BZUN – Paul Vs The Market

The Freedom Portfolio – January 2021

January 7, 2021 paul.essen Comments 3 comments

Between the kick-off of Fantasy Investing 2021, my recklessly bold predictions for 2021, and just things like being commissioner of fantasy football leagues which are winding down and enjoying the holidays with my family, the end of December is already a pretty busy time for me even without having to write up a new quarterly recap. Also, I feel like it’s still fair to use the excuse of a newborn baby sucking away time.

Anyway, I apologize in advance that this one is a little short. You can probably expect a little bit more of an abridged quarterly recap in the fourth quarter going forward.

Let’s start out with updated performance:

And here’s a look how each individual position performed over the past quarter and since the inception of the Freedom Portfolio.

Ticker	Quarterly Change	Change Since Inception
NNOX	90%	6%
ROKU	66%	164%
TSLA	57%	1053%
NVCR	54%	227%
MELI	50%	387%
CRWD	48%	114%
DIS	47%	54%
TTD	44%	273%
SWAV	38%	95%
ETSY	35%	67%
RDFN	30%	270%
FVRR	30%	-2%
SQ	29%	116%
AAXN	28%	63%
SE	24%	512%
JD	12%	238%
SHOP	7%	580%
NFLX	3%	44%
AMZN	1%	61%
TDOC	-9%	130%
FSLY	-11%	48%
ZM	-30%	128%

I’ve run out of ways to describe how 2020 was in terms of investing performance for the Freedom Portfolio. It was simply amazing and I don’t expect to ever be able to replicate those results again. So instead of focusing on the positives, I wanted to touch on a few (investing) negatives from 2020.

Magnite (MGNI): I was pretty excited about Magnite (formed by a merger of Teleria and the Rubicon Project) at the beginning of the year, so much so that I made it one of my picks for my fantasy investing 2020 portfolio. At the same time, my conviction in the company was low, so it was a pretty small position for me. Some poor performance earlier in the year along with some management changes shook my conviction and I ultimately sold in June. About 6 months later, the stock now is sitting around 4x where I sold it. It’s possible I was too quick to sell Magnite, and it might be time to take another look at the company.

Jumia (JMIA): Jumia is a very similar story. I had high hopes for the “Amazon of Africa” since many of my other ecommerce companies were thriving during COVID related lockdowns. I sold in September after some mediocre results made me question if the company would be able to seize the opportunity. Since then, the stock has gone up 5x. I’m still not convinced I necessarily made the wrong call, though. Time will tell. I’ll be keeping my eye on it, but have no plans to buy shares again any time soon.

Notable Performers

Just going to briefly touch on the best and worst performer this past quarter.

Best Performer

Nano-X (NNOX) – 90% gain: Interestingly, Nano-X was on my “worst performers” list last quarter. There’s honestly not much to say here. A series of short reports pummeled the stock in Q3 and the stock bounced back from that in Q4 (thanks in part to a live demonstration that was streamed in December). This is still a highly speculative company where so much rests on FDA approval to disprove the majority of the short thesis. I’m still optimistic, but the plan is to hold off making any buys or sells until there is more clarification from the FDA.

Worst Performer

Zoom Video (ZM) – 30% loss: This is almost the reverse story to Nano-X. Zoom peaked a few months ago (shortly after the start of Q4) after some absolutely incredible earnings reports. Since then, it has dropped a fair bit, presumably on positive vaccine news and because people are worried about Zoom’s place in a post-COVID world. I am not worried at all, and Zoom is on my list of companies I am interested in adding to if/when I have cash available.

Changes in the Portfolio

The Freedom Portfolio – October 2020

Here is where the Freedom Portfolio stands going into 2021. Need a reminder of what these terms mean? Check out: Defining my Terms. A few notes:

Mercado Libre moved up to a Babylon 5 level position on the back of an incredible 50% gain over the past quarter
Crowdstrike moved up to a Serenity level position on the back of some additional buys and a nice 48% gain during the quarter
Fastly fell to a Millennium Falcon level position after falling 11% during a quarter where the rest of the portfolio increased almost 30%.

Ticker	Company Name	Allocation
SHOP	Shopify	Babylon 5
TSLA	Tesla	Babylon 5
MELI	MercadoLibre	Babylon 5
SE	Sea Limited	Enterprise
AMZN	Amazon	Enterprise
RDFN	Redfin	Serenity
TTD	The Trade Desk	Serenity
TDOC	Teladoc	Serenity
SQ	Square	Serenity
NVCR	NovoCure	Serenity
ROKU	Roku	Serenity
DIS	Walt Disney	Serenity
JD	JD.com	Serenity
ETSY	Etsy	Serenity
NFLX	Netflix	Serenity
CRWD	CrowdStrike	Serenity
FSLY	Fastly	Millennium Falcon
FVRR	Fiverr	Millennium Falcon
ZM	Zoom Video	Millennium Falcon
NNOX	Nano-X	Millennium Falcon
SWAV	Shockwave Medical	Millennium Falcon
AAXN	Axon Enterprises	Millennium Falcon

That’s the 2020Q4 recap of the Freedom Portfolio. Thanks for following, and here’s to a prosperous 2021 for all!

The JIB is down to one

December 7, 2020 paul.essen Comments 0 Comment

A little over two years ago, I wrote about three Chinese companies that I was very bullish on. At the time, talk of FANG stocks and BAT stocks were all the rage, so I cheekily dubbed my three companies “the JIB”. Here are how those baskets of stocks have performed since I wrote that article (numbers from December 3rd):

The JIB (up an average of 110%)

JD.com (JD): Up 292%
Baozun (BZUN): Up 22%
iQiyi (IQ): Up 17%

FAANG (up an average of 98%)

Facebook (FB): Up 99%
Apple (AAPL): Up 152%
Amazon (AMZN): Up 95%
Netflix (NFLX): Up 69%
Alphabet (GOOG): Up 76%

BAT (up an average of 64%)

Alibaba (BABA): Up 87%
Baidu (BIDU): Down 20%
Tencent (TCEHY): Up 127%

Not too bad, if I can be permitted to toot my own horn for a moment. I did end up selling my position in iQiyi earlier in the year, though, so my own personal return on the JIB is slightly different than what is laid out above. Still, I’m fairly proud of how the JIB has managed to hold up against the much more highly touted FANG and BAT stocks.

