My portfolio at the end of January 2017
Here’s the summary of my positions at the end of January. As I often do, I’m figuring it on the last weekend of the month and missing a couple of trading days. If you prefer you can think of it just as a “four-week” summary. Please note that any PE’s that I give are always based on adjusted earnings, usually as the company has given them, but rarely with small modifications of my own.
So how did my year start? Well January was a new month, and a new market. I finished the month up 8.5%, with the S&P up 2.5%, the Russell 2000 Small Cap Index up 1.0%, and the IJS Small Cap Value ETF, which so excelled in 2016, actually DOWN 0.6%. What a surprise!
Let’s look at my postions. At the end of December I wrote, I now have 12 real positions plus one position that is half-way between a real position and a evaluation look-see position, and two tiny look-see positions. So say 12 and a half positions and a couple of tiny ones that may or may not be there next month.
I now have just 12 positions and one little “play-money” tiny position. I’ve cut down by a bit of positions, still trying to streamline my positions.
b>My top four positions are still the same four but have changed places a bit. This is what they were like at the end of December:
LGI Homes 13.2%
Shopify 12.5%
Amazon 12.2%
Signature Bank 12.1%
And now:
Shopify 14.3%
LGI Homes 13.8%
Signature Bank 12.0%
Amazon 11.5%
Shopify has moved up to my largest position at 14.3%. Four weeks ago it was at $42.90 and it’s now up $8.65 at $51.55. (I actually started my position about 11 months ago at about $27). This month, in addition to the price rise, I added a little again to my position as I freed up cash by selling out of some less favorite positions. I’ve never sold any of this one.
LGI Homes is still in second place at 13.8%. Four weeks ago it was at $28.75 and it’s now up $3.00 at $31.75. I trimmed a little early in the month, because it seemed to keep going down and down and I didn’t understand why. I finally reflected and decided, “This is silly, all the news is good in their sector of housing,” and I bought back more than I sold. You may be wondering “How come their percentage of the portfolio hasn’t grown more than it has?” Well you have to remember that the portfolio itself has grown considerably so that’s 13.8% of a bigger portfolio.
Signature Bank is now third at 12.0%. It’s had a bit of perhaps “irrational exuberance” as three months ago it was at $115 or so and it’s now over $160. I trimmed some early in the month, but bought a little back, mostly at about $149, as I freed-up cash. I have definitely trimmed more than I’ve bought back over the past three months. This month they announced results, which weren’t great, but which were good enough to make people feel that they had gotten past the worst of the problems from their taxi loan portfolio, which becomes a smaller and smaller percentage problen every quarter as the company’s total loans grow.
Amazon had a wild month, rising $86 from $750 four weeks ago to close at $836. I trimmed a little during the month, but it’s still my fourth largest position at 11.5%, and well above any contenders for the top four.
My next four positions are also still the same. They’re still Splunk, Arista, Ubiquiti and PayCom, but the order has changed. This is what they were like at the end of December:
Ubiquiti 8.0%
Arista 7.9%
PayCom 6.3%
Splunk 5.7%
And now:
Splunk 8.3%
Ubiquiti 8.0%
Arista 7.4%
PayCom 6.6%
Splunk is now in fifth place at 8.3%. It had been range-bound for many weeks between $58 and $62, but then crashed in December and finished at $51, but bounced back in January to finish at $57.30. I added as it was falling, but when it got to $53 and I didn’t understand why it was falling I quit adding down to $51. I don’t want to keep buying into something that is collapsing, feeling I’m getting better entry points. I then added a bunch at about $54 on the way up. I’ve never sold any.
Ubiquiti is in sixth place at 8.0% of my portfolio. It had also been range bound (like Splunk) between $51 and $54 for a while, but in the last eight weeks it rose roughly from $53.50 to $62.50, about 17%. I haven’t sold any and I’m willing to ride it where it takes me. It feels relatively safe with good revenue growth and good earnings. However I’m not adding, in spite of its unusual business model and adoring fans, because, after all, they do manufacture internet hardware, and they don’t really have recurring income.
Arista in seventh place, at 7.4%. It started the month at $97, and was about $100 two weeks ago, but then US Customs reversed their decision and decided to provisionally bar their imports as possibly infringing on Cisco, and the price dropped to $88 in a day. They’ve now worked their way back half way to close to $94, as people realized they can manufacture in the US (which will be lower margin however). I added slightly during the month, but felt I really had a large enough position.
