Upsidedown's October Portfolio Summary

YTD return: 30.89%

Current drawdown from ATH: 3.92%

Portfolio hit an all time high drawdown of 36.14% mid-may.

YTD returns by month:

October: 30:89%
September: 19.29%
August: 23.91%
July: -1.57%
June: +8.99%
May: -2.84%
April: 6.52%
March: -16.5%
February: +1.26%
January: +7.91%

2020 return: 159%

Finally a month with personal higher lows and and higher highs after spending the bulk of this year with greater than 20% drawdowns. Recent action in small caps feels similar to late last year which is when I probably got antsy and diversified into less quality names in an attempt to cash in on the momentum which initially appeared to work for a few weeks before tanking and staying there for a really long time. I hope to have learnt from those mistakes and stay closer to my lane this time around.

Two more months to go in this year and a lot of enthusiasm around pointing to seasonality and all. CNN Fear and Greed Index is currently at 77 which I believe is the highest it has been this year - https://money.cnn.com/data/fear-and-greed/
But thanks to Saul’s and others’ wisdom here, it does become easier to learn over time to stay invested close to fully deployed all the time and pretty much ignore the market seasonality.

Portfolio holdings.

Upstart - 21.53%
Sea Ltd – 12.4%
ZoomInfo – 9.94%
LightSpeed - 9.42%
Crowdstrike - 8.1%
Digital Ocean – 8.08%
Monday.com – 7.04%
Affirm – 6.92%
Mercado Libre – 6.72%
Palantir – 6.66%
Roku - 3.19%

Positions

ROKU

A streaming services platform provider with a no margin hardware product, higher margin ad business and expanding original content. In addition to weak Active Account and Subscription hours growth in their Q2 and outlook, continuous loop of negative news cycle around competition subdued its stock price from making any meaningful recovery. Although I was late, I trimmed them significantly in the recent months as it appears that there are more risks to Roku as compared to others. Content streaming is a very lucrative space so I suspect Google, Apple and Amazon will continue to keep stepping on Roku’s feet for a really long time to come. TVs in my opinion are less homogeneous than mobile phones because of which Roku may not find it easy to replicate their US penetration internationally and even if they did, ARPU will not be as high and they will be forced to entice users with free original content along with a no-margin hardware dongle that already compresses their margins. There was also a lot of recent chatter around their potential E-Commerce integrations which feels farfetched for me at this time. They are on the chopping block if they can’t show improvements on pretty much all key metrics when they report on Wednesday this week A.H.

Palantir

A software platform provider for US and foreign government intelligence agencies and data operations/analytics platform for commercial clients. They guided for 33% Revenue growth which with a beat should at least be 40%, if not, this would be the lowest YoY growth rate of the past 8 quarters. And they have an easy compare coming up in Q4, so they should also guide really well showing acceleration from this quarter. They have been range bound about ~50% off of 52 week ATH for a really long time so I hope they post real good numbers on november 9th. May be they won’t and market already knows this and that’s why the stock price just can’t post a recovery and I have just been stupid to hold on to them all this while. Besides being a 40-50% grower, they have 80%+ non-GAAP margins, ~30% non-GAAP operating margins and non-GAAP FCF positive. So the missing piece is the accelerating trajectory of high revenue growth and as per their S1, the second half is better than the first from a seasonality standpoint. I will find out soon enough.

Mercado Libre

A dominant E-Commerce, Fintech platform in LATAM countries. They have taken their share of beating from Supply Chain constraints, continued weakness in Brazilian Real ( which helps with better USD reporting numbers ). Each time I tried to re-assess my position in them, I end up watching an interview or two of their CEO Marcos Galperin and come back convinced that I should hold onto them. They did pretty good in Q2 21 with a 94% revenue YoY% against a not very easy compare of 61% from Q2 2020. But they are up against really tough compares starting in Q3 with 85% and then 97%, 111%, 94%. They are reporting on November 4th.

Affirm

Arguably the hottest BNPL company currently with partnerships showing up with merchants in pretty much all consumer industries. Interested in watching how all these sudden partnerships start showing up in their numbers. I believe they are at an interesting cross section of tailwinds from a) new payment method that pretty much every industry is forced to offer to their consumers b) going beyond FICO based lending and headwinds from a) already at the peak of debt cycle and the associated uncertainties over consumer spend in the coming years b) debt heaviness of their business model even if it means offloading to third parties. Scheduled to report on November 10th.

