Retirementdough July Portfolio Update

Investment Analysis Clubs Saul’s Investing Discussions
1

Portfolio Update 7/31/21 8AM

It’s been a month since I posted my last portfolio update found here; https://discussion.fool.com/retirementdough-june-portfolio-updat…

I have found doing these updates is helping me keep better records of my investing thought processes over time. 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.


Current Portfolio as of 7/31/21.  
	  
Change since 6/30/21	    	-6.1%			YTD	+8.8%

VTI Monthly 			+1.7%   		YTD	+16.5%

I have decided to just benchmark versus the VTI which is Vanguard Total Stock Market Index Fund, which is probably what I would put my money into if I did not want to spend time researching stocks. VTI includes all 3600 stocks traded in market.


Stock		% Portfolio 	 % Portfolio	       % Change 	Market          
		  Current	   Previous	       Portfolio  	Cap (B)         

TCNNF	         35.9		37.0			-1.1		  4.2
TDOC		 16.4		15.3			+1.1		 24.9
DOCU		 14.6		13.5			+1.1		 58.7
UPST		 13.4		15.3			-1.9		  9.5
DDOG		  9.8		 8.6			+1.2		 34.3
CASH		  6.4		 6.4			   0
SKLZ		  1.7		   0			+1.7		  5.6
GAN		  1.6		   0			+1.6		  0.6
INTZ		  0.3		 0.4			-0.1		  0.08
CRWD		  3.5	 	   0			-3.5		 58.7

New positions since last portfolio update: SKLZ, GAN

Exited positions since last update: CRWD


Trades between 6/30-7/31

Bought: 	UPST		7/7		115.70
				7/26		119.99
				7/27		115.46
		INTZ		7/7		 12.44
				7/12		 10.14
				7/20		  4.55
		GAN		7/14		 15.36
		SKLZ		7/16		 14.71; 14.78; 15.08
		TCNNF	        7/27		 32.00
		TDOC		7/7		157.66
				

Sold: 		UPST		7/26		121.84
				7/28		120.90
		CRWD		7/7		265.38; 267.33
		DOCU		7/26		306.89

Thoughts on trades and companies for the month.

Largest holding is Trulieve (TCNNF) at 35.9% which has been going negative since the beginning of Feb. I continue to accumulate shares into my overly sized position. It is the one company that I feel is most undervalued currently of any that I follow. Market Cap of 4.2 billion and add another 2.1 billion for the buyout of Harvest health and recreation (which they are doing with shares). With the buyout combined revenues for 2021 will be 1.2B. Trulieve and Harvest have both been growing revenues +100% year over year organically. A few posters have asked on the board where can you find smaller companies that are rapidly growing revenue, well here is one. You can read my deep dive on it here: https://discussion.fool.com/trulieve-update-34714389.aspx

Yes cannabis still has some challenges with federal legalization. However many states are legalizing medical uses and some are legalizing recreational usage. This company is the most profitable cannabis company in the U.S. They have a great leadership team focused on return on investment. CEO just recently bought one million dollars worth of shares on open market. https://www.sec.gov/Archives/edgar/data/1754195/000175419521…
If I ever have banged the table for a company this is it at current valuation.

TCNNF
MC 4.2B
TAM in 2028 84B https://www.prnewswire.com/news-releases/legal-marijuana-mar…

Q revenues 193.8M 102% yoy
gross margin 70%
96 locations nationwide
recently approved for Georgia cultivation and sales
reports 8/12 8:30AM

Teledoc is my second largest holding at 16.4%. They recently reported earnings which was surprisingly not well covered on our board. It tanked after hours but managed to finish slightly higher than the open the following day. I personally think TDOC the stock has bottomed and we will see it climb going forward.

The Teladoc the business is doing well, subscription revenue is up and that is increasing the adjusted gross margin. The announced that they are about to close some big deals but did not give specifics. I read the transcript and I found the leadership to be confident in future growth. Interesting because I just read a great post on first movers on this board https://discussion.fool.com/perhaps-this-should-be-a-rule-of-sau… They are a first mover in telehealth. The total addressable market is absolutely huge. This company in early innings and is posed for potential massive growth. I like the risk/reward as it is currently priced.

