Complete Portfolio Review
Analyzing my performance, evaluating my positions, and looking to the future
2020 Performance
My Portfolio Return: 109.6%
S&P 500 Total Return: 17.9%
2020 Outperformance: 91.7%
Top 10 Stocks Weighting: 65.7%
# of Stocks in Portfolio: 39
YTD Performance
My Portfolio Return 28.7%
S&P 500 Return: 4.2%
YTD Outperformance: 24.5%
Top 10 Stocks Weighting: 67.0%
# of Stocks in Portfolio: 41
My Philosophy
My investing philosophy is simple. I want to be invested in companies that are changing the world, even if it’s only their small piece of it. I look for companies with bold vision, commitment to excellence, a reasonable path to revenue growth, improving margins, and solid balance sheets. If a company also has an attractive valuation, I will start a larger position or add to an existing position.
My style is to start by dreaming big. I want to hear what management has to say, combine it with my own expectations, and imagine what any given company can become. Sometimes, the company does not have the requisite upside, and I move on to analyzing another opportunity. However, if it does pass this first stage, I begin poking holes into my dream. “What are all of the reasons that this vision might not come to fruition,” I ask myself. I then analyze the counter-points and determine whether I am willing to take on that risk in order to have a share in the upside that I envisioned.
Finally, after months and years, I reflect on my decisions. It is easy to become irrationally optimistic when you dream big and listen to management’s plans. I have found that the best way to combat this is to regularly assess my own decision making. That is what this post is for, an assessment of my decisions, style, and results. I cannot wait to hear your critiques and suggestions as well. Please share them with me. I will be very grateful to learn more from all of you.
If you want to learn more about my style, check out this post: Inaugural Letter to Investors.
Key Moves in 2020
Sold:
Bank of America (BAC)
General Electric (GE)
ZScaler (ZS)
BlackBerry (BB)
Bought:
MercadoLibre (MELI)
Acuity Ads (ACUIF)
Mohawk Group Holdings (MWK)
The Trade Desk (TTD)
Shopify (SHOP)
Teladoc (TDOC)
Fiverr (FVRR)
Review:
When the pandemic struck in early 2020, I did not panic. My portfolio lost about 30% of its value, but I took it as an opportunity to get great businesses at a discount. I made some good moves (selling BAC to buy TTD, SHOP, MELI, & APPN), and I made some bad moves (buying a REIT (SRG) in the midst of vast redevelopment projects days before country-wide shutdowns).
Traditionally, I had been focused on investing in large-cap companies with growth opportunities. For instance, Disney with Disney Plus, Apple and augmented reality, and GM and EV/AVs. This year, I began digging deeper into mid- and small-caps. I found that I was able to add some really exciting companies at attractive valuations by doing a bit of extra work sourcing ideas.
I do not consider my approach a barbell strategy in the strict sense. My large cap companies do not function as counter-weights to the return profile of my small caps, but rather my large caps provide a foundation off of which I can take big bets on exciting opportunities. In a market downturn, I expect that my positions would take a major hit (like the 30% drawdown last March). I do not have positions that are particularly counter-cyclical. I am comfortable with that possibility, though. When the next market pullback happens, I will look to opportunistically buy companies at a discount to their current valuations.
Looking Forward to 2021 and Beyond
A constant debate that I have with myself is whether I should be more concentrated. I currently have 41 equity positions, and I am a proponent of the David Gardner “Rule Breaker” approach. At its core, it takes advantage of the fact that stocks have unlimited upside and limited downside. A stock can only go down 100%, but it can go up much more than that. The approach suggests that if you make many investments, and a couple are multibaggers, it does not matter much what the rest of the portfolio does because those big winners will provide substantially all of the alpha in your portfolio. The more stocks you buy, the bigger the chance of hitting a multibagger. There is more nuance to the strategy, and I suggest that you check out all of David Gardner’s content because he is one of the best investors of all time.
I believe that the strategy works (it has been wonderful for me), but I am always tempted to get more concentrated for two reasons:
It is easier to be an expert on 5-12 stocks than 40 stocks.
Theoretically, there is more upside in a concentrated portfolio.
In regard to the first point, I have enjoyed really diving deep and knowing the ins and outs of a few stocks this past year. Namely, I have become very familiar with ACUIF and MWK in the last 12 months. As I look to add new stocks to my portfolio, I am seeking to become as expert in those as I am in MWK and ACUIF. Concentration would help me to better understand each of my positions and hopefully be able to better react to trends and understand the macro-economic effects on each of my positions.
