Portfolio Summary May 2021

Portfolio Summary May 2021
YTD by Month:
Jan: +20%
Feb: +28%
Mar: +1.6%
Apr: +11%
May +13%

It feels good to be back in the money. S&P is up 13% for the year as well. So I am even-steven with a major index.

I used this downturn to sell out of a few positions. I was happy to take some small losses to offset my taxable gains for this year. I also sold a few long positions on the way back up to raise more cash as I think my stocks will keep trading in this range until September. The summer tends to low volume and the hedge funds are having a blast shorting all the popular growth stocks we love.

The rumor is that stock pick lists of popular FinTwit gurus are being circulated on Wall Street as short targets. Which is smart, if you ask me. All the more reason to double down on great businesses. And now, after seeing all the earnings reports, it was easy to decide what to sell and what I want to load up on.

Either way, going forward I am in a great position right now. In retrospect, I should have sold more at the peak in February. Live and learn.

Also, I noticed that my portfolio is consolidating around digital consumer tech, why? These businesses are the ones that have the largest TAM and the biggest long-term growth potential. I think this is why Amazon is so big and Salesforce is just interesting, but nowhere near the size of them. The market for B2B just isn’t as big as it is for consumer internet products.

About Me
I have worked in internet media and technology on the business side my entire career. I live in the SF Bay Area and focus on investing in what I know, high-tech growth companies.

Investing Style
I like to buy small positions, this gets me focused to learn about a company. Then I sell, or I add to it over time in small increments depending on a variety of factors. Some positions I hold for years, others for only a few months. My goal is CAGR. Not 10-baggers and I try hard not to fall in love with a stock. My aim is to maximize my returns and I have no allegiance to any particular method or style of approach.

Current Portfolio

Cash 26%
Sea (SE) 17%
Crowdstrike (CRWD) 17%
Twilio (TWLO) 9%
Roku (ROKU) 9%
DataDog (DDOG) 9%
Fiverr (FVRR) 7%
Asana (ASAN) 3%
SoFi (IPOE) 3%

Magnite (MGNI)
I wasn’t thrilled with the earnings report when I compared it to ROKU as a connected TV advertising play. The CEO of Magnite basically admitted that ROKU was a better business on the conference call when asked why they weren’t growing as fast. The slow down in the TTD and MGNI shows that the third-party ad-tech platform approach has limitations compared to the walled garden approach of ROKU. I reallocated most of my funds to ROKU and UPST.

DermTech (DMTK)
The ER was good for this skin cancer microcap. But, I was down overall on this and wanted to take the loss and move on. I just wasn’t that excited about this and it’s outside of my area of competence.

Asana (ASAN)
I sold some of this over the last leg up as I wanted to raise a bit of cash for other investments.

Twilio (TWLO)
I had a bunch of lots that I was long and decided to take profit to raise cash.

Bought and Sold (I know… But that is what is cool with managing your own money, is you can just change your mind when you have new information.)
Zoom Info (ZI) and Sold
I have been watching them since going public and bought some around the Q1 earnings report which was a great report. Revenue came in at $153.3 million 50% YoY and they raised 2021 guidance to $670 million to $676 million, up from a prior forecast of $645 million to $655 million. To see that the business is accelerating while the pandemic is coming to a close means that this is not a stay-at-home stock. This was the signal I was looking for before I pulled the trigger on this. I changed my mind about a week later and sold it all. Everyone hates that they help people spam you with sales calls, and while it doesn’t bother me I think that may be holding it back a bit. I can always buy back in.

Ustart (UPST) and Sold
Lots on this board about this company. I really like all these fintech plays and when this went up over 80% in a week I pulled the trigger and exited my position. I will buy back in if it dips.

I bought some of this for fun and then sold it the same day. Not a very Saul thing to do, I know. Sue me.

Companies I am Excited About
Twilio (TWLO)
They reported a great quarter. Revenue came in at $590 million, up 62% from $364.8 million a year earlier and above analysts’ forecasts of $533.4 million. They guided for $591 million to $601 million for the second quarter, which is 47% to 50% YoYo growth. Yes, that would be down from 65%, but they consistently beat guidance and see no reason why that won’t continue next quarter.

Both Lyft and Uber are clients this means there are big segments where the reopening will accelerate the use of Twilios platform.

But, what I really like about Twilio is they continue to justify losses as part of their long-term strategy to invest in the technology platform. This is exactly what I want to see with a high-growth company and why I am betting on their outperformance for the next 3 to 5 years.

