Here’s my monthly portfolio update for the month of
Summary of the month was really looking each position in the eye and asking – are you a keeper, or am I selling you to buy more Upstart?
No new positions, but I ended up doing a lot more trades than I expected.
- Added a lot to Voyager Digital and Upstart
- Added a bit to ROKU but sold it after their report, ended up selling the whole position
- Added a bit to Palantir (20%, pre earnings) but halved my position later in the month – I like the company, just don’t think the stock is in a big hurry to go anywhere. Will look to add.
- Nearly doubled my fuboTV position – little bit before and then more after earnings
- Added a tiny bit to Crowdstrike (5% - trying to get used to the «add to your winners» mentality – I’ve admittedly been more of a “buy the dip” kind of guy)
- Added to Magnite as well, first time in a while
Some of these I bought with new cash, some with the proceeds from the sales below.
Closed 3 positions earlier this month – EXPI, DOCS, FVRR.
From 70-something in October last year, I was down to 10.
And then today I closed another 2 – ROKU and SNOW, and am now down to 8 winners (hopefully).
eXp World Holdings (EXPI) had a blowout Q2 report, jumped 30% in a day, and I decided to close the position. Main reason was, I had thought about selling it plenty of times, and had plenty of opportunities to add to it in the past few months, and didn’t. Looking forward, couldn’t see myself adding to it now either, as it looks like for every dollar I have, there’s at least 10 (well, 8 now) other companies I’d prefer to put it in, so thought it best to just get the capital to reinvest elsewhere. Good luck to holders.
Doximity (DOCS) - The social network for medical professionals reported on their Fiscal 2022 Q1 on August 10. It was their first quarterly report as a public company, as they IPO’d in June. I exited the position the following day, thinking the report was good but not spectacularly remarkable, and looking for more ambitious prospects. I mean, the numbers weren’t bad, but this was the same night Upstart announced their results, so… I exited DOCS when it was up +10% on the day, and felt pretty good with myself. It went up a further 20% that day, and another 20% or so that week. Shows how much I know. Would be frustrated, if I hadn’t reassigned the capital to Upstart.
Fiverr - Sold FVRR following their earnings report. At the end of Q1, they had raised their guidance for the year, looked super bullish. 3 months later, they bring the guidance down again and blame it on Covid easing up and people starting to get out of their homes more. The story wouldn’t have looked good even if they hadn’t touched the guidance last quarter, but as they did, this flip-flopping was really infuriating. When I sold, Fiverr was my oldest purchase, and prior to earnings, I really thought this a long time hold, but there we go.
ROKU (ROKU) - Sold most of my ROKU position right after earnings. Finally decided to sell the 1% that was left today. Wasn’t that concerned with their results, I thought the slowdown in user acquisition was compensated by the ARPU growth. Reasoning to sell had to do with market cap and the suspected near-term upside on this one, when compared to other companies I’m holding, like UPST and FUBO, where I reinvested most of the proceeds from the sale.
In short: fine company, but it looks like there are currently better opportunities out there.
SNOWFLAKE (SNOW) - Following their earnings report this week and the apparent slowdown, sold half of my position yesterday. Thought about it some more and sold the rest today.
I figure for any of these I can always get back on the horse later if the story changes, and am happy to have reduced the total number of positions further.
THE COMPANIES IN THE PORTFOLIO
Here’s some comments on updated performance of companies on the portfolio:
I first bought Magnite after reading about it on the Fool last year. They are the largest independent sell-side digital advertising platform in the world. Magnite is the result of a merging between Rubicon and Telaria, with some further acquisitions (SpotX the most important, furthering their CTV strategy) following that merge.
So currently the story’s a little complex, as the revenues reported include the contributions from their acquisitions, which makes comparisons with previous quarters harder.
The Q2 results looked pretty good, though, with 139% Total Revenue growth yoy (79% on a pro forma basis), and the CTV part of their business growing 108% pro forma (Magnite and SpotX revenues each grew more than 100%).
The market didn’t exactly go crazy when hearing of these results. I added to my position this week, with the thought of holding for the time being, to give it some more time (2-3 quarters) for the CTV story to play out.
But, rereading the previous paragraphs, might also sell out of it completely to invest in less complicated stories. We’ll see.
FUBO had a great Q2 2021 report. Thesis remains strong, waiting for results of their betting platform in 2-3 quarters.
