Mekong22 Jun 2023 portfolio update

My big position in MongoDB (MDB) really made June a fantastic month for my portfolio, which was already off to a great start this year.

MDB was up +39.9% during the month of June alone, and is now up +108.8% YTD.

So here is how things look year to date at the end of June, it’s been a heck of a first half of 2023 for my portfolio:

+11.3% YTD Jan
+16.2% YTD Feb
+23.5% YTD Mar
+29.1% YTD Apr
+61.4% YTD May
+87.4% YTD Jun

I’ll use the standard line you hear from funds “Past performance is not indicative of future results”. I’ve had more than my share of bad picks in recent years, but at least so far in 2023, overweighting my portfolio with Trade Desk and MongoDB, and also adding new positions in Tesla and Aehr starting two months ago, have worked out quite well.

It’s almost funny to think about how when my portfolio was up a pretty huge amount in 2020, it felt so “normal”, like it was deserved for being so “smart”, and then two years later a hard dose of reality reminded me how much risk there can be in the market and how much is out of our control and I was feeling a lot less smart pretty quickly.

This year, my results don’t feel that way. I’m kind of in disbelief and pinching myself trying to figure out if this is real because it’s obviously way beyond what I could have ever hoped for over these six months. I sold off a significant chunk of my MDB after it popped with earnings in early June, although after selling more than a third of my Mongo, it’s still worth (total $ value in my portfolio) about the same as it was at the end of May given the apprecition. I think it was TMF1000 who used to be really good about keeping smaller trading positions, and separately larger longer term holding positions in companies he was confident in. I never really embraced that mindset (although I probably would have done better historically if I had). That is kind of how I view my sale of some MDB this month, as if I’m opportunistically moving out of a portion of it given the spike in prices, but I still think the long term view will be great and still want to keep exposure to them in a long term position in my portfolio.

I did own some LEAP call options in MDB and TTD which, had a positive impact on my returns so far this year, although I sold the last of my MDB ones when it popped post earnings last month.

Tesla is now up more than +60% over the, less than two months, since I initially bought the bulk of my position in early May.

One of the things that has also juiced my returns was the timing of when I sold off the last of my Cloudflare (NET) and Datadog (DDOG) these past two months and put much of the proceeds into Tesla and Aehr. NET was up more than +50% ytd when I sold my shares and DDOG was up more than +30%. So the funds that were invested in NET, up more than 50% when I sold and were reinvested into Tesla, which then increase subsequently, have compounded and actually gained more this year than even my MDB shares which are up +108%. While timing isn’t everything, in this case, it certainly worked out well (so far) for me with those transactions.

Here is my allocation at 6/30/23

42.3%  (TTD) The Trade Desk  
31.6%  (MDB) MongoDB   
13.6%  (TSLA) Tesla    
 9.6%  (AEHR) Aehr Test Sys 
 2.8%  (TDOC) Teladoc *NEW*
 0.1%  (MGNI) Magnite 

As big as the two TTD and MDB positions are, they represent a smaller portion of the total portfolio than they did in recent months. Combined they are 73.9% now at the end of June (yes, kind of crazy bigger than any rational person would have in two stocks). But it’s lower than when they combined were 78.8% at the end of May last month, and were actually 87.6% at the end of April!

So while still very, almost ridiculously, concentrated today, it’s a bit better than a few months ago. Keeping so much in two stocks for most of 2023 wasn’t specifically something that I felt about those two companies themselves making me want to have so much in them, it was simply the result of my not having a lot of conviction in anything else and there weren’t other companies that I wanted to be signfiicantly exposed to in the early months of 2023. Maybe that should I indicated I should have kept more in cash in early '23, but I wasn’t losing any sleep over having so much in Mongo and Trade Desk, so I felt like in the long run it would be fine holding those stakes. Certainly in retrospect it worked out very well lately.

I did sell out the last of my Cloudflare and Datadog this month. I briefly bought very small, less than 1%, positions in both Zscaler and Crowdstrike during June, but I sold both a couple days later, wanting to have more in Aehr.

