The Freedom Portfolio – January 2023

The Freedom Portfolio – January 2023

A January recap! Released in mid-March… After skipping the October 2022 and December 2022 recaps…

Yeesh. And to make matters worse, I completely missed the 4th anniversary recap! How embarrassing. Not sure which is worse:

  1. How late this quarterly recap is
  2. My portfolio’s performance over the past year plus
  3. My 2022 bold predictions
  4. My fantasy investing 2022 performance
  5. My fantasy football teams for 2022 (3 leagues, missed the playoffs in each of them)

That last one is largely irrelevant, and I’ve already touched on #3 and #4 in previous posts, so let’s get rolling discussing #2. What better place to start than the performance since inception?

I tried writing up my thoughts on my investing performance, but then I went back to read what I had written in the last quarterly recap I had finished (8 months ago) and found that I wouldn’t change a single word and probably couldn’t say it any better. Here is what I wrote:

I know I sound like a broken record, but despite the really horrid results lately, I haven’t been shaken out of my belief that I can beat the market long term. In fact, I’m excited about getting a second chance to buy shares in some of my favorite companies at prices I never dreamed would return. Much like how 2020 and 2021 saw share prices get irrationally high, I believe we’re seeing share prices in many companies that are irrationally low right now.

Why do I say that? Because even though the share price of many of the Freedom Portfolio holdings is lower than it was pre-pandemic, the companies are almost universally much better off. Short term, share prices can go all over the place, but over the long term they will track business performance.

The Freedom Portfolio – July 2022

The past year has seen unprecedented rises in interest rates by the Fed in response to inflation levels that the country hasn’t seen in a long time. The swiftness of the rise has caused issues all around: from the real estate market screeching to a halt, to big tech companies having big rounds of layoffs, to the shocking and sudden collapse of Silicon Valley Bank. It’s no wonder that the high growth companies I like to invest in have had a hard time abruptly switching gears to go from a cheap cash environment to one where suddenly everybody is looking for profitability.

Some of my investments have been exposed as poorly run companies or at the very least ones that didn’t have quite the moat or tailwinds that I anticipated. I have been attempting to slowly and methodically prune those over the past year. The proceeds from those sales have gone into companies that I believe have proven their mettle during this challenging time and have shown that not only can they survive, but they will come out of this even stronger than before.

With that said, here have been the changes that I have made since my last update:

Changes in the Portfolio

All done in September of 2022.

Sold some of Tesla (TSLA): I feel like a bit of a broken record at this point. This trimming of my Tesla position marks my seventh sale of Tesla shares over the past two and a half years. Each sale has been for the same mix of reasons that all revolve around the fact that I was uncomfortable with how high the stock had skyrocketed in such a short amount of time. As much as I love the company and its potential (still!), it was hard to deny that the valuation had gotten incredibly out of control and that it had grown to an uncomfortably large percentage of my portfolio considering some of the concerns that I have over the company (the aforementioned valuation, Musk distraction, competition coming, etc). Even after this most recent trim, though, the company remains a top 4 position in my portfolio, so I still have a pretty high degree of confidence. I just felt better locking in some gains and diversifying into other positions.

Bought more Axon Enterprises (AXON): Axon has been a sneaky good performer (as a stock, but more importantly as a company) over the past year or two when basically the entire rest of my portfolio has been falling apart. The more I follow the company and learn about it, the more impressed I become. Axon is a company that has grown far beyond the taser and has some pretty lofty aspirations. It also seems like they still have plenty of room left to grow as well.

Bought more Nubank (NU): Speaking of room to grow, Nubank has that in spades. Not only do I love the demographic trends of Latin America (growing populations which are increasingly online), but Nubank has still barely scratched the surface in terms of saturation in their non-Brazil markets. On top of all of that, Nubank has a number of financial products that they are in the early innings of in terms of cross-selling to their members. It’s been a rough life as a public company so far for Nubank, but I remain super excited about the growth possibilities ahead of the company.

Bought more Redfin (RDFN): I might have a problem. I’m not sure if there is any other company in my portfolio that I have added to more often than Redfin. Has the company made some missteps? Undeniably. Have they navigated an absolutely insane roller-coaster of a real estate market over the past few years about as well as they can be expected to? I think so. I’m a bit worried about how closing their iBuying business weakens their complete real estate offering, but their acquisitions of Bay Equity and RentPath seem like they would more than make up for that. They’ve survived a complete shut down of the real estate market during COVID, an insanely fast and furious re-opening right afterwards, and are now in the process of weathering a rocketing of interest rates. The stock has cratered along with the real estate market, but as the wise man Buster Moon once said: “You know what’s great about hitting rock bottom, there’s only one way left to go, and that’s up!”

Bought more Sea Limited (SE): Sea has encountered a number of speed bumps over the past year or so. The popularity of their Free Fire game has waned at the same time around the same time that they shut down operations in a few of their markets, including the high potential Indian market. Those are no doubt disappointments, and I wish management had been a little more prudent in terms of not expanding in too many directions at once, but I still love a lot of the growth potential with this company and the stock is far more reasonably priced now (ie, it’s a lot lower). Incredibly, their most recent earnings report showed that they can shift to profitability faster than most people thought was possible. Assuming they can keep on track with that while still maintaining their growth potential, this seems like a winner going forward.

The Freedom Portfolio – January 2023

Here is where the Freedom Portfolio stands now. Need a reminder of what these terms mean? Check out: Defining my Terms.

TickerCompany NameAllocation
MELIMercadoLibreBabylon 5
SHOPShopifyBabylon 5
SESea LimitedEnterprise
TSLATeslaEnterprise
NVCRNovoCureEnterprise
TTDThe Trade DeskEnterprise
AXONAxon EnterprisesEnterprise
ETSYEtsySerenity
SQSquareSerenity
SWAVShockwave MedicalSerenity
RDFNRedfinSerenity
SNOWSnowflakeSerenity
FVRRFiverrSerenity
TDOCTeladocSerenity
CELHCelsius HoldingsSerenity
ROKURokuSerenity
ZMZoom VideoSerenity
NUNubankMillennium Falcon
FUBOFuboTVMillennium Falcon

Once again, apologies for being so behind with updates. I feel pretty good about the next quarterly update not being nearly as late and I even feel pretty good about getting some more consistent posts out in the coming months.

