Hi everyone, hi reader,
This is an after the fact edit. Because of length I had to post in four sections. By my absentmindedness, instead of posting them as replies, I posted them as separate posts. Too late to do them all over again. My mistake. My Bad!
Saul
MY PORTFOLIO AT THE END OF 2022
There are no two ways about it. This has been an awful, even terrible or horrible, year for stocks, and especially for our stocks, which have been hit by the interest rate bugabear, as well as by spending cut backs by their customers. The good news is that, on average, they are at about a quarter of the stock price that they were at in November of 2021, with revenue on average probably about 60% to 70% higher than their revenue was then, and with better profitability, cash flow, and operating margins.
It’s evident now that our companies were probably overvalued a year ago. But it’s also clear that they were beset by wildly extraordinary circumstances.
Indeed, a lot of things have occurred that could not possibly have been anticipated or foreseen, all leading to the the wildly risk-off mentality in the current market, that has sent our stocks to what seem to be ridiculously undervalued levels at present.
The markets, and our stocks walked into a series of once in 50 year storms, all hitting almost simultaneously!!!
These include the worst world-wide pandemic in probably 50 years, and maybe back to the 1918 Spanish Flu, and next having the pandemic cause container ships to pile up in a couple of closed-down Chinese ports, causing shortages of all kinds world-wide, leading to high inflation.
Then we have to add on a crazy, unexpected, Russian invasion of a neighboring country, leading to oil and gas shortages all across western Europe which added to inflation.
And then having the Federal Reserve raising interest rates at a rate that hasn’t been seen in 40 years.
Complicated by the Fed talking as if a good economy and full employment is a bad thing that needs to be crushed by further interest hikes, instead of a good thing, which has brought about a fear of the Fed bringing about a recession.
This all hit us at once . Sure we could have realized that our stocks were overvalued. However, as the Fool says, the best companies are always overvalued. But think about this: we couldn’t have anticipated ANY of these storms (pandemic, invasion, container ships bottled up, sudden inflation, etc.)
And certainly not all these things hitting almost simultaneously, a pandemic, container ships bottled up and unavailable, shortages, a Russian invasion, inflation, and interest rates being pushed up at an almost unprecedented rate, the fear of a recession. It was a nightmare scenario leading to an extremely risk-off market, bringing us where we are now with our companies seeming as undervalued at present as they were overvalued before.
I was aided by a useful thought that several of our companies CEOs have expressed. I was something like “Hey guys, this current macro turmoil may affect our current results, but it will pass! Yes, it will pass! And it doesn’t change our long term outlook at all !” That confirmed my thoughts and helped me quit to focussing on the very short term. After all, I don’t know what the next few months will bring.
Look, I can’t tell you what will happen next month (although now that the tax loss selling at the end of the year of beaten down stocks is over, the dollar value of my portfolio rose 6.0% in the past two days, giving me a tiny bit more hope for the future). I think our stocks are for the most part quite undervalued at present and the bots and sellers have way overshot, but that’s just my opinion.
I have gradually contracted my number of positions so that I’m now down to five main positions, which I consider top companies, making up about 93% of my portfolio (and three very small positions combining for the other 7%).
I have kept a permanent safety fund out of the market that I could live off for several years if necessary, and I feel everyone who does not have a secure regular source of income should do the same.
I have learned long ago that sticking with great companies wins out in the end, and beats market timing (looking at a long term chart of the S&P you will see that the horrendous declines of the past look like tiny dips on an ever-rising graph), but living through this decline has been awful.
I can’t give you a date when the current turmoil will end but I know that our companies have secure recurring revenue, and that they are growing very rapidly, at rates almost never before seen for companies at their scale, and considering these facts really makes our companies seem way oversold to me. But that’s just my opinion. I know literally nothing about technical analysis or economics and I have no training as a financial advisor. So don’t just follow what I am doing. Make your own decisions.
MY RESULTS MONTH BY MONTH FOR 2022
Here’s a table of the monthly year-to-date progress of my portfolio for 2022.
End of Jan 71.1% of what I started with
End of Feb 73.4% of what I started with
End of Mar 71.0% of what I started with
End of Apr 56.4% of what I started with
End of May 40.3% of what I started with
End of Jun 42.9% of what I started with
End of Jul 41.7% of what I started with
End of Aug 49.2% of what I started with
End of Sep 41.3% of what I started with
End of Oct 39.7% of what I started with
End of Nov 34.0% of what I started with
End of Dec 31.6% of what I started with
My portfolio is down 68.4% of what I started the year with. This was a terrible year and down 68% for the year is just awful, and I feel that most of these companies are way oversold!
This is actually down a little more than I was at the end of 2008, which was a year when it seemed that the whole banking sector was collapsing and the entire economy would follow, and everyone was truly panicked. This year the economy is “too strong”. Oh well! As I wrote above, this too will pass!
If you are wondering how I can be so relatively calm about down 68.4%, look at the next section (Cumulative Results).
