June 2020 Portfolio Update and NewsI didn't post my May update here because the traffic has been growing exponentially and I didn't want to add to the onslaught. I decided to post here this month in hopes that some of the newer people may find some of this useful as an additional data point. I also told myself that I would add a sort of PSA at the beginning, so here goes:Post counts have exploded over the past couple months. Sadly, many of these posts aren't very useful. I think there have been 200 or so anecdotes about Zoom and how you, your boss, your mom, your grandma, etc, had a good experience with it. There have been countless other posts, where the poster is asking another poster a specific question or is responding to that poster. Here's the tip, when you hit "post reply" and start to compose your message, uncheck "post this reply to the boards", and check "email this reply to the author". You will save yourself, and the rest of us, the time it takes to go through all of the posts. I've resorted to utilizing the "ignore thread" button, when the usefulness of the thread is long over.We now continue with your regularly scheduled post... I put together these updates as a sort of record keeping for myself. It helps me to think things through with my investments and documents the reasoning for some of the moves I make. I do not want to come across as a know-it-all or a braggart just because things are off to a great start. I have always kept records of my investing because I want to see how each of the decisions I make compares with the overall market. Having these records reminds me that it is an absolute certainty that things can and will go south at some point. This is the third year that I have kept detailed information on a monthly basis. In all three years, there have been periods of time where my portfolio has dropped from 20-40% and it will happen again. I assure you that when that update comes out, it will not be a rosy picture. If you haven’t learned by now, there is a popular saying that says, “Don’t fight the Fed”. Trillions of dollars have been dumped into the economy to help keep things afloat, and it seems a large portion of that money has found its way into the stock market. There continues to be a large amount of people calling for an imminent collapse, and therefore have taken a large portion of their portfolio to cash. The week that ran from June 15-19 was the largest increase in my portfolio dollars to date. Every day that week I expected to wake up to a sea of red, but all I saw was green, day after day.This month, I was reminded of how Warren Buffet approaches things. He said that diversification doesn’t make sense for someone that knows what they are doing. Buffet also said, “To buy number one on your list equally with number 37 strikes us as madness. Diversification is a protection against ignorance”. This got me thinking to when my portfolio consisted of 49 positions. Although they weren’t all equally weighted, they started out that way. This is probably why he recommends the average investor to invest in an index fund. I have interest in other companies, but none that I’m willing to pare back one of my current holdings for.Here is a snapshot of how my portfolio has performed over the past month, compared to the broader indexes. As usual, I’ll include the CNN Fear and Greed Index. Please note, I changed my YTD designation to Portfolio to Date (PTD). This portfolio was started on March 13, 2020 when all of my assets were rolled over into this one Retirement Account. The previous months that listed YTD were always PTD. There are some people that have started following this after the first month, so they may not be aware of the time frame. I just want to be clear so I’m not misleading anyone.W/E Date Portfolio S&P 500 DJIA Nasdaq Russell 2000 Fear and Greed06/05/2020 -0.32% +4.91% +6.81% +3.42% +9.47% 6606/12/2020 +2.95% -4.78% -5.55% -2.30% -7.93% 5306/19/2020 +12.94% +1.86% +1.04% +3.73% +2.23% 5206/26/2020 +2.52% -2.86% -3.31% -1.90% -2.81% 45-------------------------------------------------------------------------------------------- June +18.82% -1.16% -1.45% +2.82% +0.15% PTD +102.54% +10.99% +7.43% +23.90% +13.95% Another amazing month for the portfolio (+18.82%), during which time the four tracked indexes were basically flat (+0.09%). Since its inception, our portfolio has now doubled (+102.54%) in just 3 1/2 months. This is more than seven times better than the indexes (Average +14.07%) have performed over the same period. As you can see, the Fear and Greed Index briefly hit a greed rating of 66 on June 5th, but quickly dropped back down into the neutral zone.On to the individual results for each company that I invested in. If a company announced earnings during the period update, I will usually lead off with that then backtrack to the other news in chronological order. They are listed by allocation from highest to lowestCompany Allocation June % Change PTD % ChangeCrowdstrike (CRWD) 18.68% +12.50% +158.21%Datadog (DDOG) 14.07% +18.56% +153.30%Zoom (ZM) 12.72% +43.08% +127.50%Okta (OKTA) 