Mekong22 Sept 2024 portfolio review

September was a good month for my portfolio, driven by the large holdings in Tesla (+22% this month) and The Trade Desk (+10%)

I sold about 10% of my TTD holdings (3.5% of the total portfolio) and sold the last of my small SCMI and ZS stock.

Here’s how things look cumulatively in 2024:

-9.7%  YTD Jan
+11.0% YTD Feb
+3.7%  YTD Mar
+2.3%  YTD Apr
+1.2%  YTD May
+9.7%  YTD Jun
+11.8% YTD Jul
+18.8% YTD Aug
+33.6% YTD Sep

My portfolio is still very concentrated, down to seven positions, and three, really mostly two now, of the companies I own make up the majority.

Tesla and Trade Desk have played leapfrog for the top spot of my port the past few months, with Tesla moving back to the top again, due mostly to the appreciation of the shares, in addition to my selling some of my TTD when it got up to $110.

This was my allocation at the end of last month 8/31/24

38.1%  (TTD)   The Trade Desk  
35.1%  (TSLA)  Tesla    
10.3%  (MDB)   MongoDB
 3.9%  (AMZN)  Amazon 
 3.8%  (MELI)  MercadoLibre
 3.5%  (MSFT)  Microsoft 
 2.6%  (CRSP)  Crispr Theraputics 
 1.8%  (ZS)    Zscaler 
 0.9%  (SMCI)  Super Micro 

and here it is at the end of September, 2024 now:

42.2%  (TSLA)  Tesla    
34.0%  (TTD)   The Trade Desk  
 8.7%  (MDB)   MongoDB
 4.9%  (AMZN)  Amazon 
 4.4%  (MSFT)  Microsoft 
 3.4%  (MELI)  MercadoLibre
 2.3%  (CRSP)  Crispr Theraputics 

Note that a portion of my TTD and TSLA holdings includes some 2026 Leap call options.

It is a very concentrated portfolio which I don’t generally prefer, but as of right now I don’t have many other companies that I have a high level of confidence in to allocate investment funds towards. TTD and MDB have been two of my top three holdings pretty consistently for the past five years.

Despite selling 10% of the TTD shares I owned, Trade Desk increased slightly as a larger percentage of the portfolio

With the proceeds from the TTD, ZS, and SMCI sales, I added a bit to my Amazon and Microsoft holdings, and pulled some funds permanently out of the portfolio for other uses.

Trade Desk TTD - I mentioned last month, when TTD was my largest holding, that if the shares got up above $110 or $120, I would probably reduce it somewhat. That is what happened and I sold one-tenth of what I owned.

If it continues to move up to $115 or $120, I’ll likely trim a little more, although I am still optimistic that they could outperform expectations for Q3 and have pretty good guidance for Q4, so I don’t plan to do anything too drastic until we see the next earnings release (unless the shares really spiked up a whole lot beforehand)

Their next release should be right around election day so it will be interesting to see what is happening with the markets that week.

Last month I noted that I feel that TTD is probably one of the top candidates to be added to the S&P 500 index. Well they didn’t get added this quarter as Dell and Palantir were just announced to be added. There was MF article a few days later, also noting that TTD is a top candidate, and noting that it’s possible they held off on including Trade Desk this quarter so not to put three new tech stocks into the index all at once. It’s an interesting take that I hadn’t considered. Still could be a while before TTD goes into S&P500 (if it ever does), but I feel if they continue on the current trajectory, it is probably just a matter of time

Tesla TSLA - There will be no shortage of news from Tesla in October. We should get their Q3 deliveries numbers in the next couple of days, then they have their much hyped Robtaxi event on October 10th and we’ll get full Q3 earnings later on toward the end of the month.

Despite the big move in Tesla this month and it’s large portion of my total portfolio, I haven’t had an urge to sell any shares like I did with TTD. I just think the opportunities for Tesla in so many fields (auto, self driving, robotaxi, energy, robotics, semi trucks, microchips, insurance, etc) is so great that I’m willing to let it play out more right now, especially with all of the new information I expect we will be recieving in October. Of course, there is a certain point where, if the allocation gets too huge, I would feel the need to sell some and diversity, but as of today, I’m not at the point where I feel that way.

Some early indicators based on China registrations might suggest that Tesla’s Q3 numbers will exceed expectations and that could be what has driven the stock higher in September.

