HOW I DIDSince taking over my family’s portfolio in mid 2017, it is up 244%. I’m averaging 41.7% per year and in 2020 achieved a 120% gain. I took out a hunk of cash to buy a home. Had I kept that dough in the market I would have done significantly better. Not Bear better but better. My year was seriously life changing and to be honest I am still processing the fact that this has really even happened. The gains surpassed anything I thought possible. I made 48 trades. 43 were positive. 16 made serious % and dollar gains. Five lost money and of those, only one was a Saul stock – Alteryx, which was a 21% loss. Only two were modest losers, barely above 1% of port, and three were trivial. So, the gainers far exceeded the losers. This was too many trades. I will make fewer this year as I feel extremely confident in my current portfolio.My performance was driven by four key decisions: 1. Committed to the Saul style in 2019 – but w my Narrative Investing flavor*2. In January, moved to large cash position upon hearing of Covid coming3. In March, became fully invested after the market crashed4. In July, took major profits to buy a home * It’s important to not just copy Saul. Adding your own insight, conviction will make the money that you earn feel more valuable. And it will assure you don’t get shaken out when the market tanks. So, while I do own pretty much a Saul port, it is more because I agree with his logic. In fact, my biggest gains this year came from The Trade Desk, after he discarded it. I end this post with a list of every trade I made in 2020. Next, I’ll discuss the Landscape of our stocks, then detail what I own and give notes on each stock from a Narrative-centric view as well as discuss stocks I'd like to add or add back. Keep in mind my analysis is complementary to the financial and tech analysis done by others, and not at all meant to be complete, by itself. I’ll end by discussing my “Post of the Year” and put in the post script additional, wild card thoughts on investing as the year-end time is good for broader reflection. If you are not familiar with my posts, I am a multimedia writer (theater, TV, cartoons) and just had a book published to rave reviews and celebrity endorsements called, 27 Essential Principles of Story, Master the Secrets of the Great Storytelling from Shakespeare to South Park. While writing the book I noticed a tight connection between great works of fiction and great stock stories. I will write more about this, in detail shortly. In it I will take a shot at Taleb and Kahneman. For me, I consider Saul a master storyteller as his investment theses are essentially just brilliant stories told with numbers. Okay, onto business… *** ***THE LANDSCAPE OF OUR STOCKSI whack up stocks into five tiers: Tier I - Hypergrowth - These are monsters racing up the S-Curve that check every box.Here I have Crowdstrike and CloudflareTier II - Express Trains - Faster than most, these are steady growers that stay on track, and check every box. Here I have Twilio, Okta, Peloton, Docusign, Trade Desk and CoupaTier III - Legends of Greatness -Likely too big to grow fast, but solid growth seems assured.Here I have Zoom, Shopify, Netflix and Disney.Tier IV - Wild Cards - Fantastic, interesting companies that are not Saul stocks but can 5-10x Here I have Stitch Fix.I will discuss these all further below under “MY PORTFOLIO”Tier V – Discards - These are likely solid, but something irks me. ZScaler - Hate the name, CEO seems past his prime, great tailwinds though.Fastly - Not a big fan of CEO, marketing terrible, name trivial, lacks guts, blood. But some I admire love the tech which apparently has huge potential. Prediction: gets acquired. Roku - Any company that makes money off channels that spew hate is dead to me and Wood lacks … something to me. Not sure what. Likely a big winner though – dominant name recognition, tail winds. And so many that admire just love this stock. Square - The CEO has to be fished out of an ashram to put out fires and runs another company. Nonsense. But obviously a great company, big tailwinds, beloved products. Asana – Selling productivity enhancement a tougher sell – feels like Slack part II – this one fine for value investors like Bear and Phoolio18, not math challenged mooks like me. Also, I just can’t stand billionaires crowing about their Buddhist enlightenment. Teladoc – My most contrarian pick, I feel this is hyped, exaggerated, and the utterly unproven. Predict big healthcare systems dump them as cost reductions never materialize. Snowflake - CEO, Slootman seems brilliant but is a hired gun. Not my bag. And “Snowflake”? As in a wimp who can’t take hard talk? A thing that melts easily? Meh. But know nothing about them and realize my