Portfolio Update 6/30/21 5PM
It’s been a month since I posted my last portfolio update found here;
I did not post a portfolio update for May on boards. I did write one and if you think it would be useful to you feel free to email me and I will send to you.
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 6/30/21. Change since 5/30/21 +10.5% YTD +15.8% VTI Monthly +2.2% YTD +14.5% 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 37.0 31.0 +6.0 4.4 HRVSF 0 3.2 -3.2 TDOC 15.3 13.4 +1.9 26.3 UPST 15.3 0 +15.3 9.5 DOCU 13.5 12.7 +0.8 55.4 DDOG 8.6 16.7 -8.1 32.8 CASH 6.4 6.8 -0.4 CRWD 3.5 15.6 -12.1 57.6 INTZ 0.4 0 +0.4 0.27 PINS 0 0.6 -0.6 New positions since last portfolio update: UPST, INTZ Exited positions since last update: HRVSF (Just decide to buy more TCNNF instead of owning) Traded position this month: SNOW, ASAN Trades between 5/30-6/30 Bought: SNOW 6/1 239.23 TDOC 6/24 163.68 UPST 623 122.85; 119.38 DDOG 6/15 97.14 TCNNF 6/22 35.81; 39.87 ASAN 6/14 47.02 INTZ 6/30 14.69 Sold: HRVSF 6/11 4.08 SNOW 6/24 246.30 CRWD 6/01 225.6; 254.33 PINS 6/10 67.36 DDOG 6/23 104.98 ASAN 6/23 57.40
Thoughts on trades and companies for the month.
I sold my extremely small holding of PINS. All it did was go up afterward. I sometimes take a small position in a company to learn more. Sometimes the company just does not excite me enough to continue to learn about it and I usually end up selling. That is what happened here. Does not mean it is not a great company, just does not excite me as an investor due to my person interests.
I had purchased HRVSF as it is trading at a discount to TCNNF based on the buyout and percent of shares that HRVSF stock holders will receive as compensation once the buyout is finalized. I realized if I really wanted more TCNNF I should just buy it. So I did just that. I obviously am extremely overweight in this company.
I traded two positions this month ASAN and SNOW. Asana was interesting because the owner/founder bought shares on open market, which I view as bullish. I figured when I purchased the stock it was a bit of a momentum trade and I took my 22% gain in nine days and got out. Snowflake I got interested in after Bear’s great post on revenue and how all revenue is not recognized however the valuation had me concerned I obviously quickly decided to get out. I made 3% in three weeks. Although I was not intending to trade this stock like I did. I will discuss my reasoning for getting out quick in more detail below.
I based some pretty significant portfolio reallocation on some simple analysis this month. Crowdstrike had been third highest position with 15.6%. I really have been struggling with the valuation of some of these stocks. Crowdstrike’s Market Cap is now 57.6B and last quarter it generated 303m in revenues. What is its future potential for market cap? I truly do not know but I looked at Palo Alto and some other more mature security software stocks for comparisons of what it may look like in future. Palo had 1.1 B in revenues last quarter but is growing at 24% vs. CRWD at 303m growing at 70% but its market cap is only 36.6B.
If you were to project out revenue for next five years at both companies assuming their current growth rates remain stable at 24% and 70% for next five years then crowdstrike would have slightly more quarterly revenue after the five year time period. So in five years what will the growth rate of both companies be? I have no idea. I really am not even trying to compare companies for some type of debate. What I am trying to do is try to verbalize what my thought process is on my decision to lighten CRWD.
I just wonder what happens when Crowdstrikes growth slows in future, what does that valuation look like. It has me concerned. Now I will be the first to tell you there are a lot smarter people on this board than me. I know this stock is a top holding for many of them. This will not be a popular thought process on this board most likely. However it is my reasoning rightly or wrongly and I decided to lighten up significantly.
This thought process has been going on for many of my stocks holdings and stocks that I see evaluated on the boards. A few other posters have brought this up just recently in their monthly reviews. When the board first invested in many of these stocks they were less than 10B in market cap now many are approaching 50B, how much growth do they really have left at those valuations?
This led me to do an overly simplistic ratio on my stocks. I took quarterly revenues and times them by percent growth rates year over year, then divided that number by market cap to create a ratio. Now this does not account for margins at all which are obviously important. However I wanted some type of simple way to compare my companies to access where value might be.
Based on that ratio I determined TCNNF had the most value (that did not surprise me). It showed me that Teladoc was second best value. I bought more TDOC this month based on this evaluation (I already in my gut knew TDOC was discounted from owning/following the stock for a year). The next hold was Upstart. I have been reading the boards on UPST but had not bought any, based on this analysis I bought a significant amount and it is now tied for second top holding. I wish I had bought when Saul was banging the table in the 80’s (why would anyone not buy if Saul is saying stock is a steal? I know better than to not listen after following the boards all these years.)
This same analysis gave a low value for CRWD which backed up what I was already thinking about the companies valuation. The lowest ratio was SNOW and DDOG. I had bought a sizable amount of SNOW earlier in month and decided to take a small profit. I am not saying it is not a great company and I am not saying many of you will not make good money owning it for a number of years. I am saying I do not like the risk/reward profile based on revenue, revenue growth rate and market cap vs. other companies that I own or follow.
I had increased my Datadog shares to become my second largest stock holding. However after running these numbers I decided that I was too overweight and reduced my position by 50%. DDOG is still a sizable position for me just not as big. I do believe it is going to rise after next earnings call as the YOY revenue numbers should jump. However if they were to have a misstep I believe it would be painful and I decided a small sized position would be more warranted for my portfolio.
Docusign was not as bad as SNOW, CRWD and DDOG but also not a great value based on this simplistic measure. Should the stock rise another 10% in next few weeks I would most likely trim my position.
Someone posted recently about a very small company called Intrusion Inc. INTZ. It was a very long post that I breezed thru initially, then went back a few hours later to read it throughly and it had been deleted from the board. It is a speculative micro cap stock and I believe that is why moderators took it down.
It peaked my interest to read some c.c. and research the stock some. It is highly speculative stock but I took a small position. I will not discuss as this stock is obviously not for this board. However if the author of that post would please email me I would like to have a copy of the original post to re-read.
I currently am holding seven 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”.
Percent gain/loss for company for month & year. June % YTD % TCNNF +1.2 +21.5 UPST -17.1 +201.7 CRWD +15.7 +21.4 DOCU +41.1 +27.9 DDOG +17.7 +8.9 TDOC +13.8 -14.3 INTZ +10.3 -7.0 Other stocks which I have held positions in this year. PINS +20.5 +19.4 HRVSF +1.0 +93.52 ZM +19.0 +17.0 GRWG +10.5 +22.0 EXPI +24.0 +26.7 NET +31.1 +41.6 SNOW +1.6 -14.0 ASAN +68.7 +109.9
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 TCNNF (just email me on that one).