Ruhaan's Year end portfolio and thoughts

At the outset, I am very thankful that I found this board late last year. It took me some time to change my investing style and you will see some carry overs from my earlier investments. I became really active during march lows and reconstituted my portfolio. I was more active last year compare to any other so far. I am surprised to see my portfolio returns of last year. I am in the camp that do believe people on the Wal street are living alternative reality than most on the Main Street folks. My experience has been vastly better than what it would have been, had I not found this board. Thanks to Saul and all the wonderful, intelligent posters on this board.

For me, this year has been phenomenal in terms of results and also as my growth as an investor. I am thankful for all the knowledge and wisdom that has been shared freely by so many contributors including Saul, Bear, Muji, Stocknovice etc. I am incredibly thankful to Saul for providing a framework needed to consider selling a stock and not just wait for a beaten down stock to recover the lost value (Price Anchoring). Opportunity cost is like inflation. It surreptitiously eats up your performance gains leaving one with mediocre results. I have learnt many other important lessons but couple others worth mentioning are,
1> the ability to add to my companies even when the price is going higher
2> reduce the portfolio size to 12 or fewer companies and follow them as best as you can.

Here is my investing record since 2006:
Overall Returns ~13.03% (not counting 2020)
Returns 2020: 120%
Overall returns (Counting 2020): 19.69%

Earlier in 2020, I was reconsidering the merits of maintaining my own portfolio vs letting some professional investing firm do it for us. I am glad I continued to pursue my own investing. For me, its not just about the returns (obviously I need to do better than the market else why even bother), it’s the experience that comes along while analyzing various businesses. I feel it helps me better understand the goings on and enriches my overall experience.

My Portfolio as of 12/31/2020:
Roku (roku)----------- 17.20%
Crowdstrike (crwd)---- 11.76%
Pintrest (pins)------- 10.75%
DataDog (ddog)--------- 8.01%
Peleton (pton)--------- 7.72%
Amazon (amzn)---------- 7.23%
Teladoc (tdoc)--------- 5.67%
Stone (stne)----------- 5.59%
Berkshire (brk.B)------ 4.72%
Alteryx (AYX)---------- 3.60%
Zoom (zm)-------------- 2.50%
Transmedics (tmdx)----- 2.95%
The Trade Desk (ttd)— 1.48%
Google (goog)---------- 0.65%
CASH ------------------ 7.22% (a lot of this is from ZM sale. I am yet to find new place for it)

Thoughts on Individual companies @yearend 2020:

Roku: It is my largest holding going into new year. The catalysts I saw were advertisement in the post covid world including 2020 elections and to strike deals with NBC Peacock and HBO Max. As we all know Peacock and HBO Max are now streaming on Roku Platform so the obvious question is what next. I think for the next couple of years, the shift to CTV (OTT) over linear programming will continue and Roku will continue to benefit from that shift. The Roku oneview platform will help boost the advertising revenue as and when the effect of COVID dissipates. Besides, Roku is trying to expand in international markets. It’s no slam dunk as they will be competing against potentially well entrenched companies. For some time their margins will suffer as they expand overseas. However, its a good step to try and expand their markets.

Pinterest: Pinterest is my second largest holding. What I like about Pinterest is that it serves those customers that are already looking to buy something. They look at Pinterest for inspiration so it is seamless to show them ideas from the marketers that may interest them. This sort of advertising does not seem intrusive and the customers in most cases love it. Pinterest admittedly has been slow in trying to monetize their growth. I think it’s their version of land and expand. This also gives me confidence that the management is prioritizing long term growth. They have more international user base versus US. However they monetize US user base much more than international user base. In very short order they will have half a billion users around the world. This is may be half that of Facebook, however their monetization is not even close to that of Facebook. So I think there is a lot of opportunity for “profitable” growth.

Crowdstrike: Most here know about crowdstrike. I feel the recent cyber attack on solar winds has demonstrated the superiority of falcon/crwd. This should continue to help crowd strike bolster its position. I also think at some point in not too distant future, Crowdstrike would offer security solution tailor made for the consumers (B2C). Houses with multiple end points, think routers, iPads, cell phones, security cameras, thermostats, streaming devices, smart TVs etc etc… Thats a huge market, one that Symantec and McAfee made a lot of money in. I will continue to hold a significant position as long as the story continues.

