YTD return: 23.91% (through eod 9/3)
Current drawdown from ATH: 2.84%
Portfolio hit all time low drawdown of 36.14% mid-may.
YTD returns by month:
August: 15.51% (through 9/3)
2020 return: 159%
August Delta YTD My pf 15.51% - ARKK 4.22% 23.45% ARKW 4.6% 18.47% S&P 3.36% 1.01% QQQ 4.66% 2.29% BTC 17.6% -46.28%
Very interesting month for my portfolio with a tug of war between my good decisions and bad decisions with the numbers speaking loud and clear for me to mull over and get better at this. Since last year’s returns were generally agreed across the board were abnormal and not to be expected again, my goals for this year and their current status are:
- Do better than market indices (SPY, QQQ at min. – Neutral, hanging by a thread
- Do better than ARK ETFs - Pass
- Don’t stray too far from this board’s leaderboard results – Fail
- Record and review results periodically – Pass
- Build upon past learnings, develop, and stick to a process – Neutral
All the inconsistent and spraying all over the place decisions I took in Jan/Feb (#5 above) have resulted in a “should have done better” results almost 3/4ths into the year. I hope at minimum I will end the year better than indices, even if that doesn’t’ happen I think I’m motivated enough to continue working at it, all thanks to the transparent and generous sharing that happens on this board that helps me a lot in understanding and believing in what is possible.
A few aspects where I should have done better and need to get better at:
Be agile with decision making – For some companies it may take me a few quarters to build position size as the company proves itself quarter by quarter like may be Digital Ocean currently and Mercado Libre, Sea Ltd from last year but occasionally there comes a company like Upstart this year, Zoom last year where I needed to be quicker in consolidating my conviction(days/weeks vs months) and rack up their position size to a size that is in direct co-relation to my conviction levels. Position sizing matters.
It took me a while to get here but aim for 10-12 positions and maintain high standards for an entry into my portfolio. This would also mean getting comfortable with 20% position sizes and moving positions around temporarily to take advantage of volatility.
Believe in something and hold myself accountable to it – if I believe in Saul flavored growth investing, I should follow it completely to expect results deserved for that style. If I believe in some other variation of investing, I should know what it is and follow it completely and only expect results deserved of that style. Mixed beliefs will result in mixed results.
Upstart – 15.5%
CrowdStrike – 11.63%
Sea Ltd – 11.08%
ZoomInfo – 9.01%
Roku – 8.98%
Twilio – 8.63%
Mercado Libre – 8.34%
LightSpeed – 7.04%
Palantir – 6.12%
Digital Ocean – 4.61%
SoFi – 2.4%
Cash – 6.5%
Digital Ocean DOCN
A cloud computing platform offering on-demand IaaS and PaaS solutions for SMBs. Interesting enough, when I poked around after I came across their name, apparently, they are very widely used and popular across small startups that don’t yet have grandiose scaling dreams and independent developers for their ease of use and simplicity of billing. In the target market they operate in, they don’t compete with AWS, GCP, Azure but with Linode, Vultr. This made sense to me as big guys don’t usually care that much about downmarket.
However they are only growing in 30% range, with gross margins in 55% range so not a hypergrowth company but I think they will do much better from now with all the awareness and marketing that comes along with being a public company. Their earnings will show.
Some of my other positions
A platform provider for streaming services that is perfectly poised to benefit from shift to streaming. One of the top two in its space in US along with Amazon Fire TV.
Ever since they reported, they have become the sick child of my holdings torn between whether to cut them loose or to hold on in the hope that they would recover. They sounded very hunky-dory in their earnings call and didn’t seem to worry too much about less than enthusiastic streaming hours and active accounts current quarter results and near-term outlook. So from a “follow the business, not the stock price” angle they are struggling on two key metrics, from a narrative angle they have been caught up in unending negative news cycle about competition this month. I’m feeling deja vu from my recent losing position with Pinterest where in Q1 they said to expect struggling MAUs, market for the most part ignored management’s caution and rallied them to near ATH anyway only to bring them back down to earth when they reported in Q2 just as management said they would. Now the market appears to be in two minds whether to rally Roku back up just like it did with Pinterest and I’ve also hung in the hope that it would at which point I can trim or cut them off completely. At ~30% down currently from ATH already I’m struggling to make up my mind if the bad news is already baked in for them. I believe at a fundamental level they have better prospects than Pinterest even with Google, Amazon right on their heels.
Palantir Technologies builds and deploys software platforms for US and foreign government intelligence agencies and data operations/analytics platform for commercial clients.