Turning to the second point of increased upside potential, it is tempting. A 10-stock portfolio of my best performing picks would have returned over 300% last year, a significant increase from my actual performance. I see that as an unrealistic comparison, however. If I had had to pick 10 stocks at the beginning of the year, probably only 5 of the 10 best performers would have made the cut. Would this have still outperformed my 40-stock portfolio? Possibly, but I am not confident that it would have. It is hard to pick the best performers in any given year, which is why I traditionally hold stocks for years at a time.
In 2021, I am expecting to stay diversified but that my top 10 positions will become an increasingly large proportion of my portfolio. I think that this is a happy medium for me. I can keep a closer eye on the top 10 and still have the upside potential from the rest of my portfolio. It would not surprise me if my top 10 became 80% or even more of my portfolio this year.
I will continue to analyze this question, and I would really appreciate your input. Please comment below or tweet me your thoughts on diversification vs. concentration. If nothing else, I hope that I have proven that diversification does not necessarily mean that your returns will match an index fund.
Positions
One of the things that I think is important in portfolio management is boiling down all of your research to a one-liner describing the thesis. Especially when you have a lot of positions, as I do, it is very helpful to have a clear thesis. The one-line theses make it easier to analyze developments and make decisions about your portfolio when you cannot devote hours of research to each position each week.
In this section, I will list the portfolio weighting, one-line thesis, first buy date, first buy price, current price, and cumulative return for each position in my portfolio. I am doing this to share a model of my philosophy as well as open up my portfolio for criticism and debate. One of the most important traits that we can have as investors is the ability to think critically about our investments without getting emotional about them. I am an optimist, and I recognize that I constantly need to hear counter-arguments in order to keep me grounded. So please, bring on the debate. I will be very grateful.
Acuity Ads (ACUIF)
Weight: 22%
One-liner: Potentially industry-changing product in ad tech at an attractive valuation.
Initial Buy Date: 7/10/20
Initial Buy Price: $1.03
Current Price: $25.60
Cumulative Return: 1078%
Apple (AAPL)
Weight: 8%
One-liner: Proven leadership with loyal users, an unrivaled consumer ecosystem, lots of cash, and nearly endless optionality.
Initial Buy Date: 12/17/18
Initial Buy Price (split-adjusted): $41.85
Current Price: $129.87
Cumulative Return: 225%
Mohawk Group Holdings (MWK)
Weight: 6%
One-liner: Simple business model, good unit economics, and a huge opportunity to consolidate the third-party seller market.
Initial Buy Date: 12/17/20
Initial Buy Price: $11.95
Current Price: $43.45
Cumulative Return: 126%
PayPal (PYPL)
Weight: 6%
One-liner: The worldwide leader in digital payments in an increasingly cashless society.
Initial Buy Date: 10/27/17
Initial Buy Price: $71.47
Current Price: $286.92
Cumulative Return: 240%
Paycom (PAYC)
Weight: 5%
One-liner: An innovative company taking market share from passive incumbents in the ever-present HR management industry.
Initial Buy Date: 10/27/17
Initial Buy Price: $81.95
Current Price: $400.13
Cumulative Return: 214%
Square (SQ)
Weight: 5%
One-liner: The bank of the 21st century.
Initial Buy Date: 12/17/2018
Initial Buy Price: $60.75
Current Price: $276.57
Cumulative Return: 355%
Amazon (AMZN)
Weight: 5%
One-liner: Quite possibly the best business in the world with no sign of slowing down and nearly endless optionality.
Initial Buy Date: 12/17/18
Initial Buy Price: $1,563.45
Current Price: $3,249.90
Cumulative Return: 112%
Nvidia (NVDA)
Weight: 5%
One-liner: The technology powering the world’s innovation.
Initial Buy Date: 12/28/18
Initial Buy Price: $134.38
Current Price: $597.06
Cumulative Return: 344%
Disney (DIS)
Weight: 3%
One-liner: The best content company in the world with a proven ecosystem for monetizing content (especially excited by Disney+ being added).
Initial Buy Date: 10/27/17
Initial Buy Price: $98.89
Current Price: $183.65
Cumulative Return: 65%
Tesla (TSLA)
Weight: 3%
One-liner: The early leader in AV/EVs with a fanatical following and a huge market opportunity.
Initial Buy Date: 5/24/19
Initial Buy Price (split-adjusted): $38.20
Current Price: $781.30
Cumulative Return: 876%
Teladoc Health (TDOC)
Weight: 3%
One-liner: The early leader in the digital healthcare industry which will become increasingly important in the near future.
