I almost didn’t do an update this month since the story of January has been pretty well covered by others and none of my companies had much newsworthy.
So I’ll keep in brief. In short, I sold out of monday.com (again) and about half of my Docusign stake. I used the proceeds to add to my Trade Desk and Nutanix holdings, and added just a little bit more Upstart, Magnite, and Pubmatic.
Year To Date Performance
-29.3% YTD Jan
Really no exceptions here. Even companies like Teladoc and Docusign that were savagely beaten down in 2021 weren’t spared and continued to drop in January.
January 31, 2022 Allocation
MongoDB (MDB) 24.6% The Trade Desk (TTD) 23.7% Magnite (MGNI) 14.2% Nutanix (NTNX) 13.9% Upstart (UPST) 7.5% Pubmatic (PUBM) 5.1% Teladoc (TDOC) 4.7% Docusign (DOCU) 3.6% SentinelOne (S) 2.7%
MongoDB moved back up into the top spot essentially by falling by less than The Trade Desk did this month, even as I made some new TTD purchases in January. Not much else changed to significantly beyond my complete sale of monday.com and partially sale of Docusign.
Since there isn’t much news this month to speak to, I’ll just summarize how I think about most of my companies, in certain categories in my mind…such as:
Strong, thriving companies, whose businesses should be strong for at least the next several years
- The Trade Desk
Companies that are simply “too cheap” right now in my opinion and likely to see significant multiple expansion if they continue to grow in line with my expectations during 2022
Riding the advertising tech and connected TV wave
- The Trade Desk
(here I am confident TTD will continue to be the leader on the demand side and I feel there is room for both Magnite and Pubmatic to both do really well from here on the sell side)
Wrapping up major acquisitions…what will their go forward growth rates be like as combined companies with like/like comparisons as they lap their acquisitions
(here I feel like even if they emerge with growth rates on the lower end of the possible range I estimate, I still think their valuations today will prove to be too low and a good entry, or hold, point)
The companies that had pandemic headwinds and are seeing improving metrics as things get closer to normal
- The Trade Desk
- (maybe) Nutanix
- (probably) Pubmatic
The companies that had pandemic tailwinds, which are no longer as significant, and are not getting love from the market right now but have big market potential ahead in years ahead IF they can execute
The hidden growth whose true business expansion wasn’t clear by looking at the topline revenue…and will get a boost from their first big tranche of subscription renewals in late 2022
The less certainty one that could really go off the rails in 2022 negatively…or could be a huge winner
The high growth company with increasing margins that are expected to continue to grow that isn’t cheap but isn’t priced crazy and could be a winner if they continue to perform
On my watchlist that I would like to own but can’t quite make space available in my portfolio right now
- (and maybe even) Square
So this earnings season might be the one of the most interesting ones we’ve seen in a while for some of the companies we follow. Are expectations so low right now that even a small outperformance will be rewarded? Or is the environment so tough right now that they really have to have a huge beat in order to not get further driven down? I really have no idea.
Facebook (or should I say Meta Holdings) reported earnings today after market close and apparently did not meet expectations and is down -22% as I write this after hours. FB is largely driven by digital advertising, so right now we’re seeing TTD, MGNI, PUBM, all ad-tech companies, are all down likely somewhat in sympathy with FB. But that’s only rational if the overall digital advertising space is suffering and impacting these other companies in a similar way. What if FB is not doing a well because they are losing share to the likes of these smaller ad-tech companies? In that case, it’s good news for owners of the small growing DSP/SSP’s. Maybe it’s a little of both?
Either way, it just makes me want to remind myself that I feel that I own really good companies that I expect will continue to be really good, and much bigger, companies in years to come. Until we start to see earnings this month, I think there will continue to be lots of volatility with companies like these. I don’t pretend to know a lot about how macro inflationary, foreign military conflicts, Fed moves, etc will cause the markets to react. But I believe that if my companies perform and grow well over the next 2-3 years, I’ll likely be rewarded. As stomach churning as this market has been so far in 2022, I’m still having fun and excited to see how these next few quarters unfold.
That’s it for another month. Hope everyone stays safe and has a great February