Monday

A cloud based Team Management Software company with low code/no code solutions that can be customized to any organization’s needs. They are probably the easiest to understand and follow of all the companies in my portfolio. Thanks to the coverage on the board and am in it for the same reasons as most here, hypergrowth, improving operating leverage and record customer adds. I used to see a lot of Monday.com ads in youtube until a few months ago and now I see a lot of Asana ads, so it’s probably another indication that Asana is the chaser between these two companies. Scheduled to report on November 10th.

Digital Ocean

A cloud computing platform offering on-demand IaaS and PaaS solutions for SMBs. They were probably flying a little under the radar until they went public in March this year despite their popularity in the independent developer and SMB market. But now that they have appreciated 100%+ since IPO and with a solid Q2 report, they now probably have a lot of eyes on them and any slippage from acceleration will be punished harshly. Also reporting this week on November 4th.

CrowdStrike

Tide appears to be slowly changing for CrowdStrike and if they can’t stop the bleeding with impressive Q3 numbers, they will probably soon be relegated to the back bench for all good investment reasons. It’s been well laid out on this board that CrowdStrike has better numbers than Sentinel One from multiple angles however since 6/30 when Sentinel IPOed, CrowdStrike is +7% to date whereas Sentinel is +45%. So clearly the market is challenging CrowdStike to prove their worth. They have the advantage of reporting at the fag end of the earnings cycle in December. Sure, there is law of large numbers in play here but if Palo Alto with +4B annual revenue rate can post +25% growth rate, CrowdStrike with ~one-fourth the revenue run rate should at least post 3x the growth rate with all the industry tailwinds if it wants to be continue to be seen as the category leader.

Lightspeed

Probably the most eagerly awaited ER besides Upstart on Saul’s board. Slowly closing the gap down from the short attack and thanks to generous contributors on this board that I’m able to retain my conviction and even add a little during the drops. I hope they don’t disappoint as I would really hate to see another sudden 25% beating on a top position after Pinterest, Twillio, Fiverr in the recent months. Reporting on November 4th.

ZoomInfo

Not exactly sure what it is but despite their SaaS credentials, they don’t get rewarded in stock price in proportion to their financials. Maybe they aren’t seen as a must have for enterprises as compared to ZScaler, Crowdstrike, Cloudflare etc or maybe the general perception on personally identifiable information holds their stock price back forever. After today’s ER, I think I have them appropriately sized to hold onto for now.

Sea Ltd

A major player in Southeast Asia with a very profitable Gaming business (Garena) that funds E-Commerce(Shopee) and FinTech(Sea Money) businesses. Their stock price has been range bound since a couple of months probably because of the ongoing supply chain impacts however their main bread and butter for profits is still their Gaming business which should continue to post impressive numbers when they report later this month. Along with Mercado Libre, they are my E-Commerce play in international markets where penetration is still lower than in the US.

Upstart

Thanks again to the generous contributors here for the detailed analysis and sharing of everything and anything Upstart related. I have been holding a 20% position for the first time and it hasn’t been that scary so far. I’m hoping that I have developed the stomach for carrying larger positon sizes as part of a concentrated portfolio. It’s fascinating to watch how this board collaborated and jumped on the opportunity with the majority capitalizing on it to the fullest extent. I’m also confident that if for some reason Upstart doesn’t deliver on their promise, this board will again lead the pack in dissecting and ejecting before it’s too late with enough dough secured in the bags.

Thanks again and good luck to everyone with the remainder of the earnings season.

September Summary - https://boards.fool.com/upsidedown39s-september-portfolio-su…

August Summary - https://boards.fool.com/upsidedown39s-august-portfolio-summa……

July Summary - https://boards.fool.com/upsidedown39s-july-portfolio-summary……

June Summary - https://boards.fool.com/upsidedown39s-june-portfolio-summary……

May Summary - https://boards.fool.com/upsidedown39s-may-2021-summary-34844……

April Summary - https://boards.fool.com/upsidedown39s-april-2021-summary-348……

March Summary - https://boards.fool.com/upsidedown39s-march-summary-34792364……

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