Goal of this thread
I am writing this review of my very short 2 years investment progress for various reasons:
- I want to structure my thoughts, in order to draw the right conclusions from it
- I hope for feedback and ideas from you to further strengthen my learnings
- There is a chance that other (silent) members of this board go through a similar progress and can learn from your feedback and ideas
I currently do not plan to do monthly reviews, as I dont think I’d add much value to the board, as there are already very good monthly reviews from the veterans.
Disclaimer: Please appologize for my style of writing and grammar. English is not my first language. I decided against using an LLM to improve my writing, as I don’t want to lose my personal touch of expressing things. If you feel its too tough to read, let me know, and I will use a translator in future.
Feel free to communicate your thoughts openly and honestly. I don’t want to be treated like a puppy, only because I am a new investor 
Current portfolio & YTD performance
This is my current allocation:
I am 100% invested in a highly concentrated growth portfolio, which is heavily influenced by the work of Muji and SoftwareStackInvesting.
This is my YTD performance vs. the S&P500:
Feelings & Thoughts
Well, I am kind of devestated right now. Not because of the last big dip, but because I feel stuck and do not really know how to develop myself from here.
For that, let me review my investment style and background.
My investment style and background
What are the reasons I am investing in the first place?
I am currently in the transition to becoming self employed and for that reason live off my invested money (yeah, yeah I know, 100% invested in a highly volatile and concentrated portfolio does not compute).
What led me to the current porftolio?
- I love software
- I want to increase my chances to outperform the market, therefore
- (I thought) I don’t care about volatility
- I care about ESG (Environment, Social, Governance)
I am coming from the software industry, worked in various positions from developer, Product Owner, team lead to creating complete new products and also new company structures.
So the obvious idea was to invest in what I know best. I worked with some of the products of the companies I am invested in. (I think) I know, how the software community thinks and works.
The theme I am invested in is based around data. The idea was that every company has a huge amount of data sitting around in different silos. Now is the time, to not only transition to the cloud, but also use your data to differentiate from other vendors and monitize it.
Coming from the software space, I know that end products are often short lived. Even technology is short lived. Therefore I decided to be involved mainly in the infrastructure part of a company and not their end products. Basically saying, even if some products are obsolete after some time, startups come and go, the all need infrastructure. And that was all, even before the AI hype.
Why am I not invested in a fund or ETF, as it is tough to beat the market anyway?
Well, I do care about the environment and how companies treat environment, the society and their employees. Back when I started I wasn’t able to find an ETF or a fund, which met my criterias. That’s the reason I started stock picking.
Looking at my portfolio, you might argue, that non of those companies have any high ESG rating or in general are good for the environment or people, and rightfully so.
To me, it is a very big compromise. Basically, I am investing in companies, where I feel they are in the software space and don’t do much harm to the environment. And that is kind of a weak reasoning, I know. But I just couldn’t sleep well being invested in companies like Meta, E.L.F, Tesla, Amazon or PDD. It’s a very personal choice and I will never say a bad word about other investors, investing in the companies mentioned above. Everyone should have his own filter criterias and feel well about it.
The only thing I wished, was that other investors would at least have a second thought about the companies from an ESG perspective and also respect other investors choices in this regard.
And please, this should not be a discussion about very personal filter criteria. This is not what the board is for. Let us all just have different opinions about it and leave it with this. Saul will thank us 
To understand my portfolio and for further thoughts and discussions of potential alternative ways of investing, I found it to be worthy mentioning though. I am very limited in the choices of companies. That’s the way it is for me. 
Let us see how my style of investment played out since the inception of the portfolio.
Portfolio development & overall performance
One thing to notice is that the biggest chunk of money was added to the portfolio in late december 2023.
Performace by years:
2022: -13.6% (S&P500: -0.7%)
2023: +43.9% (+24.3%)
2024: -18.4% (+11.0%)
Overall you could say, not bad for the first two years. But 2023 was fairly easy to come up with a positive result in the software space.