But as you may have noticed, the gains for the JIB were a bit uneven, with both Baozun and iQiyi returning less than 25% while JD.com did the heavy lifting with a nearly 300% return. As mentioned before, I sold iQiyi earlier in the year when it looked like their competition was getting to them and I think it has become time to say goodbye to Baozun as well. The hope with Baozun was that it could be the “Shopify of China” and benefit from riding the same trends that Shopify has. For whatever reason (trade war, bad execution, etc) that just hasn’t quite come to pass. Growth has been okay, but nothing near what other ecommerce companies have seen during COVID, and recently I’ve found myself wanting more and more to redeploy those funds into a new idea.

That new idea is Fiverr (FVRR), and I now have a new Millennium Falcon level position in it. I’ve used the service in the past to find an artist to illustrate my book, Penny Invests, and was pretty impressed by the wide variety of services provided. I believe they are well positioned to ride the trend of entrepreneurship, the gig economy, remote work, and people looking for side hustles.

A few other tiny shifts to the portfolio to report (none of these changes affect what size of a position they are):

Sold a small bit of Tesla (TSLA) – I’m still a huge believer in the company, but the valuation is getting a little ridiculous even for me and even with the addition to the S&P coming up, I feel like this stock has a lot of optimism baked in already. I wanted to take a tiny bit off the table to bolster a few other positions, such as:
Buying a bit more of Zoom (ZM) – Zoom has nearly doubled since I originally bought it earlier in the year, but it is also down almost 30% from recent highs from a few months ago. I’m beginning to see the optionality still ahead of Zoom even after the pandemic is over and the recent pullback seems like a bit of an overreaction to vaccine news. I think Zoom survives just find in a post-pandemic world and still has room to thrive and flourish.
Buying a bit more of Crowdstrike (CRWD) – Crowdstrike recently had a pretty impressive earnings report and it reminded me that I wanted to add a little bit more to my position. Sometimes it is as simple as that.
Buying a bit more of Nano-X (NNOX) – Nano-X recently did a live virtual demonstration of their technology and while I didn’t quite think it was the same slam dunk as many did, I was suitably impressed and think the chances of it being an outright fraud are lower than before. It felt like a safe time to add a bit to my position.

The Freedom Portfolio – October 2020

October 5, 2020 paul.essen Comments 4 comments

It’s the two year anniversary of Paul vs the Market and the Freedom Portfolio. Like last year, I thought I would take this opportunity to replace my quarterly recap with a little bit of a longer look back where I go over the performance of the Freedom Portfolio since inception.

Last year, on the one year anniversary, I wrote:

“I just wish it could’ve coincided with a better performing quarter. The third quarter of 2019 was brutal, and saw the Freedom Portfolio essentially give back all of the gains from the 2nd quarter. The Freedom Portfolio was down 10.5% for the quarter, compared to the S&P being up around 1.7%. I’m still up versus the market year-to-date 22.9% to 20.5%, but am now back to losing to the market since inception (October of 2018) -4.1% to 3.9%.”
The Freedom Portfolio – October 2019

What a difference a year makes. And what a surprising difference this year has made.

2020 is shaping up to be the best investing year I’ve ever had. I would consider either of those to be amazing returns for a single year.

Quarterly Returns: The past two quarters alone, the Freedom Portfolio saw gains of 73% and 30% respectively compared with gains of 21% and 9% for the S&P 500. (+52 and +21 percentage points for the Freedom Portfolio)
2020 Returns: The Freedom Portfolio is up 115% year-to-date versus 5% for the S&P 500. (+110 percentage points)
Yearly Returns: Since the above quote (ie, October 2019 to October 2020) the Freedom Portfolio is up 146% versus 15% for the S&P 500. (+131 percentage points)
Returns since inception (October 2018): The Freedom Portfolio is up 143% to 20% (+123 percentage points), which is a compound annual growth rate (CAGR) of 55%

For the visual learners, here’s what those returns look like:

As you can see, the past few quarters have been simply amazing for the Freedom Portfolio, and what makes it doubly amazing is that this has happened with the backdrop of COVID-19 and the havoc it has wrought on the economy.

Because I know there are skeptics out there who think the stock market is akin to gambling or that investing in individual stocks is just like throwing darts at a dart board, I always try to be careful with my usage of terms like “luck” when I discuss my investing results. I have a lot of exposure to ecommerce companies in the Freedom Portfolio because I believe ecommerce is a trend that hasn’t played out yet and still has a long way to go, especially in international markets like Latin America and Southeast Asia. It was a conscious decision to be overweight in those types of companies. At the same time, I don’t mind at all admitting that I was fortunate that those ecommerce happened to benefit greatly from the lockdown measures enacted by governments to combat COVID-19.

It wasn’t just ecommerce. Teladoc (TDOC) and Livongo (LVGO) rode the telemedicine wave while Netflix (NFLX), Roku (ROKU), and Zoom (ZM) benefitted from people staying home and working from home respectively. Even companies like Square (SQ) and Redfin (RDFN), while initially seeming like they would be impacted by harm done to small businesses and the real estate market, seem to have rebounded with a vengeance because of their strength in digital payments and virtual home tours. About the only company in the Freedom Portfolio which was really slammed by COVID is Disney, and even they had Disney+ to help keep sentiment relatively positive during this time.

Here’s a look how each individual position performed over the past quarter and since the inception of the Freedom Portfolio two years ago.