Thanks, as always, for following along. May all of our positions avoid the fate of Silicon Valley Bank.

Fantasy Investing 2023 Kickoff

Fantasy Investing 2023 Kickoff

The entries are in, the calendar has flipped to the month too good to have 30+ days, and most importantly: Fantasy Investing 2023 has officially kicked off!

After a record-breaking twelve entrants last year, we’re back with a leaner group of 6 brave souls who saw how things went last year and said, “Please, sir, can I have some more?”

You can check out the participants and their portfolios by clicking here. Good luck to all of our participants. I hope you all will follow along and check-in throughout the year. Thanks, as always, for participating.

Fantasy Investing 2023

Fantasy Investing 2023

The new one-month-later start to the 2023 Fantasy Investing season is right around the corner! Last year was rough, but this year can’t be much worse….

Right?

If you’re new to Fantasy Investing, then the game is simple: Choose 5 different investments (ideally individual companies, but we’ve had players think outside of the box and go with ETFs or crypto or other vehicles just to make my life exciting) that you think will outperform the market over the next 12 months and your fantasy portfolio will be pitted against not only other players, but also against “the market” (ie, the S&P 500). We play for nothing but pride and the time commitment can be as little as a few minutes. If you’re interested in seeing how some past seasons have went, you can check out my horribly ugly spreadsheet with previous years by clicking here.

If you want to play, get your picks in as soon as possible. The plan is to start tracking performance as of February 1st, but I’ll take portfolio submissions all of this week since I was so late getting this post out. You can leave a comment with your name and 5 picks (please leave as much info as possible, including ticker and company name to avoid any misunderstandings) and hopefully the game is a lot more fun this year.

Thanks all!

Recklessly Bold Predictions for 2023

Recklessly Bold Predictions for 2023

It’s once again time for my recurring series where I try to make the most ridiculously bad predictions imaginable!

Okay, so that’s not quite the point of my annual Recklessly Bold Predictions, but you could definitely be forgiven for thinking that was the case this year. I honestly don’t think I could’ve made worse predictions if I had tried. Not only did the majority of my predictions not come close to happening, but several went to the opposite extreme.

Let’s get these over with quick, so we can get on to some 2023 predictions which can’t possibly be any worse than my 2022 ones…. right?

2022 Predictions

Novocure (NVCR) will triple

I still have really high hopes for Novocure and I’m hoping that a few years from now I’ll realize I was perhaps a year too early with this prediction, given the current schedule of anticipated trial results. In fact, I just might re-up this prediction for 2023. For 2022, though, this was an epic miss. Novocure was essentially flat for the year, which is a far cry from tripling. Still, that is far from my worst prediction. That honor probably would go to…

Redfin (RDFN) will triple

Redfin dropped roughly 90% in 2022. 90%! I don’t even have the words to describe how bad this prediction was. The whipsawing of the housing market from red-hot to ice-cold in a matter of months certainly did Redfin no favors and I probably underestimated how big of an impact a challenging real estate market would have on the company. I think management has done an excellent job navigating a super difficult environment and that in many ways the company is better positioned relative to their competition but this is a painful reminder that some factor’s are outside of a company’s control and those things can absolutely wreck havoc with the business. I still love the potential of Redfin long term, although 2023 could continue to be rough if a recession joins high interest rates as headwinds for the real estate market.

Teladoc (TDOC) will triple

Another really awful prediction. I’m really torn with Teladoc. Every quarter their results have some fly in the ointment, but the future looks rosy to me and I think the worst might be over, only to have more concerns pop up in the next earnings report. There still seems to be a big opportunity in telehealth, but I’m beginning to wonder if it’s as big as I once thought and if Teladoc has any appreciable moat.

FuboTV (FUBO) or Nano-X (NNOX) adds $22

If “Redfin will triple” wasn’t my worst prediction, then “Fubo adds $22” certainly has to be. Instead of adding $22, Fubo lost roughly $13 going from $15 to $2. Similar to Redfin, I think Fubo was a little bit a victim of changing macro conditions. In 2021, the market was fairly forgiving of money burning companies that were putting up great growth numbers. In 2022, there was a lot less appetite for those types of companies. To make matters worse, Fubo also abandoned plans to grow a sports gambling business to pair with streaming service, which makes it a little harder to envision how they might turn profitable in the near future.

Not sure if I have much to say about Nanox. It’s a company I think I was just flat-out wrong about and that doesn’t seem nearly as capable of executing as I hoped. I sold my shares in mid-2022 and haven’t looked back since.

Annual Inflation Rate for 2022 is > 8%

Finally! Something approaching a win! It looks like inflation for 2022 is going to come in a little closer to 7%, but given how atrocious my other predictions were…. can I at least have half a point for this one? Please?

Regardless. Let’s put 2022 in the rear-view mirror and look forward to 2023.

2023 Predictions

Novocure (NVCR) will triple

No, I didn’t accidentally copy and paste and forget to change the title. As I alluded to above, I’m circling back to this prediction again. Why might Novocure triple in 2023 when it couldn’t get it done in 2022? Two words: Trial Results. Novocure is expecting trial results for the treatment of lung cancer and ovarian cancer in 2023. If they receive positive results, that could really expand their total addressable market to 4-5x where it currently is. It would also make me more optimistic that they would receive positive results from their brain metastasis and pancreatic cancer trials which they expect data from in 2024. Those two cancers could double their total addressable market on top of 4-5x from lunch cancer and ovarian cancer. There are a lot of potential positive catalysts for Novocure in 2023. I think some of them will pan out.

Sea Limited (SE) back above $100

On one hand, getting back to $100 a share would mean roughly doubling from where it is now, which seems pretty extreme. On the other hand, shares were trading for over $300 a little over a year ago, so $100 a share doesn’t seem that ridiculous. There are a lot of fair reasons why Sea shares have dropped over the past 18 months. Their gaming division has seen a drastic slowdown and they have closed operations in a bunch of countries because they were proving too difficult to turn profitable. A strong argument could be made that they were too aggressive trying to expand internationally. However, I still think there’s a lot to like with Sea. Southeast Asia still has a lot of strong demographic tailwinds and I think ecommerce and digital currency growth will continue even without a global pandemic accelerating growth. Will their gaming segment ever recover? That’s a little harder to say, but if Sea can continue to show strong growth with Shopee and Sea Money, I think the market will eventually take notice.