take is thin gruel.Other stocks I can’t excited about: Elastic, Smartsheets, MongoDB, Paycom, New Relic, Arista, Nutanix Zzzzzzzzzz. *** ***MY PORTFOLIOCloudflare 20.6%Crowdstrike 19.4%Data Dog 11.3%Zoom 10.8%Okta 8.9%Twilio 7.6%Peloton 7.1%Docusign 5% Cash 9.2%For every stock I own I have great faith in the basic story, ceo, mission, dominance and overall greatness of the company. I have lower percentages of Peloton and Docusign because I don’t know the people, culture as well as the products, basic mission.Cloudflare This company gets marketing, branding, communication, innovate like mad and are fiercely competitive. They are a tight unit – CEO, Matthew Prince, President, Michelle Zatlyn and CTO, John Graham-Cunning are all world class. Rapid innovation is baked firmly into their DNA. Their mission is clear – to build a better, faster, safer internet – and informs every choice they make. Crowdstrike This company was founded by racecar driving, slick suit wearing, marketing genius, George Kurtz and security titan, Dmitry Alperovitch, who unfortunately has left the company. Still, this is an absolute monster with the greatest marketing, branding I have ever seen. The security industry is a hyper macho one filled with intrigue, and downright Hollywood-style sexy. So, when a company like Crowdstrike comes along – with elite leadership, world-class founders, killer branding, and they have the goods what more can we ask? They are so dominant they were the ones called into help clean up what may be the biggest breach in American history, the Solar Winds debacle. Two keys to a great story are stakes and urgency it doesn’t get better than this. Every single company needs security and needs it installed as soon as possible. Compare this to companies like Asana and Slack who have cool things but rarely does a company feel an urgent need to make processes more efficient. DatadogFirst of all, note it’s Datadog, not Data Dog. New York City-based, Datadog has a feisty CEO in Frenchman, Olivier Pomel and he seems to have a real chip on his shoulder, particularly about the lack of respect paid to NYC coders compared to Silicon Valley. Feel the scrappiness in this interview, the man just has an edge I like… Datadog CEO Olivier Pomel on the cloud computing outlookhttps://apple.news/AtQTQ7yGyQ2W1K98TL-7_FQFor 2020, they were recognized by Gartner as a “Peer Insights Customers’ Choice” so what we have here is a company with a clear mission, big TAM, solid branding, some edge, a proven CEO who helped his last company get sold for big money and one that Saul and our board’s rising star, A Thinking Fool feel may be underappreciated … Datadog, Redefining Expectations – A Thinking Foolhttps://boards.fool.com/datadog-redefining-expectations-3466...Also, the stock’s gotten some tech love from Muji…A Datadog Technical Review - Mujihttps://boards.fool.com/a-datadog-technical-review-34363397....The dog in the logo’s name is “Bits” – I wish it was a tougher dog that better captured the actual soul and edge of the company, but he is kind of cute.ZoomThey have a simple, clear mission – to improve the quality and enjoyment of communication. Zoom has a CEO that I truly love – his story is as flawless as it is inspiring. He fought like hell to come to America from China, helped build Webex into a multibillion-dollar app, then watched in horror as Cisco tore the soul and joy out of it. So, he set out to build Zoom the right way from the ground up. When he left Cisco a host of high-level people raced out the doors of Cisco to join him. During Covid when all of planet Earth needed to communicate, to see dying loved ones, to connect in any way possible, Zoom was there for them and it worked, despite some security issues which Yuan dealt with transparently and effectively. We can’t quantify depth of the bond people feel toward this company who was there for us all when we needed it. As for quality, it’s hard to fathom a company put under more pressure to excel – 100s of milliions of downloads in record time – and it worked. This company is taking on Microsoft Teams, Google Hangouts, Cisco’s Webex and winning. If you want to read the most genuinely inspired reviews of any company, read what people say on Glassdoor about working for Zoom. If I had to pick one company that I could not sell for ten years, that will pass one trillion in market cap, they’d be a major contender. As I was finalizing edits on this post, this article was sent to me…Denmark is sequencing all coronavirus samples and has an alarming view of the U.K. varianthttps://www.washingtonpost.com/world/europe/uk-variant-covid...I do not want to be alarmist and hope I’m wrong, but something tells me this virus is far from defeated and that Zoom may