Ticker	Quarterly Change	Change Since Inception
TSLA	99%	602%
SHOP	8%	516%
SE	44%	375%
LVGO	86%	359%
ZM	85%	218%
MELI	10%	215%
JD	29%	199%
RDFN	19%	169%
TDOC	15%	152%
TTD	28%	142%
NVCR	88%	111%
SQ	55%	62%
AMZN	14%	56%
FSLY	10%	59%
ROKU	62%	51%
CRWD	37%	39%
SWAV	60%	43%
NFLX	10%	33%
AAXN	-7%	21%
ETSY	10%	15%
DIS	12%	6%
BZUN	-15%	-34%
NNOX	10%	-45%

While Sea (SE), Livongo, and Zoom have been amazing performers over a relatively short period of time and that is awesome, I wanted to talk specifically about the two best winners in the Freedom Portfolio: Shopify (SHOP) and Tesla (TSLA), and how they drive home two important investing lessons for me:

Don’t be afraid to invest in a company which has already run up
Don’t be afraid to hold onto winners as long as your investing thesis still holds true

While the Freedom Portfolio officially started in October of 2018, I actually first bought shares of Shopify back in January of 2017 (the return since then is somewhere in the neighborhood of 2,200%). It’s been a spectacular investment for me, but it also very nearly didn’t happen. I have a very clear memory of thinking that I had missed the boat with Shopify back in 2017. The stock had already nearly doubled and I was wondering how much further it could go. I decided to take a chance with a relatively small position that in less than four years has turned into by far my largest position in the Freedom Portfolio.

I almost didn’t hold on long enough for that to happen either, though. A little over a year ago, I wrote about how I was taking a risk on Shopify because I was concerned over the huge run-up in stock price even though “the investing thesis is stronger than ever”. I ended up not selling, and it’s a good thing I did, because the stock has tripled since then. Tripled!

Lesson confirmed: Don’t be afraid to let your winners run.

Tesla taught a slightly different lesson. I first bought shares way back in 2015, with the total return since then around 680%. You might notice that isn’t too far off from the return since late 2018. That’s because the stock was basically flat for the first 4 years that I held onto it, and was even down from my initial purchase price as recently as mid-year 2019.

During that time, there was a ton of noise surrounding Tesla as a company and as a stock (some of it coming from the CEO himself). Plenty of very smart people were predicting the company would go bankrupt. There were a lot of very legitimate concerns about dilution and margins and valuation and missed deadlines. However, if you believed that electric vehicles were the future and that Tesla possessed a huge advantage over legacy automakers in terms of battery technology, self-driving software, and charging networks, then it was hard to ignore the progress that Tesla was making despite consistently missing deadlines, some erratic behavior from the CEO, and turnover in management. Finally, in late 2019 and early 2020, the market seemed to catch on that the legacy automakers were in real trouble and that it’s entirely possible that Tesla isn’t just some tiny upstart, but might be the future of automobiles (and more?).

The lesson? Sometimes it can take years for the stock price to catch up to how the business is performing. Don’t be impatient. If the company continues to execute and grow and the investment thesis remains intact, then eventually the market will catch on.

Now that that is out of the way, let’s get into some other notable performers for the Freedom Portfolio since inception.

Notable Performers

Best Performers

Sea Limited (SE): Much like with my Shopify story above, I wondered if I had missed the boat with Sea Limited when I first bought shares in 2019 because it had already tripled. At the time the market cap was around $15 billion, which seemed high for a video gaming company just starting to dip its toe into ecommerce and digital payments in a mix of countries where it was up against competitors backed by deep pockets such as Alibaba (BABA).

I’m so glad I did.

As mentioned earlier, COVID has obviously helped to accelerate ecommerce and digital payment adoption around the world, but Sea has also done an incredible job of executing across the myriad of countries that they operate in and have seemingly started to pull away from their competitors across the board. Their gaming business also continues to impress as it makes inroads into Latin America and India.

Sea is probably the company where my conviction in it has increased the most over the past quarter. Here’s a fun fact: Out of all the current holdings in the Freedom Portfolio, Sea is the company on which I have spent the most money buying shares as I have been adding to it on the way up over the past year or so. It has become a large enough position to where I probably won’t be adding to my position anymore going forward, but I am really looking forward to seeing how they execute in the coming quarters and years.

Livongo (LVGO): Livongo has been a wild ride. I hadn’t bought shares until early this year and yet in that short amount of time it has already returned roughly 360%. I was so thrilled to see how this company was growing and riding the wave of remote healthcare.

Then the announced merger with Teladoc happened.

Initially, I was crushed, and not just because both stocks dropped on the news. It seemed like such a bad fit and I couldn’t understand why Livongo was getting acquired at such a low premium. It stung all the more since it happened right as they announced an incredible quarter that I expected to cause the stock to pop even more.

Now that I’ve had more time to digest the news, I’m warming up to the merger, though, and can understand why it was done and how the companies complement each other. In fact, I’m starting to get excited about the prospect of the newly merged company being a true powerhouse in the future of remote healthcare.

I’m holding off on making any decisions in terms of buying or selling shares of either company until the merger goes through and we get some insight into how the newly combined entity is performing, but I am cautiously optimistic.

Worst Performers

Nano-X (NNOX): This comes with a major astericks considering that just two days after the close of the third quarter, Nano-X surged more than 50% on news that it was going to offer a live demonstration of its Nanox.ARC System later in the year. Now that I have sold Jumia (JMIA) and Kushco (KSHB), Nano-X is easily my most speculative investment.

The Muddy Waters short report on Nano-X is concerning to me, since they have a pretty good track record in sniffing out problems with companies. At this point, I think I will just be sitting on my position (neither buy or selling) until we get any news on FDA approval. Hopefully this works out, but if it doesn’t, the position is small enough that I am comfortable with the idea of the stock going to zero.

Baozun (BZUN): Baozun has been a baffling investment for me. It has been a perennial under-performer in the Freedom Portfolio. Not only is it down 17% since inception, but it is down even more compared to the S&P 500 during that same time period. The US/China trade war has undoubtedly been a problem, but the company has also been in the midst of transitioning to higher margin products and away from a more capital intensive distribution model. Despite all of this, the company continues to grow.

