It’s been too long since we updated our model portfolio (February 2020) but the performance has been good thanks to continued market strength. (During this time though we have been very active in our StockTwits room with shorter-term ideas and adjustments.)

In order to provide more regular updates, we’ve created a Google Sheet that summarizes the current list and gives us an easy way to share more information. The links are below. Please don’t share them since they are for subscribers only.

Rather than so a major overhaul, we’re going to hit a few key themes within the portfolio and introduce some more.

Since our last note in February the average gain for the group is 64% (versus +2% for the S&P and 51% for the Renaissance IPO Index).

Many names in our portfolio like Twilio (TWLO), Livongo (now TDOC) have been there since their IPO debut and are up multi-fold since they were originally added to the model portfolio.

There have been some disappointments as well which revisit here.

Portfolio Change Summary:

New Themes: Home Sweet Home, Gaming, Electrification

Theme Updates: HealthTech, Modern Consumer

New Names: U, FTCH, REAL, W, ONEM, RKT, FTHM

Removing: WORK, ZUO, LEVI

Here is a link to the February 2020 portfolio.

Here is a link to the November 2020 portfolio.

Comments:

We are removing Slack (WORK) which we had reservations on when it was added.  This couldn’t be a better environment for Slack – just look at Zoom (ZM). There is tremendous growth in personal productivity tools and communication methods but Slack seems like they remain in a niche rather than expanding into the broader market. We’ll be looking at some of the other productivity names for better opportunities.

Zuora (ZUO) was a turnaround in SaaS that just hasn’t been able to manage their way out of their past mistakes. If we had confidence with the team we’d stick with it but the visibility there is limited. We’re ditching Levi’s (LEVI) in favor of other players in the “Modern Consumer” theme – namely FarFetch (FTCH) and TheRealReal (REAL).

Both FTCH and REAL benefit from two trends in the Modern Consumer theme – one is E-Commerce which is gaining share everywhere and the major brands know it. That’s why they are turning to these companies. Gucci inked a deal with TheRealReal and FarFetch has been working with the major fashion companies from the start. You can read our original post here: The FarFetched IPO.

Another name we’re adding here is Wayfair (W). This is a name we have written on in the past and had our doubts about their business model. Chewy (CHWY) has certainly been kind to us and it remains in the portfolio. One thing that has become clearer in the shift to online – Amazon (AMZN) isn’t going to win everything. So good opportunities do exist in markets like furniture, pets, and fashion. Our posts on Wayfair are dated and need an update. Wayfair IPO: Aspiring To Be The Amazon Of Home Furnishings and also The Wayfair Battleground.

We’re adding Home Sweet Home to our list of investment themes. It’s always been a large market but the pandemic has heightened interest and activity in this sector. Clearly this is another tailwind for Wayfair which helped push it onto our list. We’ll be taking a closer look at Porch.com which is coming public via SPAC (PTAC) and also Opendoor also coming public via SPAC (IPOB).

Rocket Companies (RKT) is in the mortgage business but they have certainly worked hard to leverage technology in their business. Since it’s not as “pure” a technology company as Lemonade (LMND) it trades at a reasonable valuation. They are in a position to continue to gain market share and add to their product line over time to increase margins.

Another name joining this theme is Fathom Realty (FTHM). We’ve written a fairly extensive note on this one which you can read here: Fathoming Online Real Estate (FTHM). Fathom was a small under-the-radar IPO so it’s one of the smaller-cap names on the list. But we think their model is a winner and this real estate market provides a tailwind.

We’re adding OneMedical (ONEM) to our HealthTech theme. We’re in the early stages of a major shift in how primary care and medical services are delivered. That’s why we are sticking with Livongo/Teledoc (TDOC) here. OneMedical has one of the best platforms and is building a good network. There are a few of these and we expect to see more innovation here. You can read more about OneMedical here: One Medical and the membership model of delivering primary care.

Gaming is an area we’ve been remiss in for some time. Part of the reason is that I don’t really play games as most people do so it’s harder to appreciate how pervasive and important this area is. Two names are being added here. Since it’s hard to judge which games will be successful we went with two infrastructure providers. The gorilla in the space is Unity Software (U) which recently came public. Their gaming engine is leagues ahead of any other independent options and developers rely on their platform. A less well-known name in this is Agora (API) which looks somewhat like a Twilio (TWLO) but whose services are skewed to real-time video and talking which is common to many emerging gaming models. They are also focused on Asia so that buys us some geographical diversification.

We’re not done with these updates and plan another full update before the end of the year to be well-positioned for 2021. That’s why we’re adding Electrification as a theme even though we’re not putting any names into the portfolio just yet. There has been a wave of new companies coming into the public markets both regular way and via SPAC so that will take time to sort through.

We’re also re-parsing our whole software list with an eye to adding a few more names to cover more segments of that market. It’s difficult with valuations where they are but we’re going to have to add a few names despite that.

 

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1 Comment

  1. Yernur on 11/08/2020 at 10:49 am

    Thank you very much. This is very useful!

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