WSM’s portfolio review end of April 2021

MY RESULTS YEAR TO DATE

It’s been an up and down year for me. I was up more than 11% ytd at one stage in April, but I had an 8.5% Pinterest position, which I sold after results so that hurt (Pinterest fell more than 14% after Q1 results).

I ended the month up ytd 4.6%. 2021 ytd results were as follows:


End of Jan	+	7.6%
End of Feb 	+	7.7%
End of Mar 	-	6.0%
End of Apr 	+	4.6%

MONTH OF APRIL REVIEW

Before diving into April, just quickly on the returns above. In March I put 30% cash back in my portfolio which I took out towards the end of 2020. At the time I intended to leave the cash permanently out of the market. I accordingly adjusted my January and February results to include a 30% cash holding.

In April I was quite active. My key objective was to concentrate my portfolio into my highest confidence stocks.

This was a process for me, as I bought some names which I also sold out of during the month.

I sold my full Asana position. The thing that kept niggling me was whether I had the same level of confidence in Asana’s multi-billionaire mid-thirties, ex Facebook philanthropist CEO as I had in the CEO’s of the other companies I invested in. Comparing him to the likes of George Kurtz, et al, led me to conclude that I did not. Or at least not to the same extent as my top conviction stocks. That, and the huge costs in the business led to my decision to sell.

I bought a small position in, and then sold out of GAN - as I could not get comfortable enough with the numbers behind the acquisitions they made.

I built both Snowflake and Zoominfo into mid-sized positions by trimming my Inari and Bandwidth positions and selling my Pinterest position in full after Q1 results.

My key concerns with Pinterest’s results were the lack of traction in MaU’s in the US and their bearish guidance of reducing US MaU’s and engagement for Q2 of this year. Even though the results were great, I felt there were better places to put my money.

And then I did some things which may come back to bite me. If it does I’m sure a number of people on the board will tell me so:

I bought a small LEAP position in ETSY after re-reading Bear’s bullish comments on the stock, and did the same with Docusign. And I added small LEAP positions in Crowdstrike, Datadog and Cloudflare - all Jan 2023 calls. And lastly I bought a small position in a crypto asset called Chainlink, which I hope will become a key part of smart/automated contracts in future - based on the Ehterium blockchain.

So my portfolio is now a little springloaded but the spring can go both ways to an extent, and in fact did during the last two days of last week. I kept the option part limited, though, and my intent is not short-term gains but rather to add a little to any upside on my top conviction stocks.

INDIVIDUAL STOCKS

For my current holdings, I had the following from the beginning of the year, and their share movement has been as follows since then:


Cloudflare: 75.66 to to 84.89		**up	12.2%**
Crowdstrike: 211.82 to 211.32		**down	0.3%**
Datadog: 98.44 to 88.84			**down	9.8%**

These I bought during the year, and their price change since I first purchase is as follows (I include Pinterest as I sold it just before month-end):


Inari 100.40 to 113.32			**up		12.8%**	bought in Jan
Snowflake 219.50 to 229.28		**up		4.5%**	bought in Mar
Zoominfo 47.98 to 52.03			**up		8.6%**	bought in Apr
Chainlink from €23.02 to €31.84		**up		38.3%**	bought in Mar
Bandwidth 179.41 to 130.01		**down		27.5%**	bought in Feb
Docusign Jan 2023 calls			**down		10.13%**	bought in Apr
Etsy Jan 2023 calls			**down		9.15%**	bought in Apr

I did not have any slam-dunk winners this year yet except Chainlink, which is a very small position which I don’t intend to grow. And I had two big losers in mid-sized positions: Pinterest (which I sold at about a 16% loss) and Bandwidth which is down about 27%. Luckily this was made up by gains in two larger positions: Inari and Cloudflare, both of which are up around 12%. So a bit of a mixed bag up to now.

POSITION SIZES

At one stage I was up to 13 positions, and I’ve now managed to bring them down to 10. Crowdstrike, Datadog and Cloudflare are a little leveraged due to LEAPs and Docusign and Etsy are small positions which are fully comprised of LEAPs. I currently have no cash position:


Crowdstrike	24.7%
Datadog		20.6%
Cloudflare	12.8%
Inari		10.5%
Snowflake	9.7%
Bandwidth	7.8%
Zoominfo	7.0%
Docusign	2.0%
Etsy		1.9%
Chainlink	3.0%

So my portfolio is a little more prone to drops and upside due to me having a bit more than 10% of the total in LEAPs.