Paycom in eight place at 6.6%, started the month at $45.50, but finished at $49.20. Three months ago it fell 25% from $52.50 to $39.50 in two weeks, in spite of revenue up 40% and EPS up almost 100%, because guidance wasn’t up to expectations, and because the Affordable Care Act was going to be repealed. It’s getting back up to $49 isn’t really too bad. I net added a little during the month.
My last four positions are definitely not the same as they were. They are Twilio (which was 12th a month ago), Hortonworks (which was a half sized position in 13th place, Square (which was a tiny position a month ago), and Antero Midstream (which is new but has been extensively discussed recently on the board). Finally there’s Kite Pharma, which I don’t consider a position, but rather a tiny play money speculation at 0.5%. Kite has also been discussed on the board this month.
Twilio is now in 9th place. It, and Hortonworks in 10th, are not much behind my 8th position, PayCom, as they are 5.5% and 5.2% positions. I added considerably to both of them during the month as I freed-up cash by reducing and selling out of several other positions. They both have strong business positions (Twilio is dominant in its field, and Hortonworks is the only free-standing public company in its field). They both have plummeted to a small fraction of the highs they had attained after their recent IPO’s, and they both seem to have hit bottom and have started back up (perhaps?)
Twilio started the year at $28.85. Got as low as $26.50, and closed at $29.45. I started my position in Horton about six weeks ago at $8.60. It got as low as $8.00 and I bought all along the way, then it got as high as $9.30 and I kept adding all along. It closed at $8.90.
Square is in 11th place, and a much smaller position at 3.5%. I haven’t entirely decided on this one yet. I started seven weeks ago at $14.08, bought down to $13.60, up to $15.40 and it’s now at $14.53. It was one of those two tiny positions a month ago that I wasn’t ready to talk about. It lives in a crowded space, and a tough neighborhood. It’s growing revenue and adjusted EBITDA okay, but I’m not sure that they will have a large TAM to grow into in this space.
Finally I have Antero Midstream, smaller still, in 12th place at 2.6%. I just started three weeks ago at $33.20. It got as low as $32.50 and closed at $34.66. I kept adding small amounts.
Positions I got out of:
I discussed at length why I got out of Bofi. I really have nothing to add.
Silver Spring was different. I got no alarm signals. Everything sounded great. But nothing happened. It’s been 40 weeks since I bought into this company and nothing has happened. They’d won huge contracts promising loads of revenue, but nothing happened. For example, last quarter adjusted revenues were $76 million up from $75 million, and from $71 million two year ago. Does that excite you? And in the June quarter they had adjusted revenue of $72 million up from $69 million. Nothing was happening. So I decided to put my investment elsewhere. I don’t know if it was the right decision. It may shoot up to spite me. But that’s what I did.
The third stock I exited was Hubspot. They were doing fine revenue-wise, but when I thought about what they actually did, which is helping companies to get customers to come to them through social media etc, instead of using traditional advertising, I thought to myself, “What can they do for an encore? Where will they be in 5 years?” and I decided to put my money in companies like Splunk and Hortonworks, which seemed to have much more open-ended prospects.
What I do is “modified buy-and-hold”. What I mean by modified buy and hold is that, when I take a position in a stock, it’s with the idea of holding it indefinitely, as long as circumstances seem appropriate, and NEVER with a price goal, or with the idea of holding it a few days or a few weeks, or with the idea of trying to make a few points and selling. It’s a question of intention.
I do sometimes take tiny positions in a company to put it on my radar and get me to learn more about it. I’m not trying to trade it and make money on it, I’m just trying to decide if I want to keep it long term. If I do try out a stock in a small position and later decide that it’s not what I want, I sell it without hesitation, and I really don’t care whether I gain a dollar or lose one. I just sell out to put the money somewhere better.
You should never just try to follow what I’m doing without making up your own mind about a stock. In these monthly summaries I’m giving you a static picture of where I am currently, but I may change my mind about a position during the month. In fact, I not infrequently do, and I make changes in the position. I usually don’t announce these changes until the end of the month, and if I’m busy or have some personal emergency I might not announce them even then. Don’t just follow me blindly! I’m an old guy and won’t be around forever. The key is to learn how to do this for yourself.
Since I began in 1989, my entire portfolio has grown enormously. If you are new to the board and want to find out how I did it, and how you can do it yourself, I’d suggest you read posts #4 through #8 at the beginning of the board, and especially the Knowledgebase that Neil keeps for us, which is a compilation of words of wisdom, and definitely worth reading (a couple of times) if you haven’t yet.
I hope this has been helpful.
Saul
For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.
A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board
