Happy Friday Investors,
I hope you all had a wonderful week. As I outlined in our last email, I’m changing things up a bit this year.
I will continue to offer this newsletter for free with an option to pay if you find value and/or want to help support the newsletter. I never, ever, ever want anyone to feel pressured to pay. That’s not my style. I’m so thankful to anyone who even takes the time to read this.
But, I do want to share what I’m using the revenue from subscribers for. My goal is to use that revenue to improve the level of service you all receive.
We have 1,214 total people on the email list and 81 subscribers which brings in roughly $3,800 after Substack takes their 10% cut. They provide a really easy and secure site, host, payments, etc for that 10% cut of revenue. Here’s the chart.
I’m currently using most of the revenue to pay for a Ycharts subscription which offers some really great charting and I’m trialing an upgrade that lets me provide different kinds of weekly charts as you see below. I can change these up to include some different stuff, but I wanted to give you a taste and get your feedback. Please let me know if these charts are AWESOME, or if me typing out the data is just as good.
Changes towards the end of last year..
I sold out of TWLO, ZS, and ESTC last year because as much as I loved their businesses, it appeared TWLO and ZS were hitting some rough patches and with TWLO specifically, I was not happy with how management presented to growth slow-down and somewhat tried to cover it up by excitement around “revenue growth at scale”. Most of that acceleration came from their Acquisition of Sendgrid which isn’t real revenue acceleration. It just didn’t feel good.
I wanted to continue holding ESTC and I might re-enter at some point. I believe in what they’re doing, but it was beginning to feel like their business was too confusing for investors to understand and they’re not making great progress towards profitability.
The reasons above and excitement about some smaller companies (see portfolio below) made me decide I wanted to put my money elsewhere. However, I would never short any of these three companies and they’ll probably all be great long-term investments.
Here are all the companies in our current portfolio. I’ve expanded the portfolio to roughly 25 companies. This sounds like a major departure from my “concentrated approach” but we have 65% of the portfolio in our top 5 positions. All 10% or larger. Then I have a nice group of medium-sized positions at around 5%, and a basket of try-out positions..mostly healthcare or health-tech companies, because they are so risky at times that make, are less than 1% individually. The idea here is that it won’t hurt too bad if any of them go bankrupt, but if a few are major winners, we will benefit from them.
There is a chance I’m selling down top-performers and companies that have proven themselves to have excellent management and execution for companies of lesser-quality which could hurt returns. Time will tell.
Company Name (ticker): % of total portfolio -- if I added or reduced in the last week or so
Alteryx (AYX): 23%
Datadog (DDOG): 14%
The Trade Desk (TTD): 10%
Crowdstrike (CRWD): 10%
Fastly (FSLY): 8% -- added to
Roku (ROKU): 6%
Zoom (ZM): 6%
Okta (OKTA): 5%
MongoDB (MDB): 5% -- reduced position
Virgin Galactic (SPCE): 5%
Anaplan (PLAN): 4%
Slack (WORK): 2.5% -- reduced position
Luckin Coffee (LK): 2% -- new position this year. Great potential growth (Starbucks)
Cardlytics (CDLX): 2% -- new position this year. I will likely add to this one
Livongo (LVGO): 1.5% -- new position this year. Healthcare/health tech basket
Telaria (TLRA) 1% -- new position this year. Connected TV growth story
Teladoc (TDOC) < 1% -- new position this year. Healthcare/health tech basket
Biolife Sciences (BLFS) <1% -- new position this year. Healthcare/health tech basket
Other less than 1% tryout positions (mostly 2-year option contracts which are more advanced. Buying stock is the preferred method if someone is uncomfortable or inexperienced with options.
ARWR, BLUE, EXAS, EDIT, NBIX, APPS, CRSP
Some quick thoughts on how 2020 has started..
To summarize it….WOW.
Our portfolio is up 21% in the first 17 days of 2020. That is just insane. It is for this reason that I don’t time the market, but rather stay invested in the best companies I can find. They will have ups and downs, but if I’m right about them and they continue executing and growing revenue at high-rates, eventually the share price will catch up to the business performance.
Additionally, if I would have missed this span of outperformance because I sold everything after how poorly last year ended, it would have a major negative impact on my returns. The same is true for investors in the broader indexes. There’s data that shows if investors missed the best 20 or so days over the last however many years they would have had negative returns (don’t quote me on that, but you get the idea).
With few exceptions of extreme overpricing, I will not sell shares of great companies because of price alone. This is an important point. Chuck Akre is phenomenal at this and wrote a great article about it click here for a link.
I can’t remember a better start to a year ever. To put it in perspective, I’m still not back to all-time highs from July 2019, but this is the type of rebound I’ve been expecting from companies like AYX, CRWD, DDOG, and ZM.
But now is not the time to get overconfident or do anything crazy. I’m not selling out of my companies, but I am being pickier about what new companies I invest in and holding my current companies to a higher standard. I might even shift some money out of some positions and into my best try-out positions…nothing planned yet and I’ll update you all when I do.
We add to our portfolio every month and it is likely that I will let that cash build-up for a bit. Nothing extreme and to put it in perspective, if I saved all of our contributions this year, our cash position would be less than 10%…so that’s how I’m currently thinking about things.
Wrapping it up
Congrats on the new year everyone and thanks for reading. I hope we all have a great year in our personal, professional, and investing lives.
How do you like this new format? What would you like me to add or change?
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More on the community I talked about will come next week.. I am super excited about it and there was a lot of interest from the community so thank you all!