Datadog: This frisky dog is within the long term secular trend of cloud migration. This market will continue to expand and datadog is at the right place at the right time. As long as it continues to grow its market share at a healthy rate vis a vis competition it should provide very satisfactory long term returns. It was close to 10% of my position. However it has come down as others have stepped up. I still do not feel the need to add yet. In fact, Datadog has not given my much chance after it started accelerating from 40 onwards. I did have a sizeable position then. Would look to add opportunistically.

Peloton: This company has done relatively well partly due to covid induced lockdown. Post COVID, there are still open questions around growth sustainability. I will have to wait and see. Apple entering this segment I feel is generally good for Peloton as it has the ability to raise awareness. The downside is obvious. Apple is a competitor with deep pockets and big ambitions not only in the fitness space but also TV streaming space. I do not think however its a winner take all market and there is ample space for both Apple and Peloton. I would like to see Peloton continue to sell lot of its bikes as the consumers who buy these will be most likely consuming the content provided by Peloton. Lowering the price point helps. They still have 40% gross margins on Peloton equipment. I would not mind compromising a few percentage points in order to make more equipment sales. Of course they do not need to do anything silly right now since they are not even able to supply the equipment in times and consumers are waiting for months. I would like to see the demand-supply even out as soon as possible and then to continue to gain market share reducing the price or providing 1st year subscription bundle deals should help company to continue to drive the growth. As I mentioned, Peloton machines will make for sticky subscription and I would like to see it play out over the long term.

Amazon: Its been a long term holding in non-retirement account. This year it has doubled so no complaints. However, if I were not paying too much in taxes already, I would have started to reduce my position. Will be reducing opportunistically throughout 2021.

Teladoc: I actually bought teladoc after it acquired Livongo. This has been my lone holdout which has not gone up. Its treading water for some time and I am acutely aware of the lost opportunity cost. Having said that, I do believe in the long term appeal for teladoc. For me, teladoc is able to provide service that is considerably cheaper than in-person facility and the convenience of setting the appointment and see a physician is far more frictionless. I think those two are very appealing characteristics. With addition of Livongo it will be able to provide pro-active health care solution to manage certain conditions. There are cross selling opportunities and compared to overall market the company is selling favorably to overall market. I would like to hold for now and check the progress made when they announce their quarterly results as combined company and then decide the next course of action.

Stone: Its the fintech payment processor from Brazil with market opportunity in whole of South America. Its similar to square. I sold Square too soon when Covid hit and got out at break even. Buffett through Berkshire holds close to 10 percent equity in Stone. So far I like what I have heard from the management. They seem like straight shooters and treat share holders like partners a philosophy not so different from Berkshire. It still has large market opportunity in South America. At around 5% of my portfolio, I will not add more but will not cut either till something changes with the company or my position size reaches 10%. Come on Stone, you got your work cut out for you :wink:

Berkshire: Long term holding. I used to hold largish percent in Berkshire. As individual investor I needed the safety and reassurance of holding something steady. As I mentioned earlier, Saul and his investment ideas/philosophy has helped me immensely in changing my thinking around holding steady companies. I am very much growth oriented now. I just treat this as cash available to trade. If I like any idea, I pull money out of here and invest in those. In my future updates, I will just roll BRK into my cash position. I just provided it here for full disclosure.

Zoom: I reduced zoom by 50% some time back. I was late in zoom compared to some senior members on this board including Saul who was always so positive. I have questioned the moat in zoom so it was hard for me to stake a bigger position. I was wrong to question zoom when it had great momentum and I was wrong again to not sell as soon as the vaccine was announced. Don’t get me wrong. I have not lost money in zoom and most likely will make sizable gain. My gains could have been much bigger if I were not so stubborn. That aside, zoom is looking attractive to me again. I hope I am not wrong again though I have not bought any yet. Here is why I feel its getting interesting again: If zoom can sustain “only 17%” sequential gains going forward, it will still be over 80% growth YoY. At that rate, it will hit 4.8 Billion revenues which will be close to 22 P/S. The gross margin is depressed at 67% currently because of lot of free usage. However I can see it going back close to 80% once the freebie offers are done and school is in full session. Growing @ 80% YoY with gross margins around 80% and selling around 22 P/S will make it attractive again in my book. However, the question in my mind is whether 80% YoY growth in the post COVID world is realistic? Market certainly seems to think it lower than 80% and I am not sure. So I am waiting to add.