MC 24.8B
TAM in 2026 475B https://www.globenewswire.com/news-release/2021/06/29/225464…

Q Revenue 503m
109% yoy; 41% yoy organic (excludes acquisitions)
Visit fee revenue flat, access fee (subscriptions) revenue up 138% y/y
3.5m visits 28% yoy
Living suite members 715,000 45% yoy
52m members increase of 500k over Q1 (that is 500k new members in one quarter!)
Adjusted gross margin up from 62.3 to 68.1 yoy due to increase in subscription fee revenue

My third largest holding Docusign is doing very well. The Covid pandemic accelerated their business and since it is a subscription based with usage they are growing revenues at an accelerated rate because of the shift in the way business is conducted. The one thing I do not like about the stock is the TAM is supposedly around 50B and market cap is 58.7B. I think they have a lot of international growth ahead of them and I really like the business, just which it was valued a bit lower if I was a current buyer (I am not; I already own and trimmed a bit this month).

DOCU
MC 58.7B
TAM in 50B https://www.nasdaq.com/articles/docusign-has-a-massive-untap…

Q revenue 469m 58% y/y
earnings early september

Upstart is an interesting business that is seemingly doing no wrong. I think the market cap, growth rate and TAM make this a very interesting business to invest in. Only thing that trips me up is what happens during a prolonged recession? Even in their 10k they talk about their A.I. has not been tested during recessionary periods. They are paid based on loans being paid back by borrowers, if borrowers stop paying how badly does it hurt Upstart? That thought process led to me lightening my position at the end of the month. I still hold 13.4% so I obviously am not too concerned.

UPST
MC 9.5B
TAM 161B https://www.tipranks.com/news/article/sofi-technologies-vs-u…

Q revenue 121m 90% y/y
earnings 8/10 4:30

Datadog is my fifth largest holding just under ten percent. It reports earnings this week. It should see a reaccelerating of revenue as it comparable y/y were negatively impacted by Covid. If revenues do not accelerate I will be looking to sell. This stock is not cheap. I have been thinking hard about trimming my position but earnings were close and I expect good results.

DDOG
MC 34.3B
TAM in 2025 45B https://www.marketsandmarkets.com/Market-Reports/it-operatio…

Q revenue 199m 51% y/y
earnings 8/5 8:30

I recently bought small positions in GAN which has been brought up on the board previously. I bought GAN because Bert Hochfield recommended it and bought some for his portfolio recently and his write up peaked my interest in the company. It is a very small enterprise gaming software company that acquired coolbets a B2B gambling company and has rapidly growing revenues.

GAN
MC 0.6B
TAM 3B growing to 20B per company https://seekingalpha.com/article/4429526-gan-limiteds-gan-ce…

Q revenue 28m 260% growth y/y
earnings 8/12

I also bought Skillz (SKLZ) which has been brought up on the boards. I have been researching it more since my purchase and I am not sure I will continue to invest in this company. I could see selling my shares and putting the money to work somewhere else.

Intrusion (INTZ) is an extremely small speculative company someone brought to the board but the post got deleted however the post peaked my interest in learning more and I dug into the company. The CEO got fired recently sending the stock price down over 70 percent. I tried to catch the falling knife a bit before the announcement. Thankfully I only invested a very small amount of my portfolio.

I do think this company has a data set that would be very valuable for developing or utilizing artificial intelligence software. They say they have a software that works with a.i. and is easily installed. The CEO got fired over the lack of results on selling this software. This is a total speculative investment or what Saul would call a story stock. I would not recommend it to anyone on the boards. I may buy more if the price were to get lower because I am in the financial position to do some speculative investing.

I currently am holding eight positions with majority of money in five positions. I tend to range between 6-10 at any given time with 7-9 being the “norm”. The older I get the more I am thinking about only holding five. It takes a lot of time to research stocks and why not put your money to work on your best ideas. If you want diversification invest some of your money in a broad fund like VTI.

Percent gain/loss for company for month & year.


			July %			YTD %

TCNNF	               -12.8			 +3.4
UPST			-3.3		       +196.3
CRWD			+0.9			+19.7
DOCU			+6.6			+34.1
DDOG			+6.4			+12.5
TDOC	               -10.7			-25.8
INTZ		       -70.5			-74.2
GAN			-6.9			-24.6
SKLZ		       -35.2			-29.6

Trulieve, Teladoc and Upstart are three of my top four holdings. Those three were down this month which led to my portfolio being down this month. My smaller speculative holdings were down as well. I feel confident that my portfolio will be back on the upswing next month after earnings are reported.

As always any suggestions or questions on portfolio structure feel free to email me. Any questions on why I like or dislike certain companies post it to the board with exception of Trulieve or Intrusion(just email me on those).

36 Likes
2

I’m probably only going to say what everyone else is thinking.

You have 52% of your total portfolio in TCNNF and TDOC? I honestly wish you well, I do. Hope it works out for you. A pot stock and an underperforming telemedicine play that just had a major league disappointment of an earnings report that has followed their last two disappointing earnings reports.

If this is truly your retirement dough, I think you are taking on way too much risk.

Either that or your using some of what TCNNF’s producing. :wink:

Best of luck. Hope it works out.

42 Likes
3

I’m probably only going to say what everyone else is thinking.

You have 52% of your total portfolio in TCNNF and TDOC? I honestly wish you well, I do. Hope it works out for you. A pot stock and an underperforming telemedicine play that just had a major league disappointment of an earnings report that has followed their last two disappointing earnings reports.

I wasn’t thinking that.

You might want to take a look at TCNNF chart and follow how long he has been in it. You might learn something :slight_smile:

Andy

11 Likes
4

I wasn’t thinking that.

You might want to take a look at TCNNF chart and follow how long he has been in it. You might learn something :slight_smile:

Andy, I’m sure glad you posted that. I followed your advice and I discovered that TCNNF has followed the same path as many of my stocks. 2020 was a hard taskmaster, we seldom see bull runs as crazy as 2020 but they have consequences the most important being that short term price comparisons are poor indicators of performance, they are useful mostly for trading purposes. Let me illustrate with TCNNF and DMTK, one of my stocks.

https://softwaretimes.com/pics/tcnnf-08-01-2021.gif

A comparison with February or March leads one to despair and, if you happened to buy near the top, to huge paper losses. But if you look at the big picture, TCNNF is up 100 Y/Y and DMTK is up 200%. To keep my sanity I now look mainly at the Y/Y comparison.

My DMTK is down 14.4% from my average cost per share. I started buying during the third week of January and my last purchase was this July. Just because DMTK is down 60% from its all time high in February does not make is a bad company, a bad business model, a bad stock, or a bad investment. All it means is that one has to be careful with roaring bull markets.

On the other hand, while I like a concentrated portfolio there is a limit. I have been led to believe that 10 to 12 well diversified positions is safe enough. I have just 8, the top position is 30%, the next two 10% each, and the other 50% is divided almost equally between the other five.

Denny Schlesinger

15 Likes
5

Tryingmybest,

I do appreciate your thought and concern. However can you explain maybe a little bit more in depth on why Teladoc is an under performing company? What was disappointing about their last earnings report? I will leave Trulieve out of the board discussion but feel free to email on what it is you do not like about that company as well. I like to hear the other side.

16 Likes
6

I own a little TDOC and I am concerned with their revenue growth

They usually meet the guidance and the revenue growth appears to be slowing 383.3 → 453.7 → 503 (this quarter) → 510-520 (guidance)
And by their full year guidance, seems to have minimal growth in Q4 also

7

Q/Q revenue growth is slowing versus the past two years. It is why the stock has been in decline. However back in 2018 & 2019 it was growing slower off a much smaller revenue base.

Management has said that the multi product cross selling from LVGO merger would start to manifest itself in increased revenue in 2022.

TDOC generates revenue on contractually recurring, subscription access fees.

Either in Per-member-per-month (PMPM)or per-enrolle-per-month (PEPM). Some of their contracts its per subscriber basis.

