May 2021 Portfolio UpdateMonthly Disclaimer: 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 most of the moves I make. I do not want to come across as a know-it-all or a braggart just because things are going well. 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 now the fourth year that I have kept detailed information on a monthly basis. Every year, there have been periods of time where my portfolio has dropped from 15-30% and it will happen again. It happened twice in 2020, and it has already happened twice this year, with the most recent being in May. Now on to this month’s update…This will likely be the last time I lead off with this. I'll have it as a footnote moving forward in case people are curious about why I include star ratings. This is off-topic here, so if you have a question or comment, please respond off-board. We have developed a rating system for the stocks of the companies that we follow. Although we have partial portfolios completely following the recommendations given, I am personally meshing the two together for my main portfolio. The four of the last five positions I have added to my portfolio were all rated 5?? in our system. Roku was a 4?? when I added it. You can find more information about this on Twitter @PBMMInvestmentsI don’t feel like I complained about April being a quiet month, I was just making an observation. To make up for it, May was anything but quiet. From April 26 to May 13, my portfolio dropped 23%. This put me at a YTD low of -9%. It included a stretch of 8 straight days of decline and 11 of 13 red days during that span. Once we hit our current bottom on May 13, things started heading back in the direction we all like to see. We had 10 of 12 days of green, with the final 6 in this reporting period all ending positive. This ended my month at -5% but I’m still positive YTD at +5%. During the volatility, particularly during the plummet, I had numerous people reach out to me asking what I was doing, and if I was ok. For newer investors of this style, this is something that they haven’t encountered too often. For those of us that have been investing in this style for a number of years, it just comes with the territory. When I was in High School, the Grateful Dead came out with their biggest hit song, “Touch of Grey”. I hadn’t been exposed to much of their music at the time, but this song struck a chord with me. The lyrics that hit me hardest were, “I know the rent is in arrears. The dog has not been fed in years. It’s even worse than it appears, but it’s alright.” I absolutely love the part, “it’s even worse than it appears, but it’s alright”Before I retired from Publix, I was chosen to open a new store. It was the first new store in the metro Atlanta area in a number of years. It was also located in very close proximity to the Divisional Office. We had numerous corporate visitors the first year and it seemed like we were always under the microscope. Our store had adopted a slogan, “Everything is fine”. No matter who came in, or what they said, I was always there to lift our team up and let them know that everything was indeed fine. Having that as our slogan often reminded me of the Grateful Dead hit. When times are tough, we must make the most of it and try to keep our sanity. Things come and go in cycles, they don’t remain bad forever, nor do they remain great. The best part of both is that we get to choose how we want to deal with it. I always choose the positive angle.As a reminder, I post results the last weekend of the month. This would make May a four week period. The market is closed on Monday for Memorial Day, so this will include all of the trading days in May. Our May high point occurred on the very first trading day when we closed at +7.47% on May 3rd. This was in the midst of our plummet where we bottomed out at -9.09% YTD before rebounding as the month ended. 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. W/E Date Portfolio S&P 500 % DJIA % Nasdaq % Russ 2000 Fear and % change change change change % change Greed Index------------------------------------------------------------------------------------------- May -4.88% +0.55% +1.93% -1.53% +0.11% 39 April +5.63% +5.20% +2.42% +6.27% +2.02% 56 March -12.01% +4.29% +6.92% -0.41% +0.93% 52 February +5.50% +2.61% +3.17% +0.93% +5.80% 48 January +12.72% -1.11% -2.04% +1.42% +5.35% 35------------------------------------------------------------------------------------------- YTD +5.13% +11.93% +12.82% +6.68% +14.89% 39 Although we hit our lowest point of the year in May, we once again finish the month