Transmedics: I have about 2.9% position in transmedics. I added based on the excellent write up by Analog Kid. I have no further comments to add to the already excellent write-ups. If interested, please look up his write ups by sorting the listings by Author. TMDX has not had much gain as compared to my other holdings. It was kind of expected in a COVID struck world. Its a smallish position and I can afford to wait for the story to play out.

The Trade Desk: Only a small position is remaining in the non-retirement account. Holding on to not pay short term taxes else would have been out. I had sold because the results did not follow CEOs cheery outlook. It was always hard for me to understand the business. Of course the market has pegged me wrong ever since and the stock has continued to appreciate unabated. I could have had sizable gains had I held on. However, I do not mind it. Happens some times. I just have to follow what I believe the numbers are saying and put it in too hard to understand pile.

Alteryx: Just recently got back in with less than 4% position. Alteryx suffered hugely due to Covid. In fact, in the hindsight AYX stock I feel suffered far more than some other companies that also saw the COVID impact on sales. Not to begrudge that, I feel that the AYX story might be developing once again. With the new CEO and COVID dissipating albeit slowly, there is likelihood that sales will reaccelerate. One thing that gives me some confidence is the fact that their gross margin has stayed above 90% all though. So, even with sales impacted by COVID, customers were still biting the bullet and buying up AYX software which is not inexpensive. In fact there DBNR for the enterprise customer was 138% in the third quarter and the overall DBNR was 124%. I want to be early rather than late on this one. If the sales turn around I feel this one will not give another chance. I may be wrong but I am interested in hearing what others think.

Alphabet: Sold quite a bit this year. Will be closing it out in 2021.

Zoom used to be a darling on this board and so was AYX. What do you guys think regarding my take on those?



Zoom used to be a darling on this board and so was AYX. What do you guys think regarding my take on those?

Not that it is my opinion that you are looking for, but I am happy to give my $0.02 on these two. I personally agree with one take and disagree with the other.

Zoom is looking attractive to me again… Here is why I feel its getting interesting again: If zoom can sustain “only 17%” sequential gains going forward, it will still be over 80% growth YoY. At that rate, it will hit 4.8 Billion revenues which will be close to 22 P/S. Growing @ 80% YoY with gross margins around 80% and selling around 22 P/S will make it attractive again in my book. However, the question in my mind is whether 80% YoY growth in the post COVID world is realistic?

I cannot answer your question, but I do agree with your logic. I discussed this in a post of mine last month (…). There is close to zero doubt in my mind that Zoom will reach at least $4B in revenue next year. I personally think it will land somewhere closer to $4.5B and would be quite pleased with the $4.8B you mentioned. Let’s go ahead and be conservative and say revenue ends the year at $4B. Zoom has never once traded at a TTM EV/S of below 30. Therefore, I would argue the most conservative estimate would give Zoom a market cap of $120B and the end of the year ($4B * 30). With Zoom 40% off its ATH, the market cap is down to $102B meaning the most conservative estimate would give us an 18% return. Of course, we do not work as hard as we do for an 18% return but I think this should give Zoom a solid floor. However, if Zoom trades at its historical multiple (50X TTM sales as it is now) and achieves the revenue I believe it will ($4.5B), then we would get a market cap of $225B, good for a 121% return from todays price.

This is all just some back of the napkin math, but I think it goes to show that there is still some significant upside from todays prices. With this in mind, while the majority here have been trimming or exiting their position, I have been adding to mine. It does not feel great to go against all the brilliant investors who contribute on this board, but this is how I am thinking about it. We’ll see how it plays out.

I feel that the AYX story might be developing once again. With the new CEO and COVID dissipating albeit slowly, there is likelihood that sales will reaccelerate.

One of the many valuable lessons I have learned from this board, is why invest in the hopes of a turnaround when we have companies firing on all cylinders right before our eyes? I can appreciate several of the attractive qualities of the stock (sub $8B market cap, trading at a low multiple, etc.), but I believe it makes more sense to concentrate in the best of the best. With a concentrated portfolio, opportunity cost can be crucial and leaving even a small amount of your portfolio in the wrong company can have a big impact. What Saul and others are so good at is identifying when companies begin to stumble and exiting them rapidly. Alteryx certainly stumbled throughout 2020. Its founder and CEO of many years left the company abruptly and it has not begun to show any signs that it will be returning to its former glory of 50%+ growth. For this reason, I think it is best to continue riding the wave of the companies who are clearly executing.

Anyways, since you asked I figured I would give my thoughts. Hope this helps!