Here are the highlights:
- Total revenue grew 196% YoY to $130.9 million
- Advertising revenue grew 281% YoY to $16.5 million
- Subscription revenue increased 189% YoY to $114.4million
- Subscribers grew 138% YoY and 15% Q/Q to 681,721
- Monthly ARPU increased 30% YoY to $71.43
- Monthly Advertising ARPU increased 62% YoY to $8.70
- Adjusted Contribution Margin was positive 8.3%, up 316 bps YoY from 5.1%
- Increased full 2021 revenue guidance to $560-570 million, 116% increase at the mid-point yoy
- Increased guidance on year-end subscribers to 910,000-920,000 , representing 67% increase at the mid-point compared to year-end 2020.
Guidance does not include any projected revenues from online sports wagering.
VOYAGER DIGITAL (UCD2 is what I can buy here in Europe / VYGVF is the US symbol)
Crypto broker. Off topic here.
Q2 Investor Presentation here:
Earnings Call transcripts available on Seeking Alpha and here on the Fool, recommend the full read.
Palantir’s Q2 earnings report made it clear they have a nice war chest, are debt free, aggressively expanding their sales team, accelerating time to implement within their clients, and accelerating the growth of the Enterprise side of their business, adding new commercial customers while renewing and adding new contracts on the Government side as well.
It looks like they will end this year with revenue in the neighbourhood of $1.5Bn. Also, they are partnering with and investing in several startups who will be using their software products from the start, and possibly lead to more tech innovation.
Seems most of the bear case hangs on the Stock Based Compensation, which is still pretty heavy and will not be going away any time soon.
They kicked off the presentation with the Meta-Constellation project, where the idea is to connect Palantir’s Edge-AI to a global network of satellites (they had already talked about AI at the Edge by using their software on sensors, drones, etc). This enables them to do a number of things, from tracking signs of fires from above in order to speed up first response, to military applications (of course) - tracking naval fleets, submarine movements, etc.
They were showing a video explaining the whole thing, looked like the plot of a sci-fi/Marvel movie.
Quote: “Overnight, we orchestrated a Meta-Constellation of 237 satellites by working with an array of commercial space companies. These companies have been deploying constellations at the hyperspectral, radar, and e-led sensors into Orbit. And we’re putting all of that power directly into the hands of the frontlines, empowering the edge. It’s one of the largest collaborative sensor constellations ever to see operational news.”
Overall, a few things that stuck with me from the call:
- Reinforced the idea they truly seem to believe they are the best software company in the world.
- "Vision remains unchanged: Palantir wants to be the default operating system for the enterprise and the industry, and the implementation is only accelerating."
- Management described Palantir as an “Artist colony, not a factory.” with “Extraordinarily flat hierarchy”.
- Palantir expect to continue aggressively hiring sales people in the 2nd half of the year. Good.
- Paid off all debt. Palantir is currently debt free. Good good.
- Expect to continue investing heavily in product innovation, partnerships to drive growth. Excellent.
- “It took about 8 years for Palantir to be the OS of Special Operations, 4 years to be the OS of aviation, 2 months to be the OS for COVID research, 2 days to be the OS of Day Zero companies”. Time for implementation is accelerating, is what this means.
- Palantir are really committed to Foundry for Builders - partnerships with startups, having those emerging companies who might be the winners of tomorrow start using Foundry from Day 1. A big chunk of their Total Contract Value is coming from these deals (Celularity, Roivant, Wejo, etc).
- A quote: “Building software for the future, in the present.”
On to the Q&A:
Q: Satisfied with number of new customers?
A: Numbers are strong, customer count accelerating especially in the commercial space, on track to more than double commercial customer base by end of year.
Also happy with deal volume growth.
Q: On the Day Zero companies they’re working with:
A: “Companies we think we will be working with for a very long time. We think using our product will help them win.”
Less than 1% of revenue came from this program in Q2 - long term strategy.
Q: Increase of insider selling?
A: Sales were scheduled, options granted 10 years ago that expire December this year, if they don’t get exercised employee would lose them. (most of this seems to be centered on the CEO Alex Karp)
Q: On forward looking macro and micro trends that might deliver alpha over time.
(condensed, but was something like) If I told an analyst 4 months ago that COVID was not going away, I would have been laughed at. I know this because I did tell them this and I was laughed at over and over again. Humpty Dumpty had a great fall. The world changed and it isn’t going back. We built software for the world we are in now and the world we will continue to be in. We saw that coming. We anticipated the future needs, supply chain will never be the same, but isn’t just about today’s shortages. The old world, it’s fixated on the accuracy of the forecast. The new world is all about how well you manage the error in your forecast. Error is the signal, the error is the opportunity to win. Every industry has been transformed. The reality is that shock will be more frequent. It’s isn’t a one-off. It’s the new norm. Years of investing in mindless inefficiency has resulted in enormous fragility. We are the resilient operating system for future champions.
