mekong22 July 2021 Portfolio update

This will be a relatively short update. Only one earnings release for my companies in July, so not much news to cover on the companies.

Year To Date Results by Month

Here’s my latest YTD performance:

 +5.0%   YTD Jan 
+14.6%   YTD Feb 
 -9.2%   YTD Mar
 -8.2%   YTD Apr
-19.7%   YTD May
 +7.9%   YTD Jun
 +3.8%   YTD Jul

So year to date performance slipped a little this month. I guess I shouldn’t expect to be up +34% in a single month like in June again so soon…

The short version of July is that Magnite, Nutanix, and Teladoc all drifted lower, while Docusign and The Trade Desk moved up a bit, with the others flat. Most all of that was essentially on no news.

Teladoc was the only company to report earnings last month and the stock price is essentially unchanged from where it was immediately before the press release (although it had gone lower earlier in July prior to earnings).

July 31, 2021 Allocation by Holding

My July 31st allocation:

20.7%	Magnite (MGNI)
16.5%	Docusign (DOCU)
15.3%	The Trade Desk (TTD)
15.1%	Nutanix (NTNX)
15.1%	MongoDB (MDB)
 9.1%	Smartsheets (SMAR) 
 8.1%	Teladoc (TDOC)  

I think this might be the first time, since I started posting monthly updates at the end of 2019, that I actually made no trades whatsoever during the month. I still really like having my investing dollars where they are.

I came close to adding some more Teladoc the morning after their earnings release last week when the stock was initially down -10% that day. I couldn’t decide on anything that I wanted to sell to free up some funds, and before long, the stock started moving up and up throughout the day, and before I knew it, TDOC was in positive territory that afternoon. I snooze, I lose sometimes, but it would have been a small percentage that I was considering moving regardless. At least it reassures me that I had the right idea, believing that the quarter’s results were a lot better than the initial market reaction that, very briefly drove the stock price down.

Cumulative Gains by Company

I really like the new summary from Saul’s post this month showing the cumulative performance since purchasing. I thought it would be interesting to see how that looks when applied to my portfolio.

This first version I prepared takes all of my purchases that I’ve bought over time (and still own) for each company, compared to the total sum of their cost basis to get a blended gain for each:

MongoDB	          up	259%
The Trade Desk	  up	211%
Docusign	  up	157%
Nutanix  	  up	 81%
Magnite	          up	 71%
Smartsheet	  up     43%
Teladoc	         down	-20%

These numbers get a bit muddy because some stocks, like Smartsheet, I bought most of my position all at once, while others I’ve made many small purchases over time when the stock price vs gain potential looked opportunistic. Also impacting this breakdown is that some of these positions include call options too, which I won’t discuss here.

So to try to take a modified view of the cumulative growth at a more clear point in time without the impact of the options, I took a look at the biggest single purchase I made for each company which still represents my largest tax lot for each stock (not necessarily my first purchase, although in several cases, it was) and then I looked at the gains for the regular common stock since that purchase:

	    Purchase_Date  Purch_Price  7/31_Price		
MongoDB	       7/16/2018      57.39      358.92   up   +525%
Trade Desk      1/2/2019      11.40       81.91   up   +619%
Docusign	8/7/2019      44.73      298.04   up   +566%
Nutanix	       3/16/2020      13.24       36.02   up   +172%
Magnite	      11/10/2020      10.90       30.30	  up   +178%
Smartsheet    11/11/2020      53.35       72.55	  up    +36%
Teladoc	       3/17/2021     186.45      148.45  down   -20%

One thing that jumps out to me is how much I’ve added to my companies, especially the first three, even after they had already doubled and tripled (or more). I believe I’ve added to each of them again already in 2021, as my portfolio has become more concentrated.

And even after the gains so far, I won’t be surprised if any company on that list doubles or triples again over the next 2-3 years. If I didn’t think so, I wouldn’t hold them today.

Some Company thoughts

I’ll mainly speak to Teladoc here this month since they were the only ones with an earnings release in July

Teladoc TDOC

Some of Teladoc’s GAAP results will continue to be skewed by the inclusion of Livongo in the current quarter and not in the corresponding period. There were also a lot of Livongo acquisition related costs during the quarter, particularly for stock based compensation awards and amortization of intangible assets established when combining with Livongo.

These costs, and the resulting impact on net losses, was likely at least part of what caused the stock to sell down -10% initially afterwards. But after investors digested the results and saw that these are largely one time nonrecurring costs, and also considering the beat and raise on revenue, the stock recovered and finished the day in positive territory.

Revenue increased +109% (boosted by adding Livongo), but was still +41% organic revenue growth and the company increased full year revenue guidance to more than $2 billion. And that is before they start to benefit from the cross selling synergies that are expected from the combination with Livongo, which were always expected to kick in, in early 2022 when the new website/app user interfaces get rolled out. So even as a $2B revenue company already today, they are still growing at a really nice clip and will likely continue to do so for a while.

