Here’s my monthly portfolio update for the month of
Was pretty busy with work this month so for the most part left the portfolio alone.
Around mid-month the portfolio peaked at +88% ytd, and then slowly came down, and then came down VERY QUICKLY, recovering just a little bit in the last couple of days. There was a day this week where I was down around 5% in a single day. Or was it last Friday? Doesn’t matter, really. It’s not that bad when considering there was at least a day this year where it went down 10% in a day. But again, it’s my first year, what I have is still relatively small. I was thinking if I’m grumpy now, if one day this gets to 7-figures, as I really hope it will, on these days I just better not talk to anyone, I’ll be in such a bad mood. Something to work on.
These still look like unbelievable results to me, though, just fresh off my first year of investing, where I hoped the stories about doing 10-15% per year were true. Thanks to this board and the wealth of knowledge here, results have been exceeding expectations so far.
So, my deepest appreciation for all who take the time to lay out their ideas here. Thank you, it’s a real education.
Not a lot of action for the most part, then some movement at the tail end of the month:
Added to Upstart (at ~$224) and a lot to Voyager Digital
Opened starter positions (under 2% each) in Global-e Online and Confluent:
GLBE I’m hoping is the e-commerce play I’ve been looking for. They help online businesses sell all over the world, an e-commerce facilitator that deals with each market’s specific quirks (currency exchange, returns, fraud prevention, etc) in order to provide a good localised experience for the consumer, while making life easier to the seller. They have partnerships with global juggernauts such as Shopify and Facebook, supporting the sellers on these platforms.
CFLT I bought as a big data play: they help companies to manage the increasingly big amounts of data they need to deal with these days, so that data is readily available for a variety of uses. In the CEO’s words: “Data within modern businesses is in constant motion, flowing across systems, environments, and applications each time a customer clicks, types or swipes,” said Jay Kreps, co-founder and CEO, Confluent.
Both GLBE and CFLT are 2021 IPOs and have been discussed recently on the board.
Also opened a position in Lightspeed after the short report, the drop didn’t make sense to me. I’ve owned it in the past, and was maybe too hasty in letting it go.
Trimmed Cloudflare slightly.
Bought Affirm and Zscaler but sold them almost immediately.
Here’s some comments on updated performance of companies on the portfolio:
Interesting stuff: Magnite and fuboTV, 2 companies I’m holding, announced a deal this month.
MGNI will act as the preferred Sell Side Platform for FUBO’s advertising.
From the press release:
“Following years of highly successful collaboration with Magnite, we are thrilled to officially welcome them as our preferred SSP,” said Diana Horowitz, SVP, Advertising Sales at fuboTV. “Magnite’s commitment to creating a streamlined programmatic experience has made them a highly valued partner to fuboTV and a true pioneer in the space, and we look forward to innovating with them as CTV continues to shape the future of the industry.”
CTV is fuboTV’s most popular streaming platform, representing 94% of total viewing hours during the second quarter of 2021. As the football season kicks off this month, fuboTV expects CTV’s large screen environment will be its subscribers’ streaming device of choice.
As fuboTV’s preferred SSP, Magnite facilitates access to fuboTV’s highly sought-after CTV inventory, including 50,000 live sports events per year as well as 100 + premium sports, news, and entertainment channels for the entire household.
So far both of these companies have kind of weighed down my portfolio growth this year, but the thesis still holds, and I expect to see movement over the next 6 months. Good to see them working together.
Also, the introduction of online wagering from FUBO, the main reason I’m an owner, keeps moving forward: September saw the announcement of licenses in Arizona and Iowa. And just today it was announced FUBO are working with PaySafe as the payments provider to their mobile Sportsbook.
If you haven’t seen it yet, check out this cool ad:
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
Upstart is my #1 position, and is now virtually half of my portfolio.
I’m not really worried and am not looking to trim – will probably add at some point. The way I look at it, I’m just starting my investing journey, I’m still working, and plan to add as much cash as I can to the portfolio in the upcoming years.
What I have paid for the Upstart shares I own is more or less what I can add to the portfolio over the course of 1 year. So even in the unlikely scenario where it’s all suddenly gone, it’s something that will hurt but that I will recover from. On the other hand, the potential upside is so big… if they keep up current performance, executing as well as they have so far, this one is going to be a real life changer.
From the many articles and thoughts shared here on the board (a special shout out here to jonwayne, thanks so much!), my conviction is reinforced, I think their story is just beginning: the personal loans category is far from fully explored, they’re just now getting into auto, and there’s mortgages, student loans, insurance, and so many other new products still in front of them. Along with expanding to other markets outside of the USA, of course.
For the past year I’ve been reading about Shopify, Tesla, Netflix, and all those stories, and kind of cursing my luck that I didn’t start investing earlier. Well, here it seems we have one of those spectacular opportunities, so I bought all I could and am ready to ride it out until either we reach a good multiple from where we are now, or something changes for the worst in the performance of the company. So far, no big red flags? Been watching the interviews and it seems like Dave Girouard hits all the nails on the head, while remaining surprisingly grounded.
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.
So, 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 recently he’d be shocked if they’re not working with hundreds of banks and credit unions in a few years)
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 than to $200M?)
• 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!)
• 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 09/30 Starting Growth** UPST 316.44 87.4 262.1% NET 112.65 75.99 48.2% DDOG 141.35 98.44 43.6% CRWD 245.71 211.82 16.0% GLBE 71.8 65.2 10.1% PLTR 24.04 23.55 2.1% UCD2 8.75 8.89 -1.6% LSPD 96.43 102.8 -6.2% MGNI 28 30.71 -8.8% CFLT 59.65 69 -13.6% FUBO 23.96 28 -14.4%
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%
End of September +73.9%
**Company Ticker % September % August** Upstart UPST 48.1% 12.1% Crowdstrike CRWD 11.9% 15.4% Cloudflare NET 10.3% 17.5% Datadog DDOG 8.6% 9.6% Voyager Digital UCD2 7.8% 4.4% fuboTV FUBO 2.9% 2.3% Lightspeed LSPD 2.9% - Palantir PLTR 2.8% 9.4% Magnite MGNI 2.6% 2.9% Global-e Online GLBE 1.3% - Confluent CFLT 0.9% - Cash 0.0% 2.5%
(these tables are a royal pain!)
August 2021 Update:
July 2021 Update:
June 2021 Update:
The bull and the bear are marking their territories
They’re leading the blind with their international glories