfolio Summary here: https://discussion.fool.com/jason8217s-september-port-summary-34…
October Portfolio Summary here: https://discussion.fool.com/jason8217s-october-portfolio-decisio…
November Portfolio Summary here: https://discussion.fool.com/willo2028-november-portfolio-decisio…

Hope you all have a happy New Year,