Their success is going to be largely driven by Teladoc’s ability to continue to sign on new large employer health plans and health systems. Listening to the earnings call, management sounds extremely enthusiastic about the pipeline of new customers they are in the process of adding. Here is some of the discussion from a great transcript that was posted on TMF:…

I’ll stop short of giving – of exactly sizing the pipeline.

But I do want to give some color on that. And let me walk back to the beginning of the year and what we were seeing from the beginning of the year and how that’s evolved the last couple of quarters. At the beginning of the year, we talked about the fact that our pipeline was robust, and it represented 50% growth in the pipeline relative to the same time the year before. But we also said that the pipeline was weighted toward more early stage deals, right? So it was earlier in the process, but the gross size of the pipeline was significantly larger.

Since then, as you can see, many of those deals have progressed to closing, right, including the East Coast Blue plan that we talked about on the last quarterly call, including HCSC, including the large health system in Florida that we talked about rolling out chronic care management with. And so those deals are coming to fruition, as well as the Primary360 signature that we just talked about. So those are coming to fruition. We’re happy to see those close, and they’ve moved through the pipeline.

But we’ve also seen, as I look at our pipeline today, our late-stage pipeline as those deals have progressed through the pipeline – and our sales force has made progress on those. Our late-stage pipeline at this point is 20% greater than it was last year, right? So we’re now at a point where we have great visibility into what that’s going to look like because we’ve successfully moved those deals through the pipeline. And what’s most exciting to me is, whereas last year, 50% of our bookings were multiproduct bookings, this year, at this point, we’re up over 75% in terms of our multiproduct bookings. And after seeing an explosion in our average deal size last year, our average deal size in our pipeline now is up another 10% versus where it was last year.

So when I put all of those things together, that’s what gives us confidence as we look into '22 and beyond. And certainly, some of the deals that we’ve announced already are part of that. But I would say I’m at least as optimistic and excited about what’s still in our pipeline as what we’ve already closed. So I feel very, very good about that.
-Chief Executive Officer, Jason Gorevic

The new deals announced with HCSC, a major health insurance firm, and new integration with Microsoft Teams sound like significant steps forward as well.

Margins have also been improving. Gross margins increased from 62.3% in Q2 last year to 68.1% this quarter.

Today Teladoc is valued at about $24 Billion. When they announced the Livongo purchase, the acquisition price was $18.5 Billion. So today you’re not paying much more for both companies vs where LVGO was valued at the time. So I think it’s worth repeating what I said in my May monthly summary writeup two months ago:

At one point Teladoc (now combined with Livongo)’s market cap was valued nearly as low as the acquisition price for the LVGO purchase alone! Consider that many Livongo shareholders thought that TDOC’s acquisition was a bad thing because the company could have grown to be worth even more than the purchase price. And consider that now you’re paying that same price and getting both LVGO and Teladoc’s telehealth business. Unless you think that Teladoc is going to completely screw up Livongo, and their own business too (which there is no evidence that I’ve seen suggesting that is happening or likely to happen), then I think TDOC shares are still just an absolute steal at these prices.

Competition will be important to keep an eye on as it will surely be fierce in the lucrative, massive, healthcare market. But Teladoc is already established as one of the leaders in tele-health, and even despite bit competition, they should stand to take a sizeable piece of the pie too.

The Trade Desk TTD

There wasn’t much news from TTD this month, but one thing that has resonated with me is the reporting on how bad the ratings for NBC’s Olympics coverage have been so far, even when factoring in the streaming viewership. They’re down -48% vs 2016 over the first eight days! I’m seeing reports that the ratings are so much lower than what was suggested/promised when some ad packages were sold that NBC will have to potentially give them free NFL ads this year or other freebies to make up for it. And the network already owns the rights to all Olympic games through 2032…sounds pretty scary if the trends continue over the next decade.

What this really drives home for me is how risky traditional linear advertising is, even during major events that have historically driven huge viewership. Why would any company or brand want to commit tens of millions of dollars to huge expensive campaigns when the audience, or more importantly, your intended desired audience, may not ultimately watch. Why wouldn’t they want to move more and more aggressively toward programmatic where we have the technology to target ads at exactly who they want? I would.

Programmatic digital advertising is the future, and I feel like it’s accelerating even post-pandemic and has a long runway ahead. The Trade Desk is the leader on the demand side. Of course, Magnite MGNI will benefit too.

Magnite’s earnings are coming up on Thursday and then Trade Desk next Monday. I’m excited to see what they report and what they have to say on the investor calls.

That’s it for another month. Everyone have a great August!



Hi Mekong, I have followed this board for the past year. I too have a position in MGNI. I noticed that everyone had been selling as it went down and you and I may be the only holdouts for this earnings report and forward. I just wanted to know what you are thinking will be reported?