The Trade Desk (TTD) back above $100

I’ve been really impressed with how well the Trade Desk has executed over the past few years. Not only have they had to deal with changes in consumer behavior due to the pandemic, but they’ve also dealt with a shifting ad landscape with Apple’s decision around iOS 14.5. I’m a little baffled why the stock is down over the past year, especially considering how much growth they still have in front of them. The shift to streaming services and connected TV seems clearer than ever, and yet the ad spend there still hasn’t seemed to have caught up with reality. Add to that that services like Netflix are considering ad-supported tiers and it seems like a lot of opportunity for a company like the Trade Desk.

Bitcoin back above $30k

Over the past few years, a lot of people have asked what my thoughts were on crypto. My go to response was to compare it to the early days of the internet: I thought there was a lot of potential and almost certainly some huge opportunities, but also probably a ton of pretenders / frauds as well. I’m old enough to remember the times before the dot com bubble bursting where companies were raising huge amounts of money without any clear business plan or idea how to become profitable. The hysteria around NFTs and cryptocurrency trading seemed very similar to me, which is why I only ever dipped my toe into Bitcoin and Ethereum despite being fairly bullish on crypto.

2022 has been a rough one for all things cryptocurrency related, and to carry on my internet-analogy further, I wonder if we just saw the equivalent of the dot-com bubble bursting. Time will tell. However, nothing that has happened over the past few years has made me any less bullish on Bitcoin. I still think there is a big need for a decentralized and non-inflationary currency / store of value. If anything, the events of 2022 simply cause me to believe that even more strongly than ever. Which brings me to…

The Fed will reduce rates to 2.5% (or lower) in 2023

I typically don’t try to worry too much about what the federal reserve might do and I don’t let it affect how I invest. However, I have long been fascinated by the whole monetary situation around the US dollar, the federal reserve, and the ballooning debt of the US government. Simply put, it seems impossible for the federal reserve to continue to raise interest rates and keep them there for any length of time without causing some severe issues for the US government. We’ve seen some historically fast increases in interest rates this year, and I wonder if we might see the reverse in 2023 even if inflation doesn’t completely get squashed.

Well, those are my recklessly bold predictions for 2023. I don’t think it’s possible that I can do worse this time than I did in 2022, so I at least have that to look forward to. What do you think? Have any bold predictions of your own? Let me know!

A quick PvtM update

A quick PvtM update

Hello! It’s been far, far too long.

I haven’t posted updates here in a very long time. How long? We’re a few days away from the end of the year and I still haven’t posted a third quarter Freedom Portfolio recap. Not only am I a whole three months behind on a quarterly recap, but that quarterly recap also doubles as the fourth year anniversary recap. It’s embarrassing. I could chalk it up to the normal things (three kids and a full time job take up a lot of time, writing about portfolios growing is a lot more fun than writing about them plummeting, etc), but I frankly don’t have any good excuses.

But I am determined to get back on track, and I have a plan.

First off, I will be abandoning the 2022Q3 update for obvious reasons. It will simply be lost to the sands of time. The next update will be the 2022Q4 update that hopefully comes out in a few weeks.

My next update will be a recap on my 2022 bold predictions (spoiler alert: they were absolutely horrible) and my 2023 predictions. Hope to have that written and out by the end of this upcoming weekend.

The fantasy investing schedule is going to be tweaked a bit. The end of the year is already pretty busy for PvtM with a pending quarterly recap, my bold predictions, and fantasy investing. But there’s no reason the fantasy investing season has to overlap with the calendar year. For my own sanity, I’ll be bumping the start of the fantasy investing season to February in order to spread things out a bit. So going forward, the fantasy investing season will be running from February to January.

The 2022 season still ends in a few days, though, and while a lot can happen in a few days, I feel like it’s pretty safe to call things early. As a reminder, the current results can be found here.

  • The winner looks destined to be the market, with a roughly 19% drop for the year.
  • Second place looks to be safely held by Daniel, the proxy market, with a close to 20% drop for the year.
  • Third place (and first among actual stock pickers) looks to be wrapped up by Gurkie with a drop of around 29%. Her returns were boosted by the positive return of IBM.
  • Our hero, Paul, had a truly horrific return of -59%. I was somehow able to identify not just one, but two stocks that had a near 90% drop in 2022: RDFN and FUBO

Hopefully everybody has a better 2023!

The Freedom Portfolio – July 2022

The Freedom Portfolio – July 2022

In my last quarterly recap, I wrote: “the first quarter of 2022 is likely the worse investing quarter than I have had (and hopefully ever will have)”.

Well, the second quarter would like to have a word.

As bad as the first quarter of 2022 was for performance of the Freedom Portfolio, the second quarter has been worse. It was so bad, it took me nearly two full months to write this quarterly recap!

Thanks to supply chain disruptions, the war in Ukraine, soaring inflation, abrupt federal reserve moves to raise interest rates, or whatever other thing people want to blame, the first half of 2022 was the worst for the market in 50 years. As bad as the market has been, the Freedom Portfolio has been even uglier:

Yes, after crushing the market for two years, my returns have fallen back below the returns of the S&P.

Woof.

Here’s the details:

TickerQuarterly Change
SWAV-8%
TSLA-38%
CELH11%
AXON-33%
TTD-42%
MELI-48%
SNOW-41%
NU-54%
ZM-9%
NVCR-21%
ETSY-42%
SQ-54%
SE-45%
SHOP-55%
TDOC-55%
ROKU-35%
FVRR-55%
RDFN-53%
FUBO-62%

I would be lying if I said this wasn’t frustrating and disappointing. I knew valuations had gotten a bit out of control in 2021 and we were due for some flat years or even some pullbacks, but I didn’t quite expect this degree of resetting.

I know I sound like a broken record, but despite the really horrid results lately, I haven’t been shaken out of my belief that I can beat the market long term. In fact, I’m excited about getting a second chance to buy shares in some of my favorite companies at prices I never dreamed would return. Much like 2020 and 2021 saw share prices get irrationally high, I believe we’re seeing share prices in many companies that are irrationally low right now.

