Portfolio Update 6/14/19 as of 10PM.
It’s been a month since I posted my May portfolio update found here; https://discussion.fool.com/portfolio-update-515-34209679.aspx
I have found doing these updates is helping me keep better records of my investing thought processes over the past few months. Much like keeping a journal in life when you re-read in the future it helps you remember what your thoughts were at the time of writing. Hopefully others find this helpful as well.
My portfolio monies are all in tax free accounts; Roth IRA, HSA, ESA. Thus I do not worry about tax consequences of my trading actions.
Current Portfolio as of 6/15/19. Change since 5/15/19 +4.7%. 2019 YTD +38.1%. Stock Current % of Port % Change Mark % of Port on 5/15 in port since 5/15 Cap CASH 39.4 45.8 -6.4 NTNX 0 4.5 -4.5 4.6B TWLO 9.9 15.1 -5.2 18B AYX 14.5 10.2 +4.3 6.2B ZS 18.6 15.1 +3.5 9.2B CLNE 0 1.5 -1.5 534M MDB 5.9 6.4 -0.5 8B TTD 1.8 1.2 +0.6 10.6B ESTC 9.9 0 +9.9 5.4B New positions since last portfolio update: SMAR, ESTC Exited positions since last update: NTNX, CLNE, SMAR Trades between 5/16-6/14 Bought AYX 6/3, 6/5 85.95; 86.50 ESTC 6/5, 6/10 81.97; 82.00 TTD 6/6 186.93 MDB 6/5 141.01 SMAR 6/6 39.46 ZS 5/29 71.26 Sold NTNX 5/29 33.12 CLNE 5/24 2.94 TWLO 6/12 140.74 SMAR 6/12 44.42 MDB 6/12 167.94
Thoughts on trades and companies for the month.
I increased my position in AYX as I felt this company had better chances at increased returns than other companies in my portfolio. There stock price had not been increasing as rapidly as others. Then a competitor got bought out and it reaccelerated AYX movement last week.
Slightly increased my TTD position. I most likely will sell it soon, as I am not in love with the company like many others on the board. Why even hold it, because when I originally bought it I saw it as temporarily undervalued. It has risen sharply in the last two months. I also wanted to have more diversity (more than 5 stocks) in my portfolio.
I sold out of my NTNX position. Last update I said I would probably keep a small position. Thanks to this board, I decided to get out before the earnings call. It was a day that NTNX was up compared to many of my other stocks which were down greatly on the same day, so I sold NTNX and bought ZS. I do not remember the exact % gain however I do remember that it was close to a 10% swing compared to the previous day. That is NTNX was up 4% while ZS was down 6% that day (or something close to that). A few days later that trade seemed like a brilliant move as NTNX tanked while ZS has moved higher.
I sold out of CLNE. I am getting tired of waiting for the story to unfold. There was better places for my money, even holding cash IMO right now.
I bought and sold some SMAR and made a quick 12.5% gain. After reading some post on the board, I just felt that SMAR may not be that special of a company. I could be entirely wrong (and probably am).
Biggest movement this month has been establishing a full position of ESTC. I have owned/traded ESTC in the past (briefly). However I feel this currently is the best position company for stock appreciation based on growth that can be bought right now. They mentioned in last conference call that they have one more quarter of headwinds due to a change last year in the way they recognize revenues. I full expect that what has been perceived as slowing growth, will prove to be more of an accounting issue.
I reduced some of my TWLO holdings. The market cap is currently 18B. As many have pointed out on this board before, the law of large numbers starts to effect price movement. I think the company is performing brilliantly. I still hold nearly 10% of my portfolio in it, but did not want a 15% position.
I often talk about my cash holdings, some on the board have a similar philosophy as me and many do not. I do not think one way is right and one way is wrong. On December 22nd, 2018 I posted my portfolio update and had 0.1% position in cash. It was a great buying opportunity. By 3/15/19 update I had 34.5% in cash. Did I reduce my positions too soon, possibly. However my cash holdings give me the comfort of having a small highly aggressive stock portfolio. My return of 38.1% YTD greatly exceeds my returns of a few years ago, when I held more numerous and “safer” stocks for diversity.
I bring this up as those that may not want the risk of high growth stocks may want to consider how a portfolio performs with a large cash holding along with high growth stocks. When (not if) a buying opportunity comes, I will be in position to benefit. Now if stocks were to appreciate 50% in value before this opportunity occurs I will still benefit with 60-70% stock holdings. As stocks continue to perform the percentage of cash in portfolio will drop, as stocks performance goes negative the % goes up.
Scenario 1. Stocks appreciate 50%.
Current stock holdings 60% and cash 40%. After appreciation stock would be 69.2% of portfolio and cash would be 30.8%. If started with portfolio value of 100K, portfolio value would be 130K; 90k in stock, 40k in cash.
If current stock holdings were 100% stock with value of 100K, then after appreciation 150K. 100% of portfolio in stocks.
Scenario 2. Stocks depreciate by 25%
Current stock holdings 60% and cash 40%. After depreciation stock would be 52.9% and cash 47.1% of portfolio. 100K portfolio would have value of 85k; 45K in stocks and 40k in cash.
If current stock holdings 100%, portfolio value would be 75K.
Scenario 3. Stocks depreciate by 50%
60/40 split would have a value of 70K; 30k in stock and 40K in cash. 42.9% of portfolio in stocks, with 57.1% portfolio in cash.
100% stocks. Portfolio value of 50K.
Scenario 4. Stocks depreciate by 25%, deploy all cash, then 50% rise in stocks.
60/40 portfolio would be 100% in stock with value of 127.5k in stock
100% portfolio would be 112.5k value in stock
Scenario 5. Stocks depreciate by 50%, deploy all cash at 25% avg, then 50% rise in stocks.
60/40 portfolio would be 100% in stock with value of 95.625k in value
100% portfolio would be 100% with value of 75K
Scenario 6. Stocks depreciate by 50%, deploy cash at 25% drop, then 200% rise in stocks
60/40 portfolio would be 191.5K
100 portfolio would be 150K
Scenario 7. Stocks depreciate by 50%, deploy at 25% drop, rise 200%, go 40% cash at 100%
60/40 portfolio would be 165.75k
100 portfolio would be 150K
I did this mental exercise as much for myself as others. Out of the scenarios number four is the most unrealistic. As everyone notes it is near impossible to time the market with precision. However I do think scenario five is very realistic. If this is your investment style more than likely scenario 7 would come into play. That is as the market recovered and were to move back up deployment of stocks back into the safety of cash would most likely be done.
Under scenario 7 one still has a greater portfolio value than if they would have been 100% invested in stocks. This is why I am a fan of some cash holdings when you think the market may be a bit overvalued. This style is not for everyone, but I felt it would be helpful to others particularly newer investor that maybe hesitant to go with a more aggressive investment style.
Additionally going in and out of cash makes one evaluate and trim losers and evaluate where the best opportunities currently reside. If your someone who lives off your investments, this is a natural consequence of managing your portfolio. If you are a younger person who does not currently need the money, typically the advise is to leave it alone. I think that the person who treats the investment like a cash flow machine benefits from the decisions of maximizing portfolio allocations based on cash needs.
This is just some rambling thoughts on my part, they could be wrong. However I like sharing my thought processes with others as I think it helps us all learn. That is why I am all for people sharing there portfolios and their thoughts on what they are doing in their portfolios. Please feel free to send me an email with your thoughts on why I might be thinking about these allocation decisions wrongly and any other thoughts on my holdings.