11.91% +4.04% +92.74%Fastly (FSLY) 10.12% +100.53%!! +139.64%Alteryx (AYX) 9.50% +12.84% +58.74%Coupa (COUP) 8.69% +21.18% +113.97%Livongo (LVGO) 7.09% +25.13% +28.47%MongoDB (MDB) 7.07% -3.27% +94.94% In the middle of June, I started dabbling with covered calls in an attempt to generate some additional cash flow. The thought was that as I built up cash, I would be able to invest into my current positions. I set them pretty far out of the money, thinking although I wouldn’t receive too much of a premium, at least I would hold on to my stock. Sadly, the week I started doing this, Fastly decided to increase more than 35% that week. This resulted in me having my shares called away, but I took the money and reinvested it back into Fastly. I did not make any changes with selling or buying any additional companies, so the changes in allocation are a result of how the stocks have performed over the past month. As we hit the 3 1/2 month mark, the only one of my original companies that has not seen an increase of 90% or greater, is Alteryx. It is still one of my highest conviction stocks, and I expect big things from them in the future. There are now five companies that have more than double in price since my initial investment, as well as two more that are over 90%.By traditional valuation metrics, many of these companies have run up to very high multiples. It sometimes gets a little difficult to maintain the conviction I have in some of them, but I have to stick to what got me here and stay fully invested. As Peter Lynch famously said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves." As the old saying goes, bears sound clever, but bulls make money.CrowdStrike (CRWD) - CrowdStrike set out to reinvent cybersecurity by utilizing a multi-tenant, cloud native, intelligent security solution. Announced earnings on June 2nd. Total Revenue increased 85% YoY, while subscription revenue increased 89%. Non-GAPP subscription margin improved to 78% compared to 73% prior year. One of the biggest jumps was in free cash flow (FCF) which improved to $87.0 million versus negative $16.1 million last year. They added 830 net new subscription customers in the quarter, representing 105% growth YoY. All in all it was a blowout quarter and one of the reasons it is my largest position. CEO George Kurtz commented that he thinks the future of work will be a hybrid environment, where some work splits between office and home. He called it a “work from anywhere” movement. Crowdstrike is capable of keeping their information secure from anywhere. Datadog (DDOG) - Datadog operates a fast-growing software platform that monitors customers’ cloud activity and mines it for business insights. On June 2nd, Datadog announced that they had been named a Customers’ Choice in the May 2020 Gartner Peer Insights “Voice of the Customer”: IT Infrastructure Monitoring Tools. On June 17th, Datadog announced integration with Amazon Elastic File System for AWS Lambda. This brings single-click correlation between the two and allows developers to have visibility across the serverless components that power their business, and trouble shoot issues quickly. The next day, they achieved FedRAMP Low-Impact SaaS Authorization. This allows U.S. federal government departments and agencies to adopt and use Datadog’s cloud platform. This serves as a reassurance in the quality of Datadog’s offerings, as well as increasing the pool of available customers.Zoom (ZM) - Zoom provides a cloud-based communications platform that concentrates on making the video conference experience better. Announced earnings on June 2nd, and totally blew every analysts’ numbers out of the water. First Quarter revenue increased by 169% to $328 million. Growth in Customers with greater than 10 employees increased 354%. Peak number of daily meeting participants was greater than 300 million. Growth in customers with greater than $100k in TTM Revenue was 90%. They had their 8th consecutive quarter of Net Dollar Expansion Rate above 130%. Operating Cash Flow and Free Cash flow both increased by more than 1,000%. It’s pretty remarkable. Although everyone agrees that it was an amazing quarter, it is nearly impossible to find an article about Zoom that does not say they expect them to already be at their peak, or that they expect them to drop from here. I’m not sure why all of the “experts” say this, because simple math from reading this quarter’s numbers indicate that next quarter will be even bigger. Many people feel the future growth is already priced in. I am not one of those people. In spite of being up 43.08% in June, it was not the portfolio’s highest performer.Okta (OKTA) - Okta uses cloud-based software to provide identity solutions for enterprises, allowing them to securely integrate internal and third-party cloud applications. On June 10th, Okta priced a $1 Billion offering of convertible senior notes. With the interest rate on these loans being so incredibly low, it makes sense of these hyper growth companies to take advantage of it. Overall, it was a pretty quiet month for Okta and their stock quietly increased by 