To be honest, my conviction in the company is starting to waver. However, I don’t want to make any hasty decisions (see my comments about being patient with Tesla above), and the growth story is still intact. I plan on holding on for a few more quarters to see how the transitions play out and to see if US/China tensions ease. But if an exciting new opportunity comes along, Baozun might be one of the first companies that I consider selling.

Disney (DIS): It’s no surprise why Disney has struggled over the past year or so. Despite it being a very diversified company, almost every single major revenue generator for the company has been completely shut down by COVID-19. Obviously theme parks and cruises have been hugely impacted. Their movie business has also been put on hold as theaters are largely shut down and the Mulan experiment in releasing their blockbusters straight to digital has seemingly flopped. Even ESPN has been affected by the postponement and cancellation of sports. About the only positive for Disney during this time has been Disney+, their streaming service, and that doesn’t generate nearly as much revenue as their other business lines. And all of this happens right after Disney took on a lot of debt in order to purchase a lot of Fox assets. Frankly, I’m a little surprised Disney isn’t down even more.

I’m still a big believer in Disney. I believe their theme park and movie businesses will rebound. I believe they have a ton of growth left in Disney+ and a huge international opportunity in front of them. Yes, they might not have the same amount of upside as many of the other companies in the Freedom Portfolio, but there’s nothing wrong with the occasional slower and steadier grower.

Changes in the Portfolio

In the past, I had written about the buys and sells of the previous quarter in my quarterly recaps. With this quarter, I tried something new and decided to write up short posts soon after I made any changes to the Freedom Portfolio. As a result, there’s nothing additional to share here, so I will simply link to the posts that I wrote detailing my buys and sells during the quarter:

The Freedom Portfolio – October 2020

So here is where the Freedom Portfolio stands at two years. Need a reminder of what these terms mean? Check out: Defining my Terms.

A few notes before moving on to the full breakdown:

Teladoc and Livongo are on track to merge. While I have no reason to think the merger won’t go through, they are currently still separate companies, so I am treating them as such. If I treated them as a combined entity, they would be an Enterprise level position.
Since last quarter, Tesla has moved from an Enterprise level position to a Babylon 5 level position. That’s what tends to happen when a stock doubles in 3 months.
Likewise, MercadoLibre moved from a Babylon 5 level position to an Enterprise level position. It’s not MercadoLibre’s fault. It was up 10% for the quarter, which is a perfectly respectable gain. The rest of the portfolio just did a little better.
Baozun dropped from a Serenity level to Millenium Falcon level position. While this was mostly due to poor performance, it also perfectly mimics my lessening confidence in the company (as described above).
Lastly, Fastly (see what I did there?) moved from a Millenium Falcon level position to a Serenity level position, largely because I added to my position as I got more confident in the business.

With all that being said, here is the Freedom Portfolio as of October 2020:

Ticker	Company Name	Allocation
TSLA	Tesla	Babylon 5
SHOP	Shopify	Babylon 5
AMZN	Amazon	Enterprise
SE	Sea Limited	Enterprise
MELI	MercadoLibre	Enterprise
LVGO	Livongo Health	Serenity
JD	JD.com	Serenity
RDFN	Redfin	Serenity
TDOC	Teladoc	Serenity
TTD	The Trade Desk	Serenity
NVCR	NovoCure	Serenity
SQ	Square	Serenity
FSLY	Fastly	Serenity
ROKU	Roku	Serenity
NFLX	Netflix	Serenity
DIS	Walt Disney	Serenity
ZM	Zoom Video	Millennium Falcon
CRWD	CrowdStrike	Millennium Falcon
SWAV	Shockwave Medical	Millennium Falcon
AAXN	Axon Enterprises	Millennium Falcon
ETSY	Etsy	Millennium Falcon
BZUN	Baozun	Millennium Falcon
NNOX	Nano-X	Millennium Falcon

That’s the two year recap of the Freedom Portfolio! While 2020 hasn’t been the greatest year in many ways, it has at least been a pretty great run for the Freedom Portfolio. More than ever, I am excited to see what the future holds for the companies I have invested in. Thanks, as always, for following me on my journey to beat the market.

The Freedom Portfolio – July 2020

June 30, 2020 paul.essen Comments 4 comments

Wow.

2020 has been such a crummy year in so many ways, but when it comes to investing returns, I don’t know if I’ll ever see a quarter quite like the second quarter of this year.

This might be the best investing quarter that I will ever have.

The Freedom Portfolio was up 73% this past quarter alone. That is a ridiculous return for a whole year, let alone a single quarter. Granted, some of that is coming off of the Coronavirus-induced lows, but that’s just a tiny part of it. The Freedom Portfolio is still up 64% year-to-date and is now up 81% since inception, for a nearly 40% annual return. During that same time period, the S&P 500 is up only 10%, giving the Freedom Portfolio an outperformance of 71 percentage points.

For those who prefer visuals, here’s what it looks like:

Two years is still a pretty short period of time in the grand scheme of things, and I’m sure that gap will narrow at some point in the coming years, but at the same time I do believe evidence is starting to emerge that it is possible to beat the market… and that I’m doing it.

Here is the performance broken down by position over the past quarter:

Ticker	Percent Change
RDFN	169%
LVGO	163%
SE	144%
SHOP	128%
TTD	116%
TSLA	106%
SQ	100%
MELI	99%
JMIA	86%
YEXT	61%
JD	48%
FSLY	43%
SWAV	41%
AMZN	40%
BZUN	38%
ROKU	33%
AAXN	31%
TDOC	22%
NFLX	21%
SPOT	19%
DIS	15%
CRWD	1%
NVCR	-13%

Notable Performers

Best Performers

Not to brag (too much), but this list was nearly impossible to trim down. Two companies had stocks that appreciated over 150% this quarter alone. Another six appreciated 100% or more. Amazon (AMZN) had an incredible quarter that saw it gain 40% and yet it was (relatively speaking) a disappointment compared to the rest of the Freedom Portfolio and in fact dropped from a Babylon 5 level position to an Enterprise level position.

