Over the past week, I made two changes in the Freedom Portfolio involving closing out two Millennium Falcon level positions and redeploying the cash to open up two new positions.

Jumia (JMIA) – I really love ecommerce companies in developing markets and have largely had success with them in the past with companies like Mercado Libre (MELI) and Sea Limited (SE). So when I heard about a company that some were calling “The Amazon of Africa”, I was intrigued. In retrospect, I think I probably got a little too carried away in IPO hype and jumped in before seeing if the company could put up consistent growth and show a path towards profitability. I was prepared to be patient with Jumia as long as it looked like they were moving in the right direction, but that no longer seems to be the case. Plenty of other ecommerce companies have flourished during Coronavirus related lock-downs, but Jumia has continued to struggle. Previously I had dismissed concerns that Jumia, while operating in Africa, wasn’t even an African company (they are based in Europe). Now I am beginning to wonder if there is something to that.

Either way, I had lost my conviction in Jumia. I’ll be keeping an eye on it, but for now, I am closing my position.

Yext (YEXT) – Chalk this one under “you can’t borrow conviction”. I often had a hard time seeing what people were so excited about when it came to Yext as an investment. Growth seemed unimpressive and the total addressable market didn’t seem as big to me as some others thought it was. Still, since I knew so many investors who I respect who really liked the company, I had decided to start a small position. The hope was that my conviction would increase as I learned more about the business. But that never happened, and so after about a year of middling returns, I decided to cut bait.

Nano-X (NNOX) – This is a small, purely speculative position which in my mind replaces the small and purely speculative position that Jumia once filled. Nano-X (or Nanox, it’s a little unclear the proper spelling) has a vision for completely re-imagining X-rays and helping to make them more available throughout the world to help improve preventative care. They believe they have a radical new way to reduce the cost of X-rays by an order of magnitude and are aiming for a 1 x 1 x 1 plan which would provide a least 1 X-ray scan per 1 person every 1 year to help improve medical outcomes across the globe. If they are successful, the upside would be incredible, but there also remains substantial risk that they simply won’t be able to achieve what they hope they will be able to. I’m starting this one off as a Millennium Falcon level position, but will be keeping a close eye on it and will not hesitate to add to my position if I see solid progress.

If you are interested in learning more, I encourage you to check out the short video on their website.

Etsy (ETSY) – As I mentioned before, I love me some ecommerce companies. The problem has always been that I largely viewed them as winner-take-all situations in most regions. For the longest time, it seemed like Amazon (AMZN) was the big winner in the United States and that nobody would ever be able to compete with their size and scale. That appears to be starting to change. Not only are traditional retailers like Walmart starting to be able to compete with Amazon online, but so are other ecommerce companies like Wayfair (W) and Etsy (ETSY).

I see three things going in Etsy’s favor right now:

We’ve seen Shopify have tremendous success playing the role of the “Rebels” to Amazon’s “Empire” as more and more merchants are growing weary of relying on Amazon’s marketplace to sell their goods and, in some cases, even competing with Amazon’s own products or competitors paying more to advertise their products. I believe the idea that Amazon is the only place to go to find things online is beginning to be questioned by more and more people. I think Etsy can take advantage of that.

I have also seen some push back lately in terms of fake reviews and cheap knock-offs being passed off as the real thing on Amazon. Etsy seems to have the air of being more authentic as it seems like the items are being sold by more trustworthy mom and pop business instead of faceless mega-corporations trying to cut corners whenever possible.

Maybe it is my imagination, but there also seems to be more and more a movement towards side hustles and entrepreneurship lately. I think that movement also benefits Etsy as more and more people try their hand at starting their own business and selling things online. More sellers attract more buyers and the network effect strengthens.

For all of those reasons, I have started a Millennium Falcon level position in Etsy as well.