I was on vacation in July, but my portfolio was working hard and it shows! This month, for the first time since the beginning of 2021, my overall portfolio was net positive. Thank you, July!
With time off, I was also able to remedy the fact that I have not felt comfortable holding only seven companies. I want a bit more cushion, so this month I had the opportunity to more fully research and add two others: Aehr Test Systems (AEHR) and Pure Storage, Inc. (PSTG).
As my portfolio sits right now, it looks like this–by allocation:
Upstart (UPST) 22.19%
PureCycle Technologies (PCT) 12.11%
The Trade Desk (TTD) 12.02%
Global-e (GLBE) 12%
CrowdStrike (CRWD) 10.13%
Cloudflare (NET) 9.44%
Braze (BRZE) 7.83%
Aehr Testing (AEHR) 6.92%
Pure Storage (PSTG) 6%
Thank you to the many who convinced me to get into Aehr. I bought in on July 10 and it’s already up almost 36%! And a shout out to @wsm007 whose portfolio update for last month made me take a closer look at Pure Storage, which I bought just last Friday, July 28.
Since I have any extra money committed to other things for most, if not all, of this year, I had to sell something to get into both of these companies. Since the beginning of July had almost everything rocketing higher, I trimmed from almost everything else I owned to get into Aehr and from just two to get into PSTG.
I left my position in Braze untouched, since it was only a half position and I just got into it in May. I’d like to add to it, but it’s up 51% already and now I’m anchored to the $29.58 share price I paid in May. My Trade Desk position had grown to almost 15%, so that got a bigger cut than others.
And guess what? For the first time since the end of 2021, I trimmed–you might need to sit down for this–Upstart!
In case you haven’t been watching, UPST’s stock price on Jan. 1, 2023 was $12.89. As I write this, it is $70.26. That’s a 445% increase this year! The biggest leap of any company I own.
That sharp spike–which I think is partly from good news in Q1 and partly short covering–put my position above 30% of my portfolio, which was too big. So I used some of it for AEHR and a bigger chunk for PSTG, which brought it down to 20%. But it has grown more since last Friday and is at 22% as I write.
Upstart reports Q2 next week (Aug. 8 in pm), and that may trim it again for me. But I’m guessing the report will be pretty good. I get that impression because in the Musk-induced ruins of what used to be Twitter, Upstart CEO Dave Girouard posted this on July 14:
That tweet is throwing shade at Mark Minervini, who made a fool of himself and turned Upstart into a joke meme all at once when he appeared on CNBC in the fall of 2021 to tout how great the company was and then couldn’t say what they did. And that coincided with the market downturn and the cratering of UPST’s stock price.
But what struck me is that, since that time and up until the Q1 2023 earnings call, Girouard has been on defense. You could hear it in his voice in every call throughout 2022. Sometimes there was anger, sometimes confusion, often dejection and/or defensiveness. But in my time holding the stock and following him on Twitter, he has not been the kind of CEO who throws shade, or struts around, even when the stock was soaring and he had every right to do so.
It was a newly confident Girouard on the Q1 call, and that tweet from July 14–a few weeks past the close of Q2–was not the tweet of a man who anticipates a difficult conversation with stockholders in under a month’s time. If he’s spiking the ball on top of Mark Minervini, he believes he has good numbers. He might be wrong–we’ll see. But the list of new partners joining the referral network keeps growing, he now has at least $4B in committed partners to buy loans, and I think, barring another macro shock of some kind, the worst is behind the company.
This critical support for cross-border e-commerce has been a steady gainer for me. I bought it within the first minutes of its May 2021 IPO, but then sold early in 2022 as the market began to turn south and Russia’s invasion of Ukraine made the already-tight supply chain issues worse. I feared for how that would affect e-commerce.
As it turns out, Global-e’s customers kept right on buying things. Between their direct partnerships with places like the LVMH family of brands and Shopify, they were hit on FX costs, but not much else. So I bought back in last August, added through last November, and the gain on my DCA is now almost 65%.
