WSM's 2020 review

First off happy new year everyone!

I was wondering how I could add value to the many extremely thoughtful annual reviews that have been posted here. So I thought to analyse what I did, what went well, what did not, my current portfolio and what I intend to do in Jan. And then to close with what I worry and wonder about. Hopefully you find it interesting and of use.


My portfolio is up 220.5% in 2020.

The winners and losers contributing to that gain were as follows - the first column shows the contribution (of the total, adding to 100%) per ticker, the second shows the actual contribution (% growth of my starting portfolio, adding to the total portfolio gain of 220%). Of the 220% gain, call options which I bought before an anticipated event (earnings, investor events) and sold shortly thereafter contributed 14% out of 100% and 30% out of the 220%. The underlying of all the options were in growth stocks that I also owned outright.

Ticker		% of total	% gain
CRWD		28.93%		64%
ZM		17.03%		38%
DDOG		13.61% 		30%
LVGO 		12.92% 		28%
DOCU		6.97% 		15%
ETSY 		7.00% 		15%
FSLY 		5.72% 		13%
Other+ 		14.12% 		31%
Other-		-2.66% 		-6%
AYX		-1.97% 		-4%
NET		-1.68% 		-4%
		100.00% 	220%

The top 4 contributors to my gains of the past year below contributed 160% of the 220% gains (options on those 4 included in the 160% contributed 23% of the 220%):

1. Crowdstrike

Crowdstrike has been my best performing, highest confidence position for the whole year. I bought shares every month from January at $61 to August, including quite a bit in March at $46. My average price was $79.67 by August, by which time it was a very high position (close to 30%). I trimmed quite a bit in September at $128, only to buy back in October at a higher price of $131 (not so smart in hindsight!). I trimmed in November at $141.90 and December at $220. It is now at $211. I also traded a couple LEAPs which spiced up my results somewhat.

→ Looking back at my transactions in CRWD, I should not have trimmed this position at all during the year. I remember Saul saying of Bert that he believes he is good at timing purchases but not always at timing sales, and I’ve made the same mistake with CRWD. Still have a thing or two to learn here…I get (too) skittish when valuations get high.

2. Zoom

Zoom, ah, Zoom. I bought a mid-sized position in January and February at an average price of $80.29. Then I got cold feet and sold it all in March at an average price of about $103. Only to see the error of my ways and buy again from April through to August at an average price of $177. I started trimming at the end of Sept and sold down to a smallish position after earnings and continued to trim all the way through December, mostly at prices above $400.

→ Two things on Zoom: I should have bought earlier and not wavered, and I should not have sold out early. Reading Saul’s commentary of early 2020 now (and of course with the benefit of hindsight) it is obvious that ZM was a screaming buy when it became clear that it would become the de facto standard for video conferencing in the pandemic. But I wavered. And I sold when I got anxious. And accordingly I missed a lot of upside. However when the story changed post results, I sold and have not looked back.

3. Datadog

I bought a full position (up to 15%) from January to April at an ave price of around $40, and sold everything mid May at $71 just after results, only to buy an even larger position from end May to July at an ave $77. I then sold about half of my position end July at $92 in the run-up to Q2 results and bought back again mid Aug just after results at $75. From September I reduced my DDOG position each month, selling from mid $80’s to just above $110 in November, when I sold down to zero just before earnings. Just after earnings I bought the 6% position I still hold now at around $88. Some LEAPs spiced up my returns a tad.

→ Even though I made some money on all the activity before earnings and after earnings, I think the same applies as for ZM. I should have bought a full position earlier on, and then just left it unless the story changed.

4. Livongo

I bought Livongo in May and June at around $60, trimmed it a bit when it got too high for my liking ito allocation, and sold everything in August straight after the merger announcement at around $130.

->I was late to the Livongo party. By the time I bought, others on this board have already made very good returns. Still, it was a very good investment which went according to the playbook I would like to play by: identify and get to know the company, buy it, and only sell when the story changes.


I have been a member of this board for a year now, and I think the two most important things I did this year were changing to a very concentrated portfolio, and secondly buying a lot of shares in March, when the market fell.