In some cases their clients pay monthly subscription fees based on per-participant-per month model, based on the number of active enrolled members each month.

They also generate revenue from health system and provider clients related to their licensed technology platform. Primarly in the form of recurring access fee revenue, also from sale and lease of devices.

Additionally they generate on a per telehealth visit basis with visit fee only arrangements.

Teladoc’s big announcements this quarter were:

• Signed significant new agreement with HCSC to provide our suite of chronic care solutions to their commercial fully insured members and to expand our products offered to their ASO clients.

• Signed multiple new chronic care relationships in the hospital market, including a contract with a large health system to provide our whole person diabetes and cardiovascular solutions to their at-risk populations.

• Launched myStrength Complete, which integrates capabilities across Teladoc and Livongo to deliver a comprehensive mental health program for consumers through their health plan or employer.

• Announced collaboration with Microsoft to integrate Teladoc’s Solo platform for health systems into Microsoft Teams to streamline clinician workflows into a unified experience.

PMPM is metric to really keep an eye on.


2Q20   $1.02
3Q20   $1.18
4Q20   $1.76
1Q21   $2.24
2Q21   $2.47

Also with Teladoc’s history of acquisition it would not be out of character to add some revenue in near future.

5 Likes
8

“I do appreciate your thought and concern. However can you explain maybe a little bit more in depth on why Teladoc is an under performing company?”

Retirementdough.
I have no idea how old you are. I do know that one or two folks on this thread that are backing your decision to have 52% of your portfolio in two stocks are I believe in their 80’s. Personally I think owning any two stocks that make up half anyone’s portfolio is taking too much risk, whatever their YTD return is. Yes it can work out beautifully if those two stocks perform well, but it can also be a bit of a disaster if just one of those flunks out. Better if you are a young investor, but someone in their 70s or 80s may not have the time to make up for that stock representing 35% of their portfolio.

As for TDOC, are you saying it hasn’t been underperforming? It’s been falling pretty much ever since it’s merger with LVGO. At or near a 52 week low. Which might make it interesting again actually.

Again best of luck with this.

3 Likes
9

As for TDOC, … It’s been falling pretty much ever since it’s merger with LVGO. At or near a 52 week low. Which might make it interesting again actually.

Oof, I don’t think I agree with that last bit. I bet a lot of Fools here owe some part of our success to following the foundational principle of ‘water your flowers, not your weeds’. The first reaction I had to this ‘52-week low = worth attention’ sentiment was a different famous quote: “the market can stay irrational longer than you can stay solvent”, but that one’s not directly applicable here, at least by Saul Stock Standards, because it presumes that TDOC is a fundamentally solid stock that will turn around if only given enough time. As I used to be fond of saying, “reversion to the mean is a b!+ch of an investing mistress” (not sure whether I made that one up). Once I got free of my affinity for shiny turnaround stories and learned to ‘dance with the one that brought ya’ (side note: the song by that name has one of my favorite opening lines ever), my returns got a lot better.

I owned an investigation-level position in TDOC for about 5 months (between ~200 and ~186) before deciding that money was better used elsewhere based on my assessment the company’s outlook relative to where that money went. I learned enough about the company during that time to know how it quacks, and I don’t trade on charts.

The last foundational principle I’ll toss out there, related to the ‘reversion to the mean’ one, is that a 52-week high or low is not a magic number–neither the stock price nor the calendar is aware (or cares) about the round number a year represents. The lowest a stock price can go is zero dollars per share.

-n8

8 Likes
10

I have no idea how old you are. I do know that one or two folks on this thread that are backing your decision to have 52% of your portfolio in two stocks are I believe in their 80’s.

Well, let me chime in as someone in my early 40’s that doesn’t think it’s an overly risky situation if those are very high confidence stocks and you’re an experienced investor. I certainly wouldn’t recommend that allocation for most people, especially if you are newer to investing, but I myself have more than 52% of my portfolio in my top three stocks as of the end of July and won’t be losing any sleep over where my money is invested anytime soon.

