May Review: Down 6% and $23,500

Hey everyone,

I’ve been a little less active this month because we were preparing to move for the first half of the month then moving during the second half. We will probably be unpacking boxes for the next 3-5 years so can I still say we’re moving that whole time?

On a more serious note, my mother in law was diagnosed with breast cancer and has already had her first round of chemo. I have such a range of thoughts and emotions about this series of events. I don’t want to dwell on it because that really doesn’t help anybody, but I want to share a few thoughts.

First, many of you reached out with your thoughts and kind words after I initially wrote about this. Thank you so much. That means a lot to our family.

Second, we never saw this coming. I think that’s how stuff like this happens. I’m relatively aware of how common some types of cancer are, but you never really expect it to happen to someone in your family (or you) until it does.

Third, cancer and chemo is devastating physically but it’s also very challenging mentally. My MiL has already had her energy zapped from her. I think she’ll get some of it back after she recovers a bit from chemo. However, the mental aspect of it, knowing she has at least a year of treatment ahead of her, knowing she’s going to lose her hair and “look so ugly” (I don’t mean to offend anyone who has lost their hair, but that’s how she feels about the way SHE will look), and knowing she won’t have the energy to play with her grandkids (at least temporarily) will probably burden her throughout treatment.

I know these unfortunate events happen and I also know that we as a family have been very fortunate to have good health, relative safety, opportunity, privilege, and so many other things. But it’s still hard.

So my personal takeaways: I want to spend more time with loved ones doing things I love, less time worried about work (to include investing), and remember that people we interact with are all dealing with their own challenges so I should give them the benefit of the doubt.

Onto the portfolio…

As my catchy titled shows, May was a down month. Over the last 30-Days, we’re down 5.% which is a little more than the S&P 500. I’m lucky that I’m not down more because I was far too active and did some short term gambles (yes that’s what they were) on earnings with options.

I don’t want to go into detail on what I did because I’d hate to influence anyone to give it a try. I am an advocate for long-term investing because it’s an incredible way to build wealth in a way that doesn’t distract from life (see story above).

And that’s my big takeaway from these options gambles. Even if I made a lot of money from them, the amount of time they take and stress they cause just simply isn’t worth it. Then add in the capital gains taxes if you’re doing them in a non-retirement account, and for me at least, it just is not worth it.

Current Holdings…

Twilio (TWLO) 18%
The Trade Desk (TTD) 18%
Mongo Database (MDB) 15%
Alteryx (AYX) 14%
Okta (OKTA) 10%
ZScaler (ZS) 8%
Pager Duty (PD) 7%
Elastic Search (ESTC) 6%
Roku (ROKU) 3%
Anaplan (PLAN) 3%

Options
* Please, please, please do not mess with options unless you are very familiar with them. You can really screw yourself over by using them. I’m sharing these for transparency, but they could all backfire.

Short $OKTA Aug'19 $120 Call (covered)
Short $ROKU Oct '19 $100 Call (covered)
Short $ZM Aug'19 $70 Puts

Changes this month

Shopify (SHOP) out: We bought 45 shares in February at $175.98 per share and sold them yesterday for $274.49 which is a 56% gain in about 3 months. I decided to sell for four main reasons.

  1. Shopify is now a $31 Billion market cap company. For it to 10x from here, it would have to significantly increase revenue and become a $310 Billion market cap company. I believe this can probably happen over time, but it’s easier for me to imagine a $5.5 Billion market cap company like Anaplan growing 10x to $55 Billion.

  2. Shopify’s Year over Year revenue growth rate has begun to slow down. This is natural. As revenue increases over time, it gets harder and harder to grow at the same rate. Naturally, as revenue growth rate slows, Price to Sales ratios should trend down as well. But, that has not happened which leads me to the next reason…

  3. Shopify’s Price to Sales ratio is now over 25 which is the highest it’s been over the last 3+ years. I don’t pay too much attention to P/S ratios, but with Shopify, I can’t see any reason why the P/S ratio should be so much higher now when the company is much larger and growing slower than it was several years ago.

  4. Because of all this, I felt I had better places for my money (Roku (ROKU and Anaplan (PLAN).

Atlassian (TEAM) out: We bought TEAM for a second time at the beginning of the month at $123.2 per share and sold them yesterday for $125.55. A less than 1% gain. Regular readers know I love this company but have struggled to hold shares due to its market cap and P/S ratio compared to other smaller, faster growing companies.

See reason’s for Shopify above as to why I sold. Basically the same exact reason for Atlassian. Chart below

Added Roku (ROKU) and Anaplan (PLAN): I’m running out of time, but I added both Roku and Anaplan after they reported strong earnings and jumped anywhere from 15% - 30% so this emphasizes an important point.

Anaplan is a $5.5B company with 45% YoY revenue growth (ignore the 72% on the chart) and a P/S ratio of 17. I believe as they gain market share there is an opportunity to significantly increase YoY revenue growth.

Roku is a $10B company with 51% YoY revenue growth and a P/S of 12. I think there’s opportunity for increased or at least sustained 50% revenue growth and room for the P/S to expand when compared to other companies growing at a similar rate.

Chart below.

Hopefully this explanations gives a little insight to how I invest. There is certainly a chance I’m wrong on these which is why I’m not afraid to change my mind and sell quickly if the story changes.

I believe in investing in companies that are performing well and I’m totally fine buying shares after they have increased substantially. This is often a sign that the business will continue outperforming (see SHOP and TEAM over the last 3 yrs above).

I’ll try to get a write up in on Roku and Anaplan’s business as well as earnings reviews for Anaplan, Zscaler, and Okta.

Wrap it up already Austin

That’s all for this week. As always, thank you for your time and attention. I would love your feedback on these updates. Are they too long and what else would you like me to talk about? Email or comment and let me know.

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