For me, the numbers being integrated from the SPOTX acquisition are the exciting part and also hoping they don’t have a whiff of one month out of the last 3 (as they did in Q1).

Any thoughts would help as I am sure you have done this longer than me.

  • Nate

Hi Nate

As you know Magnite’s growth will continue to be muddied by the two big acquisitions for a few more quarters so it will be interesting to see what they report and how the market responds. Plus, Q2 2020 was the peak weakness for advertising last year and MGNI has a very weak comp. Even if they only hit their guidance, their revenue will be up +125% this quarter. So that’s of course one number I’ll be looking at, to see how much they surpass that expectation by.

I suspect that the market is going to be primarily focused on their reported organic growth, which is likely to drive the short term stock price reaction afterwards.

Last quarter they reported +67% GAAP revenue growth including the Telaria acquisition (which wasn’t in the prior year Q1’20 comparison number), but only +18% “pro forma”. However, I had pointed out at the time that SpotX (not yet included in the reported pro forma number) grew +66% in Q1, so all told, including SpotX (e.g. the company that today’s shareholders will own going forward) grew organically by about +36% in Q1 and management commented that this growth rate had been increasing early on in Q2.

So it’s possible that some people that didn’t do the back of the envelope math to incorporate SpotX in Q1 and believe that 18% is a true organic growth rate for the whole company going forward may be surprised if they disclose +30% or +40% or more organic growth this quarter.

At the end of the day, I own Magnite because I’m optimistic for the multi-year opportunity ahead. They’re not going to be impacted by cookies going away (might even benefit from it). If they’re half as successful on the supply side as TTD has been on the demand side, and I think they will, then MGNI shareholders will do really well from here.

I’ll be interested in hearing about a few things during the earnings call afterwards as well:

One thing I’ll interested in is how the IT dev roadmap is coming together to integrate all of the products from all three companies. Last quarter they said that by July, they would have all products including from SpotX on a single interface in July, which seemed really quick, considering how recently SpotX had closed. Of course, that will be a bit of a taped-together linking different systems together and not ideal, but if they were able to do it in any sort of way that makes customers experience and ability to upsell additional products even mediocre for now, that could be a big boost to the second half of 2021. Of course, in the long term, we’re not looking for a “mediocre” combination of the products into an ducttape interface, but a purpose built user experience, but realistically it will be 2022 by the time that can really be rolled out. They tripled their CTV developer workforce when buying SpotX, which was one of the big attractions of that deal/acquisition, so hopefully we’ll hear that they are happy with the progress made and we’ll get more of a timeline around when the businesses might truly be integrated.

The other thing I’ll want to hear about are new customer progress. Has anything new transpired with the Disney/Hulu deal. More about the Rakuten Europe deal that was announced last month, etc.

Last quarter was kind of strange because Magnite’s stock reacted more on earnings day to TTD’s earnings announcement (before the market opened) than it did to their own Q1 release (after market close on the same day). This quarter, MGNI reports well before TTD, who doesn’t report until next week. So that won’t be a factor this time.

But ultimately, I don’t have any guess as to whether the stock will be up or down after earnings. This is a company that, unless something significant changes in the long term story, I expect to own Magnite for at least the new few years so I’m less concerned about shorter term ebbs and flows especially right now when much of the company’s focus is (and should be) on integrating the three sizable entities they’ve brought together to create an industry leader.



I too have a position in MGNI. I noticed that everyone had been selling as it went down and you and I may be the only holdouts for this earnings report and forward.

Hi Nate,

I haven’t had time to post much this year (given work) but I have certainly maintained a major position in Magnite @24%. At one point within the past year MGNI represented over 30% of my portfolio before it was revalued by >50% this year. I don’t think it will trade down there for long given the growth coming. (FWIW Tesla, which I’ve owned since 2012, has reemerged as my largest holding again @ 29% of my port now.)

Mekong and I appear to be similarly aligned on Magnite since last year when we both made it a committed, major and long-term portfolio holding. It traded <$10/sh. last year and in my opinion is just getting started. Magnite is in an enviable position as a fast emerging and largest worldwide pure SSP benefiting from cord-cutting (from cable to streaming), CTV, and broadly speaking programmatic advertising. They are also likely to benefit from the end to end capabilities they can offer that others cannot given MGNI is the largest SSP and growing. It is clear that sell side publishers and others who seek their services want scale and value. Magnite is most appealing on these elements and because of it will likely see a disproportionate share of orders and relationships flow its way as has The Trade Desk. The share price will eventually follow and possibly sooner than later.

Regardless, I will be focused on the ‘Foolish’ longer term given all of these dynamics need time to play out, but make no mistake they are and will continue to enjoy major tailwinds moving forward.