Anyway, to avoid going on for too long, I’m going to just stick to a top 3:

Livongo Health (LVGO): I first bought shares in this company last quarter and I am really glad I did. Livongo seems to be riding the telemedicine wave in the wake of Coronavirus, but I honestly thought this was an impressive company even before the pandemic. Their growth rates were incredible before and their model of health nudges and delivering medical supplies directly to the consumer should only benefit from a new normal that sees people visiting doctors and pharmacies less often. Few companies have gained my trust in terms of future performance more than Livongo over these past few months.

Sea Limited (SE): Although if any company could challenge Livongo’s claim to that title, it would be Sea. I’ve had my eyes opened to the potential of the Southeast Asia region and I was already a big fan of eCommerce and digital payment companies in developing regions (see, Mercado Libre (MELI)). Sea is following a slightly different path with their gaming business, and the competitive landscape is a little different with Alibaba looming, but I’m still really excited to see if Sea can become the dominant player in eCommerce and digital payments in Southeast Asia over the coming decade.

Redfin (RDFN): One of my favorite investments, and finally the performance is catching up to my conviction in the company. Early in 2020, Redfin looked to be on track for having a great year, before the stock got whacked hard by Coronavirus. I was confident that the short term challenges would be a long term gain for Redfin, though, as they had an advantage with virtual tours and low mortgage rates could heat up the housing market. It looks like I was right, and I’m thrilled to see people are finally realizing what a great investment Redfin can be.

Worst Performers

Again, not to brag too much, but it’s hard to find any contenders here. Only four positions under-performed the S&P, and two of those (Crowdstrike (CRWD) and Spotify (SPOT)) were only owned for a few weeks so it’s an unfair comparison. Thus, the only companies it makes sense to write about are…

Disney (DIS): It’s not at all a surprise that Disney hasn’t been the best performer this past quarter considering how almost all of their business lines have taken a major hit from Coronavirus induced lockdowns. Amusement Parks and Cruises are shut down. Movie theaters are shut down. Live sports are shut down. Short term, things will be messy for Disney, but assuming life ever gets back to some semblance of normality (which I believe it will), then I still like the long terms prospects. Disney+ is still killing it and they still have an amazing library of IP to pull from.

Novocure (NVCR): It makes some sense that Novocure is down a tiny bit this part quarter, as it sounds like Coronavirus is causing some delays in the clinical trials that were hoped to show how their Tumor Treating Fields could be effective with other types of cancers. I’m absolutely not worried at all, and even added to my position, as I see this as purely a short term speed bump and no challenge to the long term thesis.

Changes in the Portfolio

It was an unexpectedly active quarter for the Freedom Portfolio, as I closed out some lower conviction positions and added some new positions as well. Stock prices were also so volatile that there were some instances where I both added to my position AND trimmed some in the same quarter (Sea Limited).

Going forward, I’m hoping to try to write short pieces explaining my trades within a week of me making them, instead of saving them all up for the quarterly recaps. So if you don’t see this section in the next recap, that will be why.

Sells

KushCo (KSHB): It was long past time to sell. Too many things had happened to ruin the bull case and the company had gotten reduced to issuing more stock at depressed prices just to stay solvent. I don’t regret the initial investment because I thought it was worth the risk, but I do regret having held on for so long.

The Rubicon Project (RUBI): You might be asking yourself where this company came from since it wasn’t in the Freedom Portfolio last quarter. Teleria merged with the Rubicon Project and the combined entity took on the latter’s name. That’s not the reason I sold, though. The main catalyst was that the former CEO of Teleria, who had become the COO of the combined entity, ended up leaving the company soon after the merger was completed. That was enough of a red flag for me to exit for now, although I will keep an eye on the company to see how it executes going forward.

iQiyi (IQ): This one hurt for a few reasons. The first reason is that selling my entire iQiyi position effectively breaks up The JIB. The second reason is that just a few weeks after selling my shares, the stock popped big on news that Tencent (TCEHY) was planning on investing in the company, which makes it a lot more interesting. I have no plans to buy back into the company yet, but I will keep an eye on it.

Invitae (NVTA), Guardant Health (GH), CRISPR Therapeutics (CRSP), and Editas Medicine (EDIT): I group all of these together because my reasons for selling them were pretty similar. I was looking to reduce the number of positions that I have, and all of these were lower conviction holdings because they score so low on the “Understanding” level of my P.A.U.L. scoring system. I personally find it difficult to grasp what kind of advantages and moats and optionality these companies possess, and so I felt it was better to re-deploy those funds to companies I had higher conviction in.

I can’t help but note that Invitae made sure to get a parting shot in at me, though. One month after I sold, they announced an acquisition which caused the stock to jump 60% in two days. That hurt, but I consoled myself by remembering that I used the proceeds to buy shares of Sea Limited, which had almost doubled in that same month.

Trimmed the following positions: Teladoc (TDOC), JD.com (JD), Shopify (SHOP), and Sea Limited (SE). I trimmed all of these positions because many of them had appreciated a ton and I wanted to free up some money for some new ideas. Selling shares of Shopify really hurt, though. Why? Because up until then, I hadn’t sold a single share from my original purchase at $44.55 a share despite watching it skyrocket and increase by 1,800% (that’s not a typo). Because of my past experience with Netflix, I had sworn I wouldn’t sell my winners too early again, and I am worried I might be doing that here. Still, Shopify was approaching 20% of my portfolio and I only sold a small percentage of my position (less than 10%), so I resigned myself to trimming a little bit.

Buys

Axon Enterprise (AAXN): I kept hearing good things about the moat that this company has from some investors I really respect on Twitter, so I started digging into it more. This company is basically the old “Taser” company, although the exciting part of their business now appears to be body cameras and the fees they charge police departments to store the video generated by those cameras. I spoke to a friend who is familiar with the product and they gave a fairly glowing review, so I decided to dip my toe in with a small position. We’ll see how it performs in the coming years, especially in the current “defund the police” environment.

Zoom Video Communications (ZM): It sounds bad, but I feel like I was basically begrudgingly pulled into this position. I struggle so much seeing what kind of moat this company can possible have when so many other huge tech giants also offer video conferencing (and have been for years), but I also know a lot of investors I really respect really believe in the company, so I decided to start a small position. It’s already up 70%(!) from where I bought it two months ago, so I guess I have been proven wrong so far.

Spotify (SPOT): I keep darting into and out of a position in Spotify because I really like the moves they are making in acquiring deals with major players in the podcast space, but I also struggle with how they are going to successfully monetize them. I decided to jump back in after hearing about the deal they made with Joe Rogan. I’m going to try really hard to just hang on for at least a year this time to see how this podcast experiment plays out.

Fastly (FSLY) and Crowdstrike (CRWD): Much like some of the companies above, I’ve been hearing a lot of good things about these companies from investors that I have a lot of respect for, so I decided to open some small positions while I do some further research. I’m looking forward to learning more so that my conviction can grow and I can become just as bullish on these companies as they are.

Additions to already existing positions: Disney (DIS), Livongo Health (LVGO), Novocure (NVCR), Redfin (RDFN), Sea Limited (SE), The Trade Desk (TTD), Yext (YEXT), Roku (ROKU).

The Freedom Portfolio – July 2020

Obviously a lot of this is influenced by the incredible performance this quarter, but I’m really excited where the Freedom Portfolio sits right now. A couple of positions (Shopify and Tesla) have seen huge run-ups and will likely see periods of under-performance over the coming quarters and maybe even years, but I really like a lot of the Serenity level holdings I have and am looking forward to them taking off and being the next big growers in my portfolio.

Ticker	Company Name	Allocation
SHOP	Shopify	Babylon 5
MELI	MercadoLibre	Babylon 5
AMZN	Amazon	Enterprise
TSLA	Tesla Motors	Enterprise
TDOC	Teladoc	Serenity
RDFN	Redfin	Serenity
NFLX	Netflix	Serenity
SE	Sea Limited	Serenity
LVGO	Livongo Health	Serenity
DIS	Walt Disney	Serenity
TTD	The Trade Desk	Serenity
SQ	Square	Serenity
NVCR	NovoCure	Serenity
JD	JD.com	Serenity
ROKU	Roku	Serenity
BZUN	Baozun	Serenity
YEXT	Yext	M. Falcon
ZM	Zoom Video	M. Falcon
AAXN	Axon Enterprises	M. Falcon
SWAV	ShockWave Medical	M. Falcon
FSLY	Fastly	M. Falcon
SPOT	Spotify	M. Falcon
CRWD	CrowdStrike	M. Falcon
JMIA	Jumia Technologies	M. Falcon

Thanks, as always, for reading. I hope you’ve been having as much fun following along with me as I’ve had doing this so far.

The Freedom Portfolio – April 2020

March 31, 2020 paul.essen Comments 2 comments

I don’t know how to start this quarterly update.

Just a month ago, I was watching the Freedom Portfolio have a scorching start to the new decade thanks to the incredible run of companies like Tesla (TSLA). I was even wondering if I might be able to talk about how the portfolio had managed to double over a mere 15 months. That kind of thinking seems patently ridiculous now.

For those unaware, this past month has seen the fastest market drop in history as COVID-19 (aka, Coronavirus) has brought the US economy to a screeching halt. The volatility has been extreme, and it has gotten to the point where I don’t even blink when multiple positions in the Freedom Portfolio are up (or down) 20%+ in a day. Redfin (RDFN) was recently up 20% and 30% in back-to-back days and is still down something close to 50% in the past month alone. So I’ve very quickly had to shift my mindset from one of, “Isn’t the market an amazing way to generate wealth?” to “Don’t panic! This kind of thing happens sometimes”.

After some consideration, I decided that I wanted to get one main point across with this quarterly update: That I am completely and utterly unfazed by what the stock market has done this quarter.

I laid out most of my thoughts in my previous article: Don’t Panic (and also: COVID-19 Update: What a month), but the short version is this: I was investing during the Great Financial Crisis. I know that markets often go down and the drop is often much faster than when it goes up. Volatility like this is the price paid for superior long term returns. I don’t know where the market will go over the coming months or even year, but I am very confident that over the next 5+ years (which is my investing time frame), that the market will be up from where it is now. Throughout this entire market drop, I only sold one position and immediately re-allocated those funds to another (new) position. I stayed invested in stocks the entire time and even increased my 401(k) contribution and shifted some of my emergency fund money from CDs to the market. I am not calling a bottom, but I am absolutely convinced that stocks are on sale right now for anybody who has a 5+ year time horizon like I do.

Before I get to the results for this past quarter, I want to make a very important note. The market has been extremely volatile lately, and it hasn’t been uncommon for the market to move more in a single day than it has in some previous months or years. I saw one stat that said, “In 2017 the S&P had daily moves of more than 1% 8 times. In the last 27 trading days it’s happened 21 times.”

All this is to say that the numbers contained below are very tentative and could easily be out of date by the time you read this. I typically like to write these quarterly updates a week or two in advance, and most of these numbers will be coming from March 26th/27th, but who knows how things might change by the time April 1st comes along. If things change too much, I suppose I can always write this article off as an April Fool’s Day joke.

So basically, treat the numbers below as very tentative.

With that being said, it looks like the Freedom Portfolio will end up down around 6% for the first quarter of 2020. That’s not good, but still far better than the S&P 500, which is down roughly 21%. Since inception, the Freedom Portfolio is now convincingly beating the S&P with a positive return of 4% versus a negative return of 11% for the S&P. That’s an outperformance of 15 percentage points over a year and a half.

In terms of beating the market, that’s a pretty great quarter for the Freedom Portfolio. Obviously, it’s a bit of a mixed bag because my portfolio has lost tens of thousands of dollars over a mere 30 days, which is almost certainly the biggest loss of wealth I’ve ever experienced in my life in that short of an amount of time, but I am pleased that my portfolio has held up better than the market overall during these trying times and has opened up a convincing lead. Here’s hoping the Freedom Portfolio can expand that lead as the market rebounds.

Here is the performance broken down by position over the past quarter:

Ticker	Percent Change
TDOC	80.7%
TSLA	24.0%
JD	17.3%
SE	13.2%
SHOP	13.1%
NFLX	9.9%
AMZN	4.2%
MDB	0.5%
NVTA	0.0%
IQ	-7.0%
LVGO	-7.0%
SQ	-11.4%
GH	-11.4%
BZUN	-12.1%
RDFN	-14.7%
MELI	-16.6%
NVCR	-20.2%
TTD	-20.9%
SWAV	-23.0%
YEXT	-23.2%
DIS	-27.6%
CRSP	-28.4%
TLRA	-29.2%
EDIT	-30.0%
ROKU	-32.2%
KSHB	-34.2%
JMIA	-51.6%

Notable Performers

Best Performers

Teladoc (TDOC): It should be no secret why Teladoc had an amazing quarter. I don’t want to make light of a situation which is killing people and obviously Teladoc management would never want to phrase it this way, but you couldn’t have written up a better script for Teladoc than a highly contagious pandemic where the government is encouraging people to practice social distancing. I had invested in Teladoc because I thought telemedicine would be big in the future and COVID-19 seems to have only accelerated that future to now.

Tesla (TSLA): Tesla shows up as a big winner, but it almost feels like a loser to me. Why? Because just around a month and a half ago, Tesla was above $900 a share and absolutely crushing it with early Model Y deliveries and promises of shoring up their balance sheet with secondary offerings and actual profit. Now, the stock is barely above $500 a share and factories are (begrudgingly) being shut down. It has still been an amazing run for the company over the past six months, though, and the future still looks bright.

JD.com (JD): It’s probably a surprise to most people, but China’s stock market has been one of the best performing (if not the best performing) market in the world in 2020. JD.com was basically born during the SARS epidemic when its founder decided to take advantage of the opportunity to sell things online and it sounds like it has been able to come through this COVID-19 crisis stronger as well.

Worst Performers

Jumia Technologies (JMIA): Another quarter, another appearance on the “worst performers” list. I’ve run out of things to say about Jumia. It has flat out been an awful investment so far. I’m probably holding on for now, especially since it has shrunk to such a small position, but I’m definitely not looking to add any more shares.

Kushco Holdings (KSHB): Everything from above can be said for Kushco as well. There’s a possibility of a rebound if/when vaping bounces back and/or marijuana becomes legalized at the federal level in the United States, but those hopes aren’t big enough to buy more shares. Like with Jumia, I am tempted to close out this position.

Roku (ROKU): I’m not sure I understand why Roku has sold off as much as it has this quarter. My best guess is that it has less to do with the company itself and more to do with the sector it is in: connected TV and advertising focused companies. Not only was Roku down big this quarter, but so were companies like The Trade Desk (TTD) and Teleria (TLRA). Perhaps the market is concerned that there will be less money spent on advertising during a recession? Regardless, I’m unconcerned about this drop so far.

Disney (DIS): While it’s a mystery to me why Roku is down big, it’s no mystery at all why Disney has been crushed in the wake of COVID-19. Their amusement parks have been shut down to help prevent the spread of the disease and movie theaters have also been shut down, meaning they can’t release movies like Mulan and Black Widow. Even their TV properties are likely struggling with ESPN having so little professional sports to cover. Maybe they’re seeing a slight bump in Disney+ adoption due to social distancing, but it’s not nearly enough to offset the damage being done elsewhere. No wonder Bob Iger jumped ship early. Disney is going to have some tough earnings reports coming up (especially compared to the incredible year they had last year), and the timing is rough since they just spent a ton of money acquiring Fox and ownership of Hulu, but I still believe in Disney over the long term. I’m holding tight.

Changes in the Portfolio

It’s worth noting that the majority of the moves below were made before the market tanked. Since February 21st, the only moves I have made are the MondoDB sell and the Livongo Health buy. All of the other changes were made earlier in the year and were mostly focused on trying to concentrate my portfolio down into fewer positions (something I alluded to wanting to do in my previous quarterly recap).

Sells

Abiomed (ABMD): I was beginning to lose hope in the promised turnaround and was beginning to wonder if the damage had already been done and would ever fully get reversed. Once the seed of doubt is planted that a medical device might be unsafe, how many studies is it going to take to remove that doubt? Does Abiomed have a second act to rely on? I had lost my conviction in the company, and decided that meant it was time to sell.

StoneCo (STNE): I had bought StoneCo because I loved the idea of buying the “Square of Latin America” and also liked seeing that Berkshire Hathaway had a position in the company. However, I kept struggling with the fact that I hardly knew anything about the company outside of earnings reports. Also, one of the main reasons I love Square is their Cash App, which is something that StoneCo doesn’t seem to have (but possible competitor and other Freedom Portfolio holding Mercado Libre (MELI) does have). This was a lower conviction holding, and I felt like the money was better invested in another company I had a higher conviction in.

MongoDB (MDB): There’s a saying that I like that says, “you can’t borrow conviction”. MongoDB was increasingly feeling like a stock where I was trying to borrow conviction from others. A lot of smart investors I know are high on MongoDB, which is why I had dipped my toe in with a small position. However, I always struggled to understand what gave it an advantage over similar offerings from Amazon (AMZN). It has eternally languished as one of my lower conviction positions and this year I finally decided to close it out to put the funds to better use in higher conviction picks.

Alibaba (BABA): One of my initial reasons for investing in Alibaba was because I liked a lot of the opportunities they seemed to have expanding their eCommerce operations outside of China (specifically Southeast Asia). With my recent purchase of Sea Limited (SE), that itch has been scratched, and there was one less reason to invest in Alibaba. I liked the Chinese exposure that I was getting from the JIB stocks, so it felt like the time to put those funds to better use somewhere else.

