November Portfolio Roundup

PERFORMANCE

MTD
Me: (9.89%)
S&P 500: (0.83%)

9.06 points worse

YTD
Me: 43.54%
S&P 500: 21.59%

21.95 points better

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CURRENT PORTFOLIO

Tier 1 (10-25%):
MNDY - 21%

DDOG - 19%

ZI - 14%

UPST - 11%

Tier 2 (5-9%):
CRWD - 9%

GLBE - 7%

AMPL - 6%

Tier 3 (2-5%):
FUBO - 2%

BILL - 2%

Cash - 9%

10 positions, including cash (9 last month)

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ACTIONS FROM THIS PAST MONTH 

Bought:
BILL

AMPL

Added:

MNDY alot, 6% to 21%

GLBE a little, 4% to 6%

Trimmed:
FUBO alot, 8% to 2%

UPST alot at first, then bought some back. But now considering selling some back to make it a Tier 2

Sold:

DOCS

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GENERAL THOUGHTS
Rough month in the end. But now coming off tour, I can spend time concentrating on investing again. 

The market, in general, had ugly days this month. Even the last day of the month the S&P was down 2+% and my portfolio was down 5-6%. Ouch. 

Early in the month I had 6 of my companies report on the same day and everything was down, down, down. A painful day of down 9%. Very shocking and bruising to see 6 companies out of 10 fall 10-22% each. I think it's the worst I've experienced in one day. 

At one point I was up about 70% on the year. But stepping back, to still be up 44% on the year is something I should be thankful for. 

I have no idea what the market will do. It could get worst still.

My moves in Datadog and Upstart earlier in the Spring and Summer have made my year. It only takes 1 or 2 ideas to really move a portfolio.

When I think about the Tiers, the idea is that Tier 1 should really be driving the results. There should be one or two that really drive it home. It's important to lean into winners. To become aggressive when the opportunity is there.

Tier 3 are companies either about to fall out of the portfolio, or are new positions.

Tier 2, is the in-between, ideas that are on the back-burner ready to either step up to Tier 1,  or step down to Tier 3 if need be. They aren't large enough to really impact the overall portfolio in either direction.

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PORTFOLIO THOUGHTS
The number of positions feels comfortable. I like having 9 + cash. It basically allows me to allocate 3 to each tier. 

I've also noticed how I don't really like taking positions to over 20%. My thinking may evolve on that, but I like the idea of taking a high conviction idea to 20%, let it pop, then trim back to 15% or so. Doing that with UPST and DDOG worked well. It starts to bother me if I have a position sitting at 25% for more than a few days. It's a balance of letting winners run, but trimming something that has grown to be too large within the overall portfolio.

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COMPANY OVERVIEWS

A lot happened in November with reports. Because I was on tour, I wasn't able to really digest the earnings. It was difficult to try and take them all in ("difficult" is an understatement). I basically only concentrated on the numbers and made decisions based on that. It allowed me to look at them scientifically, but provided no context. That said, my decisions were basically summed up in one or two sentences on each company. 

MONDAY.COM (MNDY)

When Monday.com reported and I looked at their report I wrote off the cuff: 

Even just scanning the release I can see that this is exactly what I want. High revenue growth and rapidly improving margins

This is exactly what I want

And my reaction was to take it from about a 6% position to 14%. Then as the stock continued to fall with the market overall, I eventually got aggressive and took it to 20%, which is where it is today.

Obviously, there's more to it than just my two sentences above, like the fact that the customer growth was again off the charts and the improvement in DBNER. But those sentences sum it up. 

Their lockup expires 7 December and it could be a ride around that date. The float is very low until then, avg volume of ~ 400,000 shares traded daily.

UPSTART (UPST)

I had Upstart at about 18% going into earnings. It had grown to as high as 26% but I trimmed several times. The day after earnings the stock fell 20%, and has trended down since then.

After I looked at the numbers, I sold 2/3 of my shares then bought some back.

What can I say? The numbers they reported were stellar. But everyone, myself included, was expecting (hoping for?) something truly out of this world. After the company reported 60% QoQ growth in Q2 it got everyone thinking they could continue on an asymptotic trajectory. In retrospect, that wasn't tenable. I'm just glad I had trimmed it some. 

I still have high hopes for the company but it's a reminder of what it's like to invest in non-SAAS companies. The growth is lumpy, and therefore warrants a lower allocation within the portfolio. I can't have a Tier 1 position fall 20% in a day. I just can't. 

These were my stream of conscious initial thoughts:

I'm going to have to come to terms with the fact that the numbers took a huge hit QoQ, and how does that compare to Zoom last year?

