February was another good month, as the upward trajectory of my portfolio continues to be driven by Magnite.
The first two weeks of February were probably the best two weeks of gains I’ve ever had, I was actually up +45.2% two weeks ago today! Yes, you read that right. I was ready to completely re-think my goal of +25% gains this year, given that I had almost doubled that in just a few weeks…on top of being up +140% last year!
But things game back to earth the last couple of weeks, finishing February at +14.6% YTD
Hello Lightspeed! I added a new position this month, LSPD. It’s the first new company in my portfolio since I first invested in Magnite back in November of last year.
Performance
2021:
End of Jan +5.0%
End of Feb +14.6% (high point of +45.2% Feb 12th!)
My three biggest positions all went up this month, especially Magnite, but also MongoDB and Trade Desk. Magnite has actually dropped more than -20% from its highs a couple weeks ago but is still up significantly for the month of February. Most of my other holdings stayed relatively flat, although Alteryx dropped a fair bit after their earnings and guidance didn’t impress.
On Wednesday of this week, two my largest positions, Magnite and Nutanix both announced earnings after close, they looked really good to me, and both were up a few percent after hours. Must mean they’ll be in for a good day on Thursday right? Wrong! I think NTNX was down -10% and MGNI was down -15% the next day! What a crazy month this has been.
February 28th Allocation
MGNI 36.3%
MDB 13.0%
TTD 11.5%
NTNX 10.2%
SMAR 5.4%
DOCU 5.0%
DDOG 4.9%
LSPD 4.7%
CRWD 4.0%
AYX 3.8%
GH 1.0%
It’s been a while since I’ve had one company represent more than one-third of my portfolio. I haven’t added any new Magnite shares since early December, but it’s the little engine that could and just keeps rising, even after the more than -20% pullback the last couple weeks, it’s up about +400% since my initial purchases in November. I don’t plan to trim it anytime soon unless it really moves up a lot more from here, although I am mindful that there is only one more earnings release between now and when the June call’s expire.
The Lightspeed position is brand new, at close to 5%, so I had to sell a few things to make that happen.
Most of those funds came from sales of Alteryx and Guardant Health. I got lucky selling a lot of my Guardant just before earnings, near their recent highs. I’m only keeping the last 1% of my GH for now as there are a lot of gains still short-term until August, and those shares are in a taxable account. I sold the last of my Elastic shares once they hit LT gains, and also sold about half of a percent worth of Crowdstrike in February.
In addition to the LSPD purchases, I also added small amounts of DOCU, SMAR, and NTNX this month.
The Companies
Magnite MGNI
What a ride so far. I bought about half of my MGNI holdings in November when it was around $10/share and the other half in December when it was about $20. In February they were over $60 for a while, now just below $50.
I know some folks will steer clear of Magnite given their recent acquisitions combining Rubicon Project and Telaria and now about to add SpotX too. While I wouldn’t want to invest invest in a company that only grows by acquisition, that’s not what I believe is happening here. If you can consolidate a bunch of top companies in an industry right before a period of expected high organic growth, that sounds like a recipe for a supercharged investment to me.
They not only renewed the Disney deal for another 18 months, but also expanded it and are now selling ads for some ABC and ESPN services that they weren’t previously.
As big as my MGNI position has grown to, I just don’t feel like now is the right time to sell, so I’m holding tight. I hadn’t added any in 2021, nor have a sold any thus far.
MongoDB MDB
Mongo’s stock price has remained strong so far this year. Still a couple more weeks until they announce earnings, so not much else to report right now. This is a high conviction long term holding for me, so even if they have a weak quarter or two here and there, I believe in the LT future of MDB expect this will be a core holding of my portfolio for a while.
The Trade Desk TTD
Given that advertising has been hurt by the pandemic more than most companies we follow, TTD’s growth in the past three quarters has been Q2 -13%, Q3 +32%, Q4 +45%, and they have guided for +35% in Q1 (which probably means they will have another quarter of growth in the +40%’s, even without the political spend boost that the fourth quarter had). The following quarter Q2’21 is likely to have a pretty huge growth number considering that was the weakest one from last year.
And all this while more and more of us move to watching Connected TV “CTV” (TTD’s CTV revenue has been growing close to +100% in the last couple of quarters).
Not long ago, TTD’s valuation looked really frothy. It’s only taken a couple of quarters of growth for the valuation to appear downright reasonable to me now. I’m almost tempted to add more at these prices.
Nutanix NTNX
It’s never going to be a 50% grower like other companies here, but the benefits of their transition from hardware to software to subscription will eventually show in the form of revenue growth, and I still expect that today’s prices should look very cheap in the not too distant future.
Smartsheets SMAR
I’ve said it before and I’ll say it again, I don’t understand why SMAR is valued as inexpensively as it is, and I think that will eventually change. It looked that was changing earlier this month, but SMAR is another one that is down about -20% from their highs in mid Feb.
They don’t report until March 16th, so we’ve got a few more weeks to wait on earnings. I still think they could also be a takeover target this year.
Docusign DOCU
I love this company. I added a very small amount early in the month. Yet another company whose quarter didn’t end until January 31st, so they report in mid March. Between continued expansion of e-signature, and the eventual contribution from Agreement Cloud (at least a year or two away), I expect several more years of high growth ahead
Datadog DDOG
Well covered on this board, they should continue to perform really strong
Lightspeed LSPD
Thanks to Ethan for putting this one on my radar. I like how they are positioned, especially as the re-opening moves forward in 2021.
Crowdstrike
Again, the board covers them better than I could. It’s lower conviction for me, and I’ve sold a bit of it this month to fund additional LSPD purchases.
Alteryx AYX
I admit, I had stubbornly not viewed Alteryx as a turnaround until now, believing they were just hitting a blip last year from the pandemic impact and that they would take right off again as things opened up. Well if that was the case, they would be doing a lot better than they are. While I do believe they are going to have a lot of work to do to right the ship, I really felt positively about what I heard on the conference call. I liked what I heard from the new CEO, I think he is the right guy to get them back on the right foot again. Like NTNX, I think if AYX just gets back to 20-30% growth in a year, which I think they can, this stock will be worth much more than it is today. But AYX has dropped in terms of my own conviction over time and is now one of my smallest positions. I sold off a bit this month
Guardant Health GH
I only bought my GH shares and calls last summer, and it’s done really well for me, nearly doubling since August and my calls had about tripled. I sort of feel like the easy money has been made. If their LUNAR program (early detection) does well, today’s price will seem like nothing, but at this point in time, I felt I’d rather have a decent LSPD position, given the potential short term catalysts for Lightspeed, so I’ve sold most of my GH holdings. A small amount, 1% is in a taxable brokerage account with significant gains and won’t be long-term until August. Since I could see the stock gaining over the next six months, and the tax savings will be significant once it becomes subject to LT gains, I expect I’ll hold the last of it until then, and close it out by the end of the summer.
That’s it. I truly have no idea what to expect from the overall stock market over the next few months, but I feel good about the companies I own today. Stay safe, be well, and thanks for the continued great discussion here.
-mekong