Initial Buy Date: 10/9/19
Initial Buy Price: $68.06
Current Price: $292.51
Cumulative Return: 66%
Stitch Fix (SFIX)
Weight: 3%
One-liner: A retailer incorporating AI into the apparel industry to help automate shopping (I cannot wait until nearly all shopping is automated).
Initial Buy Date: 12/17/18
Initial Buy Price: $19.20
Current Price: $79.62
Cumulative Return: 315%
Shopify (SHOP)
Weight: 3%
One-liner: A company making it easy for people to be entrepreneurs and capitalizing on the e-commerce trend.
Initial Buy Date: 3/16/20
Initial Buy Price: $340.48
Current Price: $1,435.01
Cumulative Return: 105%
Zoom Video (ZM)
Weight: 3%
One-liner: A company with a great leader and potential to be the virtual office provider going forward.
Initial Buy Date: 6/14/19
Initial Buy Price: $101.34
Current Price: $417.26
Cumulative Return: 350%
MercadoLibre (MELI)
Weight: 2%
One-liner: The major player in Latin American e-commerce that understands the culture, has built the necessary infrastructure, and has a rapidly growing payments business.
Initial Buy Date: 3/16/20
Initial Buy Price: $471.49
Current Price: $1,910.39
Cumulative Return: 86%
General Motors (GM)
Weight: 2%
One-liner: An expertise in making, distributing, and maintaining cars with ambitious AV/EV plans at an attractive valuation.
Initial Buy Date: 10/10/17
Initial Buy Price: $45.58
Current Price: $52.57
Cumulative Return: 45%
Fiverr (FVRR)
Weight: 2%
One-liner: A company at the center of the gig-economy revolution with an intuitive platform.
Initial Buy Date: 11/12/20
Initial Buy Price: $163.92
Current Price: $318.70
Cumulative Return: 94%
Appian (APPN)
Weight: 2%
One-liner: A leader in low-code, helping businesses create useful applications in very little time.
Initial Buy Date: 7/5/18
Initial Buy Price: $31.60
Current Price: $203.86
Cumulative Return: 394%
Home Depot (HD)
Weight: 1%
One-liner: An incredibly consistent business that knows its customers and has the tailwind of aging US housing inventory.
Initial Buy Date: 12/17/18
Initial Buy Price: $171.22
Current Price: $279.64
Cumulative Return: 63%
Activision Blizzard (ATVI)
Weight: 1%
One-liner: A top gaming company at the beginning of a massive new industry (e-sports).
Initial Buy Date: 12/17/18
Initial Buy Price: $47.86
Current Price: $100.80
Cumulative Return: 111%
Walmart (WMT)
Weight: 1%
One-liner: One of the only retailers that can compete with Amazon with the competitive advantage of a broad network of stores (distribution centers).
Initial Buy Date: 1/3/17
Initial Buy Price: $70.12
Current Price: $138.34
Cumulative Return: 63%
Nano-X Imaging (NNOX)
Weight: 1%
One-liner: A potentially transformational x-ray replacement with an intriguing “imaging as a service” model.
Initial Buy Date: 8/27/20
Initial Buy Price: $25.05
Current Price: $56.85
Cumulative Return: 127%
Sea Limited (SE)
Weight: 1%
One-liner: An impressive SE Asian e-commerce company with high aspirations generating FCF from its gaming business.
Initial Buy Date: 9/4/20
Initial Buy Price: $139.01
Current Price: $280.00
Cumulative Return: 95%
Izea Worldwide (IZEA)
Weight: 1%
One-liner: A pure-play in the influencer marketing industry with plenty of potential.
Initial Buy Date: 1/19/21
Initial Buy Price: $4.04
Current Price: $5.11
Cumulative Return: (15%)
Intuitive Surgical (ISRG)
Weight: <1%
One-liner: A leader in robotic surgery with the tailwind of pent-up demand for elective surgeries.
Initial Buy Date: 12/17/18
Initial Buy Price: $487.11
Current Price: $750.15
Cumulative Return: 54%
Markel (MKL)
Weight: <1%
One-liner: Baby Berkshire using cash to fund investments in public markets and venture opportunities.
Initial Buy Date: 1/23/19
Initial Buy Price: $1,041.65
Current Price: $1,091.18
Cumulative Return: 5%
Lightspeed (LSPD)
Weight: <1%
One-liner: POS software and business solutions for specific segments of retailers following the Square model at a fraction of the size.
