New Position: Zoom (ZM) @ $101 Per Share

  
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My experience with Zoom since it became a publicly traded company (since it IPO’d) in April is a great learning opportunity. I have probably displayed every bad investor tendency with this company so far.

I just bought 80 shares of Zoom at $101/share for a total cost basis of $8,008. A 1.25% position in my portfolio.

Now let’s rewind a take a look at how ridiculous my decision making has been with this company so far.

Zoom IPO Day: April 18
Bought 160 shares at $62.50 = $10,000: those shares are now worth $16,000 so that’s our comparison

Here is what I said at the time:

I added ZM despite it’s incredible 70%+ rise and its extremely high price to sales ratio that apparently even CEO Eric Yuan thinks is a bit excessive (NY Times article). He and many who are saying the company is overvalued right now are probably correct. I’m a big fan of this company and I plan to be an investor long term. I started a 2.5% position in the company so it is relatively small. I invested because I think this company will be much larger in 5-10 years than it is now and I wanted to have at least a small position.

April 22: Sold 160 shares at $59.04 = $9,446. So I was at -$554 with Zoom. A 5% loss.

Here is what I said at the time:

I think an important part of investing (and life) is to be able to admit when we're wrong. Or at least when we made a bad decision.

I love Zoom's business but I like many others think it's too expensive and the risk/reward is not worth it at this point.

I am confident I'll own shares at some point, but will wait for some volatility either in the market or in ZM individually to buy.

There are a lot of other great businesses with a bit slower growth but much lower Price to Sales ratios.

Keeping the proceeds in cash for now to see if we get that volatility soon.

So then I decided to get “smart” and sell two $75 Strike August 16,2019 Puts. This meant that if Zoom went lower than $75 before August 16, I would be obligated to buy 200 shares at $75 because each contract represents 100 shares. I was paid a premium of $10.5 for each contract so $2,100 total.

May 10: SOLD 2 ZM Aug16'19 75 PUT @ 10.5

But then I got scared for whatever reason and wanted a lower strike price. To get that, I had to buy back the Puts I sold with a $75 strike and sell new Puts at $70.

May 13: BOUGHT 2 ZM Aug16'19 75 PUT @ 12

So I had sold the $75 Puts for a total of $2,100 and bought them back for a total of $2,400. My total loss on Zoom at this point (adding my loss from the shares back in) at this point was $854.

May 14: SOLD 2 ZM Aug16'19 70 PUT @ 8.49 

On June 6, I got really foolish and decided to try some short-term earnings based options gambles. I figured the stock would move a lot in one direction or the other so I wanted to try and profit from that volatility. Before doing that, I wanted to purchase the $70 Puts I had sold to get rid of that obligation to buy shares if they dropped significantly.

June 6: BOUGHT 2 ZM Aug16'19 70 PUT @ 6.4 

I sold those puts on May 14 for $1,698 and bought them back (closed them) on June 6 for $1,280. This brings my total loss on Zoom down from $854 to $436.

Now for the earnings gamble. I bought Puts and Calls so you’ll see the Buys/Sells reversed from when I sold Puts previously. It’s confusing which is a great reason not to get involved with options strategies like these (if you have not already picked that up!).

BOUGHT 10 ZM-COMB @ 5.1 = $5,100

June 7: Earnings came out, stock popped something like 30% and I got lucky.

SOLD 10 ZM-COMB @ 10.58 = $10,580

Here is what I said on that day:

So again, reiterated that I believe the company could 5x or 10x in 10yrs. Why in the world would I not just own shares of a company if that’s what I think? That brought me to:

Total loss/gain on Zoom = +$5,044

Remember, if I would have just held the $10,000 position I initially started, I would own $160 shares with a $6,000 unrealized gain. That means no taxes (which are going to take a big chunk out of that $5,044 gain I currently have and a heck of a lot less stress.

So again.. reminder to myself. Get back to investing with a long-term ownership mindset in the absolute best founder-led companies I can find.

This lesson is painful and a bit embarrassing to share. Like I said before, just about every common investing mistake is there. Greed, fear, action-bias, herd mentality, all of it.

I don’t know what is going to happen to Zoom’s share price (or the market) today, next week, or next year. But I do know this is one of the best businesses from a fundamental, cultural, and leadership stand point I have ever seen. I believe Zoom is going to innovate and come up with new products we never imagined. The best companies always do. I also think Zoom is far more than just a video teleconferencing company. So I am going to be a long-term owner of this business.

Some recent material I’ve read/listened to on Zoom that helped me be informed:

Acquired Podcast: The Zoom IPO - With Santi Subotovsky
Medium Article: Zoom IPO | S-1 Breakdown
And finally - Zoom Founder/CEO Eric S. Yuan delivering customer happiness: