Matt's Portfolio End of Jan 2020

Hi All,

It’s been a long long time since I posted a review, so I figure now is as good a time as any for a check-in/check-up. I finished up 2019 with a gain of 36% which of course is terrific, but like many of us, I also peaked in July 2019 at 83%. I’ve still kept my portfolio concentrated, and currently hold 11 positions.

Jan 2020 YTD return: 17.56%

2020 YTD Transactions

Buys:

Livongo Health (LVGO) - new position
Roku - added to existing position

Sells:

Elastic (ESTC) - I began trimming in Nov/Dec, and sold the remaining shares throughout January.

Current Holdings and Sizes:


AYX  23.24%
TTD  13.73%
MDB  12.80%
CRWD 12.11%
OKTA  9.33%
ZS    7.59%
DDOG  5.87%
ROKU  4.85%
LVGO  3.21%
GH    3.17%
ZM    1.79%

AYX - continues to be my largest holding, and like many here, my highest conviction stock. Looking at my account, I see that I have not added any shares since May, 2018! Although I was sorely tempted when the price had been in the low 90’s. In any event, this is how I like my position sizes to get big - let the company do all the heavy lifting for me. When you have a winner, let it run.

TTD - There is still a whole lot to like with the Trade Desk. This is a company led by a visionary CEO/Founder who probably understands the programmatic ad world at least as well as anybody on the planet. The company has a massive untapped market, and is in the midst of a very long term mega trend/shift to streaming media. I’m hoping to be able to hold shares in this stock for a long time. It would be wonderful to only have to trim my position if got too big (probably above 20%)

CRWD - Like many here, I also increased my position A LOT during the December sell off. Most of the new shares were acquired in the mid and high $40’s range, offsetting some higher priced shares in the $60’s and even some in the $70’s. Everything is going gangbusters at CRWD and I expect the shares to perform better this year, certainly. I’m not certain how comfortable I would be letting this position get super big (above 20% let’s say) before trimming back a bit. I feel that Security stocks need to be watched closely as new tech is always around the corner. I’m no Technology expert, so I typically will follow the numbers and base my decisions around them.

MDB - Mongo is the clear leader of NOSQL database world and still has a very long runway in front of it. Checking again in my account, I have not added shares since July of 2018. I can’t complain with the results - ranging from 210% gain to 360% gains. I’m content to let the position keep growing. With a market cap currently under $9 billion, I believe Mongo still has a long way to go before they peeter out.

OKTA - Okta is another holding that I have not touched. Last add-on was back in November of 2018. I’m fine with the position size, and never really added so much that the position was a huge one. Possibly because it valuation was always so rich or me not fully understanding their tech beyond the single sign-in stuff and the Zero trust stuff or possibly some combination of both. Growth has been slowing (which you have to expect at some point, but it certainly has not fallen off a cliff). Cant complain with the results however, and they certainly seem to be the leader in their category.

ZS - Zscaler certainly has fallen on hard times, and my position was double it size going back to the summer of 2019. I gradually trimmed my position back about half in the fall. I still love the company’s disruptive technology, and visionary CEO. A few major one time sales caused YOY results to look worse than they actually were, along with the drop in billings (Although not the best metric to look at) RPO, or remaining performance obligations, and retention rate must also be considered. ZScaler has also always given ultra low guidance. I’ll be watching closely, as my position size, although reduced is certainly not trivial. We will see how effective the new CRO has been and take it from there. 7-8% weight seems about right for now.

DDOG - Datadog has been discussed at length here, so no need to dive into their fantastic financials. The only thing keeping me from greatly increasing my position is the lockup expiration coming in March. The shares may or may not come under pressure. I don’t think anything less than accelerating growth into the triple digits would send the shares soaring, but thats just my take.

ROKU - I finally opened a position around $102, somewhere close to the lows at the end of September of 2019. Of course I missed the massive gains a lot of you have who have held the stock over a year. Roku, along with the Trade Desk is part of the mega trend towards streaming media. I was overthinking how the company makes money earlier in the year. Looking at it in a simpler way, the more people who have Roku accounts are collectively streaming more and more hours of viewing, will continue to attract more advertising dollars, will equate to higher ARPU (Average revenue per user). Which continues to happen.