REVIEW OF THE POSITIONS

Pinterest (PINS)

So the biggest thing for me in April was that I exited Pinterest in full, after having had it as a mid-sized position and being bullish on the stock as recently as my March review. I also did a deepdive from which I came away quite bullish here: https://discussion.fool.com/Message.asp?mid=34781934

So why the change?

I did a lot of thinking about this one. For me a key realisation from previous discussions on this board has been the importance of customer growth. Previous favourites on this board got dropped by the likes of Saul the moment customer growth seemed to go the wrong way - Fastly is a good example. And got bought when customer growth was going the right way - Cloudflare is a good example.

And on this front Pinterest disappointed a bit in Q1, but more importantly disappointed more with their guidance for Q2. They have a two-sided model where they sell ads to businesses who want to reach the customers using the service - measured as monthly active users - MaU’s. Without MaU’s there is no other side to the coin - no selling ads. And their MaU was static in the US in Q1, at 98m. In Q2 they guided for 96m and less engagement. And even though international was still growing well, the expectation of declining MaU in the US and the bearish tone (to me) of the CEO led me to conclude my cash was better deployed elsewhere - especially since I feel that I still have too many positions.

These two discussions really paints the full picture and all sides of the story well:
https://discussion.fool.com/pinterest-q1-2021-conf-call-summary-…
https://discussion.fool.com/pinterest-reports-q1-earnings-348170…

Bear summed it up well, I thought, when he said “Since meaningful user growth is largely behind them, it’s as if they’ve already had their “land” and all they can do now is “expand.” This doesn’t seem likely to lead to hypergrowth.”

Bandwidth (BAND)

Bandwidth has certainly not shot the lights out yet and is actually the biggest drag on my portfolio this year - it’s down 27%. And I can’t really understand why - it seemed cheap when I bought it and seems even cheaper now, of course. The market cap is a relatively small $3.4bn and the P/S multiple on last Q’s annualised revenue is about 7 atm. BAND is EBITDA and even (adj) Net profit positive, had an underlying NRR (excluding political messaging one-offs) of 125%, and is growing fast. They guided for 58% yoy growth in Q2 and by my (and Bear’s) calculations could quite reasonably grow at 75% in Q2 - see here:
https://discussion.fool.com/bandwidth-band-review-and-q4-results…

There are 2 key things that I think bode well for Bandwidth:

  1. I believe that Zoom Phone utilises Bandwidth. We know from ZM’s results that this is growing exceptionally fast and getting a lot of sales attention.
  2. The Voxbone acquisition opens up their platform to more international customer growth and to a wider customer base in the US.

They report Q2 numbers on 5 May, and I’m hoping to see positive signs with regards to international customer growth, revenue growth coming in close to what I pencilled in at 75%, and good progress with integrating Voxbone. I won’t be making any changes before then.

Other positions

Crowdstrike, Datadog, Cloudflare, Inari, Zoominfo and Snowflake have all been discussed at length on the board and I don’t have much to add, except perhaps on Zoominfo and Snowflake. My allocations above relfect my relative convictions on the position.

Both Zoominfo and Snowflake are led by exceptionally focused and demanding CEO’s. I’ve upped my positions in both of these companies after watching videos of the CEO’s in live discussions and intend to make that one of my important due diligence points going forward.

CLOSING

The market has been, and I expect will continue to be fickle and nervous. The big guns in cloud have reported absolutely stellar results (see here: https://discussion.fool.com/q1392021-earnings-preview-34819176.a… ) but the shares did not get a huge boost.

Perhaps the same will continue happen with some of the stocks a in my portfolio. But as the underlying businesses are doing incredibly well, I intend to wait for results before changing anything in my portfolio.

  • WSM

Previous reviews:

March 2021 Q1 ytd: https://discussion.fool.com/Message.asp?mid=34791940
Dec 2020 full year: https://discussion.fool.com/Message.asp?mid=34710356

32 Likes

Hi WSM, Thanks for posting your results, but bringing discussions of the details of option trades and holdings is Off Topic for our board. For example

I bought a small LEAP position in ETSY… and did the same with Docusign. And I added small LEAP positions in Crowdstrike, Datadog and Cloudflare - all Jan 2023 calls.

We are trying to avoid the discussion of option details, which are infinite in number. However, for completeness in describing, if you wanted to say something like

I took on some extra leverage with options in several of my favorite positions,

I would have no objection to that wording.

Please remember for the future, and thanks in advance for your cooperation,

Saul

12 Likes

I just re-read the rules and they are pretty clear - and what applies in general also applies to the month-end summaries. Apologies for straying into OT territory.

1 Like