Update on my portfolio
Although I just gave my end of February a week ago, and I usually give updates just at the end of the month, I will give a quick update on the portfolio today as there have been a number of changes in a short time. Here is what it looked like a week ago:
**.** **Crowdstrike 30.2%** **Cloudflare 22.3%** **Datadog 18.2%** **Snowflake 6.9%** **Inari 6.4%** **Okta 4.6%** **Zscaler 4.0%** **LightSpeed 2.9%** **Twilio 2.6%** **Zoom 2.2%**
Here’s what it looks like now:
**.** **Crowdstrike 29.4%** **Cloudflare 20.2%** **Datadog 18.0%** **Inari 7.4%** **Zscaler 4.4%** **Etsy 4.1%** **Okta 3.6%** **Snowflake 3.4%** **LightSpeed 3.1%** **Twilio 3.1%** **Peleton 2.8%** **Zoom 1.8%**
I made no changes in Crowdstrike or Datadog during the week, but I decided that it made no sense to carry a well over 20% position in Cloudflare while I had other strong companies in my portfolio with much, much, smaller positions. It just didn’t make sense to me. I cut Cloudflare 2.1 points to about a 20.2% position. As you can see, I cut my Snowflake position in half, as it seemed that its huge growth was at war with its huge price, and I could see other places I’d like to put my money. I continued to slowly trim Okta which is now 1% lower in its share of my portfolio. Okta made what may turn out to be a smart acquisition, but it’s a huge acquisition for a company the size of Okta, and the acquisition makes the story much more complicated and uncertain. And finally, Zoom is 0.4% lower, and my smallest position. I’m still ambivalent about Zoom. I think that noone currently using Zoom for video is going to quit it post-pandemic, but I don’t think that even Zoom phone will budge the needle. And they are basically forecasting no growth at all for the last two quarters of the fiscal year they just started. (Of course they will beat their forecast handily though).
So what did I do with the money? I decided that I had a brilliant group of smaller contenders, and in addition I finally added a 2.8% position in Peleton. Why? I felt that not being able to keep up with demand because of supply constraints, and still growing well over 100%, seemed a positive rather than a negative, and I dipped my toe in. As you see though, it’s the smallest position except for Zoom.
So what is left? Five contenders that I enjoyed building up. My favorite is Inari, which has grown to a 7.4% position, in 4th place, but well behind my big three. It preannounced some weeks ago but will give final revenue results this week. Its revenue will be up about 140%, it will have gross margins about 92%, it is quite profitable, it just paid off all its longterm debt. It is low capex, and has a form of recurring revenue, because once they sell a cardiovascular surgeon on their products, they don’t need to go back and sell him again next year. He will keep using it, and probably use more the second year.
The next four are tightly packed between 3.0% and 4.5% positions. First is Zscaler which just announced results and accelerated revenue growth, again, this time to 55%! Billings were up 71%, RPO was up 68%. RPO was $1.025 Billion. That’s enormous for a company whose revenue last quarter was just $157 million.
Then Etsy, with revenue up 127%, with marketplace revenue up 150%, and gross margins of 76%, up from 67% yoy. Net Income was $149 million, up from $31 million.
Next is Lightspeed, which is a cross between an ecommerce company and a recovery from the pandemic company, as it serves a lot of restaurants and hospitality companies as well as regular retail.
And finally Twilio which is again reaccelerating, and has been well discussed on the board. Remember though to consider their orgainic revenue growth (without the acquisition), as they are also digesting a large acquisition.
Please remember that this is just where I happen to be now, and I give no guarantees for tomorrow. I could change my mind about any one or more of them, and I promise that I won’t do another update until the end of the month.
Twelve positions is much more than I like but 68% is in the top three positions, and the rest are heavy hitters as well, and I’m easing out of Okta and Zoom very slowly.
To summarize: I cut my Snowflake postion by 50%. I now feel that taking such a large position (around 11% or more at one time) was a foolish mistake. I cut my Cloudflare by 10% (just because it was larger than I wanted). I cut Okta and Zoom positions, each by about 20%. Neither of them was a mistake and both have been very profitable. It may just be time to move on.
With the money I freed up, I took positions in Etsy and Peleton, and then added to them. I also added to existing positions in Inari, Zscaler, Lightspeed and Twilio.
I hope that this was of interest,