I have just two reservations about my position here. One is that they are an Israeli company and Israel is in political turmoil. Headlines like Israel’s Tech Companies are Fighting Netanyahu–or Leaving the Startup Nation, or Foreign Investors Flee Israel: ‘Decide if You’re a Democracy or Dictatorship’ make me wonder how Global-e will be affected. They have offices in many countries around the world, so it’s not like they would have to start from scratch if they moved their headquarters, but I would imagine there would be disruptions.
They report next week also–August 8 in the morning–and I’ll be curious whether it comes up on the call. Israel has been a golden place for tech startups, and the above articles are just a small sampling of what’s going on. It isn’t pretty.
I wrote about them last month–I got in on May 10–just before earnings, which were good. As I said above, my position is now up 50.39%. It shot up so quickly after earnings that I didn’t even get a second bite at the apple.
They help companies communicate directly with customers or, as they put it,
Braze is a leading comprehensive customer engagement platform that powers customer-centric interactions between consumers and brands. Our platform empowers brands to listen to their customers better, understand them more deeply and act on that understanding in a way that is human and personal.
I wrote about PureCycle last month, also; and they, too, report next week on August 9. This is a pre-revenue plastics recycling company that was spun off from the R&D department of Proctor & Gamble. I bought in six times since last August and trimmed some to get into Aehr when the price spiked as their first plant in Ironton, Ohio rolled the first pellets off the line at the very end of June. There has been no additional news, since then. It’s up 39% from my DCA.
Most people here either do or have owned it, and it is well covered. I trimmed some here for AEHR. I don’t know who is going to win the cybersecurity race, but I’m confident that CrowdStrike will not lose it and will be at least close enough to the front of the pack to keep my portfolio happy. There is room for more than one company in this space to do well.
I still have some high priced shares, since I first bought in Feb. 2021, so my position here is still underwater, but only by a few percentage points.
THE TRADE DESK
As linear TV goes the way of floppy disks, I see TTD as the biggest winner. Will it be hypergrowth? It could be. But I don’t care. Like CRWD, I’m convinced it will do well and is big enough that I don’t have to worry about it from quarter to quarter. I owned it back in early 2021 and then sold it when I came to this board that summer. I bought back last August and my position is now up 35.75%. So I can’t complain. I trimmed this to buy both AEHR and PSTG.
This is the position I’ve held the longest, with my first buy on Feb. 1, 2021. Which means my DCA is high and it is currently a bit underwater, although it is much improved since last month. I trimmed some of this for AEHR also. Lots of you follow or own it, so I don’t have anything to add besides noting that I’m still a believer in the future Prince paints.
AEHR TESTING SYSTEMS
Many of you own this, which is why I took a closer look and picked it up on July 10. I replied to a post and gave my reasoning here. It’s up over 37% since then, so who am I to complain?
Last, but by no means least, is my newest holding, Pure Storage. It’s been on and off my radar for quite some time. I think one of the reasons I didn’t pick it up before now is because the name makes me think of the physical self-storage units that litter almost every town. I mean, I knew it wasn’t that, but it shows you the power (or drag) of a name.
But I wanted to hold another company, so I went through last month’s portfolio reviews to see what I was missing, which is when WSM’s post that I linked at the start of this post made me take a second look.
I have some screens for my stocks that many of you don’t have. Since I’m not a numbers person, I let others analyze those gnarly details and am incredibly grateful to be among those who do it so well and clearly. But your vetting of the numbers doesn’t guarantee my entry, even if the company is growing like a weed.
Probably the most important of those additional screens are that I don’t invest in companies with high exposure to dictators, and I care deeply about management. That means I am especially averse to CEO’s who operate like dictators. The numbers pique my interest, but it’s research on management, especially the CEO, that builds my conviction.
Then, given the concentrated portfolio, I want to know what makes a particular company unique, or at least a cut above the competition. That research usually looks like checking out (and reading) the reviews on Glassdoor, if available and then hunting down any videos with management on YouTube.
So with all that in mind, I began digging on Pure Storage.
To begin, I have to say that the company’s home page is brilliant. There’s much more on the page, but this is where your eyes go first.
Three things caught me here:
“Good Evening” I have to assume this changes with the time of day. I took that screenshot at 5:30 pm EST which was just mid-afternoon at their Santa Clara, CA headquarters, so it adjusted to my location. When I turned on a VPN and refreshed, it just said “Welcome Back.” So points for the dynamic content.