FoolishJeff was nice enough to provide this quote in his update on their earnings, “With regards to our operating loss guidance for the second quarter, as we have previously discussed, some of the investments we planned on making last year did not materialize as we had originally forecast due to COVID. Those investments are largely centered on enterprise sales, Flex and new growth products, plus core systems and infrastructure. As of the end of Q1, we have largely caught up on the hiring related to these investments, which will generate losses in the short term while allowing us to grow at elevated levels, and sets us up well to scale in the long term."

Asana (ASAN)
With revenues in 2020 at $227 million, they grew 59% year over year and I think there is a lot more room to grow. And with 93,000 paying customers and 1.5 million paid users they should be able to easily monetize their massive user base significantly. Some have compared them to Slack, but I think Asana provides more value. Slack messaging can easily be duplicate as we’ve seen with MS Teams. A project management tool once set up, is much harder to replace.

Fiverr (FVRR)
Kaboom! The highest Q1 revenue figures reported in their history, with revenue growth accelerating to 100% YoY. And the guidance, Fiverr expects business momentum to continue and is upgrading guidance for 2021 from 46-50% to 59-63% revenue growth.
Active buyers are up to 3.8 million, an increase of 56% year over year.
Spend per buyer (SPB) reached $216, compared to $177 as of March 31, 2020, an increase of 22% year over year.

This report shows that digital transformation is here to stay. We are not going back to the old in-person way of working, in spite of what the media is saying. This company is at the nexus of a few powerful trends WFH, globalization, and emerging market adoption of the internet. All of which is accelerating and the companies that can take advantage, and FIVRR is a company poised to take benefit.

Roku (ROKU)
I closed out all my other connected TV bets and got back into ROKU. They are now the best choice to play this area. I had this in my portfolio last year and swapped it for MGNI. But after the last ER I am back in this.

Highest growth rate since IPO in this ER. Total net revenue grew 79% year-over-year (YoY) to $574.2 million. This stood out to me in the earnings report, Average Revenue Per User (ARPU) grew to $32.14 (trailing 12-month basis), up 32% YoY.

It appears that the shift to advertising is having the expected impact, and advertising should continue to recover this year accelerating Roku’s growth. Here are some notes from the ER regarding advertising.
Advertisers continued to follow audiences and move budgets into TV streaming, with Roku’s monetized video ad impressions more than doubling year-over-year.
In April, we completed the acquisition of Nielsen’s video automatic content recognition (ACR) and dynamic ad insertion (DAI) team and technologies, which will accelerate our launch of an end-to-end linear ad replacement solution in partnership with programmers.
Additionally, we launched our advertising brand studio to help marketers tell their stories using the unique benefits of a streaming platform: marketers can go beyond the traditional 30-second TV ad spot to amplify big moments through advertiser-commissioned short-form TV programs, interactive video ads, and other branded content on The Roku Channel.
In Q1, total TV streaming ad impressions delivered through OneView nearly tripled year-over-year, while total impressions on the Roku platform (sold by Roku or its publishers) more than tripled.

I placed a small bet on this and so far so good. The merger was approved and the ER looks great.
Adjusted EBITDA is up $70 million YoY, while total revenue of roughly $216 million is up more than 150% year over year. Nice. The big differentiator is their membership model, and they added 430,000 new members in the quarter, bringing total membership to 2.28 million, up 110% year over year. I have heard lots of rumors on what the final valuation will be when the merger goes through the ticket switches to SoFi. They are on track for nearly a billion in revenue this year, my plan right now is to wait for the ticker to switch and watch which way the wind blows to decide if I want to add to this.

MORE: The merger will happen on June 1st. It will be interesting to see how this trades. The research that I have done says there are 865 million shares post-merger. So this should trade from $15 to $30 a share for a market cap of $12B to $25B. At least that’s what I think. I am definitely looking to add to this. It all depends on the multiple investors are willing to pay.

The issue with this company is that this is now a crowded space, from Square to Robinhood to Coinbase to Paypal, there are a lot of players in consumer fintech. Even Upstart and Lemonade to some degree could be put into this category. We are currently in the fintech boom phase and consolidation will happen quickly as they run out of easy growth. I have no idea what that means for SoFi, but I am watching this space closely.

Sea (SE)
Now my biggest position. I loved the ER. They had a monster quarter, as revenue soared 146.7% to $1.76 billion in the quarter. Sea’s digital entertainment division, known as Garena, posted 117% growth to $1.1 billion, while e-commerce sales continued to skyrocket with sales up 250.4% to $922.3 million, and strong growth in its marketplace and in direct sales. Sea held its guidance for the year, calling for $4.3 billion to $4.5 billion in digital entertainment bookings and $4.5 billion to $4.7 billion in revenue for e-commerce.

I think this company is uniquely positioned and has competitive advantages in South East Asia that are hard to duplicate, such as tech optimized for old and cheap mobile phones.