PORTFOLIO PERFORMANCE
| DATE | GR Portfolio (YTD) | S&P500 Total Return (YTD) |
|---|---|---|
| Jan | +25.7% | 0.0% |
| Feb | +27.7% | -8.3% |
| Mar | -2.9% | -19.6% |
| Apr | +16.7% | -9.3% |
| May | +64.7% | -5.0% |
| Jun | +110.3% | -3.1% |
| Jul | +144.7% | +2.4% |
| Aug | +144.3% | +9.7% |
| Sep | +187.0% | +5.6% |
| Oct | +172.6% | +2.8% |
Overall, the portfolio is down 5.0% in the month of October, but as you will see below, October was anything but a smooth ride. The portfolio hit 6 all-time highs in the first half of the month (September only had 2 all-time highs). The peak was on October 13th with a YTD return of +250.3%. The difference between +250.3% seems like a BIG difference between the current +172.6%. The portfolio is actually currently down 22.2% from the October 13th peak. Looking back at previous portfolio declines, we can see that declines happen occasionally:
| PEAK — BOTTOM | % DROP |
|---|---|
| 4Sep2018 – 24Dec2018 | -37% |
| 26Jul2019 – 22Oct2019 | -37% |
| 18Feb2020 – 16Mar2020 | -45% |
I am always prepared for a 50% portfolio decline, but I also always expect a rebound at some point. When I look back at these past declines, I can say the following.
- In August 2018, my portfolio had many up days; it was showing monster rallies on many days leading into early Sept 2018.
- From early May 2019 until the peak on July 26, 2019, the portfolio had 21 days of all-time highs.
- The portfolio hit an intraday all-time high (but not a closing ATH) on Feb 18, 2020, and leading up to that day, the portfolio had 10 straight weeks of positive returns. But not an 11th week in a row.
- The portfolio had 6 all-time highs in the first half of October 2020 and 10 weeks in a row of portfolio gains (but not an 11th week).
So each of the big portfolio declines had strong runups leading into the declines. So where are we now in the current decline. It’s been about 2.5 weeks of decline. It’s down 22.2%, and the max decline in the past 3 years has been 45%. Sure, it could drop more. We also have a lot of uncertainty going into next week. Some of the uncertainty will be gone in a week. We also have historically low interest rates and promised monetary support should businesses, which are the engine of the global economy, need support to continue their operations. These backstops limit the long term downside risks. Also, eventually the pandemic will be over and in hindsight it will be a blip. So long term things look just fine. The digital transformation will continue on and it is well less than half of the way complete. The transition to the cloud is also still relatively early in its life. So tailwinds for our companies are still very much intact. Perhaps some or most are overvalued or perhaps these valuations are well deserved; we don’t know which it is for sure, but what we do know is that these companies are continuing their hypergrowth. Therefore, their stock prices will generally be much higher in the long run. So when our portfolios are sinking, we must remember that such declines come with the territory of being invested in these companies that are taking over the world.
Below I’ve appended new portfolio highs onto the table that I posted in my last update. The entries from 02/18/20 through 09/22/20 are reposted and the entries after 09/22/20 (bolded) are new.