have a second run back to all-time highs. May very well add to position.OktaThe mission couldn’t be simpler: Okta sells identify management to help companies and orgs make sure that everyone accessing their networks is who they say they are. CEO Todd McKinnon and COO Frederic Kerrest were big wigs at Salesforce before founding Okta. And both come off as just fundamentally decent, honest, trustworthy leaders with a very tight bond. This company is their life’s work. McKinnon has a youthful energy, is a socially conscious leader without being obnoxious about it and speaks eloquently and sincerely about the challenges the world faces in terms of inequality, diversity, and political toxicity. He is a Grateful Dead fan, health and fitness fanatic and seems to care deeply about his company, people, clients and his role in protecting them during the pandemic. Kerrest has been interviewed on the Fool and both are fairly active on Twitter. If I had to ask two leaders to stash money for me without stealing it, these two would be my guys. McKinnon was clearly stung by a recent snub from Gartner and makes clear that he has a great deal of innovation in the works and that the company needs to do better. That said he clearly believes Okta is just getting started that the market for their product is tremendous and there is still a staggering number of companies that are not even on the Internet yet. The way I see their narrative playing out here is you have a rock solid, trustworthy company with a best-of-breed product that has massive blue sky ahead. They’re laser focused on their mission but also determined to innovate. I believe in 2020 he was committed to protecting his workforce and more inward focused. My guess is this effort pays off and that they come into 2021 and a more inspired group, with tighter bonds, and unleash more innovation. This is my sleeper pick for a return to hypergrowth. Though one never knows how high they can climb I find it hard to imagine this one ever cratering too hard. Of note, an okta is a meteorological term that refers to the degree of cloud cover. 0 Oktas indicate a clear sky, 8 one totally covered by clouds. Cool and appropriate enough without being too on the nose. There conference is called Oktane. Nice. TwilioFounder and CEO Jeff Lawson worked on Amazon Web Services, then built Stub Hub. But get a load of this… Before Twilio, he figured that Extreme Sports had a bright future, and built an omni channel business with e-commerce and retail locations for extreme sports. But while working in a store Lawson, whose Twitter handle is “Jeffie L” realized he hatred extreme sports and quit. The man is a developer to the core and not an athlete. This led him to focus on building the company that is perfect for him to lead: Twilio.The company’s mission is to foster communication between businesses and customers by making it simple to add communication to apps using APIs, which are often compared to lego blocks. When you call your Uber driver he doesn’t see your phone number nor does he see your number. This is powered by Twilio. In my experience it’s never failed.Lawson has a commanding presence, is a dominant intellect, intensely passionate, confident bordering on arrogant and fully understands human nature – and all the intangible stuff I talk about. He puts a great deal of thought into branding, logos, symbols. For example, they have pairs of shoes all over the corporate offices to remind employees to stand in customers shoes. Twilio is a made-up word, I have no clue what the logo is and a worker at the company is called a “Twilion”. None of this works for me – way too doofus – but I’m not their target market, coders are and they clearly dig his shitck. Lawson is a major thought leader in the industry and famously put up a billboard that read, cryptically, “Ask your developer”. He is downright evangelical in his passion for empowering, validating, and celebrating developers. There’s a lot of lip service paid to data being the new oil but by far the most valuable resource in modern business is elite human beings who code. Lawson just published and is now heavily promoting his new book,Ask Your Developer: How to Harness the Power of Software Developers and Win in the 21st Centuryhttps://www.amazon.com/Ask-Your-Developer-Software-Developer...This is good for the world and further establishes Lawson and the Twilio brand as the place to work if you’re a coder. Also, as you all probably remember his character was called into question after some felt he exaggerated some numbers and there was an incident in which Twilio released incorrect numbers. Lawson stepped up like man, even took a scolding from Cramer on Mad Money and has proved over time he is a strong leader