Concentrated portfolio

I originally read about a concentrated portfolio and growth investing in “Common Stocks and uncommon Profits” by Philip Fischer…

However it seems that the advice is even older. Apparently Andrew Carnegie, in a speech in 1885 said the following:

“The concerns which fail are those which have scattered their capital, which means that they have scattered their brains also. They have investments in this, or that, or the other, here, there and everywhere. “Don’t put all your eggs in one basket” is all wrong. I tell you “put all your eggs in one basket, and then watch that basket.” Look round you and take notice; men who do that do not often fail. It is easy to watch and carry the one basket. It is trying to carry too many baskets that breaks most eggs in this country. He who carries three baskets must put one on his head, which is apt to tumble and trip him up. One fault of the American business man is lack of concentration.”

So Saul’s advice is sound.

And it’s not new. Which is the best kind of advice, as it’s timeless.

It takes work and guts, though, and strong conviction - for which I have to thank this board immensely. Without this community I would probably not have had the depth of understanding which allowed me to concentrate my portfolio to the extent that I did. I started off 2020 with around 15 stocks and by early April was down to 12, and I’m now at 8. (Monkey, if you’re reading this, beware those many shiny things :wink:

Buying when the market fell

I started the year by buying some stocks and keeping 50% of my portfolio in cash when I started hearing about the first COVID infections. Then, in March when the market had a tantrum, I started deploying the other 50%. This lowered my cost base and set me up for the truly spectacular gains thereafter.

This was me heeding the good old Buffet advice of being greedy when others are fearful. It worked beautifully for me this year. I’ll get to the flipside of that coin when I turn to what I’m currently wondering about at the end of this overview.


Trading in and out of stocks

I bought ZM, DDOG, CRWD, NET, FSLY, sold again when I thought the stocks were too expensive, and bought again when I regained my conviction and…repeat. I did way too many transactions and many of them I had to reverse again later - often at higher cost because the story had not changed.

Buying too late

I was late to buy into LVGO, ZM, FSLY because for some or other reason I read the analysis, made up my mind, but then just wanted to check this, or that, or read this, that and the other before pulling the trigger. And by the time I got round to doing that, ZM was already Zooming, Fastly was fast on its way, and Livongo had almost doubled…

Selling too early

I think this is a symptom of trading too much. I sold/trimmed both DDOG and CRWD too early last year, with the story still intact, and because of that I limited my returns.

Not following through on my conviction

I started reading deeply about Cloudflare, their history, numbers, leaders, products in Sept/October and thought it was a great company with fantastic leaders and a wide TAM that I would like to buy more of. I am one of the owner-managers of a small SaaS company and we use Cloudflare extensively, so I have first hand experience with the product too.

I wrote a small story about it to a group of friends on 6 October when the stock was at $42 but I did not buy even though I really had all the data points that I needed. Then on 22 October I wrote another follow-up to the same group saying NET is a buy when it was at $55 and still I did not buy!. On 6 November after earnings, and with the stock at $69 I lamented to the same group that I should have bought…”damn!” I said. “Shows you the importance of following through!” I said. I eventually bought my current position at the end December at $78 ave price. It’s now at $76.


In December I did what Saul does in periods of uncertainty (thank you Saul): I reduced the number of my positions and sold all of the distracting rats and mice. My portfolio now consists of the following:

CRWD		15%
DOCU		13%
ETSY		12%
NET		12%
TDOC		8%
DDOG		6%
ZM		5%
MGNI		1%
CASH		29%

I like to review my positions relative to each other on a couple of key current metrics to evaluate the most recent historical performance relative to one another, as a summary of some of the quantitative measures that others on this board have discussed in much more depth. This is what my portfolio’s looks like for the last quarter that they reported, if I didn’t make a mistake in there somewhere:

Ticker	rev y/y%	adj gm%		adj op m%	NRR		adj r/o 40
CRWD	86%		78%		8%		>120%		94%
DOCU	53%		79%		14%		122%		67%
ETSY	137%		74%		35%		n/a		172%
NET	54%		77%		4%		1.15		58%
TDOC	109%		64%		14%		±94%		123%
DDOG	61%		80%		11%		130%		72%
ZM	367%		68%		37%		>130%		404%
MGNI	12%		66%		23%		n/a		35%