Why do I say that? Because even though the share price of many of the Freedom Portfolio holdings is lower than it was pre-pandemic, the companies are almost universally much better off. Short term, share prices can go all over the place, but over the long term they will track business performance.

Let’s briefly look at two notable Freedom Portfolio holdings and how they look now versus pre-pandemic (I chose February 2020 to represent “pre-pandemic”).

Business performance vs share price:

As a reminder, if you like the insights you see in the visuals below, consider checking out Stockcard.io. VIP members can follow the Freedom Portfolio there to get greater insight into my portfolio. There’s a 14 day free trial and you can get 10% off using the promo code “paul”.

Shopify (SHOP): In February of 2020, Shopify shares were around $46 (split-adjusted). They currently trade for around $33 a share. While a roughly 30% drop is pretty notable, that undersells the dramatic fall Shopify stock has had of late. Under a year ago Shopify shares were as high as $150, which would make the current drop almost 80% from those highs. Yet the business has been growing stronger in all sorts of ways. During that time they announced new products like Shopify Audiences and Shopify Collabs and have formed partnerships with companies like JD.com, Spotify, and Youtube. Their quarterly revenue more than doubled, from $470 million to $1.2 billion. Their Gross Merchandise Volume has similarly more than doubled, going from $17.4 billion to $43.2 billion. Shopify the stock might look pretty sick right now, but the company has never been healthier.

Redfin (RDFN): It’s a remarkably similar story with Redfin. The stock was sitting around $27 a share pre-pandemic and is now at close to $10 a share despite having seen an incredibly red hot housing market in between. Also like Shopify, that decline looks even worse when you realize Redfin stock was at $75 about a year and a half ago. And yet, just like Shopify, Redfin’s business is much more fleshed out and robust now than it was pre-pandemic. They acquired RentPath to get a foothold into the rental market and Bay Equity to strengthen their mortgage segment. They saw significant missteps from competitors like Zillow while they avoided blowing up their balance sheet by being prudent and conservative with their iBuying initiative despite a roller coaster of a housing market. They continue to slowly but sure take market share, going from 0.93% of houses sold to 1.18%. Their revenue more than tripled over the past two years. In almost every way Redfin is a stronger, healthier, more robust company than it was 2 years ago, regardless of what the share price might imply.

I could write a recap like this for almost every position in the Freedom Portfolio and they would all hit similar notes. This gets at the heart of why I’m not overly concerned with what I see as a temporary pullback in my portfolio. Eventually sentiment will change and innovative, growing companies will once again be in favor. When that happens I expect the share prices for these companies to more closely match the reality of how the business has performed over the past few years.

Until then, it may sound boring, but I intend to hold tight to my strongest conviction positions.

Changes in the Portfolio

That doesn’t mean holding onto everything, though. When the thesis gets busted or is no longer relevant, then it’s time to cut ties and move on. Here are some moves I made in the previous quarter:

The Freedom Portfolio – July 2022

Here is where the Freedom Portfolio stands now. Need a reminder of what these terms mean? Check out: Defining my Terms.

TickerCompany NameAllocation
MELIMercadoLibreBabylon 5
SHOPShopifyBabylon 5
SESea LimitedEnterprise
TSLATeslaEnterprise
NVCRNovoCureEnterprise
TTDThe Trade DeskEnterprise
AXONAxon EnterprisesEnterprise
ETSYEtsySerenity
SQSquareSerenity
SWAVShockwave MedicalSerenity
RDFNRedfinSerenity
SNOWSnowflakeSerenity
FVRRFiverrSerenity
TDOCTeladocSerenity
CELHCelsius HoldingsSerenity
ROKURokuSerenity
ZMZoom VideoSerenity
NUNubankMillennium Falcon
FUBOFuboTVMillennium Falcon

That’s the recap of the Freedom Portfolio for the second quarter of 2022. Apologies for it being so late. I’ll try to do better next time. Last quarterly update I signed off with: “Here’s hoping the next quarter is a better one. It can’t be much worse.” Obviously I was tempting fate with that, so I’m not going to say anything about next quarter and just thank you all, as always, for following along.

Cutting some losers to add to other losers

Cutting some losers to add to other losers

It’s been a bloodbath in my portfolio for many months now, and I finally got around to shaking things up a little bit. These transactions happened a few weeks ago. Sorry for the delay getting this written. Who knew that 5 day a week swim and dive practice for two kids would be such a time sink? Also, some COVID in the family didn’t help. It does help to put things in perspective, though. Alpha is nice, but health is better. Anyway, here are some of the moves I made in my portfolio lately, along with my rationale.

As a reminder, if you like the insights you see in the visuals below, consider checking out Stockcard.io. VIP members can follow the Freedom Portfolio there to get greater insight into my portfolio. There’s a 14 day free trial and you can get 10% off using the promo code “paul”.

Sells

Sold entirety of Disney (DIS): Another long time holding bites the dust after nine years. Disney has been such a frustrating holding. Despite nearly doubling my money, Disney fell well short of the roughly 140% gain of the S&P during the same time period. Every time it felt like the company started gaining momentum with massive box office receipts and blowing away Disney+ subscriber numbers, it was followed up with a momentum breaker like a cash reserve draining acquisition or a global pandemic that shut down many of their main revenue generators.

So why sell now, with things opening back up and the acquisition in the rear view mirror? Simply put: the thesis is busted. When I first invested in 2013, I thought Disney had huge potential to create a strong streaming solution to rival Netflix and dominate the box office with the newly acquired Lucasfilm (Force Awakens was still over a year away) and red hot Marvel Cinematic Universe (the first Avengers film had just been released and Thanos was still a very distant threat). Now? Disney is the clear number two video streamer and 10 of the top 15 grossing movies of all time are Disney related. Additionally, the video streaming market went from basically just Netflix to oversaturation.

Speaking of oversaturation, I’m worried that might be happening with Disney+ and the avalanche of MCU and Star Wars shows. Initially, there was a huge novelty seeing something like The Mandalorian and I used to wake up early every Wednesday to watch new episodes of WandaVision and The Falcon and the Winter Soldier to avoid getting spoiled throughout the day. Now? Not only has the novelty worn off, but it almost feels like there’s too much to keep up with. I’m sure I’m not the only one who feels that way.