that deserves our trust. For additional coverage of the stock – which has fallen out of favor here, I highly recommend subscribing to the great Stock Novice’s https://thestocknovice.substack.com/The two of both own and admire the company and he scours every number. PelotonI have not done a deep dive into this company but all I can say it is among the most absolutely dominant of any consumer facing company. People have lost their minds for the bike. I have at least 10 friends/family members who own them and they get absolutely universal rave reviews. Normally I hate hardware and consumer-facing anything, but the bikes have high margins, the app has high retention rates, and they have made working out far more enjoyable. I just bought the wife one for x-mas and it should arrive shortly. The apps, which include other workouts, are very well done. Peloton is supercool word and on target – it means a group of riders in a bike race. The logo, name, branding are fantastic and the vibe the CEO was going for was apparently inspired by modern evangelical churches. In our disconnected, materialistic world, people crave connection, especially during covid and Peloton delivers that feeling to them. Like Nike before they are all in on advertising, celebrity endorsement to establish them as top dogg in fitness – sigining the likes of the Beatles estate and Beyonce among many others. Though some feared they will suffer post Covid, the stock has run up after they acquired Precor, a company that sells fitness equipment to corporate clients – hotels, companies, buildings, etc. This also helped them ramp up manufacturing to meet the gigantic demand. I know Saul fears the bikes end up plummeting in price as they pile up on used fitness equipment sites, and that he has seen countless fads come and go. But I think the subscription, community angle really is different here and they are further solidifying their dominance – a la Nike with huge spending on music by the Beatles, classes with Beyonce and all word-of-mouth is likely to come from their base. On top of this the purchase of corporate fitness equipment manufacturer, Precor has shifted their narrative away from being a pure work home stock. We can safely assume apartment buildings, corporate fitness centers, hotels and other locations will be stacked with the bike that people most want to use. The fact that second rate Nordic Track is already launching a lawsuit against them – instead of out innovating, out marketing them, speaks volumes. I doubt I keep this one forever, but feels like journey to 100B market cap safe, eventually.DocusignThe company sells e-signature services and contract lifecycle management. Is there anything worse than having to sign a trillion documents, print them, scan them, fax them, mail them, etc? Every company on Earth should have e-signature and those that don’t should be ashamed. I asked a friend who is the CEO of a company about using them and he said that he does, loves it and can never imagine not having them. They are developing AI that can scan contracts, find problems, make suggestions and the vision is that over time it can go far beyond e-signatures to add real value in writing and shaping contracts. This feels like a company that every company must own – and once they do, will never drop. This is a slightly lower conviction stock for me as the marketing, CEO seem to lack sizzle, adrenaline and the rapid innovation of Cloudflare. *** ***COMPANIES I MAY ADD SOONCompanies that I do not own because you can’t own them all, but very well may add this year:Stitch Fix Holy Moses, while creating this doc, the stock went parabolic, racing up to near 100 per share. It touched 10 bucks a share in 2019. The branding is fantastic – website/app design, colors, and the name Stitch Fix is genius and a bit edgy – alluding to clothing, precision and addiction. One reason the stock has gone up is that their success rate continues to climb, with the “success rate” being the % of items shipped that customers keep. The vision – that you log onto your app and see a curated collection of clothes that all are in your wheelhouse, that fit you perfectly, is downright inspired. The idea behind it is that human beings long to express their individuality in an overcrowded world, that we each have unique body types, preferences, tastes and styles and that Stitch Fix can find what works for you. Katrina Lake is among the very best CEOs – arguably the very best. What she has built, without being adequately funded by the male-heavy VC industry, from the ground up, literally from shipping clothes out of her apt is incredible. She is Harvard grad with an MBA from Stanford and has attracted an elite team including people from