SAUL’S PORTFOLIO AT THE END OF Feb 2023
After reading please let me know what you think. Don’t be afraid to comment or disagree on the board with things I say! People do it all the time. (I may disagree with you back though. That’s the way life is.)
As I usually do, for my own convenience, I am ending the month on the last weekend of the month, and Monday and Tuesday will spill over into March. If you want, you can think of it as a four week summary. 
Well January and February have been going up and down like a yoyo. By the 3rd trading day of January (Jan 5th), my portfolio was down 12.6% ytd, to 87.4% of what I started with. Four weeks later, on Feb 2nd, I was up 22.0%, which meant that the portfolio had risen 39.6% (122/87.4 = 1.396, or you can round it up to up 40%) in a month. A week later I was only up 6.5%, and a week after that back up 21.6%. And I’m finishing February at up 7.0%. After recovering from the first swoon in early January, my portfolio has never been in negative territory again this year.
Let me be clear , I don’t have confidence that we are really on the way up and out of this horrible bear market but it’s awfully nice to see the portfolio up on the year instead of down.
The good news is that, on average, the stock prices of our companies, on average, are at roughly 35% or 40% of what they were they were at in November of 2021, while their revenue, on average, is probably about 60% or 70% higher, with better profitability, better operating margins, and more cash flow.
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!!! I discussed them last month and won’t repeat them.
You just can’t say “I should have expected this!” Some things happen that you can’t anticipate or expect.
I was aided by a useful thought that several of our companies CEOs have expressed. It 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, but 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.
We are now in the midst of Dec and Jan quarter results. I predicted that revenue growth rates will be downfrom a year ago because of macro conditions, but many old line companies will actually have lower revenue than a year ago, which is a big difference.
What I mean by that is that, if we do get a recession, our companies may have revenue growing by “only” 40% or 50% (way down), while the old line companies may have revenue shrinking by 20% to 25%. So we will be looking at 145% of last years revenue for our companies, while they will be looking at 75% or 80% of last years revenue.
I really can’t tell you how the market will react, whether it will be “Oh how awful, just 50% growth”, or “That’s where my money should be, it’s the only thing growing”.]
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, but living through this decline has been awful.
I can’t give you a date when the current turmoil will end, though I hope it is close, but I know thatour 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 2023.
End of Jan up 9.7%
End of Feb up 7.0%
Last year, by the end of January, my portfolio was down almost 30%, so this year has been a definite improvement!
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%
2023 – up 7.0% so far
Cumulative – up 537.8%
Okay, in spite of the worst sell off you could possibly imagine in our stocks, my portfolio still has 638% of what I started with six years and two months ago. That’s almost SIX AND A HALF TIMES what I started with. In the same time the S&P 500 has risen 76.6%. That’s up 76.6% compared to up 538%, compared to sextupling and a half! 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 up 3.4% YTD. (It started the year at 3839.5 and is now at 3970.0).
The Russell 2000 (Small and Mid Cap), Closed up 7.35% YTD. (It started the year at 1761 and is now at 1890.5).
The IJS ETF ,The S&P 600 of Small Cap Value stocks), Closed up 9.75% YTD. (It started the year at 91.3 and is now at 100.2)
The Dow (Very Large Cap), Closed down 1.0% YTD. (It started the year at 33147 and is now at 32817).
The Nasdaq (Tech), Closed up 8.9% ytd. (It started the year at 10466 and is now at 11395).
These five indexes averaged up 5.7% ytd.
LAST THREE MONTHS REVIEW
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.
January. Snowflake is still at 25%. Bill inched up to 22%. I’ve reduced Datadog, Cloudflare, and Sentinel by about two to three points each to a current range of about 14.2% to 13.2% of my portfolio (still quite large). I’ve built Monday and Transmedics up about 3 points and 4 points to currently about 6.7% and 5.4%. I’ve sold out of my little Crowdstrike position.
February. I initially bought more Bill on the decline, feeling that it was greatly oversold, but after thinking about it, I sold back what I had bought and a bunch more. It’s gone from my 2nd largest at 22% a month ago, to my smallest position at a third that size (which is still respectable), due to the stock price falling, and my trimming. I had trimmed a little Cloudflare before earnings but bought back even more afterward, so that it is now in 3rd place at 16%. I trimmed a little Datadog both before and after earnings and I am content with a 12% position, down from 14% last month. I had added to Monday in January and early February, and then a lot more after results, and it’s gone from next to smallest to an astounding 2nd place in my portfolio, at 18.4%, in one month. I made no significant changes to Sentinel and it’s at 14.1% and in 4th place. I sold a small amount of Snowflake when I became a little uncomfortable with how large my position was getting, but it’s still at 24% and well out in first place. I added a small amount to my Transmedics’ position almost every week for two or three months, but it’s still, even after a 20% rise after earnings, my second smallest at 8.6%.
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!
POSITION SIZES
I have gradually concentrated my number of positions in this macro environment, and currently have one very large position, four large ones, and two smaller ones. That’s definitely more concentrated than I like, but it’s hard to find other companies to add, as I’d have to sell part of one of these.
Here they are in order of position size, and bunched by size groups.
Snowflake 24.0%
Monday 18.4%
Cloudflare 16.0%
Sentinel 14.1%
Datadog 12.0%
TransMedics 8.6%
Bill 6.9%
JUST FOR INTEREST, HOW THEY DID SO FAR THIS YEAR
My portfolio:
NET from $45.21 to $59.20 up 30.9%
TMDX from $61.70 to $78.61 up 27.4%
MNDY from $122.0 to $154.7 up 26.8%
S from $14.59 to $15.46 up 6.0%
DDOG from $73.5 to $76.7 up 4.4%
SNOW from $143.5 to $148.4 up 3.4%
BILL from $109.0 to $86.0 down 21.1%
You probably noticed that the 2.7 point drop in my portfolio’s performance this month (up 7.0% ytd, compared to up 9.7% a month ago), was entirely due to Bill, and to some extent Snowflake, and reflecting Bill’s worrisome results and posture, and worries about Snowflakes coming results, it being a usage based company. All the other companies were up from last month, except Datadog which dropped a tiny half point.