Having only four companies make up most of my portfolio is also not something I plan to continue for the long term, I would much prefer to have 7-9 companies, but I’m still searching for more companies that I feel like I understand well enough and feel confident enough to shift more significant amounts into. I suspect before too long my portfolio will be more diversified than it is today, but I’m not one that will diversify for the sake of being diversified if I feel good about what I already own. And it hasn’t been a bad thing for my portfolio at least so far in 2023.

Here is the year to date performance of each of my current holdings. Note that the companies that I didn’t own at the beginning of the year (TSLA, AEHR, TDOC), this only shows the performance since I purchased them:

December 31st^ June 30th YTD Gain
TTD 44.83 77.22 72.3%
MDB 196.84 410.99 108.8%
TSLA^ 161.3^ 261.77 62.3%
AEHR^ 32.04^ 41.25 28.7%
TDOC^ 24.33 25.32 4.1%
MGNI 10.59 13.65 28.9%

While my overall portfolio performance was driven by having so much concentrated in two stocks (which, again, I generally wouldn’t recommend) which have increased +72% and +108% so far this year, my timing has also been good starting new significant stakes in Tesla and Aehr just in the past two months which are both up nicely in a short amount of time.

^ Because I didn’t own TSLA, AEHR, or TDOC until this month, the “December 31st” numbers above for Tesla and Aehr are not their 12/31/22 prices, but the stock price of my initial, most significant purchases. For Tesla it was on May 4th. They had already reported their quarterly results in April, so there wasn’t any new earnings release since my purchase and I certainly didn’t expect they would rise 62%+ over the next eight weeks, but I’m glad I bought as much as I did early on as I probably wouldn’t be as inclined to buy as much all at once right after its recent run.

And also note that most of the shares I hold in TTD and MDB were purchased in 2018 and 2019 at much lower costs. The largest portion of my Trade Desk shares were purchased in January 2019 for $11.39 and are up +578%, while most of my MongoDB shares were purchased in July 2018 for $57.39 and are up +616% now.

Thoughts on the Companies

Trade Desk (TTD) - although I sold a good portion of my MongoDB this month, I really haven’t been inclined to sell any TTD despite it continuing to be such a high percentage of the portfolio. There could be a correction or they could have a bad quarter (or more) and bad guidance and then I’ll probably wish I treated a portion as more of a trading position and lightened.

But hindsight is 20/20 and I feel confident that TTD will be worth a lot more in the future than it is today and still think they have plenty of long term tailwinds that will continue to move them in the right direction, along with one of the best CEO’s out there (who is highly incentivized with an equity stake to see that the business, and stock price, continue to grow).

One of the big things that originally drew me to Trade Desk and I still think it going to benefit them is how easily their platform can scale when advertising, particularly CTV, programmatic etc. that TTD focuses on. Remember that they are essentially a middleman, that provides lots of tools to the ad buyers that enable them to determine how to spend their ad budget better than they ever could on their own to make sure they are getting the most bang for their buck. Since the suppliers of the ad inventory (streaming platforms etc.) and the ad buyers are already set up on TTD’s platform, any customer’s spend could double (or triple or more) overnight as they move more of their budget and spend away from traditional advertising like linear tv, to CTV etc where they can better manage and see the results of their ads and what kind of a return they get. It could not only encourage them to move their spending away from the historical platforms, but could also incentive them to spend much more than they did in the past because they will have real data showing them exactly what the return (and increase to profits) they can achieve by spending more. And this additional spend will have very little incremental cost to Trade Desk. TTD really doesn’t have to do anything or spend much of anything except to sit back and watch the revenue rise, much of which should fall to the bottom line and generate cash.

Now if the stock price doubled in the second half of 2023 from where it is today, I probably would still off a portion of my Trade Desk holdings similar to what I did with Mongo this month. But it all comes down to the data and information that is available to me at the time and what my expectations are then. I can definitely see TTD being worth much more in 5-10 years than it is today, and I feel good about them being my biggest holdings.

