It’s been a active two weeks since I posted my End of July results and I thought I’d give you an update.
I wrote two weeks ago that after a tumultuous March through June, in which my portfolio had four drops averaging 13.4 points each, July was tranquil, with no major meltdowns, just a zigzag rise. As far as the four drops and rebounds, each low was higher than the low before and each high was higher than the high before. The lows were unpleasant and a bit scary, but it would have been unfortunate to get scared out at one of those bottoms.
Well, the Monday after I wrote that, another drop began and over the course of a week my portfolio dropped from up 77.4% to up 60.9% by this last Monday (a loss of 16.5 points). It finished the week at up 72.7%. That low was also higher than the one before.
Now here’s an update on what I’ve done in the two weeks: Let’s look at it alphabetically.
I added a little to my Crowdstrike position and it has moved up from 4.1% to 4.7% of my portfolio. Then Mongo, I’ve started to lose patience with Mongo. I’ve held it for 21 weeks now, and it is up 7% in the 21 weeks while the rest of my portfolio has been hitting it out of the ballpark. I have to admit that I don’t understand why. I trimmed a little, just dropping my position size from 11.6% to 11.0%. I added some back to Trade Desk after their great earnings, replacing some of the shares that I had prematurely sold last month. Then there is Twilio. I was really a bit disappointed having been taken in by all the exaggerated hype about how Flex and Sendgrid were going to explode their revenue, and I reduced my position size a little bit. I guess I was expecting more than we got. It’s still in 3rd place but at 16.8% instead of 17.6. No changes in Alteryx, Okta, Smart, Zoom or Zscaler. I must say that Okta, Alteryx and Zscaler continue to be amazing.
And how about Square ??? You’ll remember that at the end of last month it was in last place at 2.5%. When the share price fell precipitously from $82 to $68 after earnings (dropping its position size even further), I thought that it was ridiculous and I added a good size amount at about $69. But then came the warning about the Fed setting up its own payment system and it just seemed too complicated for me, and I sold out of my small position completely. Even though further excellent discussion of the Fed announcement on the board showed that what the Fed was doing was unlikely to impair Square, I didn’t look back, and it never crossed my mind to get back in. I almost felt a feeling of relief that I was out.
Why? Well, look, Square is still bouncing around where it was over a year ago, that’s over a year ago (!) …while at least four of my other nine companies are up over 100% just from the beginning of this year. I seem to have been correct last December when I sold three quarters of my previously large Square position and reinvested in other positions.
My reasons at the time were: First that its customers were unbanked tiny merchants, and also restaurants, both of which would be hit hard in a recession. Second, they were really in a small niche, and while they could move upstream somewhat, there was no way they could “take over the world” the way some of my other companies could. Third, Sarah Friar left, and although she was adequately replaced, it now seems likely that, as CFO, she had a good view and she left because she saw the handwriting on the wall… perhaps that Square might continue to be a successful company, but that the glory days were over. She may have also disagreed with the focus on bitcoin. Fourthly, Square has plenty of effective competition (PayPal, etc), while companies like Alteryx, Twilio, Okta, Zscaler, etc, don’t seem to have much effective competition. Fifthly, Square’s market cap is $23 billion and that is much harder to quadruple than a company with a market cap of $3 billion. And sixth and finally, Square is still where it was more than a year ago, which means others are seeing it the same way I am. And you can add to that two more factors, first, their relatively low gross margin compared to our other companies, and second, Jack Dorsey in the recent conference call saying “I love bitcoin!” which promises even more focus on bitcoin. Well, I probably should have listened to those reasons and put the money somewhere more profitable sooner, but I often have to bounce around a little before I get it right.
My current positions are:
**Zscaler 20.7%** **Alteryx 18.8%** **Twilio 16.8%** **Okta 12.3%** **Mongo 11.0%** **The Trade Desk 8.2%** **Crowdstrike 4.7%** **Zoom 3.9%** **Smartsheets 3.3%**
As you can see, the first six are in the same order and are roughly the same sizes as two weeks ago. The only changes are that Crowd has moved ahead of Zoom, and Square is gone.
I hope that this has been interesting, and maybe useful.