Wal-Mart, Netflix, NASA data scientists and others. Some stories take longer to develop than others and this is one – building a high-tech clothing company that mixes data science and human fashion designers is a near impossible task. They have moved their designers out of the high-cost San Francisco area and continue to upgrade their processes and distribution centers. In fact, I heard an investor on Invest Like the Best (sorry, forget name) who visited one of them in Texas and was blown away. Apparently, the big issue with clothing companies is neat, clean shipping and efficient processing of returns. The VC said he was blown away by how well the center was run. I sold this mostly because of being all in our cloud/SaaS stock and I got cute with timing, figuring it would run this Spring as people go back to work. Consider the powerful tailwinds of the joy that will erupt when Covid end, the desire to go out, that future generations will all be on social media and want to look good at all times and that their competition from physical stores has been decimated. I’m not a 100% sure this one can hit the big time, but I find that investing in pure greatness and letting everything else work itself out is a successful strategy. Also, they are only in the USA and just starting in UK so a lot of blue sky ahead if it really can work as well as Lake envisions. I think it can and will. Coupa CEO Rob Bernshteyn is a brilliant self-made man, came to Brooklyn as a little kid from Russia. His dad had nothing, not a penny to his name and the two scrounged for discarded furniture to furnish their first apartment. He built a sports memorabilia biz and put himself through Harvard. The story of the stock – that you can’t control income, but you can control spending is as good as it gets. They have every tool imaginable to monitor and reduce spending. Your procurement guy needs to buy 100 office chairs? They can tell him the best price any of their customers got – and get it for him. And who better to run this company than an immigrant who grew up watching his father desperately struggle to save every cent? They took a bigger hit than others with Covid, as companies spend a fortune on travel and they bought a company that helps control travel related costs. Going forward I expect growth to pick up as the value proposition is undeniable. Though the name is kinda cute, I don’t love it. It sounds like lame coupon-related thing but it’s actually an anagram that stands for Comprehensive, Open, User-Centric, Prescriptive and Accelerated. Oy. Awful. That said, they seem to have a very joyful culture – there’s videos online of their dance parties. And Bernshteyn and others I watched seem legit dedicated to fostering a culture fueled by their core values: Ensure Customer Success, Focus on Results, Strive for Excellence. I say this with pure love and respect: Russian immigrants in my experience are both tough as Heck and have a deep-seated appreciation for the sheer glory of free markets.Lastly, Bernshteyn, promotes the company as a “Value as a Service” (VaaS) and is obsessed with Salesforce, which may explain his passion for acquisitions. Salesforce has acquired over 60 companies in its history, so being acquisitive is not inherently bad. Like Okta, I like this one as much for my inability to imagine it crashing as I do for chance of it 10Xing. Just a solid, sound, motivated company with a killer story. Shopify Tobi Luttke is among most inspired CEO’s of all time and his sidekick, Harley Finkelstein is fantastic as well. These guys are committed to “arming the rebels” to combat the “evil empire” of Amazon and have built a culture of creativity, innovation that seems genuinely inspired. As the world transitions to the web over the coming decades it’s hard to imagine a company better positioned to succeed that one that makes is as simple as possible to build eCommerce businesses. I sold my position to buy new house and miss it. The waltz to 500B market cap seems virtually assured as their position in this key industry is dominant, leadership elite, story rock solid and even inspired by a higher purpose – to protect small and medium sized businesses from the tyranny of Amazon, while still being able to service behemoths.Netflix and Disney, a Global Media Mega DuopolyThese companies are the most dominant alive. There is virtually no way they can possibly lose. Netflix is in 100s of millions of homes, spends billions on content, has the greatest CEO, elite engineers – it always works, everywhere and they continue to create hit after hit. In fact, the service is so powerful, word-of-mouth so strong that they make hits out of things that would never be a hit anywhere else. Tiger King was utterly mediocre but just