| DATE | YTD RETURN | NOTES |
|---|---|---|
| 2/18/20 | +40.7% | YTD high prior to lockdowns |
| 3/6/20 | +21.9% | portfolio down 10% on the day |
| 3/9/20 | +3.6% | portfolio down 15% on the day; Fear index=3 |
| 3/11/20 | +0.6% | portfolio down 8.8% on the day; Fear index=4 |
| 3/12/20 | -11.0% | portfolio down 11.4% on the day; Fear index=2 (1 intraday) |
| 3/16/20 | -22.8% | portfolio down 18.9% on the day; Fear index=3 |
| 5/22/20 | +61.0% | new all-time high (ATH) |
| 5/27/20 | +47.5% | portfolio dropped 15% (intraday 5/27) in 3 trading days |
| 5/29/20 | +64.7% | new ATH (end of May 2020) |
| 6/3/20 | +78.8% | another ATH; day after CRWD and ZM earnings |
| 6/10/20 | +79.4% | another ATH |
| 6/15/20 | +84.6% | another ATH |
| 6/16/20 | +89.4% | another ATH |
| 6/17/20 | +92.1% | another ATH |
| 6/18/20 | +101.7% | another ATH |
| 6/19/20 | +103.3% | another ATH |
| 6/22/20 | +111.4% | another ATH |
| 6/25/20 | +114.6% | another ATH |
| 7/1/20 | +119.7% | another ATH |
| 7/2/20 | +121.4% | another ATH |
| 7/7/20 | +125.7% | another ATH |
| 7/8/20 | +139.9% | another ATH |
| 7/9/20 | +147.0% | another ATH |
| 7/13/20 | +118.6% | portfolio down 10.5% on the day (biggest $ drop ever) |
| 7/16/20 | +113.1% | July trough |
| 8/3/20 | +156.9% | another ATH |
| 8/4/20 | +158.7% | another ATH |
| 8/5/20 | +158.8% | another ATH |
| 8/7/20 | +108.3% | OUCH! Biggest dollar drop ever (and -19.5% in 2 days!) |
| 8/11/20 | +94.6% | August trough |
| 9/1/20 | +177.9% | another ATH (day after ZM reported) |
| 9/22/20 | +187.1% | another ATH |
| 9/24/20 | +169.5% | trough |
| 10/1/20 | +196.6% | another ATH |
| 10/5/20 | +200.7% | another ATH |
| 10/7/20 | +209.3% | another ATH |
| 10/9/20 | +223.0% | another ATH |
| 10/12/20 | +234.8% | another ATH |
| 10/13/20 | +250.3% | another ATH (portfolio peak) |
Weekly Portfolio Performance
| DATE | GauchoRico YTD | S&P500 TOTAL RETURN YTD | DELTA |
|---|---|---|---|
| 1/3/20 | 4.5% | 0.1% | 4.4% |
| 1/10/20 | 14.8% | 1.1% | 13.7% |
| 1/17/20 | 19.6% | 3.1% | 16.5% |
| 1/24/20 | 22.1% | 2.1% | 20.0% |
| 1/31/20 | 25.7% | 0.0% | 25.8% |
| 2/7/20 | 28.1% | 3.2% | 25.0% |
| 2/14/20 | 39.8% | 4.9% | 34.9% |
| 2/21/20 | 29.1% | 3.6% | 25.5% |
| 2/28/20 | 27.7% | -8.3% | 35.9% |
| 3/6/20 | 21.9% | -7.7% | 29.5% |
| 3/13/20 | -4.8% | -15.7% | 10.9% |
| 3/20/20 | -6.8% | -28.3% | 21.6% |
| 3/27/20 | -2.4% | -21.0% | 18.5% |
| 4/3/20 | -12.5% | -22.6% | 10.0% |
| 4/10/20 | 3.1% | -13.2% | 16.2% |
| 4/17/20 | 18.7% | -10.5% | 29.2% |
| 4/24/20 | 20.5% | -11.7% | 32.1% |
| 5/1/20 | 13.8% | -11.8% | 25.6% |
| 5/8/20 | 37.7% | -8.7% | 46.4% |
| 5/15/20 | 47.8% | -10.7% | 58.5% |
| 5/22/20 | 61.0% | 7.8% | 68.8% |
| 5/29/20 | 64.7% | -5.0% | 69.7% |
| 6/5/12 | 67.4% | -0.3% | 67.7% |
| 6/12/20 | 74.8% | -5.0% | 79.8% |
| 6/19/20 | 103.3% | -3.2% | 106.5% |
| 6/26/20 | 107.8% | -6.0% | 113.7% |
| 7/2/20 | 121.4% | 2.1% | 123.5% |
| 7/10/20 | 144.2% | -0.4% | 144.6% |
| 7/17/20 | 115.4% | 0.9% | 114.5% |
| 7/24/20 | 113.2% | 0.6% | 113.6% |
| 7/31/20 | 144.7% | 2.4% | 142.3% |
| 8/7/20 | 108.3% | 4.9% | 103.3% |
| 8/14/20 | 102.9% | 5.7% | 97.3% |
| 8/21/20 | 124.4% | 6.5% | 118.0% |
| 8/28/20 | 135.5% | 10.0% | 125.6% |
| 9/4/20 | 142.9% | 7.5% | 135.4% |
| 9/11/20 | 143.6% | 4.8% | 138.8% |
| 9/18/20 | 161.7% | 4.2% | 157.5% |
| 9/25/20 | 181.0% | 3.5% | 177.4% |
| 10/2/20 | 192.0% | 5.1% | 186.9% |
| 10/9/20 | 223.0% | 9.2% | 213.8% |
| 10/16/20 | 230.7% | 9.4% | 221.3% |