4.04%.Fastly (FSLY) - Fastly is a global content delivery network that makes apps and the internet itself faster, more reliable , and more secure. Although speculated in May, it has been confirmed through multiple sources that Fastly has won the content delivery network (CDN) business for amazon.com and IMDB websites. Prior to switching to Fastly, Amazon was using their own CDN CloudFront. Amazon’s CDN’s focus is in on-demand delivery of video and downloads, so this isn’t too surprising that they would outsource to a CDN that specializes in website performance. This should result in a large surge in revenue for Fastly. They continue to improve their edge network capacity and have now achieved 100 Tbps, which is up 35% so far this year, after an increase in capacity of 96% last year. Around the same time as the 100 Tbps the stock growth accelerated rapidly and ended up increasing 100.53% this month! The vast majority of this happened over the past two weeks.Alteryx (AYX) - Alteryx offers a suite of cloud-based products that can blend data from multiple sources, analyze the data, and then share it with colleagues or output it to other tools. On June 16th, they introduced Alteryx Analytics Hub, a new product to extend the power and value of Alteryx APA Platform, and Alteryx Intelligence Suite, a new predictive modeling add-on for Alteryx Designer. Both add-ons are a direct result of feedback from customers and community members, and they will both help fuel rapid digital transformation by delivering on the promise of APA.Coupa (COUP) - Coupa’s platform connects organizations with suppliers and provides visibility into and control over how companies spend money. Announced earnings on June 8th. They reported record quarterly revenue of $119.2 million, up 47% year over year (YoY). Record subscription revenue of $105.7 million, up 45% YoY. Gross Margins were 74%. On June 11th, Coupa announced that they had priced $1.2 Billion aggregate principal amount of convertible senior notes due in 2026. Many of the companies that I invest in have been raising extra capital as they are able to do at an extremely low rate in this financial climate. The very next day, Coupa announced that it had acquired Bellin Group, a leading provider of treasury management software. This helps strengthen Coupa’s position as a comprehensive and indispensable platform for managing business spend. This feel like a positive acquisition for Coupa and fits in with their business strategy.Livongo (LVGO) - Livongo Health uses data collection and artificial intelligence to arrive at better outcomes for chronic conditions. Net Promoter Score is a management tool that can be used to gauge the loyalty of a firm’s relationships. Livongo’s member net promoter score is quite high for a health care company. They score a +64 where the average health care plan comes in at +12. This should help them retain their clients in a crowded field with plenty of competition.MongoDB (MDB) - MongoDB’s open-source database captures data not easily squished into columns and rows, disrupting traditional database vendors such as Oracle. Announced earnings on June 4th. Total Revenue was up 46% Year over Year (YoY). This is an acceleration from the previous quarter which was 44%. Atlas, their subscription service, revenue increased 75% YoY and now makes up 42% of total revenue. As Atlas becomes a larger percentage of total revenue, this could accelerate top line revenue near term. Gross margins improved to 71% compared to 68% the prior year period. One of the biggest things going for them is their consistent enterprise market share gains. MongoDB has an unrivaled leadership as the only evolving standalone player in the attractive NoSql and DBaaS spaces.This month was a lot more calm in spite of half my investments announcing earnings during the period. I feel very comfortable where my portfolio is at and feel that it is probable that I will not make any noticeable changes in July.I started to hit the treadmill again at the end of the month and was able to drop an additional 1.1 pounds, bringing me to a total weight loss of 12.4 pounds since I retired. I hope to be even more consistent with this over the next month which should result in even more progress.
W/E Date Portfolio S&P 500 DJIA Nasdaq Russell 2000 Fear and Greed06/05/2020 -0.32% +4.91% +6.81% +3.42% +9.47% 6606/12/2020 +2.95% -4.78% -5.55% -2.30% -7.93% 5306/19/2020 +12.94% +1.86% +1.04% +3.73% +2.23% 5206/26/2020 +2.52% -2.86% -3.31% -1.90% -2.81% 45-------------------------------------------------------------------------------------------- June +18.82% -1.16% -1.45% +2.82% +0.15% PTD +102.54% +10.99% +7.43% +23.90% +13.95%
Company Allocation June % Change PTD % ChangeCrowdstrike (CRWD) 18.68% +12.50% +158.21%Datadog (DDOG) 14.07% +18.56% +153.30%Zoom (ZM) 12.72% +43.08% +127.50%Okta (OKTA) 11.91% +4.04% +92.74%Fastly (FSLY) 10.12% +100.53%!! +139.64%Alteryx (AYX) 9.50% +12.84% +58.74%Coupa (COUP) 8.69% +21.18% +113.97%Livongo (LVGO) 7.09% +25.13% +28.47%MongoDB (MDB) 7.07% -3.27% +94.94%
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