End of Month Portfolio Update: August
Updates on several moves from a busy month
Disclaimer: the content within should not be misconstrued as financial advice. Please do your own due diligence before purchasing any equities discussed in this article.
Growth Portfolio - September 1st, 2022
Activity - Buys / Sells
August proved to be a bit more active than previous months. I ended up selling a couple smaller positions (Nvidia and Sea) and liquidating what was previously a sizable position (Unity).
With Sea SE 0.00%↑, I was never comfortable with the geopolitical forces that are constantly at play with this company. It could turn out to be a non-issue, but SE Asia is not part of the world I want to have individual exposure to. The other concern with Sea is that their path to profitability continues to be mirky. With Garena’s growth slowing significantly, it brings into question how the company’s other two branches are going to continue to grow as Garena has historically funded the unprofitable ventures. I’ll keep an eye on this from afar, but there are just too many factors at play that make me uncomfortable as a shareholder.
The story with Nvidia NVDA 0.00%↑ is a bit different, as I don’t really have any concerns about the business. I sold my small position to raise some cash to cover some upcoming personal expenses. I’ve also said this before, but I don’t want to overweight this portfolio with mature companies, so this sale was strategic in nature.
I also ended up selling Unity U 0.00%↑, which was a much more significant move in terms of the overall portfolio. This is a company I was very excited about, and I still am, to an extent. Unfortunately, I have seen so many red flags that I can’t continue to be a shareholder. CEO John Riccitiello called developers idiots for not considering monetization early on in the app development process. I was willing to overlook this as it seemed like a fiery CEO expressing passion in a bizarre way, but his comments came on the heels of some significant business weaknesses. One of the issues Unity has faced is helping users monetize their apps. Riccitiello’s comments aimed at developers are almost a deflection from the company’s inability to create a successful monetization system. While Unity did address these problems with the acquisition of ironSource IS 0.00%↑, it is concerning that they were unable to solve this problem internally. Two things I want to see from Unity before I consider reinvesting:
New CEO. Most of the concerns I’ve discussed boil down to management decisions.
How does ironSource acquisition play out? I am actually encouraged by the potential here, but I would prefer to watch from the sidelines for now.
All of these sales also present an opportunity to reevaluate exposure to the gaming industry. This is not necessarily by design, but of the three companies discussed, I still feel that Unity presents the best long-term opportunity. Despite all their problems, I am still keeping an extremely close eye on this company.
Now let’s take a look at how I am ranking each position. I have split the previous “Top” tier into “Elite” and “Upper” tiers. I realized that the previous top tier contained too many names that were frankly in entirely different leagues, so I have added a new tier to distinguish the companies that I think are the best of breed. My strategy for adding to these two tiers remains the same, but the upper tier companies generally have more concerns I am keeping an eye on.
Elite Tier
Airbnb - ABNB 0.00%↑
Crowdstrike - CRWD 0.00%↑
Datadog - DDOG 0.00%↑
Google - GOOG 0.00%↑
Paycom - PAYC 0.00%↑
ServiceNow - NOW 0.00%↑
Snowflake - SNOW 0.00%↑
Tesla - TSLA 0.00%↑
The Trade Desk - TTD 0.00%↑
Zscaler - ZS 0.00%↑
Upper Tier
Axon - AXON 0.00%↑
Confluent - CFLT 0.00%↑
D-Local - DLO 0.00%↑
Elastic - ESTC 0.00%↑
Global-e - GLBE 0.00%↑
Hubspot - HUBS 0.00%↑
MongoDB - MDB 0.00%↑
Pubmatic - PUBM 0.00%↑
SoFi - SOFI 0.00%↑
Stem - STEM 0.00%↑
Stem is a new position I initiated early this month. It is an extremely small position at the moment, but I feel that the potential for this company is enormous. You can read my full review of stem here.
Veeva - VEEV 0.00%↑
ZoomInfo - ZI 0.00%↑
Middle Tier
Olo - OLO 0.00%↑
Olo reported a disappointing quarter, with the loss of Subway and low location growth (11%). Part of this could certainly be macro-related, as restaurant orders have been impacted by economic conditions. Restaurants may not prioritize signing up for Olo as they don’t exactly provide a mission-critical service. A necessary and efficient service, absolutely. But this may be a case of restaurants holding off until things improve in the economic landscape. I’m still excited about the market opportunity, but it does seem that Olo will be one company hampered by a recession as they have a usage-based revenue stream in addition to the primary subscription offering.
monday.com - MNDY 0.00%↑
No changes here. I’m just sitting on my position and nibbling a bit. I love the company and what they could be, but there is a lot of speculation going into my thesis for monday.com.
Shopify - SHOP 0.00%↑
Nothing new from last month’s update. I’ll nibble here and there as the market allows, but my confidence in Shopify isn’t what it was a year ago.
Twilio - TWLO 0.00%↑
The story here continues to be the high stock-based compensation and profitability promises. Management basically promised profitability at all costs, which isn’t the most comforting thing to hear. Jeff Lawson has proven himself to be a competent CEO, so I’m still on board. I’m not adding aggressively, but if the price drops much lower I may have to add simply because of the opportunity it presents as the business itself is in good shape and revenue growth is still strong.
Lower Tier
GoodRx - GDRX 0.00%↑
The good news here is that the PBM situation was resolved this quarter, so that’s a step in the right direction. This situation did call into question the company’s bread and butter - providing prescription discounts to customers. Of all the companies I own, I have somewhat of an emotion attachment to GoodRx. They are providing a much-needed service in an industry riddled with ethical problems. I will probably ride this position to the bitter end, but I am not adding until the business gets back on its feet.
Watchlist and Plans for September
While I am always on the lookout for outstanding companies to add to my portfolio, I plan to spend extra cash beefing up my strongest positions this months. TTD 0.00%↑ is already a pretty sizable position after a huge post-earnings move, so I won't be adding to that despite the fact that this is one of my highest conviction holdings. I will mainly be focusing on the following names:
I’m not aggressively looking to add new companies, but here’s the short list if I were to initiate new positions:
That’s it for August. September is historically a brutal month for short-term investors, but it may provide some great opportunities to deploy some cash.