Many of us concentrate our portfolios to less than 10 companies, so it isn’t too uncommon for the top few to make up a big percentage sometimes.

Also, count me in as someone that thinks Teladoc is a great place for your money right now. It’s not one of my biggest positions, but definitely one that makes me wish I had some more free cash to add to it now. The business is doing great and that’s what really matters to me, even if the stock hasn’t been a top performer (so far, at least!) since they closed the Livongo deal. In the future, I’m betting we’ll look back and see that Mr Market was overly fearful/conservative with TDOC for a few quarters this year, but Teladoc owners saw a mispriced opportunity and took advantage of it, even if it look a little time for the rest of market to catch up. I’ll expand on my thoughts on TDOC when I post my July summary later today

-mekong

24 Likes
11

Thanks for sharing. We have different views on a lot of investments and reading this helps me be critical of my own process. A couple of things stood out for me:

“[Upstart] are paid based on loans being paid back by borrowers, if borrowers stop paying how badly does it hurt Upstart? ”

They get paid for referrals. The quality of the referrals are a big part of what makes their services so valuable. I see this as an indirect risk and not something I am really worried about, especially as they diversify across more verticals like auto and mortgage.

“[TDOC] Management has said that the multi product cross selling from LVGO merger would start to manifest itself in increased revenue in 2022.”

I said this when I sold on the day of the merger and it is still true: I no longer invest in what I hope a business will do in the future. If this proves true in 2022 then we can still buy then. There is very little to be gained in “getting in early” compared to ride provided by multi year success. I’d rather own companies like Crowdstrike or Upstart or Datadog that are consistently innovating and growing with no dependency on a future product, platform, macro event or other catalyst to bring growth back up to an attractive place. Especially not when I already have plenty of other ideas that are already there.

This reminds me of recent posts by Saul on opportunity cost. Sure I could cherry pick some days and do well, or far worse, but on the day I sold (Livongo) it was aug 5th, 2020, and the TDOC share price opened at $250 and closed at ~$205. Today, a year later, it is at ~$150. Think of all that time, and all the time still to wait, that could be applied to a more knowable investment opportunity. Most of the funds that day went in to DDOG @ $95 and CRWD @ $115 which is roughly +75% and +165% better than I would have done if I stayed in TDOC. That means, using Crowdstrike, instead of $100 turning in to $74, it became $265!!. DDOG shares became $175! …and this doesn’t include the next year of growth.

Just so the point isn’t lost in all this (or think there is some hind-sight-bias in play) the major reason I sold is because the merger didn’t make sense to me and I wanted to take my investment out and let them prove what they were saying before considering a new investment. I wanted to see the numbers back-up the speach. I still feel that decision was correct for me, and authentically made.

23 Likes
12

RafesUserName,

Upstarts revenue is difficult to track for me there are many moving parts. I will be the first to admit I am not an expert in how they make their money. However they talk about this risk I brought up in their literature quite a bit.

pg. 72 of most recent 10-Q found here: https://ir.upstart.com/static-files/23b6f56b-2439-4c30-8297-…

Our AI models have not yet been extensively tested during down-cycle economic conditions. If our AI models do not accurately reflect a borrower’s credit risk in such economic conditions, the performance of Upstart-powered loans may be worse than anticipated.

The performance of loans facilitated by our platform is significantly dependent on the effectiveness of our proprietary AI models used to evaluate a borrower’s credit profile and likelihood of default. While our AI models have been refined and updated to account for the COVID-19 pandemic, the bulk of the data gathered and the development of our AI models have largely occurred during a period of sustained economic growth, and our AI models have not been extensively tested during a down-cycle economy or recession and have not been tested at all during a down-cycle economy or recession without significant levels of government assistance. There is no assurance that our AI models can continue to accurately predict loan performance under adverse economic conditions. If our AI models are unable to accurately reflect the credit risk of loans under such economic conditions, our bank partners, investors in our loan funding programs and we may experience greater than expected losses on such loans, which would harm our reputation and erode the trust we have built with our bank partners and investors in our loan funding programs. In addition, the fair value of the loans on our balance sheet may decline. Any of these factors could adversely affect our business, financial condition and results of operations.