Throughout the many earnings, I never felt comfortable. My conviction has never been high with the names I am invested in. But my personality “helped” me stay focused and invested, not to let FOMO or FUD lead to buying or selling much.
In fact, the names I am invested in, stayed the exact same since 01/23, only trimming DDOG once to live off of that money 
What did I learn from all that? Let’s see.
Learnings from 2 years investing
- Stock picking is hard, even if you invest quite some time into it
- Only concentrate your portfolio in companies that deliver
- Don’t invest in hope. Wait for confirmation of a story to play out
- Understanding and loving the technology won’t guarantee success. Instead, follow the numbers
- Don’t fall for CEOs describing their company outlook like sales people.
- Valuation does matter, even long term
- Software is not a theme for longterm investors, as the industry innovates too quickly
- Don’t underestimate disruption
Sounds mostly fairly straightforward, right? Well, not that quick. Otherwise it might lead to false learnings due to confirmation bias, emotions and a tiny samplesize.
I want to dig deeper into each topic and see if I can confirm my initial learnings or if I have to change my perspective.
1. Stock picking is hard, even if you invest quite some time into it
That is undeniable in my oppinion. I thought I was smart, quick learning and highly motivated, and that this would be enough to have success, although I absulutely knew, I would make mistakes.
The hardest part for me is, to find companies that fit my criteria. I feel so limited in my choices.
And what if I just can’t find enough conviction in my companies? Well, then I should not invest that much money into it. Period. Otherwise, it will become very emotional and stressfull.
Conclusion: Explore other forms of investing. If none exist, continuethe bumpy road.
Result: Confirmed
2. Only concentrate your portfolio in companies that deliver
I don’t have a problem with one or two bad quarters. I don’t have a problem with overreactions of the market in both directions due to 0.1% adjustments of the guidance. In the end, it all comes back to the fundamentals anyway. It’s always a regression to mean, based on Daniel Kahnemann.
What I noticed during that time though, is that I put all my conviction into a story, not into the actual numbers. I was (and am still) waiting for some reaccelations to happen. The only company I felt safe with, was Crowdstrike. The reason is, they just deliver and not only promise.
Conclusion: If you have companies that deliver and follow a story that truely plays out, it’s totally fine to concentrate your porfolio. This will create havy alpha.
Otherwise, put your money in multiple smaller baskets and wait for the stories to play out.
Result: Confirmed
3. Don’t invest in hope. Wait for confirmation of a story to play out
I feel like this is the biggest mistake I am currently doing. I paint a bright (software) future, can see so much potential in those companies, give them my money and wait for some magic to happen.
I mean, don’t get me wrong, some stories are much more clear than others. Betting on some new social media startup to be the next Facebook or seeing Snowflake becoming a core part of a companies data are two completely separate things.
But still, there are so many factors playing in that it feels suicidal to invest 25% of your savings into some utopia.
With a much broader portfolio, it is totally fine to have story-positions, which still have to play out. Though I am not sure if it is worth waiting, blocking money and having to monitor more companies, just to hopefully catch some early alpha from some storie-companies.
For companies like Snowflake, Cloudflare, MongoDB and Datadog, I am waiting for the second S-curve to play out. And that doesn’t feel very good.
Conclusion: Personally, I should not invest more than 5% into non-confirmed-story-companies per position and potentially not more than 25% overall.
Result: Partially confirmed
4. Understanding and loving the technology won’t guarantee success. Instead, follow the numbers
I might be a victim of the sunk-cost-fallacy. The more I dig into the technology of a company, the more I am convinced that the story is great. Honestly, I always thought Muji and even SoftwareStockInvesting might also be victims of that. But thats just a feeling from reading their deep dives. And I might not be fair with this thought. So appologize you two.
Interestingly, investors like Saul and Bert Hochfeld admit that they often don’t understand the technology very well (and I can partially confirm by reading Bert’s articles from time to time), but still they are very successfull in investing in this complex industry. Why? Because they, and especialls Saul follow the numbers. That simple. And I am a friend of KISS (Keep It Simple, Stupid).