| 10/23/20 | 204.8% | 8.9% | 195.9% |
| 10/30/20 | 172.6% | 2.8% | 169.8% |
ALLOCATIONS
| Ticker | 10/31/20 | 9/30/20 |
|---|---|---|
| ZM | 23.0% | 22.2% |
| CRWD | 20.4% | 22.3% |
| NET | 14.6% | 10.5% |
| DDOG | 12.6% | 17.8% |
| PTON | 11.6% | 4.7% |
| DOCU | 9.6% | — |
| GOLD | 4.4% | 4.4% |
| NEM | 2.7% | 2.6% |
| BPRMF | 1.5% | 1.2% |
| FSLY | — | 14.5% |
| Cash | 6.1% | 2.7% |
The above allocations include leaps on CRWD and NET. I won’t get into the details of the breakdown of options versus shares, but these options amplify the upside and the downside of the positions.
PORTFOLIO CHANGES
Changes during the month of October 2020
- I sold all of my FSLY shares and the FSLY leaps.
- I added significantly to my PTON position.
- I opened a new and fairly large position in DOCU.
- I sold about 20% of my DDOG position.
- Cash increased because all of the proceeds from the FSLY sale were not reinvested. 2% of the cash will be used to make an estimated tax payment in January 2021. Part of the cash increase is from selling options (collected premiums on short puts). Overall, while it appears that I have a large cash (plus GOLD and NEM which I consider a proxy for cash), the portfolio currently has a moderate amount of leverage due to short put positions which were mostly added during the past week.
EARNINGS IS UPON US
Earnings dates are below:
| Ticker | Date | Top of Guidance |
|---|---|---|
| NEM | 10/29 | increase dividend by 60%!! |
| NET | 11/5 | 40.0% growth |
| PTON | 11/5 | 220.2% growth |
| GOLD | 11/5 | |
| DDOG | 11/10 | 51.3% growth |
| CRWD | 12/3(E) | 71.8% growth |
| DOCU | 12/3(E) | 45.1% groth |
| ZM | 12/3(E) | 314.2% growth |
| BPRMF | H2 earnings release not expected until late January |
The earnings release dates for CRWD, DOCU, and ZM have not yet been announced. The dates are my estimates based on their historical reporting dates.
I sometimes like to make bets on some of my stocks as we approach earnings release dates. I have already made bets on ZM, CRWD, PTON, and DOCU (in order of the size of the bets). The PTON bets may fail to be profitable because we are currently in the midst of a market downdraft which may be difficult to overcome. The reason I made bets on these four companies is because I believe that the market is underestimating the next earnings results; this is just my personal opinion.
ADDITIONAL THOUGHTS
The short term may seem uncertain. The long term seems much more certain. This past week we had all three of the cloud titans report their calendar Q3 results. MSFT, AMZN, and GOOG all reported stable sequential growth in their cloud businesses. Azure grew 48%, AWS grew 29%, and GCP grew 45%. Not bad but less than I had hoped for. There may have been a further pause and belt tightening in cloud spending during Q3. This has me a little worried about DDOG and I wonder whether cross selling and customer adds can overcome a lack of cloud transformation acceleration. We have also had some other SaaS companies report results. ZEN had a good result and the stock price increased on a big down day. TEAM had a good result but the stock price dropped 9% after the report (albeit on a big down day for the sector). I think expectations for great results for the SaaS companies are quite high. Perhaps even a good result will cause a stock price drop. Perhaps by the time CRWD, DOCU, and ZM report results in early December the market and sector sentiment may have changed.