Lastly, it’s worth noting that the CEO change is a point of concern as well. Bob Iger was a greatly respected, long time CEO who made a number of big and bold moves to transform Disney during his tenure. The jury is still out on Bob Chapek, but I think it’s fair to say that the results have been mixed so far. He seems to have rubbed many people the wrong way and I believe his decision to wade into Florida politics was an absolutely terrible one. It’s hard not to see the CEO change as a net negative, at least thus far.

So, with many of the catalysts I was banking on for Disney as an investment having played out, now seems to be the time to look for better opportunities for my money.

Sold entirety of Nanox (NNOX): This one is pretty simple. Nanox was always a high risk / high reward pick and it looks like the risk didn’t pay off. Management just keeps on failing to execute. Founder Ran Poliakine is out as CEO. FDA clearance keeps getting delayed. I’ve lost patience and see better opportunities to deploy my capital elsewhere.

Buys

Added more Redfin (RDFN): The past 30 months or so have been some of the most chaotic that I’ve ever seen in my lifetime for the real estate market, and that includes the housing bubble bursting during the great recession. At least in that case it was a relatively straightforward up and then down. The past two and a half years have seen an almost instantaneous collapse of the real estate market during the COVID lockdowns of the first quarter of 2020. That was immediately followed by an incredible comeback as low supply, low mortgage rates, remote work, and the great migration led to a red hot real estate market. Now we’re seeing the brakes get slammed on again with some of the fastest rising mortgage rates ever. Throughout it all, Redfin has handled it about as well as can be reasonably expected. They’ve continued to grow market share (although it has been decelerating, which is a concern) and continued to build out there complete offering by acquiring Bay Equity and RentPath. Their cautious approach to iBuying allowed them to avoid completely blowing up their balance sheet (looking at you, Zillow) and their reduced commission business model should be particularly appealing during a slowing market where buyers are more cautious.

I like Redfin the company now as much as I ever have while the shares have almost never been cheaper.

Added more Roku (ROKU): I can understand why Roku has been hammered along with other “COVID” stocks. Growth in video streaming services seems to have stalled out, which seems like a big warning sign for Roku. I think the market is overreacting, though. Chord cutting and the migration to video streaming services doesn’t seem like a temporary thing that is going to get rolled back. Roku is a dominant player in the space, and is also well positioned to benefit from the increasing shift of ad dollars to connected TV. I’m happy to lower my cost basis on Roku here.

Added more Sea Limited (SE): Sea has had a few minor setbacks over the past few quarters. They seemed to have scaled back their ambitions in terms of expanding outside of the Southeast Asia area. Freefire seems to be losing popularity some. And India seems to be getting more hostile to them making inroads. However, the main reasons I was initially bullish on the company still remain in place. There is a massive opportunity in Southeast Asia for ecommerce and digital payments and I think Sea is well positioned to take advantage of that opportunity. Still a happy shareholder, and excited to add to my position at these levels.

Added more Shopify (SHOP): The extreme turn in sentiment for Shopify is a bit hard for me to explain. Did the stock get overly expensive? Definitely. Did people get overly optimistic about the company and misjudge how much of the shift to ecommerce would stick around post-COVID? Apparently. But an 80% drop is still pretty extreme. I continue to believe Shopify is well positioned to be the #2 option in ecommerce behind Amazon and that it will continue to benefit from trends that started before COVID, even if COVID accelerated them.

Those are my recent portfolio moves. What do you all think? What do you disagree with? Is Disney too high quality to sell? Should I have given Nanox more time? Or cut my losses earlier? Am I being too stubborn with Redfin or Roku or Sea? Let me know in the comments!

The Freedom Portfolio – April 2022

The Freedom Portfolio – April 2022

In my July 2020 quarterly recap, I had written: “This might be the best investing quarter that I will ever have.”

Well, the first quarter of 2022 is likely the worse investing quarter than I have had (and hopefully ever will have).

On the heels of a tough 2021 which initially saw my portfolio soar to incredible all time highs (only to eventually give all of it and more back), the first quarter of this year was absolutely brutal. At one point my portfolio was down 50% for the quarter alone and I was getting close to having my total returns since inception start to lose to the market after being up over 170 percentage points around a year earlier. Here’s the visual representation:

As you can see, my portfolio recovered a bit before the end of the quarter, but it’s still been quite the fall from grace.

I know I’m going to sound like a broken record, but my confidence in my investing style and my ability to beat the market remains unshaken. I have been investing for nearly 20 years and lived through many bear markets and recessions and have seen long term results despite short term setbacks.

At the same time, I strongly believe that it is important to always be learning and growing and getting better and it would be the height of arrogance to look at the chart above and conclude that there is nothing to be learned from such a change in fortunes.

The obvious question to ask is: Why couldn’t I have seen the last year plus of under-performance coming for my portfolio? Many of the stocks in my portfolio had appreciated tremendously over the past few years, often times far outpacing the actual growth of the underlying companies (even though that growth was often also very impressive). Valuations had gotten absolutely insane and it was clear that COVID had pulled a lot of growth forward for many companies. Even if remote work was here to stay, there was no way Zoom was going to keep growing like it had in 2020. At the same time, it was clear that a combination of stimulus checks, easy access to low and no fee trading, and abundant free time by people who might otherwise be gambling on sports or actually be working had caused some pretty crazy activity in the stock market (Gamestop, anybody?).

Simply put, stocks don’t always go up, and they most certainly don’t just keep doubling and tripling year after year. I knew there was bound to be choppiness in my portfolio in the near future. Did I know it would be this extreme? No. Did I know it would happen this fast or all at once? No. Most importantly: Did I have any idea when this pullback was going to happen? Absolutely not.

One of the clearest lessons I have learned in the many years I have been investing is that I simply have no ability to time the market and any attempt to do so is only likely to hurt my returns. When I first started out investing I passed on Google (GOOG) because I thought it had run up too much and was too expensive and wanted to wait for it to get cheaper. That caused me to miss out on a 20 bagger plus. I sold Netflix (NFLX) way too early because I thought it had run up too much too fast and wanted to lock in some gains before there was a pullback. That ended up being a $1 million+ mistake. I’m still making the same mistake even now as I have sold shares of Tesla (TSLA) six times over the past year and a half and only one of those sales was for a price higher than it sits at now (most were significantly lower).