For the 10/10/24 robotaxi event next week (which CEO Elon Musk has posted that it will also include “other things” too), Tesla has rented the Warner Bros studio, most likely to demonstrate live, not only what the vehicle(s) will look like, but also to show what the experience will be like on a (fake) movie studio neighborhood of streets. I’m excited to see what unfolds during this event and whether it will be mostly hype or something more.

This week, Tesla just released the first version of their FSD Full self driving for Cybertrck (“supervised”, as with all Tesla FSD right now, which requires an attentive driver at the wheel even when the car is driving itself). Early reports on social media testing the system show that it is working very well, right from the intitial release.

“IF” (big if) Tesla is someday successful in licensing FSD to other auto brands, this gives me some comfort that they can adjust the system and test it on a brand new, very different shaped car in a pretty short amount of time, which would obviously be vital in getting other brands to sign on. Time will tell whether other brands want to license that system from a major competitor…it will probably ultimately come down to how much better Tesla’s FSD system is compared to the alternatives and what consumers expect from their vehicles in coming years in order for the other automakers to stay competitive.

Not much else to report on the other companies I own this month. I think this is the first time in a long time (years) that MDB has dipped to less than 10% of the portfolio (a year ago, it was 30% of my portfolio). I still like the company and their opportunities ahead, but just dont’ have as much confidence in them right now as I do in my two largest positions.

Here is the year to date performance of each of my current holdings. Also note that the companies that I didn’t own at the beginning of the year (MELI, CRSP, AMZN, MSFT), this only shows the performance since I purchased them:

Dec 31 2023^ Sep 31 2024 YTD Gain
TTD 71.96 109.65 +52.4%
MDB 408.85 270.35 -33.9%
TSLA 248.48 261.63 +5.3%
MELI^ 1,409.42^ 2,051.96 +45.6%
MSFT^ 402.50^ 430.3 +6.9%
AMZN^ 177.88^ 186.33 +4.8%
CRSP^ 55.06^ 46.98 -14.7%

^ Because I didn’t own MELI, CRSP, AMZN, MSFT until this year, the “December 31st” numbers above are not their 12/31/23 prices, but the stock price of my initial, most significant purchases.

The TSLA Jan 1st number above is somewhat misleading as, although the stock was $248 at the start of 2024 and I still own those shares, I added a decent amount in the $170-200 range during 2024 this year, so my actual percentage performance from Tesla investments this year is higher than what the simple table above indicates. I also sold a good chunk of my MDB early in the year when the stock was over $400 and even over $500, so my total MongoDB investment hasn’t taken the full negative 2024 hit shown above (although my remaining shares that I still hold, have).

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 +863%, while most of my MongoDB shares were purchased in July 2018 for $57.39 and are up +371% now.

That covers it for another month.

Thanks as always to Saul and everyone else that makes this board so great!

-mekong

65 Likes

Given the tailwinds of political spending, I would hesitate to trim until those results are fully baked in. I believe that is north of 120.

5 Likes

The political spending is well understood to be cyclical and certainly baked into all expectaions, forecasts, analyst expectations etc. Might it get a blip of a pop by uninformed investors or some bots - sure. But election spend is well understood for TTD. Could it be higher or lower than those expectations? That to me is the only question.

8 Likes

If I only had 10-15% of my portfolio in TTD, I would probably not look to make any changes before we get the next earnings report.

But as large as my Trade Desk stake is, trimming a bit more each time it reaches new highs feels like the right thing to do for my own situation, and if it does move up sharply next month, I’ll still be very happy to watch my remaining (still large) number of TTD shares appreciate accordingly.

A very large percentage of TTD shares are owned by institutions (about 80% per Yahoo finance) so I wouldn’t bet on many being surprised that political ad spending will have an impact on Q3 & Q4 2024 results. Certainly, yes, the analysts do have some increased political revenue baked into their expectations.

Historically, I believe political spend has only added in the high single digit percent extra revenue for TTD during big election cycles. So yes, it could be higher or lower than expectations. But it is also possible that a higher percentage of all political spend this year will be digital programatic ads, in TTD’s wheelhouse, compared to four years ago.

If just a few extra percent move away from traditional linear tv/radio ads toward digital programatic this year, it may have a significant impact. Maybe it will be more of a shift than that? Right now, I doubt anyone really knows what to expect with any precision.