positive YTD. I’m very pleased to have positive YTD numbers at the end of every month so far this year. I know there aren’t a lot of people that can say that. As you can see, we are currently trailing the indexes that we track, but we look towards closing that gap as we head into June. The Fear and Greed Index hit a 2021 low of 33 on May 25th, before rebounding to close the month at 39. It dropped into the Fear range on May 12th and hasn’t moved out of it since.I seem to keep jinxing myself. At the end of April I wrote, “I probably feel better about my portfolio right now than I have at any point in 2021.” Although I did feel that way at the time, the feeling didn’t last for long. On May 6th, Etsy announced earnings and reality slapped me in the face. They had a blowout quarter and it was even better than I anticipated. The part that caught me off guard was when they said they were expecting a sequential decrease in revenue. It was already obvious that their triple digit growth days were coming to end, as they were about to be facing the initial pandemic blowout quarter, fueled by mask sales. I was expecting a very modest sequential increase for Q2, which would put them in a +30% to +35% Y/Y range. Once they commented about already seeing a big slowdown, I exited my position. We still have Etsy rated as one of the best stocks in our system, and it currently holds a 4?? rating. I could see myself starting a position back up after they report their Q2 results, assuming the news moving forward is a lot more positive. When a company tells me things are slowing down, I try to listen instead of staying in there waiting/hoping things are better.Because Etsy was my largest position at the time, it took a bit more shuffling to get my allocations where I wanted. Luckily I was able to spend a lot of time in April reading up on my watchlist, as exiting Etsy opened the door for Roku to join my portfolio. More about that below.On to the individual results for each company that I invest in. They are listed by allocation from highest to lowest. Company Allocation Initial Purchase May % Change Purchase Price % Change since Pur----------------------------------------------------------------------------------------------CrowdStrike (CRWD) 22% 01/01/21 $211.82 +6.54% +4.88%Roku (ROKU) 14% 05/07/21 $327.00 +6.03% +6.03%Pinterest (PINS) 11% 03/08/21 $67.38 -1.61% -3.09%DocuSign (DOCU) 14% 01/01/21 $222.30 -9.56% -9.30%Square(SQ) 14% 01/04/21 $219.15 -9.11% +1.54%Zoom (ZM) 10% 01/01/21 $337.32 +3.74% -1.72%Digital Turbine (APPS) 8% 02/02/21 $60.76 +12.28% +8.90%Fulgent Genetics (FLGT) 4% 03/12/21 $93.86 -3.83% -21.08% On the chart above, you get a clear picture of how things are currently allocated. For the “Initial Purchase” column I default to the stock price when the year started for stocks I have owned prior to this year, instead of when I purchased it. I want to see how things go from this point forward. Once again Crowdstrike has had a run-up in price. Its valuation is getting quite frothy again, so I can’t imagine it moving up much if any at all after they announce earnings. Definitely something to keep an eye on.Now on to the discussion of the individual holdings in my portfolio, listed in alphabetical order. CrowdStrike (CRWD) - CrowdStrike Holdings offers cybersecurity services through its Falcon platform, which monitors client operations at their endpoint connections to the internet and works to identify and stop threats. The platform learns from attacks made on it and then warns the entire CrowdStrike cybersecurity network about likely avenues for future security issues. Another month goes by and we have another major cyber attack. This time it was the Colonial Pipeline ransomware attack. Crowdstrike continues to flourish with their platform continuously hunting down activity and communicating it throughout their network. They will announce earnings this coming Thursday and I look forward to seeing their results. Although they are my top position, Crowdstrike is the lowest rated stock of my 8. They come in as a high 3?? and my only stock not rated 4?? or 5??Digital Turbine (APPS) - Digital Turbine simplifies content discovery and delivers it directly to the device. Its on-device media platform powers frictionless app and content discovery, user acquisition and engagement, operational efficiency and monetization opportunities. As we headed into the last week of May, I was really looking forward to Digital Turbine’s earnings call. I had been reading up more on their recent acquisitions and now feel like this company is a