CUMULATIVE RESULTS
For those wondering about the long term results of investing this way.
2017 – up 84.2%
2018 – up 71.4%
2019 – up 28.4%
2020 – up 233.3%
2021 – up 39.6%
2022 – down 68.4%
Cumulative – up 496.0%
Okay, in spite of the worst sell off you could possibly imagine in our stocks, my portfolio now has 596% of what I started with six years ago. That’s roughly SIX TIMES what I started with. In the same time the S&P 500 has risen 70.8%. That’s up 71% compared to up 496%, compared to sextupling! Figure out for yourself which method gets you the best results!
HOW DID THE INDEXES DO?
Here are the results year to date:
The S&P 500 (Large Cap), Closed down 19.4% YTD. (It started the year at 4766 and is now at 3839.5).
The Russell 2000 (Small and Mid Cap), Closed down 21.6% YTD. (It started the year at 2245 and is now at 1761).
The IJS ETF ,The S&P 600 of Small Cap Value stocks), Closed down 12.6% YTD. (It started the year at 104.5 and is now at 91.3)
The Dow (Very Large Cap), Closed down 8.8% YTD. (It started the year at 36338 and is now at 33147).
The Nasdaq (Tech), Closed down 33.1% ytd. (It started the year at 15645 and is now at 10466).
These five indexes averaged down 19.1% ytd. They fell an average of 4.5 points this month!!!
LAST THREE MONTHS REVIEW
October, I sold out of my 3% position in Zscaler (again), and reduced my position in Monday from 6% to 3%, and put all the money into Cloudflare, Bill, and Datadog, with small amounts also into Sentinel and Snowflake (in spite of Snow’s already large position), so as you can see, I am captivated by Snowflake’s story, although with six positions making up almost all of my portfolio, their average size will be over 16% and it is thus unlikely that the largest would be under 20%. Yes that’s just my excuse, although it makes sense too 
.
What I seem to be doing is pulling out of, or shrinking, positions in good but lower confidence companies like Mongo, Zscaler, Trade Desk, and even Monday, and concentrating on what I see as the best of the best (Snowflake, Cloudflare, Bill, Sentinel, Crowdstrike, and Datadog). Please don’t copy what I’m doing though because I could be way wrong. Make your own decisions.
November. I didn’t do much of anything this month except reduce my Monday position to 1.4% from 3.2%, and reduced my Cloudflare position from 19% to 15% (still a large position). I put the money to work adding to Bill, to Datadog, and to Sentinel (at what seemed ridiculously low prices). No closed out positions and no new positions.
December. I took a tiny try-out 1.5% positions in ENPH (solar energy) and in TMDX (medical transplant technology), but then closed out ENPH. I don’t know yet whether I will keep TMDX. I sold most of my Crowdstrike and a little bit of my large Cloudflare positions and, with the money, in addition to the TMDX, I added to Sentinel, Snowflake and Monday, and a little to Bill.
Please remember that I could change my mind about any one or more of my positions tomorrow, depending on new information or other factors, and I may not do another update until the end of next month. Make your own decisions. Don’t just follow mine. I make mistakes at times! Guaranteed!
HERE’S THAT TABLE AGAIN!
Of how much each stock is still up or down from its Apr/May/Jun sell-off low .
MNDY from $87.05 to 122.00 up 40.1% !!!
SNOW from $110.3 to $143.5 up 30.1% !!!
BILL from $89.9 to $109.0 up 21.2%
NET from $38.96 to $45.21 up 16.0%
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DDOG from $81.1 to $73.5 down 9.4%
CRWD from $130.0 to $105.3 down 19.0%
S from $18.64 to $14.59 down 21.7%
You see that of my companies, Crowdstrike, Datadog and Sentinel are still below their Apr/May/Jun lows, and Crowdstrike cratered this month, while the other four are still considerably above them. You can also see (big surprise to me, I have to admit) that Monday is doing best since those springtime lows, and is up 40%! That Snow and Bill have also had substantial rises is no surprise (they are my first and second largest positions.
Remember that I could be totally wrong and everything could crash again next week. I’m sure the Market Bear will make further attempts to push our stocks down. We’ll just have to see what happens.
POSITION SIZES
I currently have five positions, two little ones in Monday and Crowdstrike, and one little keep-it-on-the-radar position. That’s definitely more concentrated than I like, but my five big positions are companies I have a lot of confidence in. However, with five positions making up 93% of the portfolio, it means that they average 18.6% of my portfolio each. Thus it’s inevitable that some will be over 20%, and indeed, Snowflake is almost 25%.
In my company reviews below I will devote an oversized section to Sentinel at the end of my reviews as it has gotten controversial since Crowdstrike, which is in the same area of security, took it on the chin.
Here they are in order of position size, and bunched by size groups.
Snowflake 24.7%
Bill 21.0%
Datadog 17.1%
Cloudflare 15.2%
Sentinel 15.0%
Monday 3.4%
Crowdstrike 2.5%
TransMedics 1.6%