Now 13.4% of my portfolio is in UPST so I obviously am not too worried about this however I brought it up as a reason I do not even own a higher percentage.

I first bought LVGO in March of 2020 which is documented in my monthly update here:
https://discussion.fool.com/portfolio-update-33120-34458954.aspx…

I did not document that price that month but it was around ~22 a share. It was 11.3% of my portfolio.

I also sold all of my shares on 8/5 after merger was announced between 135.34-136.08 documented in my August update here: https://discussion.fool.com/retirementdough-august-portfolio-upd… That’s over a 500% return on my money in less than six months.

I bought into TDOC after some interesting posts on the boards and a bit of research.
I bought a little in Sept from 204-to more percent in October at 217-220. I kept buying a few shares Feb, Mar, and a bigger chunk in June for $163.68 and my most recent update shows July purchase for $157.66.

It currently priced at $149.26. I am down -19% on my average purchase price on this investment. 52 week high for the year was $308.00 in February. That price represented a 43% return in approximately 5 months which was not too shabby. However I held and the stock has been down. If I had a magic crystal ball I would have sold.

Here is the thing. Company still performing well. Over 40% y/y organic revenue growth over 100% y/y with acquisitions. I personally like the company and price point for future returns. Now can I be wrong? Absolutely! Did I know I would make a over 500% return on LVGO in less than six months? I had no idea. I just liked the company.

On you putting money in DDOG in August at $95 congrats! If you look at my monthly update I bought DDOG in August at $77.50! I also bought some CRWD in August at 114.79.

I trade in and out of partial percentages of my holdings taking advantage or what I feel is opportunities on the pricing of the companies I own. I am not always correct but like Bear recently said I am more right than I am wrong and that is all that matters.

Same can be said with my stock investments. I do not always get it right. I believe Teladoc is a good buy at this price. I could be completely wrong. I might sell it all next week because I find a different company that I have more conviction in its future performance.

I do appreciate the point you are trying to make about opportunity cost. I think Saul is a great teacher and I think it is something you have to keep in mind. However, Teladoc is not a turn around story. It is executing, revenue growth is strong and the value of the stock/company is low IMO. I believe their future looks bright. It is a huge TAM plenty of room for many companies to be successful in this space.

I will say this we all invest in what we think the businesses are going to do in the future as nothing is certain. I held Datadog because I believed y/y revenue growth would accelerate but I did not know that for 100% certain. If I waited to verify that I would have had to buy it at 15% greater price than the day before earnings. What if it had not performed as expected? I would have sold as the valuation of the business is priced for revenue acceleration in my opinion.

I know valuation is difficult for high growth companies and I know it is not a favored topic on our boards but it is something I try to evaluate in my investing. I want growth but I am not willing to pay for it at crazy prices. What is a crazy price? That is for everyone to decide for themselves. The opposite side of the coin is I want growth for a discount or what I believe is a discount. Sometimes I am wrong in my evaluation of growth or valuation but I always try to get it right. Time will tell on Teladoc. Good thing for anyone following this thread is I post my portfolio monthly so you will see how it plays out.

14 Likes
13

While Upstart admits that their model hasn’t been tested in a down cycle and while one would expect loan defaults to increase during a down cycle, if their model is better at judging credit worthiness than other approaches, which seems to be the case, one would think there would be fewer defaults for loans it originated that for loans from other sources, so the lender would still be ahead.

3 Likes
14

Presumably the same AI credit rating tools used today can be back tested to periods of high interest rates, recessions or near collapse of the banking system as in 2008. Though it is hard for me to believe that the Fed would not react more vigorously than they did in previous recessions. Likely they will throw money at borrowers.
In any case no credit rating scheme can show in advance how well it will work in the future, which is unknowable to a significant extent.
Meanwhile I suspect that the legacy credit rating systems available to small and mid size lenders could be much improved by use of modern machine learning and that Upstart has a head start on the process. I am not going to worry about a future deep recession as it relates to Upstart specifically because I expect it will have a very adverse effect on prices of all of my stocks.

1 Like