bit more underpriced than I realized. It’s easy to look at how much the stock price has increased in the past year (stock priced closed at $6.06 on 5/28/2020) and think that it may have run up too much already, but I feel like it has a lot more room to grow.Sadly we will have to wait until June 1st now as they postponed earnings “…in order to accommodate certain scheduling matters, including the anticipated completion of a recently announced acquisition.” They had already pre-announced at the end of last month, revealing a sizable beat for Q4 and raise for Q1 (their current quarter). I don’t necessarily expect the stock price to jump after earnings due to the pre-announcement, but this is a position that I am strongly considering expanding. After all, it ended May as a 5??, and the #1 ranked stock in our ratings. DocuSign (DOCU) - DocuSign is the market leader in providing electronic signature technology and automation of the agreement process through its cloud platform. DocuSign's solution addresses the core of every business transaction - the agreement - and makes the process much more efficient, resulting in lower processing cost and time. Easily the company that I see the least news about, but that isn’t necessarily a bad thing. The stock price plummeted in May as the nation continues its recovery and more and more places open up with fewer restrictions. As the overall economy slowly recovers, this should not be a negative for DocuSign. You cannot convince me that people as whole would prefer to use paper documents than digital. We are currently in the process of refinancing our house and it will be completely handled remotely. I couldn’t be happier.DocuSign announces earnings this coming week. I’m looking to see how their net dollar retention rate compares to last quarter’s 123%. This is a number that has continued to creep up over the last 8 quarters.Fulgent Genetics (FLGT) - Fulgent Genetics is a technology company that provides comprehensive diagnostic genetic testing using its proprietary platform, which integrates data comparison and suppression algorithms, adaptive learning software, advanced genetic diagnostics tools, and integrated laboratory processes. Fulgent Genetics announced earnings on May 6th and I found the results very encouraging. Revenue increased 4,500% Y/Y, but that was mostly due to Covid testing. Revenue was $359 million, which was a substantial beat from the $321 million expectation. The part I found encouraging was that their core business, which includes next-generation sequencing (NGS) was up 115%. They increased 2021 projections from $800 million in revenue to $830 million, stating that the $30 million is from the ramping up of NGS. When asked on the conference call how much of that was from their new contract with the CDC, they stated that a very insignificant part was from this new contract. They also spoke of other potential contracts of significance still being a possibility. Any of which if signed would result in further raises due to the size of these contracts.Revenue is expected to greatly taper off throughout the remainder of the year, as the necessity of Covid testing continues to dwindle. This company is very profitable and is building up an enormous sum of cash, which could possibly be used for an expansion acquisition. I’m very happy with my position size here and plan to hold it for a while.Pinterest (PINS) - Pinterest is an image-sharing social media site that allows users to collect links and create virtual pin boards for personal photos, ideas, decorations, places to visit, recipes and other items. Advertisers use Promoted Pins to reach users across the full purchasing funnel. After exiting Etsy, I added significantly to my Pinterest position, increasing it by 21% at a $60.78 price point. It has now grown to one of my largest positions. I’m not worried about their Monthly Active User growth stagnating, I’m counting on their Average Revenue Per User accelerating. Especially so with international users. This company maintains a 5?? rating in our system.Roku (ROKU) - Roku is a key player in the growing over-the-top (OTT), or video streaming services market. Through the sale of streaming players and offering the Roku TV operating system on select smart TVs, Roku offers users a way to access various applications, primarily streaming services including Netflix, Hulu, and Amazon Prime Video, among others. Roku's strategy focuses on acquiring active accounts and then monetizing them primarily through advertising revenues. Roku is a company that I’ve loved for years, and a