Initial Buy Date: 11/12/20
Initial Buy Price: $38.94
Current Price: $77.50
Cumulative Return: 99%
The Trade Desk (TTD)
Weight: <1%
One-liner: The leader in DSP ad tech capitalizing on the major shift toward digital advertising and connected TV.
Initial Buy Date: 3/16/20
Initial Buy Price: $167.32
Current Price: $903.35
Cumulative Return: 323%
Docusign (DOCU)
Weight: <1%
One-liner: A history of execution in the digital agreement space in an industry that will surely grow over the next 10 years.
Initial Buy Date: 10/9/19
Initial Buy Price: $67.38
Current Price: $265.16
Cumulative Return: 230%
Okta (OKTA)
Weight: <1%
One-liner: The leader in cloud digital-identity management with opportunities to expand into DTC offerings.
Initial Buy Date: 8/27/20
Initial Buy Price: $222.49
Current Price: $288.36
Cumulative Return: 30%
ZScaler (ZS)
Weight: <1%
One-liner: A leader in enterprise cloud security with an impressive track record.
Initial Buy Date: 12/17/18
Initial Buy Price: $38.82
Current Price: $226.03
Cumulative Return: 482%
Jumia (JMIA)
Weight: <1%
One-liner: An African e-commerce platform with a head start in a difficult-to-enter market.
Initial Buy Date: 8/11/20
Initial Buy Price: $17.29
Current Price: $55.92
Cumulative Return: 223%
Datadog (DDOG)
Weight: <1%
One-liner: A SaaS provider of IT monitoring software executing on a land and expand model with an extremely sticky product.
Initial Buy Date: 6/24/20
Initial Buy Price: $88.76
Current Price: $105.05
Cumulative Return: 19%
1847 Goedeker’s (GOED)
Weight: <1%
One-liner: An e-commerce play on the appliance market (hard to execute) with big goals over the next 3 years.
Initial Buy Date: 2/16/21
Initial Buy Price: $12.70
Current Price: $13.43
Cumulative Return: 6%
BlackLine (BL)
Weight: <1%
One-liner: The software provider for the CFO office with a talented management team, impressive customer value prop, and important relationship with SAP.
Initial Buy Date: 7/10/20
Initial Buy Price: $87.10
Current Price: $132.06
Cumulative Return: 65%
Pinterest (PINS)
Weight: <1%
One-liner: A fast-growing social platform where ads improve the customer experience.
Initial Buy Date: 4/22/19
Initial Buy Price: $24.44
Current Price: $85.90
Cumulative Return: 222%
Twilio (TWLO)
Weight: <1%
One-liner: A usage-based SaaS company providing the communication infrastructure for the world’s applications.
Initial Buy Date: 12/19/19
Initial Buy Price: $98.33
Current Price: $425.55
Cumulative Return: 333%
Crisper Therapeutics (CRSP)
Weight: <1%
One-liner: A leading gene-editing company as we are on the precipice of revolutionary medical breakthroughs.
Initial Buy Date: 12/19/19
Initial Buy Price: $65.39
Current Price: $148.98
Cumulative Return: 148%
KB Home (KBH)
Weight: <1%
One-liner: A homebuilder with outstanding customer satisfaction and a build-to-order model at the beginning of a return to the suburbs.
Initial Buy Date: 8/11/20
Initial Buy Price: $36.44
Current Price: $42.37
Cumulative Return: 18%
Fastly (FSLY)
Weight: <1%
One-liner: One of two companies at the cutting-edge of edge computing.
Initial Buy Date: 9/4/20
Initial Buy Price: $77.63
Current Price: $80.68
Cumulative Return: 5%
Seritage Growth Properties (SRG)
Weight: <1%
One-liner: A REIT focused on the redevelopment of former Sears properties seeking to quadruple average rent.
Initial Buy Date: 3/2/20
Initial Buy Price: $34.00
Current Price: $17.94
Cumulative Return: (19%)
Derivative Positions
The weightings listed above do not include my derivative positions.
Long Via Calls:
JMIA
PINS
CRM
Thank You
If you somehow made it to the end of this post, I thank you. Like I said, please give your feedback. I am constantly looking to improve so any thoughts that you have would be much appreciated. I hope your 2021 is off to a great start!
Thanks for sharing. Trying to educate myself in the very sort of investing you are describing. It seems that though most of the stocks are at much higher share prices then when you entered, since you are still holding them, you think they are still a good buy at current prices? Tryings as much as possible to buy dips?