In retrospect, do I wish I had sold a bunch of my high-fliers which have dropped 50, 60, 70 percent and more over the past few months to a year? Of course. However, I also realize that there was no way to tell exactly when those drops were going to occur. Many of my biggest winners, the same stocks that have been cut in half, have looked incredibly overpriced for months or even years. If I were to sell whenever I suspected an investment was overvalued and due for a big pullback, I would’ve sold most of these big winners way too early and missed out on big gains… and I still might not have accurately pegged the best time to sell.

So as unbelievable as it may sound, I don’t necessarily think the right takeaway from the past few months is: “Try to time the market better”. I’ve been investing for long enough to know that I just don’t have the ability to reliably do that and any attempts to try is likely to just make my returns worse. I didn’t see the beginning of the great recession coming, and there were multiple times I thought it was ending and we had bottomed and I was wrong most of those times. Likewise with this first quarter of 2022. On at least three different occasions I thought the bottom might be in and I’ve been proven wrong each time so far.

But there must be something I feel like I can learn from this pretty dramatic pullback. Yes, I believe there is. While the market, and my portfolio, were soaring to new highs, I’m pretty sure I started to relax my standards in terms of what companies to invest in. Instead of staying close to the ~20 positions that I wanted to keep my portfolio to, it started getting closer to 30. I started to invest more in companies that I knew less about or ones which seemed to have more red flags (or at least yellow flags). I had more new investments based more on “somebody else likes it” rather than “I have developed my own conviction in this company based on my own research”.

And while plenty of my high conviction investments are down an incredible amount from their recent highs, those lower conviction picks were often down even more. What is doubly damning is that, because I had lower conviction in them, I’ve sold those positions so they won’t even have a chance to recover. Why is that important? Because many of those previously mentioned high conviction picks, while down over the short term, are still beating the market over the long term. Would that have happened with these lower conviction picks? Maybe, but I likely won’t be around to find out.

I’ve been trying to remedy this over the past few months by trimming those lower conviction positions in order to add to high conviction ones. The big question is: will I be able to stick to this when the market turns around? Time will tell, but maybe it would be helpful if I printed up this quarterly recap to keep on my desk the next time I am justifying adding a 29th position to the Freedom Portfolio.

As is the custom, here’s the damage from last quarter:

TickerQuarterly Change
TMDX32%
CRWD14%
SWAV8%
NVCR3%
NU-6%
AXON-10%
TSLA-10%
MELI-11%
DIS-13%
DMTK-16%
SQ-17%
TTD-23%
TDOC-24%
CELH-27%
FVRR-31%
SNOW-31%
NNOX-32%
ZM-36%
ETSY-41%
ROKU-46%
SE-46%
SHOP-50%
RDFN-54%
FUBO-59%

Typically at this point, I would discuss some of the best and worst performers of the previous quarter. However, in line with the point above, I thought I would do something a little different and discuss what freedom portfolio positions I am considering trimming or liquidating to further focus the portfolio.

Reevaluation list:

As a reminder, if you like the insights you see in the visuals below, consider checking out Stockcard.io. VIP members can follow the Freedom Portfolio there to get greater insight into my portfolio. There’s a 14 day free trial and you can get 10% off using the promo code “paul”.

Nanox Vision (NNOX): Nanox has always been one of the higher risk companies in my portfolio, so I’m not as concerned about the precipitous drop in stock price. What concerns me is that the company has seemingly struggled to execute. FDA clearance keeps getting pushed back and the company has consistently failed to meet goals that they have set for themselves. The founder is no longer the CEO (which admittedly could be a good thing considering the previously mentioned struggles). There are enough red flags that it’s worth wondering if the upside of Nanox is worth the risk at this point.

Zoom Video (ZM): Zoom has been a painful position for me. I resisted buying for the longest time because I couldn’t see how Zoom could succeed in a world where deep-pocketed tech companies like Microsoft (MSFT) and Alphabet (GOOG) already offered established video chatting for free. Even if they were better, how long would it take for the smart engineers at these big tech companies to bring their offerings up to snuff? Since I was a little late to the party, I missed a lot of the run-up in stock price. By the time I finally relented and decided that they did have some sort of moat which protected them to some extent from the obvious competition and there was still unclaimed opportunity in things like remote work, remote board games hangouts, etc, COVID related lock-downs were wrapping up and people were ready to unleash their pent-up desire to get out of the house.

How much of the remote work trend will stick around? Will people still be willing to take remote classes or do frequent video calls with family and friends? Will Zoom be able to capture any of the opportunities that I thought they would? The future looks a lot cloudier now and I am once again starting to doubt their moat.

Disney (DIS): This hurts to admit. Disney is my longest held position and is much older than the Freedom Portfolio. I first bought shares in 2013 and the position has doubled for me, which sounds really nice until you realize that the S&P is up close to 160% since then, making Disney a significant under-performer over that time. When I bought shares of Disney, I did so because I thought they had an absolutely unmatched catalog of content (Pixar, Marvel, Lucasfillm, ESPN, etc) and were one of the few players that I thought had a great chance to launch a streaming service to challenge Netflix worldwide. That thesis has largely played out, with that content bringing home major money at the box office and helping to drive Disney+ to be a major success.

And yet despite all of that, Disney stock has not been impressive. At the same time, the future of Disney is looking murkier. Legendary CEO Bob Iger has stepped down as chairman and CEO. Disney+ growth is beginning to slow down. And new CEO Bob Chapek has gotten Disney embroiled in a political controversy with Florida Governor Ron DeSantis. I mentioned before when I talked about my reasons for selling Twitter (TWTR) that I hate it when companies get involved in politics. Having an almost universally beloved brand like Disney wading into politics strikes me as supremely bad idea that will serve as a distraction and ultimately leave a large section of their customer base unhappy. Right now, Disney seems to have less upside than any other time in the past 9 years while having a lot more risk. It might be time to reevaluate my longest held position.

Changes in the Portfolio

Just one round of portfolio changes in the recent quarter. I think we might be seeing a little more than that in the coming months.

The Freedom Portfolio – April 2022

Here is where the Freedom Portfolio stands now. Need a reminder of what these terms mean? Check out: Defining my Terms.