stock that I owned for a while in 2020. They announced earnings on May 6th and the results drew me back in. Total revenue grew 79% Y/Y to $574 million, while platform revenue increased 101% Y/Y and was $467 million. Roku is the #1 streaming platform in the US based on hours streamed, and these hours increased by 1.4 billion hours sequentially. They currently have 38% market share in US and 31% in Canada. Average revenue per user (ARPU) increased 32% Y/Y.I jumped right in with a large position here, starting off with a 14% allocation. We currently have it ranked as a 4?? in our system.Square (SQ) - Square is a commerce enablement platform focused on providing card acceptance, business analytics, and other ancillary products to help small merchants grow their businesses, as well as well as utilizing the Cash App ecosystem to broaden their reach to people that are under banked, and wanting to trade including crypto currencies etc. Square announced earnings on May 6 and the Bitcoin influence was really felt. Revenue came in at $5.06B (+267% Y/Y) which was a beat of $1.73B. You don’t get those kinds of numbers in a traditional manner, so I am greatly undervaluing them. Bitcoin just makes so many of these numbers look wonky. That said, Gross Profit grew 79% Y/Y to $964 million. Cash App continues to be a cash cow for Square. The increased adoption of Cash Card has been a tremendous boon with more than 10 million monthly active users. On May 24th, news surfaced about Square expecting to offer checking and savings accounts to small business customers. It will be interesting to see how this plays out.In spite of their stellar results, the stock was down 9% in May. This was primarily driven by devastation to Bitcoin’s value. Over the course of the month, Bitcoin is down more than 40%. In ends the month rated as a 5?? with us so we are definitely hopeful of a rebound in June.Zoom (ZM) - Zoom Video Communications provides telecommunications services that allow people to connect via video, voice, and chat as well as sharing content. The dedicated cloud-based platform aims to offer a superior user experience compared to traditional teleconferencing options, and its device-agnostic features offer high-quality communications regardless of how users connect to the platform. Zoom will announce earnings on June 1. Although I do not see Zoom as solely a platform for online meetings, I think many others do. Of course Zoom Meetings is the bulk of their business, what we are expecting to see is the expansion of Zoom Phone as well as their app growth. With the rapid deceleration of growth as they begin to lap the explosion of growth they had from the pandemic, it will be crucial to see how their expansion with all these new customers is coming along, as well as seeing if the churn rate has stabilized. Oddly enough, in early May Zoom’s valuation was cheaper than it was before the pandemic. They moved to a 5?? rating on the last day of reporting this month. We hope this is a good sign heading into earnings.The beginning of May kicked my butt with 39 of the 100 companies we track announcing earnings the first week. This took a lot more time to go through than I anticipated. Although I’ve gone through the numbers on all, I haven’t dug through the conference call notes on the bulk of them. This is something I will work on in June as I work on updating my watchlist.
W/E Date Portfolio S&P 500 % DJIA % Nasdaq % Russ 2000 Fear and % change change change change % change Greed Index------------------------------------------------------------------------------------------- May -4.88% +0.55% +1.93% -1.53% +0.11% 39 April +5.63% +5.20% +2.42% +6.27% +2.02% 56 March -12.01% +4.29% +6.92% -0.41% +0.93% 52 February +5.50% +2.61% +3.17% +0.93% +5.80% 48 January +12.72% -1.11% -2.04% +1.42% +5.35% 35------------------------------------------------------------------------------------------- YTD +5.13% +11.93% +12.82% +6.68% +14.89% 39
Company Allocation Initial Purchase May % Change Purchase Price % Change since Pur----------------------------------------------------------------------------------------------CrowdStrike (CRWD) 22% 01/01/21 $211.82 +6.54% +4.88%Roku (ROKU) 14% 05/07/21 $327.00 +6.03% +6.03%Pinterest (PINS) 11% 03/08/21 $67.38 -1.61% -3.09%DocuSign (DOCU) 14% 01/01/21 $222.30 -9.56% -9.30%Square(SQ) 14% 01/04/21 $219.15 -9.11% +1.54%Zoom (ZM) 10% 01/01/21 $337.32 +3.74% -1.72%Digital Turbine (APPS) 8% 02/02/21 $60.76 +12.28% +8.90%Fulgent Genetics (FLGT) 4% 03/12/21 $93.86 -3.83% -21.08%
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