This is my first portfolio update shared on Sauls board so apologies for any mistakes along the way…
Background
I’m often intrigued about the background of the champion board members here when I read their monthly updates so I thought I’d share a little information about me.
I’m a 37 year old Brit, I have 3 kids under the age of 6, live in London, and run my own angel investment co & incubator, focusing on Saas, fintech, marketplaces and D2C. I founded designmynight.com and exited a few years ago.
I began picking stocks about 10 years ago, started out penny stock investing on the AIM market in the UK but thankfully discovered the Motley Fool, fell in love with the Gardner brothers and found my way to Sauls board, which I am forever grateful for.
Over the past two years, I’ve evolved from picking long term hold, founder led growth companies to a hybrid of that and Sauls methodology.
I use a combination of the Motley Fool, Sauls Board, Beth Technology, and Berts Ticker Target services as my research tools to ultimately land on my companies.
Performance to date
YTD - I am up 105% as of September 30th 2020
January 2020 - 16%
February 2020 -12.40%
March 2020 -20%
April 2020 -9%
May 2020 - 22%
June 2020 - 29%
July 2020 - 60%
August 2020 - 68%
September 2020 - 105%
My portfolio
Peloton - 21.49%
Zoom - 15.82%
Crowdstrike - 14.93%
Fastly - 12.84%
Digital Turbine - 11.04%
Livongo - 9.25%
Etsy - 8.96%
September Activity
It’s been a very busy month for me, mainly because of a convergence of conviction and share price appreciation. Strong positions in Peloton and Digital Turbine, fueled my gains in September whilst the Saas companies wobbled early on. It’s worth noting, I changed my investment approach in April/May, concentrating my portfolio down to 6-8 companies but going big on my high convictions, Zoom, Crowdstrike, Livongo, Peloton and Fastly, and it had quite a big impact on my performance in Q2.
SOLD
Zoom - sold 30% of my position, it’s been a star performer for me, and I well aware of the winners keep winning mantra, add to your winners philosophy, but I feel comfortable reducing my position at $480, and I have one eye on its market cap size (more below) and high conviction on some new positions below.
Crowdstrike - sold 20% of my position, similar to Zoom, it had gotten too big in my portfolio and I needed cash for some buys below.
BOUGHT
Etsy - It’s starting to turn into a little Amazon, all my friends use it, one click buys, faster shipping, increased range, they have major tailwinds heading into what looks like a long 6 month Covid affected winter, TAM is expanding and I see the market cap expanding significantly in the future.
Livongo - I was a previous shareholder from the $20 days. Sold in August. But after reading extensively about the potential of the merger, cross sales etc, the revenue growth for both companies on fire, and Covid tailwinds to continue at least for the next 6 months, the market will wake up to this come next earnings season, so I have a high conviction owning Livongo (Soon to be Teladoc of course).
My companies
Peloton - thanks to a few posts on here, I dug deep into these guys and liked what I saw. I bought in August, immediately with a tier two position and it’s been performing very well since, and now my top position. John Foley is a very impressive founder and I see him as a visionary and fundamental to their growth. Covid has obviously been the driver for them, but I think their model is here to stay, the optionality is incredibly exciting and I see a lot of future growth being driven by their subscription model rather than the hardware. They only have 3 million members! They are scratching the surface here, international remains a huge opportunity as well and their growth metrics are going to get better over the Winter months (the backlog of bike orders keeps growing!) so I see Peloton sitting in my portfolio for a while yet.
Zoom - Love Eric, love the optionality, love the tailwinds. As many have touched on here, it’s now a new chapter of their story, can they be great capital allocators, can they build out the product into a foundational platform, can they hire the right people to follow a similar path of Google et al. My conviction is still high but as you can see with my sale above, there is a little haze for me with that story right now, so I’ve adjusted accordingly.
I’d be interested in views of their likely 2021 revenues. A fag packet analysis of their calendar year revenue below. They are going to have to go some to match the comps from Q2 onwards, so we can maybe hope for 50-100% revenue growth. A 40x Ev/s valuation is reasonable at those rates, so I’m struggling to see how we’re going to get a market cap much bigger than 200b? I know Saul pays no attention to valuation so I’d like to be shot down for this with some strong counter points?
2020 - $200, $663, $690, $710 - Total - $2,263
2021 - $800, $850, $900, $690 - Total - $3,500
Crowdstrike - I’d recommend reading the conference call transcript from Q2 again. George and Burt are just awash in positivity with performance and outlook. Superb metrics on all levels, the market still seems to downgrade them somewhat because of a perceived crowded field in the Cybersecurity space. So they’ll need to work harder to prove out their growth, and the power of their shared network learnings model. If they have another quarter like Q2, with no wobbles ala Datadog, then surely the market has to reward them more than they already are.
Fastly - I’ve listened to countless podcasts (Muji et al), read deep technical analysis, I love the team, founder and most importantly the platform they are building for enterprises. I also rate the new CEO highly and think once they get the sales machine firing, we’re going to see some fireworks. Go see how fast https://www.dunelm.com/ performs as a case study. This is the future. I’m very excited to see this company grow in the future. I want to make this a top tier allocation so will be looking to add in October.
Digital Turbine - This has been a try out position which has gone very well. I bought in the low 20’s and it keeps powering on. I shared this on the board a while back and it didn’t garner much interest. They basically sell pre installed apps on Android and are looking at getting into CTV. Revenue growth of 93% last quarter, profitable, and strong forecast revenue. 2-3b market cap but I’m still 50/50 on it as there aren’t many deep dive reports available compared to my other companies.
Etsy - as discussed above, I think they’ll stay in hyper growth mode for a fair while. Still a small market cap.
Livongo - as discussed above, I believe in them as the leader in digital healthcare, and this story is only just beginning.
Watch List
Cloudflare - aside from every Champion board poster all owning it and me having FOMO… I’m getting very close to buying. The techies seem to love it, the last earnings call was very positive, but the revenue growth hasn’t entered the top tier (yet!) I want to get in before that happens.
Bandwidth - CPaaS, powering Teams, Google, Zoom and has shifted from snail pace revenue growth to significant quarter on quarter growth in 2020 due to high usage from their partners. Hitting 35% in Q2, up from 29% in Q1, and 18% in Q4… a 4b market cap, might just be the beginning. Would love to know if anyone is following them here?
The Trade Desk - I’ve been in and out of them, wish I held over the years, they are a classic TMF buy and hold, founder led play. If we get a significant market correction I’ll finally open up a buy and hold position with them.
Sea Limited - I did own them for a few months but sold in August. My conviction waivered a little but I love everything about the founder, opportunity and MELI-esque approach.
Square - similar to The Trade Desk but I’ve never owned them. I love Jack Dorsey, I love CashApp and how they are poised to be the bank of the future. I just have higher conviction on my current companies and so can’t find a space for them, for now.
I hope you’ve found this helpful, in any small way, feedback welcome.
Forever grateful to Saul and the contributors here.
Cheers