April 2021 Review
The beautiful struggle...
Overview
April was a little better than March.
That really isn’t saying much after a grim Q1. Things are still a long way from portfolio ATH and still negative YTD, but also better than the rock bottoms of March. There is a semblance of recovery in some companies in my portfolio.
I’ve had 3 similar style drawdowns over the short 3.5 years I’ve been investing - Dec 2018, Q3-4 2019, March 2020, and now March 2021. It is never fun. I have however come to expect it as part of the territory.
So far, I would have had better 2021 returns by simply owning classic FAAMG - you have to respect the durability and growth of the classics…
Sharing the truth about my YTD prompted some ̶s̶m̶u̶g̶ ̶a̶n̶d̶ ̶a̶r̶r̶o̶g̶a̶n̶t̶ ̶interesting responses…
Investing is hard. No doubt about it. It’s hard for professionals too…
But what the poster above misses out on is that it is foolish for a retail investor to approach investing as a zero-sum game when the cost of collaboration is lower than it has ever been.
Sharing thoughts online is always going to attract some detractors. You need to believe that you can win over the long term for individual stock investing to be a worthwhile endeavour. The best way for me to optimise my chances is through a combination of patience, discipline, a willingness to learn, collaboration and luck.
Owning individual stocks is not a worthwhile endeavour for everyone. We are each wired so differently. I understand that my strategy comes with a dose of -35% volatility on a yearly basis and remain optimistic about the long term.
If you are going to do it, you also have to accept that there is no style that won’t underperform for a period of time in certain market conditions. The key is to understand the sort of investor that you are and make decisions that take that into account.
Portfolio Changes
Buys
Added to HAAC.
Sells
Closed my position in $AGC. I am interested in Grab, but I realised that I had been a little sloppy with my position management here.
I was interested in Altimeter’s SPAC, overpaid due to my enthusiasm and as a result, the sale of my holding was essentially neutral from a portfolio contribution POV. I consider it costless tuition that has sharpened my thinking on seeking asymmetry when starting new positions, including SPACs.
As a general rule, I don’t buy new listing companies - I like to see how they perform as public entities first.
The data we saw from Grab looks good, but a lot of what I consider key data was also missing from the presentation. I have a few questions about valuation vs growth, especially in comparison to $SE.
If I waited for true asymmetry at under $11, I could have had a useful amount of money to help accelerate the loan payoffs. A cost basis of near $13 was not good enough for me to feel confident holding in the near term. No loss of capital, and a small profit, but much more importantly a reminder of the importance of discipline in your investing process.
Current Portfolio Allocations via Google Sheets
Portfolio Philosophy
One notable downside to my loan-based strategy is that it is hard to build a substantial cash position to take advantage of selloffs. I have wanted to buy $SE for some time. As I mentioned about $AGC, cost basis is important to me even with a long term outlook. Buying right is important. The window when Sea dipped under $200 was short, and I didn’t have a sizeable cash position to be able to do what I wanted.
Similar feelings about $TMDX - I was interested at $25, but it is a different type of company to what I usually invest in, has a small revenue base at the moment, and has been extremely volatile, so buying right would be important.
I’ve said before that at this stage, the debt has done the majority of its job - it’s now my job to get rid of it as soon as is practicable. 12-16 months is the goal. By paying off my loan early and shortening the term (currently due till November 2024) I get a guaranteed return. Any prospective investment purchases that I might make have a higher hurdle to overcome for me to feel confident it is my best idea for use of any extra money.
Finding higher probability asymmetrical investing opportunities is even more important now that early loan payoff feels within my reach. Once the loan is paid off, I can build a meaningful cash position in anticipation of the next sell-off.
$HAAC
This will likely be a short term holding in the near term once a DA is confirmed. The reason I’m doing this is to see if I can make a meaningful dent in the size of the loan outstanding with gains here.
$TDOC Earnings
Teladoc released earnings on 28 April - numbers were decent even ex-Livongo, and the long term company story seems intact. One time post-acquisition expenses are understandable.
I was disappointed to learn from Fintwit that both Glen Tullman and Hemant Taneja, founders of Livongo were both leaving the Teladoc board after less than a year. Discovering this news was a great example of the positive power of Fintwit. I’m sure I would have found out in time, but it definitely accelerated the information discovery.
I still like the idea of what Teladoc could become over the longer term, but it’s not a positive sign to see two well-respected entrepreneurial executives exiting so early. I can understand that there are likely good reasons why this has happened but I have a natural bias towards founder-led companies.
Teladoc is not founder-led and has a long pedigree of growth via acquisition. I turned $TDOC down as an investment prior back in 2018, especially after the shenanigans with the ex CFO but came into it via Livongo.
With the $LVGO founders on the board, I was willing to consider $TDOC as founder influenced-by-proxy….already a bit of a stretch.
These changes have me reassessing my portfolio weighting even though I like the idea of what it could become. $TDOC is the second-largest position I own, but there is a gap between the size of my position and my conviction that after these qualitative changes. The $TDOC numbers at ER are good. But observing there are also excellent founder-led companies that aren’t in my current portfolio has me considering whether I will adjust my position size in time. There is no desperate rush just yet.
Fintwit
I don’t know whether I’m right about this at all, but I can’t help but be relieved to have spent less time on Twitter this month…
A request to all readers - if you see me posting douchebaggery on Twitter - please call me out. The world has enough negativity and I’m not interested in adding to it. I try to keep it positive and am sure that I fail sometimes, but all I can do is try…
The days are getting longer, the weather is getting a little better, and I’m looking forward to May. Have a good one!
Watchlist
$OLO, $HK.2013, $NET, $TMDX, $CLPT, $SNOW, $SHOP
Great article! The thing about $TDOC is that there are many holders of the stock that were using other people's conviction and now they are selling based on other investor's selling it too. I agree with all the qualitative points that you mentioned and I will also be watching closely to see how Teladoc integrates Livongo.
Thanks for the post. Yes the loss of founder led leadership is a problem for conviction in TDOC. But with 30-40% revenue growth and 70% gross margin, P/S= 10, could see great returns from here. I added some more at this level. It’s is only a small position ~2%.
I am very bullish on $SE too, and my largest SIPP position getting in at $200. This thing on it’s currently trajectory could be a potential multibagger, probably already is for people that got in early enough. It’s not available in ISA’s and so you would need to sell ISA funds? I am torn. It looks an amazing investment, but I want cash in a tax wrapper but is it worth paying 20% capital gains on profits. I am leaning yes.