And with my background in the software industry and the love for disruptive solutions its always the same thing: I don’t feel convinced in certain technologies for the longterm (I look at you, MongoDB), but then, when I dig deep into the company and its products and technologies, I see a different side of the coin.
And honestly, I think I am often falling for the advertisment of their products and technology. I feel like, people have an easy time selling me stuff. Which brings me to the next topic in a second.
Conclusion: Understand the products and technology, but remember the KISS-principle. The story should be backed by the numbers, and not the other way around.
Result: Confirmed
5. Don’t fall for CEOs describing their company outlook like sales people.
I look at you, Matthew. 
Conclusion: As described above, I need to learn to be more objective and exclude my feelings from earnings calls, blog posts and SEC statements.
Result: Confirmed
6. Valuation does matter, even long term
My initial reaction is: If valuation is mainly based on a story, then sure, absolutely. If it is based on the numbers, then no, long term, valuation won’t matter much.
Let’s pick an example from my portfolio: Crowdstrike.
On 07/30/19 Crowdstrikes EV/S was 64, today its at 24. That’s a decline of 62.5%
On 07/30/19 Crowdstrikes Stock Price was $94, today its at $313. That’s a return of 233%
So even if you bought at a very elevated EV/S level (Median is at 27), it would have resulted in a decent return. Price follows the fundamentals.
And for a company like Crowdstrike that just delivers again and again, that shows that a premium in valuation for execution, doesn’t matter much in the longterm.
For companies like Snowflake, that is a different story. Their premium was always about their story. And investors are not patient forever. Me neither.
Conclusion: Valuation does matter if the premium is based on a story. It does not matter much, if it is based on the numbers
Result: Not confirmed
7. Software is not a theme for longterm investors, as the industry innovates too quickly
That is a tough one for me. Coming from the software space, I know that technology, end products, development languages just change constantely. There are so many factors like Hype, consolidation, experience of certain groups or employees, company governance restrictions and others.
Especially products like MongoDB, Kafka, Spark could be obsolete quickly, when deciding for a technology. Sure, they are sticky as hell, but for new evaluations, they can become obsolete with a blink of an eye lid, just because Amazon just released a similar technology.
There are still software players, which are hard to attack and disrupt. Companies, that have a whole eco system in place in a certain niche that can not become a victim of some consolidation play. Crowdstrike, Monday.com The Trade Desk and others come to my mind. Monday.com invests heavily into their new areas. As long as they have a big enough TAM and continue to invest, it is very tough for a new player to disrupt them as their product suite has become so big that companies wouldn’t want to go back the road of single point solutions of multiple vendors again.
I am scared about my investments in technologies. Especially if the numbers don’t support a strong story.
Conclusion: Be very strict about the numbers and story of technology plays. Give it more room for platform plays.
Result: Not confirmed
8. Don’t underestimate disruption
This goes hand in hand with the previous point.
Conclusion: Be very strict about the numbers and story of technology plays. Give it more room for platform plays.
Result: Confirmed
Alternative approaches to investing
I have stupid limitations in my country to rebalance my portfolio (my health insurance will skyrocket, if I rebalance a lot throughout the year, even if I don’t live off that money, but reinvest).
I am still a novice and have not proven yet to beat the market or at least be inline with it.
Therefore I am considering other options to invest my money. And the only thing that comes to my mind is the ETF of Ivana Spear from spearinvest.
And again, its a big compromise. Her theme of investing is pretty much inline with my current theme. I am ok with the companies invested ESG wise, and it wille remove the rebalance limiations.
But I have no idea if I can sleep better with that option, and honestly, I would miss stock picking and dig deep into software companies.
Wrap up
I am so sorry it has gotten so long. There were a lot of unstructured thoughts in my head and it felt good writing them down. Even if Saul deleted the thread, due to its length or missing value, it was a good exercice for me.
You all can help me a lot if you throw your thoughts at me. Feel free to express your feelings, thoughts, critiques and ideas. I appreciate any input.
Thank you so much to everyone, for all your work you do for this board and the other investors.