The first column shows their last reported quarter’s yoy revenue growth, the second the adjusted (non-GAAP) gross profit margin, and the third the adjusted operating profit margin. The fourth is NRR or similar and the last column is my adjusted “rule of 40” - the adjusted operating margin plus the revenue growth. It’s a rule of thumb for SaaS companies and is also calculated on free cash flow% and should be at/north of 40%. It implies that healthy SaaS companies should strike a balance between profitability and growth, and the “rule” says that, if you’re growing at 40% yoy you should not optimise for profits, but can afford to have zero profits/fcf. If you’re growing at 60% you can afford to have -20% profit/fcf margins etc. It’s a rule of thumb only, but useful for me nonetheless.

So clearly a bunch of great companies based on recent performance (except Magnite). All have revenue growth in excess of 50%. Magnite is the exception at 12%, but the component of its rev growth that’s interesting to me is the 51% yoy growth of CTV, where the future acceleration is expected from - so clearly not yet a qualifying Saul Stock. However that’s why it’s only a 1% position.

All have great gross margins and all are profitable on adjusted op margin level, and all have blow-it-out-of the water rule of 40 scores (using adj net op margin, and not fcf%). Look at TDOC and ETSY’s (sure they’re not pure SaaS, but still)!!

I also like to look at the relative sizes, valuations and market caps of my positions at a basic level. This is what that looks like at the moment, for the last reported quarter’s revenue, today’s market cap and the run-rate revenue multiple [market cap / (last Q revenue x 4)]. It is basically P/S but with the most recent quarter’s revenue annualised instead of using the latest 12 months. I know Saul doesn’t calculate it…but it helps me compare my holdings in the context and in addition to all of the other information about the companies. A kind of sanity check:

Ticker	rev $m		cap $bn		Rev r/r mult
CRWD	233		46.9		50.4
DOCU	383		41.5		27.1
ETSY	429		22.4		13.1
NET	114		23.4		51.2
TDOC	289		29.0		25.1
DDOG	155		30.0		48.4
ZM	777		96.5		31.0
MGNI	61		3.4		14.1

So DDOG, CRWD and NET all with a rev run-rate P/S around 50, which is pretty damn high but also deserved imho.

I think all three companies are exceptional, but CRWD has not set a single foot wrong, and has maintained >80% revenue growth throughout the pandemic, while NET still needs to get to those types of revenue levels from the current mid-50’s even though it is doing absolutely everything right, and DDOG needs to get back up there after its recent quarterly revenue blip which will suppress yoy revenue comparisons until 4 quarters have passed. Which is why CRWD is my top position.

All positions seem to me to have accelerating top-line growth, except ZM, which is why ZM has been trimmed. And possibly TDOC (but I would wager not). I still wonder why TDOC and ETSY seem rather unloved on this board (and by the market!) despite the numbers above. I think and am betting that they will surprise on the upside at the next quarterly results, though. Let’s see.

What I also notice is that most of the stocks in my portfolio are relatively large companies now - with market caps higher than $20bn. And while not a problem per se, I would really like to find some smaller hyper-growth companies in 2021.


In 2021 I would like to trade less. A new-year’s resolution if you want. I counted the number of trades that I did in 2020 and it was frenetic. And many trades were pointless…I think that if I halved the number of trades, I would have avoided some of the silly sell and buy back activities, or selling too early episodes that I highlighted above.

In January I intend to buy more MGNI (after reading Mekong’s excellent year-end review), dip my toe into some SNOW (even at these valuation levels, emboldened by Saul’s actions and writings), buy more NET (for so many reasons which have been discussed in great depth on this board but also because the stock took a bit of a breather from the ATHs in Dec - and I can’t find any reason why) buy more DDOG (because of the increasing underlying growth as explained by Saul). I will sell some ZM and/or DOCU and/or TDOC to fund those purchases. They have been going sideways for a while, and despite my conviction in the companies and their opportunity, as well as my belief that COVID will be with us for longer than what is currently priced into these stocks, the market does not seem to agree at this stage. I will not sell ETSY at this stage.