Q: How will Palantir continue to attract great talent?
Artist colony, not a factory. Don’t come to Palantir if you want a predictable career. Looking for extraordinary people who by definition will be uneven and spiky. How do we maximize their potential? What gamma radiation do you need to turn this Bruce Banner into the Incredible Hulk?
Q: Commercial business QoQ - talk a little more about the drivers to direct sales, a little more color about what’s driving this.
A: It’s an effect of investment in direct sales. Ramping well, really big logos in the quarter, Avis, John Deere, government sector as well, a few wins like the FAA. Impact of direct sales starting to take hold here.
Q: Please talk a little more about the Total Contract Value coming from strategic partnerships. Looking for better understanding of the strategy here.
A: $543 Million of the $925 Million of TCV are from this program. Longer duration in time to revenue recognition. Portion of TCV outside of this program is also very strong at $382M, 33% sequentially. Long term vision here - Karp described how we’re building software for the future in the present. Foundry is for the people who have the ambition to transform industry.
Q: 20 new commercial customers - how many from strategic partnerships program?
Also, how have they increased the modularity of their software?
A: 7 of the 20 came from strategic investment program.
Definitely continuing to invest in modularity - Were able to implement compliant anti money laundering workflows in 2 days, for a EU bank, would be impossible if the software was not modular.
Having reviewed their presentation, here’s a revised and extended version of the highlights for Q2, as some other details from their report surfaced:
PALANTIR Q2 Highlights:
- Revenue of $376M (+49.1% yoy, guidance was 43%)
- Non-GAAP EPS was $0.04, beating estimates by $0.01
- Q2 Adjusted Operating Margin 31% (guidance was 23%)
- Adjusted gross margin improved to 82% yoy (was 80% last year)
- Contribution margin improved to 58% (was 55% last year)
- Commercial revenue grew 28% yoy (last quarter it was 19% yoy)
- 90% Growth in Commercial revenue in the US yoy (vs 72% yoy last quarter)
- Government Revenue grew 66% yoy
- Added 20 net new customers - so they have 169 total customers (up 13% from last quarter)
- Q2 Total Contract Value booked ($925M) grew 175% yoy
- Landed 62 deals of $1M or more
21 deals worth $10M or more (vs 6 last quarter)
30 deals worth $5M or more (vs 15 last quarter)
- Commercial customers increased 32% qoq
- Remaining Commercial deal value $2.1Bn, 122% yoy
- Avg Revenue from Top 20 customers grew from $36M in Q1 to $39M this quarter
- In H1 2021, total deal value increased 63% to $3.4 Billion
Q2 2021, 60 additional sales hires
* Q2 2021, active commercial pilots up by 26% since end of April (pipeline acceleration)
- Government revenue grew 66% yoy in Q2 2021 (new/renewed deals with US Army, Air Force, Coast Guard, HHS, and CDC)
Q3 Guidance: (seems to include a lot of sandbagging)
Revenue $385 Million
Adj Operating Margin 22%
Full Year Guidance:
- Adjusted FCF in excess of $300M (was in excess of $150M)
- Continue to expect Annual Revenue Growth of 30% or greater for 2021 through 2025
I am bullish on Palantir, but reduced my position by half at the end of the month, to invest further in UPST. Will look to rebuild the Palantir position with time, back to ~8% of the portfolio.
Added a little bit in August in the $240s, really looking forward to the earnings report next week. Guidance given for Q2 was $318.3-$324.4 Million.
In their Q1 report, some of the highlights:
- Revenue: Total revenue was $302.8 million, a 70% increase yoy. Subscription revenue was $281.2 million, a 73% increase yoy.
- Annual Recurring Revenue (ARR) increased 74% year-over-year and grew to $1.19 billion as of April 30, 2021, of which $143.8 million was net new ARR added in the quarter, including $3.6 million from the acquisition of Humio.
- Subscription Gross Margin: GAAP subscription gross margin was 77% in the first quarter of fiscal 2022 and fiscal 2021. Non-GAAP subscription gross margin was 79%, compared to 78% in the first quarter of fiscal 2021.
- Cash Flow: Net cash generated from operations was a record $147.5 million, compared to $98.6 million in the first quarter of fiscal 2021. Free cash flow was a record $117.3 million, compared to $87.0 million in the first quarter of fiscal 2021.
- Cash and Cash Equivalents was $1.68 billion as of April 30, 2021.
- Added 1,524 net new subscription customers in the quarter, including 119 from the acquisition of Humio, for a total of 11,420 subscription customers as of April 30, 2021, representing 82% growth year-over-year.