TickerCompany NameAllocation
TSLATeslaBabylon 5
MELIMercadoLibreBabylon 5
SHOPShopifyBabylon 5
SESea LimitedEnterprise
TTDThe Trade DeskEnterprise
NVCRNovoCureEnterprise
SQSquareSerenity
ETSYEtsySerenity
RDFNRedfinSerenity
TDOCTeladocSerenity
SWAVShockwave MedicalSerenity
FVRRFiverrSerenity
SNOWSnowflakeSerenity
DISWalt DisneySerenity
ROKURokuSerenity
AXONAxon EnterprisesSerenity
ZMZoom VideoSerenity
FUBOFuboTVMillennium Falcon
CELHCelsius HoldingsMillennium Falcon
NNOXNano-XMillennium Falcon
NUNubankMillennium Falcon

That’s the recap of the Freedom Portfolio for the first quarter of 2022. Here’s hoping the next quarter is a better one. It can’t be much worse. Thanks, as always, for following along.

January 2022 Portfolio Changes

January 2022 Portfolio Changes

What a start to 2022.

Not only is the Freedom Portfolio down 25% for the year (as of this writing), but the volatility has been crazy. It hasn’t been uncommon for my portfolio to be up 5% the day after a 5% fall. I don’t like to make snap decisions when it comes to my investments, so I’m always cautious making any moves during extreme volatility like this, but when I see some of my top conviction companies getting cut in half, then it gets hard not to take action.

In the past few weeks, I made a couple of changes to the Freedom Portfolio to discard some lower conviction companies or companies I was beginning to worry about in favor of some of the aforementioned beaten down companies. Below are the changes I made, along with a brief description of my thought process.

As a reminder, if you like the insights you see in the visuals below, consider checking out Stockcard.io. VIP members can follow the Freedom Portfolio there to get greater insight into my portfolio. There’s a 14 day free trial and you can get 10% off using the promo code “paul”.

Buys

Added more Redfin (RDFN): I feel like a broken record talking so often about how much I love Redfin. Here’s an interesting fact: Redfin the company currently in the Freedom Portfolio that I have added to my position the most times without ever selling any shares. Technically, it’s actually tied with Nano-X, which was quite a surprise to me considering my conviction on Nano-X is so much lower.

The reason for adding to Redfin is simple. The stock keeps falling as the macro environment worsens for the company (cooling real estate market and rising interest rates), but the positioning of the company just seems to keep getting better and better in my opinion. Zillow’s epic misstep in iBuying lessens them as a competitive threat and vindicates Glenn Kelman’s caution on iBuying. The acquisition of Bay Equity Home Loans should supercharge their mortgage business and strengthen their ability to offer customers a unique whole real estate process. The next few quarters might be rough as rising interest rates put a damper on the real estate market, but I have confidence that Redfin will continue to take market share and emerge as a stronger company a few years down the line.

Added more Sea Limited (SE): Take a look at the stock chart for Sea:

That is a pretty epic collapse in stock price. I’m not sure I’ve ever seen a more dramatic fall in such a short amount of time where there was basically no negative news for the company. Did the stock have an amazing run-up before then? Yes. Was the valuation a little crazy? Sure. But it’s still pretty strange to me to see sentiment shift so quickly. Just a few months ago I was kicking myself over not having bought more shares of Sea back when it was between $100-$200 a share in late 2020. Looks like I got my wish, and I’m not going to pass up this opportunity.

Started position in Nubank (NU): Nubank first showed up on my radar when I learned that Federico Sandler, the awesome former head of investor relations for Mercado Libre, had left the company. I was interested in what position could’ve lured him away and learned that it was a (at the time) private company called Nubank. Nubank is, as it sounds, a new kind of bank that focuses more on technology and mobile apps over the physical branches that traditional banks are focused on. The company is headquartered in Brazil and has a lot of exposure to Latin America. As I’ve mentioned before, I’m a big fan of fintech companies and also a big fan of exposure to developing markets like Latin America and Southeast Asia. Whenever I can invest in a company that combines both, I’m doubly interested. Nubank IPO’d late last year and pretty quickly dropped below IPO price. I couldn’t help but dip my toe in with a starter position.

Sells

Sold entirety of CrowdStrike (CRWD): Crowdstrike had been a pretty solid performer for me, but despite that I found myself getting increasingly nervous about my investment in the company. Cyber-security is an ever evolving space with new competitors (and new threats) constantly emerging. And due to the nature of the business, it only takes one breach for trust to be shattered and the brand to be tarnished. I had gotten burned before thinking a cyber-security company had a durable advantage and didn’t feel confident enough in my knowledge of the space to say for sure that Crowdstrike was in a better position than its competitors. Throw in a rich valuation and I just found myself not loving the risk / reward and wanting to deploy the capital elsewhere.

Sold entirety of Dermtech (DMTK): Dermtech seems to have a technology in their Smart Sticker which is clearly much better than what currently exists. Who wants to get cut with a scalpel? Yet for whatever reason Dermtech hasn’t seemed to be able to capitalize. Maybe COVID has suppressed the number of people getting checked for skin cancer and once things return to normal the company”s prospects will improve? Maybe, but I’m not sure I want to stick around to find out. I would rather have my money in some of the companies listed above in the “buy” section.

Sold entirety of TransMedics Group (TMDX): I love the idea behind TransMedics and what they’re trying to do with their Organ Care System, but I always had some concerns over how big of a market there was for transporting organs and if they were going to be able to meaningfully disrupt that market. I’ve only grown more doubtful recently. It was always a low conviction position for me, and with so many higher conviction companies on sale, it seemed like now was the time to make a move.


The Freedom Portfolio – January 2022

The Freedom Portfolio – January 2022

My January quarterly recaps tend to unfortunately not be as long and in-depth as some of my other quarterly recaps. The reasons are pretty obvious: Not only do the holidays take up a lot of time but I’m also busy focusing on my recklessly bold predictions and setting up the new fantasy investing season. It’s a shame, too, because the January quarterly recap would be an excellent time to reflect on the previous year and do some examination of the Freedom Portfolio’s performance during the year and not just the past quarter. Perhaps something to consider for next time. For now, though, I apologize if this recap is a little shorter than usual. I’ll try to do better next time.