Q2 was an extreme outlier but it looks like they are still planning to grow in the 15 to 16% QoQ which is 75% to 80% YoY

After I thought about it, I don't think that the falloff in revenue is similar to Zoom simply because they have guided much stronger than Zoom did. 

But I also don't think that it makes sense to annualize Upstart's revenue in any quarter. So it comes back to what I said before, which is that this is not a SAAS company and guessing where the growth is going to go is going to be quite difficult. Therefore I can follow the numbers and go along for the ride while it lasts but keep it lower Tier.

Global E (GLBE)

Global E's report showed strong growth but of course the company has a much lower gross margin than I'd like. I like that it's a smaller company, and the tailwinds behind it are as strong as anyone could ask for. I let this one sit.

AMPLITUDE (AMPL)

Like GLBE, I like that this is a smaller company ($9 billion market cap). After the report I wrote:

Everything looks pretty standard SAAS. Except the guidance for next quarter is only 3%. that's really terrible

But since then, I've digested it more, and in the earnings call, the CEO addressed the guidance directly and it seems he's simply being very prudent since it's their first full quarter as a public company. We'll find out!

"Pretty standard SAAS" is maybe a loaded term but it's got all the metrics I'm looking for. Similar to Monday.com, it's got high revenue growth with rapidly improving margins. It's got land-and-expand along with some big customers. I'd say the potential for this company to continue to grow rapidly is quite good.

Fubo TV (FUBO)

FuboTV is now a stock I've held for close to a year albeit at a ~ 2% allocation. It's a stock the market loved at first and has since completely hated. Prior to earnings, it had trended down and I took it up to an 8% allocation thinking it would pop on earnings. It then rose going into earnings and subsequently sold off hard after they reported back down to where I had bought more shares. I've now taken it back down to a less than 2% allocation with nothing lost except opportunity cost. 

After their report I wrote:

High revenue growth but still no operational leverage. In fact the margins deteriorated slightly. 

I might give FUBO another quarter. I do think it could really go on a run if they could improve their margins, but it hasn't happened yet. Fubo is exactly what I have in mind for a Tier 3 holding: something I can keep an eye on, but keep at a harmless 1-2% allocation.

Doximity (DOCS)

I sold out of Doximity after their report because I don't see their TAM as big enough. It's very profitable with strong cash flow and extremely high DBNER (170%) but there's been a deceleration over the past few quarters. Even if they grow above guidance it's slowing to a 40-50% grower. The growth just doesn't seem sustainable. They would have to go into other verticals I think. I could be wrong, but I'm out for now. 

Bill.com (BILL)

I've been ignoring Bill.com for two years now. I looked at the company two years ago, and have kept a tenuous eye on their reports since, but have never dug in. The company's growth really slowed during Covid but now they have the same thing going on as Datadog and Asana: accelerating YoY revenue growth because of the easy Covid comp – even if the company continues to grow at the same rate QoQ, it will appear as if the revenue is accelerating YoY. 

They also just made a couple of acquisitions that appear to have actually improved their margins, which is rare. So we have core revenue accelerating YoY and acquisitions that push their growth into overdrive. I'll likely build this one up to a Tier 2. 

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MACRO THOUGHTS
There's a lot of noise about the market "topping out". That might be true. It doesn't affect my decision making much in my retirement account, which has a 30 year horizon. Maybe I'll try to hold more cash, maybe not.

It does affect my decision-making in our shorter term accounts. It's a reminder that if you need the money in the next three years or so, be prudent with how it's allocated.

Overall from a GDP level, we're in an environment where growth and inflation are both accelerating (reflation). That's historically good for "growth" stocks. The economy seems like it will transition to something else where inflation can't continue to rise at the same rate at which it has. In other words, inflation will, or has already, peaked, and will now decelerate. So that will transition us into a world where growth either continues to accelerate (goldilocks), or will also decelerate with inflation (deflation).

That said, the Fed is tapering their asset purchases and that tends to trump everything. This could be the harbinger for things to come. "Long duration" assets will get sold hard. Again, in my retirement account (which is what I post) it doesn't bother me too much because the time horizon is long. 

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NEW LINEUP GOING FORWARD

I might consider doing something like this. CRWD reports 1 Dec so I'll reassess then.

Tier 1 (10-25%):

MNDY - 20%

DDOG - 19%

ZI - 14%

Tier 2 (5-9%):
UPST - 9%

BILL - 7%

GLBE - 7%

AMPL - 6%

Tier 3 (2-5%):
CRWD - 5%

FUBO - 2%

Cash - ??

Watchlist:
ASAN after their earnings report this week.

ZS, NET, SNOW are all companies I have kept an eye on.

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ACTIONS FOR NEXT MONTH
- Build position in BILL

- Consider selling UPST back down to Tier 2