MongoDB (MDB) – I touched on Mongo a bit above already. Obviously I’ve lightened my holdings quite a bit this month, although still own a lot of MDB.

Snowflake reported earnings just a few days before MDB and SNOW’s results were not considered good and the stock took and hit and I suspect there “may” have been some people assuming that Mongo would have a similar reaction to their stock when they reported and probably took some short/negative bets going into earnings and had to cover quickly when the results were not bad, leading to some of the 30%+ pop in MDB’s stock the day after earnings.

I just think Mongo still has lots of opportunities for some customers to shift more of their traditional database needs to MDB, particularly for existing MDB customers who I believe still only have a tiny portion of the DB spend with Mongo and there is lots of potential to grow just through existing customers, beyond possible new customers. Like everyone they talked a lot about AI in their conference call and while I don’t pretend to really understand it, it does make sense to me that lots of AI growth could benefit MongoDB more than some of the other companies I follow. We’ll see.

I do think if there is eventually a recession (which seems to be less likely in 2023 and possibly could be a risk for 2024 now), MongoDB is likely to be hurt more than a lot of other companies, as they were in 2020 during the pandemic. But long term, I think they have plenty of good years ahead of them regardless of the shorter term.

Tesla (TSLA) – I described my thought process for buying into Tesla last month. Never in my wildest dreams did I think the stock would go up 60%+ two months later and I’d be lying if I said there isn’t a temptation to take those gains, or a portion of them, and lock them in. And I might very well regret not selling some. But right now the only stock I really would be tempted to add more to might be Aehr, and I’m already pretty comfortable with that one being around 10%, so I don’t want to put much more there until we’ve seen another quarterly result or two.

At the end of the day, I invested in TSLA because I thought the company can be worth much more 5-10 years than it is today. The valuation looks high right now just about any way you look at it (although I suppose you could say the same thing about TTD, or MDB….or for that matter Amazon when held it and had incredible returns in years past). So I think I just plan to hold on and see where it goes. It’s not a stock that I plan to buy and sell based on any one quarter’s results or guidance. Unless the overall story changes a lot, I tend to think this is one I forget about and ride it and accept that it will be a bumpy ride and will likely be some rough days and weeks when it sells off.

Teladoc (TDOC) – This is a new position and it’s not really on topic for this board so I’ll just briefly say that I put a few percent into TDOC not so much because I view it as a turnaround, but more of a readjustment of expectations compared to what was expected from the company a couple years ago, and I think the stock price currently reflects very minimal expectations that, even with mediocre results, they could beat. They’ve written off most of the goodwill from the disastrously overpriced Livongo acquisition and that is in the rearview mirror. But I do think they will be a mountain of data around diabetes (largely from Livongo) that is likely to be pretty valuable to them going forward. And telehealth isn’t going away. It won’t see the spike like it did during Covid, but there is still a nice runway in coming years for the legacy business. I don’t have as much faith in management as I do in my other investments so if TDOC shot up 75% or so in a short amount of time, I would almost certainly sell it all off and move on, unlike how I think about Tesla. We’ll see, I’ll leave it at that.

So that’s it for another month. Pretty amazing first half for my portfolio. And I’ll point out that I didn’t reinvest all of the cash I generated from my MongoDB sales. Although I put some of it into Aehr and TDOC and a little more TSLA, I did pull some funds permanently out of my portfolio. With the performance this year, it felt like a good time to make some extra payments on the mortgage principal and save some future interest. I wish I did more pulling some funds out in late 2020 and 2021 and I guess I’ve learned from that, not to get too optimistic or have unrealistic expectations and to sometimes take some exposure off the table given how unpredictably things can change very quickly.

Wishing everyone in the U.S. a great holiday this week. Thanks as always to Saul (wishing your arm a speedy recovery!), and others, for the great discussions and ideas we get to learn about here.