TLDR; 12 kept, 12 eliminated – Keeping SDGR, SWAV, GSHD, WK, HUBS, ARLO, AVLR, U, API, TWLO, DOCU, FTHM and eliminating FVRR, MRNA, PINS, TDOC, SFIX, SVMK, PLAN, ONEM, CDLX, RKT, TMDX, W
Twilio (TWLO) – This is one of our longest holdings. In 2017 we published Time to Buy Twilio and never looked back. It’s been a steady performer and given the role online communication infrastructure plays we want to continue to own the company that “reduces all that complexity to a simple API call.”
Schrodinger (SDGR) – One of our “real biotech” names. At the time of their IPO, we wrote “This is one of the most interesting companies we’ve seen coming public in years.” You can see our original post here.
DocuSign (DOCU) – Competition and valuation remain a concern but that was true at the entry point at $86. The shares are now $200 but this is another “sticky” enterprise software name that will continue to benefit as more business processes move online.
Workiva (WK) – This is a niche software product for public companies who have to comply with myriad rules around compliance and governance. These rules will be expanding to capture more companies and also add to what the requirements are. Workiva has the wind at their back and if they are smart, they could expand into some adjacent markets.
Goosehead Insurance (GSHD) – Lots of companies are working on upgrading the insurance industry. There are some purer technology names out there like Lemonade (LMND) but I like the hybrid approach that Goosehead is taking. Success in this business is about more than technology – you need strong management, culture, and a plan too.
Avalara (AVLR) – This niche e-commerce software vendor remains a critical part in the “guts” of both online and offline transactions. There is competition and the shares are not inexpensive but we continue to like their positioning. You can read our original post here: The Astonishing Avalara.
Hubspot (HUBS) – Like Twilio this one has been around and in our portfolio for a long time. Think of this as Salesforce (CRM) for the little guy.
Arlo (ARLO) – One of our first “broken candy” names which was trading below net cash per share when it was added. It’s rebounded some but has much more opportunity to grow a bigger SaaS business as more consumers opt for their paid subscription plans. Our original post is here: Broken Candy: Arlo Technologies.
Shockwave Medical (SWAV) – This one was just too simple and promising not to add when we did. Using ultrasonic energy to treat vascular blockages is one of those things that seems so obvious once you learn about it. We are up about 300% so far.
Unity Software (U) and Agora (API) – These are relatively new names in the portfolio and they have gone nowhere so far. However, they fit very well into a major theme and more will be included in our “part two” coming tomorrow.
Fathom Realty (FTHM) – The real estate market in the US is transitioning from the crazy boom times to a more measured advance. The limits are mostly on the supply side and higher rates are making refinancing unattractive. Innovation is alive and well in the market though and it remains a major opportunity. Fathom is a small innovative company combining technology and a new business model to capture a segment of the market. I like the management team and see them continuing to be successful in this or any real estate market.
Fiverr (FVRR) – This has been a great stock for us – from $25 to $207 in a short period of time. They did something great by packaging freelance work into something much more like a product. Packaging services up into “solutions” is a proven tactic. The easy money has been made in this one.
Moderna (MRNA) – We added this just after their IPO because of their unique mRNA platform. Back then the situation was very different!
So why Moderna? They do have a kind of “platform” that attempts to kind of short-circuit gene therapy by directly manipulating cells with messenger RNA (MRNA). It’s controversial but they have many partnerships and a great management team. Although their drugs will require clinical trials they have a lot of them already, 21 active compounds. That helps to provide some level of risk management. We acknowledge that it’s yet to be proven that MRNA-based therapies can deliver on their promise.
Of course, at the time we could not even imagine what would happen vis a vis the COVID vaccine. The story is now completely different and I certainly don’t have an edge in the vaccine space. MRNA was just under $19 when it was added and now it’s $218. I think we have done well enough here.
Pinterest (PINS) – This one has been a long time coming. You can see our original write-up here – The Persistence of Pinterest. It took some time but with the shares up from $22 to $64 we will move on from this one.
SurveyMonkey (SVMK) – We were wrong on this one. It’s still very much undervalued but management has had lots of time to right the ship. Someone will acquire them. Our old post is here: Ask The Monkey. (Turns out I guess the monkey doesn’t know!)
StitchFix (SFIX) – I feel like we are lucky to get out of this one with a gain of over 100% from $27 to $64. The execution has been good and I’m pleased the recent quarter gave the shares another boost. However, I’ve had issues with their CEO. I worry about the model sowing the seeds of churn over time and the model is less attractive as we transition to a more “omnichannel” model between brands and consumers.
Rocket Companies (RKT) – This online mortgage provider is now one of many. Real estate is still healthy but unit volumes will decline just due to inventory. The easy demand from refinancing seems to be behind us as well. We are exiting this one flat.
Livongo (TDOC) – A big winner that got acquired. We should have sold right away but the telemedicine trend is strong. But the new management hasn’t been half as good as the team behind Livongo.
Anaplan (PLAN) – This one should have thrived and may yet as a kind of uber-supply-chain software solution. It had a good run but gave much of it back in the last few months. Our approach to this whole category of company will be different and this one probably won’t make the cut.
OneMedical (ONEM) – It’s been a decent performer but the space is more crowded now. Solutions and networks in the “on demand” primary care business make picking winners today harder. I expect they will get acquired but don’t want to wait around for it.
Wayfair (W) – I’m happy to walk away from this one with a decent return. They have executed well and the pandemic was clearly a positive for them. At this point the online furniture business just isn’t exciting enough to have this one around.
Transmedics (TMDX) – This is a MedTech play that has done reasonably well (up 46%) after suffering due to the pause in elective procedures due to COVID. Organ transplant is still interesting but this one is too niche for the portfolio.
Cardlytics (CDLX) – The shares have done well since the IPO. We got in a little late but are exiting with a modest gain. Working with traditional banks feels like it has limited their potential. You can read more here: Cardlytics gets banks into the online ad game.
We’ve seen lots of ebbs and flow so far this year. We’re not going to be chasing meme stocks but with them stealing lots of attention there should be good opportunities to add to our model portfolio this month in both IPO Candy and SPACvest.
Next week we will roll out parts 2, 3, and 4. I also found some tools to make sharing our Google Sheets easier so we can provide more spreadsheets and downloads.
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