GH - I’ve held Guardant for about 13-14 months and I can’t complain. The shares up 118%, which I’ll take every day of the week, twice on weekends, and thrice on holidays! :slight_smile:
I had opened with a small position back then, since they were a fairly recent IPO, and there was some risk involved with their NILE study and application to the FDA for the PAN cancer approval. Nothing has changed, except for the better since then. They expect an expedited approval I believe as early as May 2020, and will begin a huge colorectal study. Their revenue growth has been huge (triple digits), margins remain high, and the company has ample cash on hand to fund this new study. I’ve been thinking of increasing my position, possibly to 5-6% as the shares have recently been stuck in the $70’s range. Like many others, Guardant shares are not cheap.

LVGO - My newest position, Livongo Health. After reading Bert’s in depth, deep dive, and being a growth sl*t, how can I resist a company helping people, growing at triple digits, with high margins and recurring revenue? All at a $2.5 billion market cap and less than 9x EV/S? I’m sure Livongo is not widely followed yet, and the majority of IPO lockup shares have expired this week. An additional lock-up will expire in March, so I have been slowing accumulating shares. I’m guessing big institutions cannot acquire this name at the moment. As I type this, average volume is less than one million shares. Earnings will be announced on March 2nd, and we will get some insight as to the outlook for 2020.

ZM - I still hold a small position in Zoom, and I love everything about the company, except for the $20 billion market cap, probably the only thing at the moment keeping me from increasing my weighting. Revenue growth will start to come down eventually, and hopefully not steeply. That will be offset by what I believe will be stellar cash flow generation, which actually support a steep valuation, despite slower growth (Atlassian and Veeva are prime examples). I’ll be watching how revenue growth comes along this year.

There you have it. Right or wrong,my current thoughts and subject to change :slight_smile: I will say, these write-ups really do challenge you and make you question and sometimes second guess your stance on a company, when you have to put it in writing in your own words, without regurgitating the latest financials!

Thanks for reading

Best,
Matt

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Great performance, Matt, well done.

I like your choices so much that the only thing that sticks out a little to me, are our differing thoughts on a couple of your holdings:

TTD I like the business plan and of course management’s clear vision and obvious enthusiasm. However, I feel like a lot of the low-hanging fruit has already been priced in, making the very near term results questionable. Of course, I could be very wrong and TTD could keep on shooting upward in price.

In spite of the success enjoyed by everyone following Saul’s board, my old-school thinking still forces me to recognize companies that would make fine longer-term holdings. This small dilemma is my one of my only 2 current (mild) frustrations with our chosen paradigm. By the way, my second is that I currently don’t— and for a while won’t—have the time to follow companies as closely as I feel is necessary when holding very concentrated ports, whereas with say, 20 diversified holdings, I would feel better letting them fight for themselves without my interference other than maybe a quarterly check-in. With the recent volatility in local-consensus stocks, the idea of a more diversified port has a certain pull on me.

But for now, the (likely) higher returns of high concentration satisfies my level of greed. So there’s that, and I’m also too old to wait 5 or 10 years for a company to work its way into the market’s fickle favor.

GH I held Guardian for awhile but decided the chance of them matching the performance of the wide choice software companies currently kicking serious butt, was fairly slim. Per your results to date, maybe I was wrong.

ZM I can’t help but wonder, due to valuation only, if there aren’t better opportunities available short-term, but agree that the company’s performance is certainly worth admiration. So longer term I think they may well be a force to be reckoned with. In the shorter term (3-9 months?) I don’t quite see Zoom coming comparing with your other choices as far as a 3-6 month price appreciation, but just like TTD, it’s a company I want to keep on my limited radar screen.

Thanks for allowing me to “critique” your report, although I have no criticism whatsoever and I am always striving to learn. (Talk is cheap; Performance rocks.)

Good job and good luck all.

Dan

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