bizarre enough to go viral when ran through the Netflix mega-channel. What do people watch? What everyone else is watching. And surely this is premiere Cloud/SaaS company. Recurring revenue, content stored in cloud… And they have barely scratched the surface of licensing, so focused is CEO Reed Hastings on the core mission of racking up 500,000,000+ subs. Unbeatable. Beyond unbeatable. Disney has the Disney brand, Pixar, Star Wars, Marvel, ESPN … and their streaming service is on its way to number one or a solid number 2. Either way this juggernaut is unstoppable. Buying Marvel for a pittance, a measly 4.2B may yet go down as the biggest steal in media history. The theme parks, rides, games, etc. they can create are mind boggling. You simply have to own Disney+ and ESPN+ nowadways if you want in on the most popular sports and entertainment. Though many feel these stocks are too big, outdated for massive growth I can easily see them keeping up with our Tier II stocks – Okta, Docusign, etc. with virtually no chance of catastrophic loss, assuming of fcourse we will defeat Covid and Disney can re-open theme parks, hotels, cruise ships, etc. MY 2020 TRADE HISTORYTaxable AccountThe tax hit to these trades listed below will be so gruesome that upon learning the number I sobbed so terribly I soaked three bath towels. Sorry I don’t have prices but I spent countless hours on this post and this was the best I could do. Q101/06 – Sold ZScaler for 33.5% gain 01/13 – Sold Okta for 96% gain01/21 - Sold Data Dog for a 15% gain01/21 – Sold Netflix for 17% gain01/21 – Sold Okta for 69.5% gain (real dough)01/21 – Sold Trade Desk for 122% gain (real dough)03/27 – Sold Trade Desk for 74.5% gainThese January trades were abject market timing due to our run up at end of 2019 and my conviction that our country was woefully unprepared and divided and would be hit hard by Covid. At the end of March, I bought positions in Coupa, CrowdStrike, Okta and Stitch FixQ204/21 – Sold Alteryx for 111% gain04/21 – Sold Mastercard for 5% gain04/21 – Sold Trade Desk for 97% gain06/09 – Sold Stitch Fix for 76% gainQ3The trades listed here have been converted to a home two blocks from Lake Michigan.07/10 – Sold Alteryx for 106% gain (real dough)07/10 – Sold Coupa for 110% gain (real rough)07/10 – Sold Crowdstrike for 113% gain (real dough)07/10 – Sold Mercado Libre for 133.5% gain (real dough)07/10 – Sold Okta for 75% gain 07/10 – Sold Shopify for 199% gain (real dough)07/10 – Sold Trade Desk 235% gain (biggest $ gain on trade of my career!)07/10 – Sold Zoom for 240% gain (real dough)Selling out of Vanguard Int’l index funds to simply take Mercado Libre felt like investing in Steph Curry instead of the entire NBA. Why the **** do I want to own the knicks and Steph Curry when I can just own Steph Curry? I have not re-upped on Mercado Libre as it’s too complicated for my taste and not widely followed on our board. Q4In this quarter I made very small profits on trades of Crowdstrike, Docusign, Shopify and Zoom to use for home renovation. Retirement AccountsQ101/09 – Sold Ollie’s Bargain Outlet for a 32% loss (Blasphemous stupidity)01/21 - Sold Crowdstrike for 7% gain01/21 – Sold Zoom for 2.5% gain01/21 – Sold Netflix for 17% gain03/12 – Sold Vanguard Emerging Markets fund for 12.5% loss03/12 – Sold Vanguard Global Minimum Volatility fund for 7% loss03/16 – Sold Paycom for 7% loss03/19 – Sold Zoom for a 5% gainTraded ZScaler four times for trivial loss, traded MongoDB three times for trivial gain. Ollie’s Bargain Outlet was added because I like the branding and wanted diversification. Mission accomplished – I added a loser to my winners. I got diversified! Q2 04/21 – Sold Trade Desk for 24% gain04/21 – Sold Shopify for 68% gain04/21 – Sold Zoom for 97% gain04/21 – Sold Alteryx for 17.5% gain04/21 – Sold Data Dog for 5% loss05/29 – Sold Costco for 22.5% gain06/08 – Sold Stitch Fix for 4% gainQ307/14 – Sold Netflix for 50% gain 07/23 – Sold Shopify for 143% gain 07/27 – Sold Coupa for 129% gain (real dough)07/27 – Sold Data Dog for 109% gain 08/10 – Sold Alteryx for 21.5% loss 08/13 – Sold Blue Prism for 15% gain09/01 – Sold Trade Desk for 7% gain09/29 – Sold Mercado Libre for 144% gain (real dough)Q410/09 – Sold Okta for 65% gain (real dough)10/15 – Sold Fastly for 25.5% gain (real dough)12/18 – Sold Docusign for 4% gain12/18 – Sold Cloudflare for 125% gain (real dough)12/18 – Sold Zoom for 433% gain (biggest % gain, 2nd biggest $ gain of all time)12/18 – Sold Crowdstrike for 399% gain (real dough)Basically, what you see here is the portfolio management equivalent of a somewhat twitchy pilot looking smooth air to fly home in.MY GAME PLAN FOR 2020I am very confident in my methodology – Saul Style + Narrative and feel