I’ve mentioned a couple of times in the past about how incredible 2020 was for me in terms of my investments and how it would probably end up being the best year of my investment life. It’s entirely possible that 2021 might go down as the worst year of my investment life, not only in terms of absolute returns but particularly in relation to the S&P. Take a look at a tale of two years:

In some ways, in retrospect, it’s not too surprising that such a poor year would follow such an incredible one considering my style of investing where I stubbornly hold onto quality, innovative, disruptive, “growth” companies regardless of how overpriced they might seem to be getting. It’s not normal for any stock, no matter how well the company is executing, to quadruple or more over the course of a single year like so many Freedom Portfolio positions did in 2020. While I never would have tried to predict if or when a pullback would happen (companies like Tesla and Shopify have held up relatively well… so far), it’s also not something surprising or even overly concerning.

That’s not to say I haven’t been feeling the recent terrible performance of my portfolio.. The Freedom Portfolio has been cut nearly in half since the highs of February 2021 and no matter how much confidence I have the things will work out in the long term…. I am only human and it’s stomach churning to lose that much money. My emotions over the past few months have been an interesting mix of pain / anxiety / disappointment over giving up all of those gains from 2020 to excitement whenever I am able to add to some of my high conviction names at prices I couldn’t have dreamed of just a few months ago.

Anyway, the damage to my portfolio has been ongoing over most of 2021, but how did it specifically look in the last quarter? Check it out below:

TickerQuarterly Change
TSLA36%
TTD30%
SNOW12%
ETSY7%
SHOP2%
SWAV-11%
DIS-12%
AXON-12%
CRWD-18%
MELI-19%
CELH-21%
RDFN-25%
ROKU-27%
TDOC-28%
SE-30%
ZM-31%
SQ-33%
NVCR-35%
FUBO-36%
NNOX-36%
FVRR-38%
TMDX-41%
DMTK-50%

Now let’s dig into some of the outliers from last quarter:

The Best Performers:

As a reminder, if you like the insights you see in the visuals below, consider checking out Stockcard.io. VIP members can follow the Freedom Portfolio there to get greater insight into my portfolio. There’s a 14 day free trial and you can get 10% off using the promo code “paul”.

Tesla (TSLA): 36% gain: This may be one of the most painful “best quarterly performers” ever. Why? Because despite being a shining beacon of positive gains in a sea of red, Tesla has been a position that I have been consistently trimming for the past 15 months, from $400 onward. Apparently I hadn’t learned my lesson fully with Shopify about letting my winners run and instead have been cutting back on perhaps the one stock in my portfolio that has best weathered this recent storm. I guess I can look on the bright side and say that at least I didn’t sell all of it? Still, it hurts to think just how much better my portfolio would’ve performed had I just held onto my Tesla shares.

The Trade Desk (TTD): 30% gain: I had to double check my math on this one since, in the time it has taken me to write up this recap, the Trade Desk has given up a lot of these gains from Q4. For whatever reason, the Trade Desk has been pretty volatile to both the upside and downside recently. I suspect it has something to do with people trying to figure out just where the company stands in the new privacy normal ushered in by iOS 14.5 and the restriction on usage of unique identifiers from mobile phones. My money is on the Trade Desk being a winner coming out of this, but time will tell.

Snowflake (SNOW): 12% gain: This one surprised me a bit as Snowflake is notorious for its pretty high valuation and the market seems to be providing the biggest haircuts to the companies with high valuations right now. Perhaps people are starting to believe that some of Snowflake’s growth rates can continue on for longer than previously thought? That’s what I am betting on, as I believe their usage based model can help them continue to surprise people with their growth.

The Worst Performers:

DermTech (DMTK): 50% loss: I’ve mentioned before that during times where my portfolio is struggling, I tend to sell my lower conviction names to buy higher conviction names on sale. DermTech is on track to be one of those companies I sell. I thought there was a chance that their unique skin cancer detection system might have a chance to disrupt things, but it just doesn’t look like it is catching on for whatever reason. I still think there’s potential, but maybe not enough to be investable for much longer.

TransMedics Group (TMDX): 41% loss: Pretty much everything I said for DermTech above goes for TransMedics. Perhaps I am a sucker for the sci-fi looking medical technology. Perhaps I am guilty of ignoring the small market opportunity for transporting organs. Seems like really cool technology, but that doesn’t necessarily make it a great business to invest in.

Fiverr (FVRR): 38% loss: My opinion on Fiverr is pretty much the exact opposite of the above. Yes, it has had a very dramatic drop over the past 6 months. Yes, perhaps I was a little too quick to build up a very large position in a stock that had basically grown 10x in about a year. And yes, I would be lying if I said the comments around “seasonality” in a recent earnings call didn’t have me at least a tiny bit worried, but I am nowhere near ready to bail on my Fiverr investment yet. I still think we’re in the midst of a large change in how people work and I still believe Fiverr can be a big beneficiary of that change and think that this could easily be a company that is 10 times larger 5+ years down the line.

Changes in the Portfolio

Just one round of portfolio changes in the recent quarter. I think we might be seeing a little more than that in the coming months.

The Freedom Portfolio – January 2022

Here is where the Freedom Portfolio stands now. Need a reminder of what these terms mean? Check out: Defining my Terms.

TickerCompany NameAllocation
SHOPShopifyBabylon 5
TSLATeslaBabylon 5
MELIMercadoLibreBabylon 5
SESea LimitedEnterprise
TTDThe Trade DeskEnterprise
ETSYEtsySerenity
SQSquareSerenity
RDFNRedfinSerenity
NVCRNovoCureSerenity
TDOCTeladocSerenity
FVRRFiverrSerenity
SNOWSnowflakeSerenity
ROKURokuSerenity
CRWDCrowdStrikeSerenity
FUBOFuboTVSerenity
SWAVShockwave MedicalSerenity
ZMZoom VideoSerenity
DISWalt DisneySerenity
AXONAxon EnterprisesSerenity
NNOXNano-XMillennium Falcon
CELHCelsius HoldingsMillennium Falcon
TMDXTransMedics GroupMillennium Falcon
DMTKDermTechMillennium Falcon

That’s the recap of the Freedom Portfolio for the fourth quarter of 2021. Let’s hope 2022 is a bit kinder than 2021 was. Thanks, as always, for following along.