Their story is a bit complicated with an atypical CEO, ideologies and a bit of a black box on what they are actually better at than the other players especially in the commercial space. Given all this I’m not sure if market may ever give them a consistent SaaS premium and it appears they would only come in at ~40% YoY revenue growth next quarter including their standard beat magnitude. My conviction has come down and will look to exit when I’m looking for a vacant spot in my portfolio. But for now, I think they will do better than cash.
Another sick child of my portfolio that I thought posted decent Q2 results until I started this review. Their guidance for next quarter is only for 17% which even with a ~$40M short term hit from student loan moratorium which is of course is no fault of theirs but the guidance itself is extremely poor. Planning to exit completely out of my small position.
Their revenues are still 72% from lending products and I think their aspirations to be a super-app for fintech services are farfetched in a financial services rich market like US. In hindsight, I shouldn’t have stayed with them for over six months even when it was clear to me that my conviction wasn’t high.
Took a relook at their ER and they had multiple problems because of which I think they are still hovering at 20% off of ATH. Just from a revenue growth standpoint they appear to be doing fine with ~50% organic growth consistently but when looked under the hood, Segment which was touted as a star acquisition didn’t experience any revenue growth last quarter, lowest overall customer adds in the past two years even including Segment customer adds, gross margin that is trending in the wrong direction.
Note to self - I should learn to interpret earnings results in a more wholistic way and be ready to act quickly when there is evidence to lower my conviction.
Mercado Libre MELI
There is a lot of chatter of Sea Ltd denting their prospects in Latin America but I think their long history of execution is a testament to their resilience to competition. They posted 94% revenue growth with relatively tough comps but they are running into even more tougher comps next two quarters. No reason to doubt if they won’t continue to post hypergrowth numbers going into Q3 and then holiday season. Will have to wait and watch.
Sea Ltd SE
Very nice acceleration in Ecommerce and FinTech business segments even if their Digital entertainment segment is guided only for 47% FY21. Free cash flow positive, positive or near zero adjusted EBITDA since Q2 20. So nothing to fault in their Q2 21 results and plan to continue holding them.
Reasons were a combination of - discussions on the board about their dominance/relevance for Machine Language data workloads, confusion on how to interpret their results and my personal observation that enterprise data warehousing solutions (from Oracle, SAP etc) by and large historically speaking have struggled to maintain or build their dominance over the long term primarily because of significant differences between how enterprises wanted to deal with data. There is very little doubt that Snowflake is the current leader in their space but if they are able to maintain that over the next 3-5 years, I believe they will be the first ones to do so. All this, on top of their valuation concerns right out of the IPO gate, I felt from an investing standpoint my money is better allotted elsewhere.
A luxury e-commerce company with significant international and China presence. As their stock price came under severe stress tests in the recent months for various reasons including their China exposure, liquidations from alleged hedge fund solvency I was waiting for their ER which I thought was mediocre at best with their digital platform segment disappointing two consecutive quarters . Given all the other issues pertaining to them, exiting them was easy but has been a painful journey soaking up losses but lesson learnt to stick to simpler stories.
A digital twin software maker that in theory looks a must have for a real estate in the world. Exited because of less than stellar ER even if that is caused by anticipated deceleration of hardware revenue. I think they are a good company led by a good CEO but probably their story is still in the making and strangely enough the strong real estate market has probably been a headwind for them as people cared less about 3-d tours as properties were being sold even without a need for one so there was no reason for the seller to spend for their software. They probably need enterprise buy-ins I think as
An online freelancer marketplace. What they did to their revenue guidance from one quarter to other(increase in Q1 only to revise it down in Q2), is a first of its kind experience although I can only claim 18 months of active investing experience. Market got super mad and dropped them 20%+ at lightning speed, that hurt. In hindsight, I probably got convinced by their numbers even if I was less then convinced about their business potential. Freelancer market I believe inherently will stay fragmented between internal networks, smaller headhunters giving no scope for any sustainable high growth larger companies. Covid may have helped their cause but the market itself will stay cluttered with high degree of churn. Not sure how I could avoid mistakes like these in future, still thinking about it.
Upstart, CrowdStrike, ZoomInfo, Lightspeed are well covered on this board so skipping them this month.
July Summary - https://discussion.fool.com/upsidedown39s-july-portfolio-summary…
June Summary - https://discussion.fool.com/upsidedown39s-june-portfolio-summary…
May Summary - https://discussion.fool.com/upsidedown39s-may-2021-summary-34844…
April Summary - https://discussion.fool.com/upsidedown39s-april-2021-summary-348…
March Summary - https://discussion.fool.com/upsidedown39s-march-summary-34792364…