extremely confident in Saul, our board, and the role narrative plays in my picks. To be clear I think it’s easier to pick winners than call losers. I have no real opinion on the stocks that don’t work for me. And I suspect many will of course win. But for me it is much more important to have strict criteria, firm conviction and stick to my guns than chase every conceivable stock that might be a winner. I call my port the Monsters of Greatness Excessive Capital Appreciation Fund and that’s what I truly consider it – dominators led by elite CEOs telling clear stories with both plenty of blue sky ahead and a high likelihood of continued innovation to expand TAM. Lastly, I want to close with … MY POST OF THE YEAR I wrote some narrative-centric posts that racked up serious recs, including: Zoom CEO, Eric Yuan, Herohttps://boards.fool.com/zoom-ceo-eric-yuan-hero-34519852.asp...Tales of Crowdstrikehttps://boards.fool.com/tales-of-crowdstrike-34449490.aspxThe Story of Cloudflarehttps://boards.fool.com/the-cloudflare-story-34620258.aspxBut it was the Cloudflare post that taught me it is possible to see such a fantastic story shaping up that, even without any financial analysis, one can see greatness coming. At the point that I wrote this post, Fastly was still the more popular, higher conviction edge network stock. But when I discovered how elite, dedicated and inspired this leadership team is, how effectively they communicate, how rapidly they innovate, how much adversity they’ve overcome, how clear their vision is I felt it was only a matter of time before the stock took its rightful place among our highest conviction picks. And it did. So, for me this was the post that convinced me I have something valuable to contribute to our board, beyond being a passenger on our yacht. My theory is basically this: the market is exceptionally efficient at pricing stocks. Yes “Mr. Market” can be emotional and prone to euphoria and panic. And these mood swings are part of tracking the narratives of the market as a whole. But generally speaking, the prices the market assigns to stocks are within reason. So, if you’re trying to guess which reasonable future valuation will play out – low, mediocre or high, narrative offers powerful clues. If my bank account was as big as my gratitude to Saul and you all, I’d be a multi-trilionaire. Fool On,Your Loyal Pal and Devoted Foolish Fan,“The Miracle”Broadway DanPost Script: WILD CARD THOUGHTSThere are two great investment narratives: I - Stock A is making a killing and blue sky ahead; II – Stock B is about to do X will drive staggering gains. I prefer I to II but sometimes you have to take II when I has played out as it has for Zoom. Is the real engine of the gains made here based on going big on highest conviction stocks? Or is it the overall accuracy? Are our high conviction stocks represent the Pareto Principle in play – are they the 80% of the outcome that derives from 20% of the inputs?I reject the idea that concentrated portfolios are inherently riskier. If you get a chance to invest in one player in a Monopoly game, who owns Boardwalk, Park Place and Pacific, North Carolina and Pennsylvania Avenues, who has 10x the cash of other players, that’s not a high-risk investment. That’s one to go pretty much all in on. Loss aversion is so baked into being human – we HATE to lose status, money, time, loved ones, etc. – that it pays to spend quality time fully confronting this. Silly as it sounds, I worked hard this year to look at my port when it was way down, and when it’s up I literally imagine staring at it and seeing a number that is down 25, 30, 50 percent. How you can tell an investor is a chump? They whine about missing stocks that ran up. When you know why you passed or sold, you don’t care what it does after you pass on it. The benefits of sticking to your criteria outweigh the benefits of investing in a stock you love that doesn’t meet your criteria. Watching stocks you pass on skyrocket is a key part of the game.Books that had a big impact on me this year: Shane Parrish’s Mental Models Volume 1 and 2; Jocko Willink’s The Dichotomy of Leadership (This helped me market time though that’s almost always a bad idea), and David Epstein’s Range – knowing a wide variety of subjects adds infinite value one’s investment game. Thx to The Stock Novice for that rec.Patrick O’Shaughnessy’s Invest Like the Best is exceptional. He is a warm personality who speaks with incredible precision and has had some of our CEO’s on, including Okta’s Todd McKinnon and Cloudflare’s President and COO, Michelle Zatlyn. He is well aware of cloud/SaaS stocks, the failure of traditional metrics to accurately value them and often has on fiercely intelligent guests with great