- CrowdStrike’s subscription customers that have adopted four or more modules, five or more modules and six or more modules increased to 64%, 50%, and 27%, respectively, as of April 30, 2021.
Guidance for the Full Year, $1.347-$1.365.7 Million.
Crowdstrike was recently added to a few Nasdaq indexes, which seems to have helped the stock price. Here’s hoping we see it hit $300 next week.
Upstart is now my new #1 position.
Originally, I noticed the company when people here were commenting on its 2020, around February, but wrote it off as “another Lemonade”, for some dumb reason. When the Q1 report came out, I was interested, and the board’s enthusiasm, Saul’s in particular, along with a clear explanation from someone else about a key difference to Lemonade’s business model – Upstart don’t take on the default risk, leaving that to the banks, had me invest on it for the first time in early May. For those first few buys I used margin so I guess the details are off-topic, but this is just to say I am pretty happy with my current cost base.
Really excited about this one, these guys are:
• Great for the partner banks, who reduce their loan default risk and are able to get more loans approved
• Great for the consumer who gets better loan conditions, and in some cases sees a loan approved where they wouldn’t get one if they were just using FICO
• Profitable already
• In a segment with a Huge barely scratched TAM that just keeps getting bigger with the categories they’ll add…
• …and they’re adding them FAST, still haven’t started reaping the benefits from Auto, already looking at Mortgages product
• Partnered with only a few banks so far, with room to grow exponentially (Dave Girouard the CEO mentioned just yesterday on an interview he’d be shocked if they’re not working with hundreds of banks and credit unions)
…the list goes on.
If this company’s journey turns out to be half of what I’m expecting, it’ll be life changing already.
Upstart Q2 2021 Highlights
• Total Revenue $194 million, increase of 1.018% yoy (60% sequential from Q1, 21% beat over guidance given in Q1 report)
• Bank partners originated 286,864 loans (69% sequential growth), totaling $2.80 billion in Q2, up 1,605% yoy
• Conversion on rate requests was 24% in Q2 of 2021, up from 9% in Q2-2020 (and from 22% Q1)
• Income from operations was $36.3 million, from ($11.4) million Q2-2020 (133% sequential)
Q3 2021 Guidance:
• Revenue of $205 to $215 million (guessing it’ll be closer to $300M)
• Contribution Margin of approximately 45%
• Net Income of $18 to $22 million
• Adjusted Net Income of $28 to $32 million
• Adjusted EBITDA of $30 to $34 million
• Basic Weighted-Average Share Count of approximately 78.0 million shares
• Diluted Weighted-Average Share Count of approximately 94.9 million shares
Full year 2021 updated guidance:
• Revenue of approximately $750 million (vs prior guidance of $500 million given when reporting on Q4-20 , and $600 million given later when reporting on Q1-21, so they’ve increased their forecast by 50% in six months, and all things going well, will be smashing this one too! Can they hit 1Bn? I think so.)
• Contribution Margin of approximately 45% (vs prior guidance of 42%)
• Adjusted EBITDA Margin of approximately 17% (vs prior guidance of 10%)
COMPANY STOCK EVOLUTION YTD
For positions started this year, starting price is where I first bought it.
For companies I was already holding in December, starting price is Dec 31 Close.
**Price 08/27 Start Growth** UPST 223,18 87,4 155,4% NET 122,91 75,99 61,7% UCD2 12,26 8,89 37,9% DDOG 134,84 98,44 37,0% CRWD 282,31 211,82 33,3% PLTR 25,71 23,55 9,2% MGNI 29,73 30,71 -3,2% FUBO 27,05 28,0 -3,4%
PORTFOLIO RESULTS YEAR TO DATE
End of Jan +24.7%
End of Feb +14%
End of Mar -6.9%
End of Apr +0.5%
End of May +6.23%
End of June +29.66%
End of July +30.91%
End of August +56.2%
**Company Ticker % August % July** Upstart UPST 34,6% 12,1% Crowdstrike CRWD 15,9% 15,4% CloudFlare NET 14,8% 17,5% DataDog DDOG 9,5% 9,6% Voyager Digital UCD2 9,1% 4,4% fuboTV FUBO 3,8% 2,3% Palantir PLTR 3,4% 9,4% Magnite MGNI 3,1% 2,9% Snowflake SNOW - 9,2% Roku ROKU - 5,6% Fiverr FVRR - 4,3% Doximity DOCS - 2,7% EXP World H EXPI - 2,2% Cash 5,6% 2,5%
Top 4 positions are currently three quarters of the portfolio value.
Nothing right now, really. Waiting for the Databricks and Stripe rumoured IPOs.
July 2021 Update:
June 2021 Update:
May 2021 Update