Here is a trend of YOY revenue growth by quarter for recent years, with Q3 showing management’s guidance:

       Q1    Q2   Q3   Q4
2020   33%  -13%  32%  48%
2021   37%  101%  39%  24%
2022   43%   35%  31%  24%
2023   21%   23%  24%  23%
2024   28%   26%  25.3%(q3 guide)

The company does not give full year guidance so I cannot imply a Q4 number from what they provide.

Based on analyst estimates I found online (I don’t know if these are the most accurate average estimates, but it’s the best I found), it shows a Q3’24 estimate of $619.9M and a Q4’24 estimate of $750.1M. Note that Q4 is the seasonally strong holiday shopping advertising quarter.

This would imply analyst estimates of +25.6% for Q3 (only slightly higher than the +25.3% noted above per management’s guidance) and +23.8% in Q4.

IF (big “if”) those are actually the growth rates expected and baked into the current stock price, I would can see how those could turn out to be conservative.

So far in 2024, in Q1 and Q2, the growth rate of +28% and +26%, both exceeded the growth of any quarter of the prior 2023 year. And although there may have been some “primary” election advertising spend earlier in 2024, the large majority of the spend for this cycle will hit Q3 and Q4. And keep in mind, although a lot of the presidential spending will only focus on a few states, there will be close senate and congress races taking place throughout the country, along with related election spending for those contests in other states.

So to only expect 25% and 24% in the second half (with a political spend boost) when the growth was 28% and 26% in the two quarters of the year (without much political spend) seems, at least to me, to leave the potential for an upside surprise.

And then beyond 2024, and looking ahead to 2025 next year, keep in mind that some of the announcements of the major streaming TV services that have recently partnered with The Trade Desk, are only starting to incorporate them into their ad sales, particularly Netflix, which TTD CEO Jeff Greene has said is not likely to start to contribute much until at least 2025.

So I don’t think there is any guarantee that there will be a big move when Q3 get announced in November. Especially if there are macro or global concerns right around the time that the company announces earnings and new guidance that could potentially cause them to be extra conservative with Q4 guidance (I hope not, but it could happen and that could have a big impact on how the market, and the stock price, reacts to the release).

But like Fool4ZTribe, I’m optimistic that we may get good news and good reaction in a few weeks. Just not assured enough that I wouldn’t take some more chips off the table if the stock price runs up much more beforehand.

-mekong

18 Likes

Mekong - a couple of additional factors to consider.

  1. WRT political spend - TTD have become diligent in breaking out the political vs core base ad spend. No matter what the political spend upside might be they will still provide transparency and guidance around the “Business As Usual” (BAU) situation. So effectively the SP might be as much driven by core fundamentals than political upside.

  2. What hasn’t really been discussed is the Ad spend of the Olympics which they wouldn’t break out usually. On the one hand this hardly made a difference with the last World Cup in Mid East or Olympics in Japan. On the other the JP Olympics were during Covid and in completely the wrong timezone for live Ad spend. Maybe the Paris Olympics will be different - it certainly was well marketed and Team America did come top of the medal table (just).

Ant

10 Likes

Ant - good point. I was only speaking to the political spend in response to the prior posts. The Olympics should help a bit in Q3 too. I just don’t have any strong opinion regarding how signfiicant it might be, so will just wait and see when we hear from the company next month.

and yes, “business as usual” revenue and results will likely be just as impactful, likely more so, to how the stock responds.

It’s yet to be seen if the new deals with Disney, Netflix, etc’s streaming services will ultimately just serve to keep the current growth going at similar rates over the next couple of years, or will it lead to an acceleration at some point. That’s one of the bigger stories that I’m excited to see how it develops over time.

Although there was a huge shift in the ad industry during the pandemic, I’ve been a little surprised that the advertising market hasn’t continued to move more swiftly away from traditional media ads, despite all of the benefits associated with programatic.

Despite this, The Trade Desk continues to grow at a much higher rate than the overall advertising market and has been taking more and more market share each quarter, regardless.

I’d also note that I don’t view the boost from political spend as “one-off” or as revenue that doesn’t recur. It recurs, not in the beautiful way that subscription recurring revenue repeats, but the election spending does come back every 24 months. Not just once every four years, but every two years. In 2022 I believe it was reported by TTD that the political election spend exceeded that of any presidential cycle, despite it only be a midterm election.

So just like how the seasonal holiday boost only happens once every four quarters in Q4, the seasonal political boost happens once every eight quarters and should be treated similarly, in my opinion.

I almost look at TTD’s year as a 24 month year that repeats, rather than as two 12 month periods with election spend alternating in one and then not in the next.

-mekong

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