insights. I also like his father, Jim’s podcast, Infinite Loops. I want to fear missing big moves up as much as I do crashes. Getting caught with 25-50% on the sidelines when the market moves up may cost you an opportunity that won’t repeat. So almost always, it’s better to just ride out the volatility, fully invested – unless you have a low risk tolerance and optimize for sleeping soundly over profits. But now that I’m in my 50’s and in a better place, playing some more D is fine. I accept the tradeoffs. Losing 50% and still being up money feels a trillion times better than losing 50% and being down 50%. Marriage counseling, martial arts, talk therapy, coaching, and personal development have all, over time, given a 100x return on the investment of time, money, energy. This was a rough year for us all. Had my past challenges with anxiety, anger management got the better of me, I’d have never done so well. Fear and anger (two sides of same coin) cloud judgment. Also, it was more my wife’s success than my own that gave me the initial booty to invest. Divorce costs a fortune, so staying happily married has paid off big time for us.If beating the market is so hard, get a load of my CAPS portfolio and the gains featured there. Good grief. I must be one lucky guy if Taleb is right. I’ll have a lot more to say about the tradeoffs of his shtick soon.Analyzing the beliefs your parents, influencers and defining experiences instilled in you is important. For example, my dad often says, “the glass is not half empty, it’s two thirds empty.” He owns a ton of stocks, mutual funds and only buys stocks with dividends. If I shared his pessimistic outlook I could never invest in our companies as it takes trust and realistic optimism. What you believe radically impacts your risk tolerance. Having a community, and better yet, a true friend to bounce ideas off and question assumptions and just enjoy the journey with is invaluable.If Dave Grohl can be a great musician without reading music, I can pick winning stocks without doing math. I named my portfolio the Monsters of Greatness Excessive Capital Appreciation Fund to help me to stick religiously to only investing in great people, products, stories. This name of my port makes doing this work more enjoyable and like Beyonce constructed the persona of “Sasha Fierce” to fully rage on stage, it helps me stay focused on what’s essential to success. This is about greatness – of the Fool, our community, investments. The wife and I started a charitable fund. Giving a higher purpose to investing is helpful and just a good thing to do.
Great write-up!One question: In what tier do you have Datadog? (It’s the only company I did not see identified as being in one of your tiers).Speedy
And “Snowflake”? As in a wimp who can’t take hard talk? A thing that melts easily? Meh.Just to clarify, for those who don't know: Snowflake refers to a now-dated name for a way to organize data in non-second-normal form, as in a "snowflake schema". Snowflake Schemas are one of the ways to organize transformed transactional data in a manner that is more conducive to analytics.Tiptree, Fool One guide, former data architect
To go along with what Tiptree said Snowflakes are also born in the "cloud". Here is a blog post from the company with background on the name. I don't give too much weight to company names, but this one works pretty well IMOhttps://www.snowflake.com/blog/behind-snowflakes-name/bnh
Thank you for Snowflake clarification - makes more sense now. Obviously that was a bit tongue in cheek and I said my analysis was "thin gruel." Still do like a founder led company likely to stay for long haul best. As for Datadog, I have that in Tier II but the higher end of it and hopefully it makes its way back to Tier I soon.
I love your writing :-)I am new to stock investing and this approach especially so I greatly appreciate posts like this. Thank you for sharing and explaining your motivations so well.I am curious though, did all your trades were to sell? You did not buy any new stocks or add to existing all year?
Oh never mind, I read again and saw some comments about buying. Wish I could edit or delete my post :-) Sorry!
The line of all lines:How you can tell an investor is a chump? They whine about missing stocks that ran up. When you know why you passed or sold, you don’t care what it does after you pass on it. Thanks Broadway, you made clear something that's been intuitive for some time now. Anyone who wines about these things should stop investing as it will CLEARLY make them miserable for their one time down here on earth.Brian
wow, great post, Broadway. i loved the 'life learnings' as much as i did about the analysis
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