Portfolio Review 28 Mar 2022.md
My first portfolio review! This will be a different format to most, with less focus on individual companies and more on the themes I look at. Some companies are board companies, others not.
I run a broader portfolio than most here, with roughly 17% in Google and Microsoft for example, as well as reasonable positions in a number of other companies that aren’t part of the current board discussion (eg: NVDA, MELI, SHOP)
As such, my portfolio underperforms Saul et al by a significant margin. I’m not too concerned by this, because most of my challenge is dealing with my emotional responses and learning. I’m sort of retired so no new money into the account. My main concern is not to lose money, and feel like I understand a little more today (about the market and myself) than I did yesterday.
2018 - +30%
2019 - +35%
2020 - +66%
2021 - +18%
2022 YTD: -16%
My portfolio is more themes-based because that suits my (current) thinking and temperament. The major themes (with current and (watchlist) examples) are:
- AI/Hyperscalers - GOOG, NVDA, MSFT, (FB, AMZN)
- Ecommerce - MELI, SHOP, (FB, AMZN)
- Cybersecurity - CRWD, ZS, S, (OKTA)
- Analytics/Big data - DDOG, (ESTC), SNOW, AYX.
- Business 2.0 - (ASAN), MNDY, TEAM
- Consumer - (AAPL), UPST, ROKU
- A better internet - NET
At the moment, I am 100% invested, and have sold out of my AAPL position to invest in others (bad move to date!).
This is my big “step-change” belief which is longer term and yet to pay off. Most on this board would say “Greg, why don’t you just wait until revenue growth shows that it’s paying off?”. My counter to that would be that MSFT and GOOG are still growing rapidly, with improving margins. AMZN AWS as well, although I sold AMZN to buy MELI as part of the ecommerce theme because I thought the reward would be greater.
My underlying belief with AI is that it will benefit those companies that can centralise their operations, so the AI can operate on data in their own datacenters. Also, the worlds cutting-edge AI talent is pretty centralised to Google, Microsoft, Facebook, maybe Alibaba, and a few others, and those companies are the ones that will retain most of the benefits. Long GOOG, MSFT. Watching FB, AMZN.
I believe everything that can be ‘ecommerced’ will be, and the things that can’t (clothes? shoes?) will be subject to increasing attempts to ‘ecommercify’ them. Everything will be transacted online, and we’re only a small way to building out this (possible) future. SHOP and MELI will be a big part of that, and I believe Facebook will as well. Long SHOP, MELI. Watching AMZN and FB.
My belief is that cyber-attacks are commodities, and will become increasingly commoditised and hence cheap. It will make economic sense to extract $50 out of a small florist for example. The costs of cybersecurity software will be cheap enough to make sure everyone has it. I also expect that this field will become more concentrated through acquisitions. Long CRWD, ZS, S, MSFT. Watching ESTC, PANW.
A must have with software development and who doesn’t develop? Long term holder of ESTC which didn’t pan out as well as DDOG, and sold after the CEO change. Now only in DDOG and SNOW (small position). Recently repurchased a position in Alteryx, which has jetisoned its previous CEO and has new management with a lot to prove - hopefully it makes them super motivated. Funnily enough its one of my best performing positions this year
I’m less sure of B2.0, which in my view just means not using email, Excel etc to run your business. Slack (WORK), Asana, Atlassian, Monday. This is a bit different to things like Salesforce, ServiceNow and Workday, but very related. Mainly unsure of the timing and who the winners will be. I was a long-term shareholder in Slack, which was purchased by Salesforce for a reasonable return. I sold out of ASAN recently because of the disparity between the management messaging and their forecasts eg: Dustin said "We’re entering the new year with incredible momentum” and then subsequently they guided sequential +3% which is a few million dollars. Long MNDY, TEAM.
Apple is (still) IMO an under-appreciated company. Their new processors are the best consumer processors on the planet, and it is very unclear if anyone can stop them. My new Macbook Pro has fast charging which charges to 80% in about 30 minutes and it lasts all day. I have been long AAPL for ages, until recently where I sold because I wanted cash to invest in faster growers (to date, a bad call). Will look to add on any weakness which is unlikely because it is unsurpassed IMO as a company.
ROKU is another consumer play, a favourite of Beth Kindig which was the major catalyst for purchasing. It’s an interesting play on the consumer, ad tech, and cable-cutting, and I think is worth a longer-term bet. Not high confidence, and probably first on the chopping block.
UPST has had forests written about it. I’m still holding, because as far as I can see, the premise is still there. FICO sucks, what comes next? All smaller banks et al will struggle immensely to develop their own alternatives, but what option do they have? Just stick with FICO? UPST seems to me like a good longer term bet.
NET is a bit of an odd company. They’re essentially creating an alternative to the large cloud providers (“a better internet”), providing the picks and shovels (eg: website/app performance, analytics, vpn, security, edge compute, etc) that are necessary to have an internet prescence. They’re moving more into security now, which makes them an interesting alternative to ZS, and probably CRWD, and OKTA in the future. They’re priced for a very long runway
In order to outperform, my stocks must do something the entire market is not expecting. The biggest lever for outperformance is revenue growth. That is, they need to grow revenue faster and/or for longer than the market is expecting.
Thats why investing is so difficult. SNOW might conquer the entire world, or they might just do really, really well. For example, if SNOW/NET etc do really well, the stock price probably won’t do very much. But if they do unexpectedly well…