It’s always good when a home page can concisely say what a company does, but “Welcome to the Data Center of the Future” does a whole lot more than that. Forward looking, but still descriptive. And my images of self-storage units are gone.
“Where you’re headed, you won’t need disk.” That’s an angle on their edge. It’s what makes them “Pure” storage. No mechanical disks–all flash storage. Again, it’s forward looking–“where you’re headed…”
And while there are other companies with 100% flash storage, further down on the homepage they tout several advantages that put them at the head of the pack:
Their tagline: “Uncomplicate Data Storage, Forever.” Their “Evergreen/Forever” subscription will continually update/upgrade your storage. Forever. Without any lag or disruption in use. And, again, the wording is simple, memorable, and easily understandable.
Their data centers use 85% less energy than the competition. This gives them a recruiting edge with younger talent who care about having a planet to live on in 50 years and with potential customers who want to lower their carbon footprint.
They are cost effective with a 30%+ lower TCO.
On to management.
The CEO, Charlie Giancarlo is not the founder. He has been at the helm since 2017, arriving two years after the October 2015 IPO. But the 2009 founder, John Colgrove, is still in the C-Suite as the Chief Visionary Officer.
Some testimonials to their quality:
Their Net Promoter Score is a whopping 81.4.
They have been a leader in the Gartner Magic Quadrant for nine consecutive years.
Giancarlo has an 89% approval rating on Glassdoor with 350 rating him; 78% of the 831 reviews would recommend working there to a friend.
I take special note of the Magic Quadrant placement because the length of time covers all of Giancarlo’s tenure and three years prior. I don’t know if Colgrove was the CEO prior to 2017 or whether it was someone else, but they have maintained excellence across that shift, which speaks to a deep bench of quality leadership.
On to YouTube. I like to see CEO’s in action. Do they know their field? Can they explain what they do to someone NOT in their field? Are they effective communicators? Are they willing to talk openly about failure? Do they show integrity? Do they live in the real world?
One of the best interviewers I’ve seen for tech companies is Jon Fortt of CNBC. I watched two interviews he conducted with Charlie Giancarlo.
Here is a short, four-minute one. It is also the most recent interview, from right after their Q1 earnings report at the start of June. (They won’t report Q2 until the end of this month.) The most helpful part of this interview for me was his comparison between “cold” and “warm” storage.
The other Jon Fortt interview with Giancarlo is long-form, where Fortt excels, imo. It is here and just under 43 minutes. The video quality is quite poor–especially in the first half, but I loved getting the full biography. Giancarlo was a double major in Engineering and Latin/Classics. I’m in!
There is one small section of the longer video that I would love to have some of the data tech experts on this board analyze. The section begins at about minute 36 and goes just over two minutes. After Giancarlo describes seeing flash as the storage of the future very early on, Fortt asks him what he sees as the next similarly big thing. Giancarlo responds with “cloud operating models.”
I am in over my head in the tech, but it sounded vaguely to me like what Cloudflare is trying to do. Is that right? If not, is there some other company trying to do what Giancarlo is describing–or maybe has already done at some level?
And if you’d like a different interviewer with a mid-range length, here is Karen Walker with Giancarlo at just under 26 minutes. The first half of the interview is focused on their sustainability advantage and the second half notes the interesting challenge of helping people to see them as a technology company rather than a commodity.
Were I part of a focus group, I might tie that challenge to my initial reaction (and therefore long delay in even examining the company as an investor) of imagining self-storage units. The word “storage” is certainly accurate and descriptive, but it quite literally conveys weight, when their whole purpose is to get rid of mechanical disks and move people to all flash.
Anyway, all of that is why I dove in with enthusiasm last Friday. I love Giancarlo. At the end of Karen Walker’s interview, he describes with some frustration the fact that, even though they are far ahead of the competition in terms of their tech and offerings, having their sales teams go up against the likes of HP and Dell was like “a knife fight in a phone booth.”
I found myself grateful that he could express that frustration without challenging the Dell CEO to a physical cage match. Just sayin’ …