And lastly: I’m going to take 29% cash permanently out of the market, which still leaves me with more than twice my starting capital of 2020 to invest with. I detail why below.


2020 has been an exceptional and weird year. I’ve been around long enough to know that investment results of the kind we had last year do not happen often. In fact I know of no other investor who has had these kinds of returns in a single year except of course for Bear and Saul this year :wink: (and Bitcoin - bah!) And I have never before seen, heard, or read about similar returns for a portfolio - even a concentrated portfolio of publicly listed companies.

And looking back at a time series of exceptional results (such as Saul’s, or Warren Buffet’s from his earlier years) seem to indicate that the chances of having two consecutive years of results like I had in 2020 are vanishingly small.

Valuations of our stocks seem high. Yes, it matters to me. Valuation multiples (ttm revenue, growth-adjusted revenue, run-rate revenue, EBITDA - pick any one) and expected future growth and cash flow, if you’re DCF-inclined like I am, for B2B SaaS stocks have expanded greatly from historical levels, even as the companies we invest in have posted stellar results. This has of course rewarded us who invested in those companies greatly as we benefited from faster growth and great results, and a greater appreciation (valuation) for that growth and results from the market. A nice double-whammy.

But I start to fret when I hear people talking about valuation being unimportant or even irrelevant (not, mind you, like Saul, who states, with quite a lot of backup, that a specific metric - such as P/S - is relatively unimportant to him), but people who do not look at valuation at all. I even read somewhere that a new generation of investors will look at valuation completely differently to us old dogs and will laugh in the face of such quaint concepts such as discounted cash flow, that the old ways are out…

And then there are the record number of tech IPO’s. There is a reason for the Tech IPO feeding frenzy of the moment: sophisticated private investors see an environment in which they are richly rewarded for selling their private companies to public markets.

Public markets where yield is scarce and many, many new young individual investors have started piling into tech stocks by betting on the next big IPO and often being instantly rewarded by a “pop”. There are a number of highly inexperienced investors in my personal network who have had stupendous results this year. So it’s easy, right?

Which leads me to the key question I am currently pondering:

Is now still a good time to be fully invested in our SaaS growth stocks? Or will 2021 be the year when valuation multiples contract - potentially even greatly and for a long period of time - driven by fear and exacerbated by panic from the horde of young, inexperienced (and potentially leveraged) short-term and call option traders who have never seen a market rout - even while our companies continue to generate exceptional results? Would it not be a better strategy (like I did at the beginning of 2020) to hold a large amount of cash at this time?

I don’t know the answer to that question. And I’m not forecasting doom and gloom for our stocks. Hell, I own CRWD and NET and I’m going to buy some SNOW in the days ahead!

But I can’t help myself from feeling a bit of unease…which is why I’m taking cash off the table at this stage. Benjamin Graham introduced me to the concept of margin of safety in investing, and I feel it applies just as much to growth as to value investing. That is obviously different for different people - for me it is taking 29% cash out, and going all-in with the rest.


I hope 2021 returns to some level of normality for all of us! It is quite an experience to know that everyone, everywhere in the world - and all of us on this board - has a kind of shared experience of isolation and bewilderment after a year like 2020. My wish for all of us is for happiness, freedom and to be able to socialise normally again soon.

To all of you on this board, and especially to Saul: all of the very best for 2021, happy investing and thank you so much for your contributions.

This board is a treasure trove, so please do comment/disagree/agree if you can spare the time!

Kind Regards,


The heading MY PORTFOLIO AS OF 2/2/2020 should of course read 2/1/2021 - yesterday. Sorry.

I really enjoyed your 2020 review. Thank you for taking the time to write it, and congrats on a great year. Quite the community we’ve found here.


Hi WSM - thanks for sharing.

Your story about cloudflare resonated with me. How do you plan to bring more decisiveness to buy or sell decisions?

On a related note, similar to Reveneue what other quarterly metrics do you track for SaaS? one thing that’s making valuations harder these days is the accounting style.