Buys

Livongo Health (LVGO): This is a buy from last quarter’s watchlist. I was really interested in their business model, which uses AI to provide “nudges” to people dealing with chronic diseases like diabetes and high blood pressure. It’s a subscription model that appears to be growing nicely and has some good data to back up how it helps improve health outcomes and also save money. They also have held up surprisingly well over the past month for some reason, which is a nice bonus.

Additions to already existing positions: Roku (ROKU), Teleria (TLRA), Yext (YEXT).

Watchlist

I’ve been pretty inactive in terms of buying and/or selling positions in the Freedom Portfolio during this COVID-19 induced market drop because I don’t like to make rash decisions. However, seeing a lot of my positions losing 30%, 40%, or even 50% of their value has really illuminated which companies I really believe in (and want to buy more of) and which have me worried (and make me want to sell). There’s a decent chance I purge some of those companies in the coming quarter in order to load up on some of those companies that I believe i more. In addition to possibly adding to positions I already have, here is what is on my watchlist to buy or sell in the coming quarter:

Luckin Coffee (LK) – China has a lot of people, and they’re not nearly as obsessed with coffee as Americans are… yet. I’m intrigued by this China-based, mobile app / kiosk focused coffee company. The stock is down about 50% from its recent highs, and I’m tempted to dip my toe in now. If it drops more (presumably after some pretty bad earnings reports due to China’s lockdown) then I’ll be even more tempted.

Spotify (SPOT) – Spotify used to be in the Freedom Portfolio, but I sold because I lost conviction in it. I never stopped being intrigued by the company, though, and continue to be impressed by the moves they are making to become the Netflix of audio. Purchasing The Ringer (and their stable of popular podcasts) could be huge and could give them something that differentiates them from things like Amazon Music and Apple Music. I’ll be watching with interest to see what their next moves are.

KushCo and Jumia – See above. These two companies have been awful performers over many quarters, and I’m not sure I can see daylight at the end of the tunnel anymore. I have no plans to sell right now, but the thought has crossed my mind a few times.

Crispr (CRSP) and Editas (EDIT) – It’s really hard for me to have that strong of conviction when it comes to areas I know so little about. Everybody tells me that CRISPR is going to be huge, and I believe them, but I don’t have a strong sense of how to judge which companies are best positioned to take advantage or even how to measure how progress is going. Since I am trying to concentrate my portfolio on my higher conviction picks, then, these two have to be under consideration for being on the chopping block.

Guardant Health (GH) – Similar to the above, I’m far from a healthcare expert, and so it’s hard for me to judge just how good of a moat Guardant Health has and how susceptible they are to disruption. Another company I might consider selling to raise funds to buy something else.

The Freedom Portfolio – April 2020

Due to the incredible volatility in the market the past month or so, the Freedom Portfolio has seen more change than usual. Former Babylon 5 sized position Mercado Libre has shrunk back to an Enterprise level position. Former Serenity sized positions Teladoc, Tesla, and Netflix have surged into Enterprise level positions, and there has been a lot of switching up between Serenity and Millenium Falcon sized positions as well. Will things return to normal once everything related to COVID-19 settles down? Or will Tesla and Teladoc be permanent fixtures among the Enterprise and above levels? I guess we’ll find out.

Ticker	Company Name	Allocation
SHOP	Shopify	Babylon 5
AMZN	Amazon	Babylon 5
MELI	MercadoLibre	Enterprise
TDOC	Teladoc	Enterprise
TSLA	Tesla Motors	Enterprise
NFLX	Netflix	Enterprise
SQ	Square	Serenity
DIS	Walt Disney	Serenity
NVCR	NovoCure	Serenity
JD	JD.com	Serenity
RDFN	Redfin	Serenity
BABA	Alibaba	Serenity
IQ	iQiyi	Serenity
CRSP	CRISPR Therapeutics	Serenity
BZUN	Baozun	Serenity
TTD	The Trade Desk	Serenity
ROKU	Roku	Serenity
TLRA	Telaria	Serenity
YEXT	Yext	M. Falcon
NVTA	Invitae	M. Falcon
SE	Sea Limited	M. Falcon
EDIT	Editas Medicine	M. Falcon
SWAV	ShockWave Medical	M. Falcon
GH	Guardant Health	M. Falcon
JMIA	Jumia Technologies	M. Falcon
KSHB	KushCo	M. Falcon

Thanks, as always, for reading. I hope you all manage to stay safe during these extraordinary times. And remember: Wash your hands.

The Freedom Portfolio – January 2020

January 15, 2020 paul.essen Comments 6 comments

2019 is in the books! It’s time for another quarterly Freedom Portfolio update. Sorry this update is a little late. Over the past few weeks I’ve been juggling the typical holiday hecticness, setting up the next season of Fantasy Investing (new post coming soon!), trying to stick to a New Year’s Resolution to workout more, and dealing with 3 separate cases of flu in the family.

The fourth quarter was a pretty great one for the Freedom Portfolio, which was up a strong 16% versus roughly 9% for the S&P 500. Since inception, the Freedom Portfolio is now up 11.2% versus 10.4% for the S&P 500. It’s not a huge amount of out-performance, but it’s still a relatively short time frame when it comes to my investing horizon.

Here is the performance broken down by position over the past quarter:

Ticker	Percent Change
TSLA	71.0%
CRSP	58.1%
SWAV	46.4%
TTD	41.5%
EDIT	34.3%
IQ	32.6%
RDFN	32.0%
GH	31.3%
ROKU	30.8%
TLRA	29.6%
SE	28.5%
BABA	28.4%
SHOP	26.9%
TDOC	25.3%
JD	25.0%
NFLX	20.0%
STNE	16.8%
NVCR	14.5%
DIS	11.6%
MDB	9.2%
AMZN	6.5%
MELI	3.9%
SQ	1.5%
ABMD	0.2%
KSHB	-4.1%
YEXT	-6.8%
JMIA	-8.9%
NVTA	-11.5%
BZUN	-22.5%

Notable Performers

Best Performers

Tesla (TSLA): Even for a volatile stock like Tesla, the fourth quarter was a little crazy. Positive news regarding Model 3 deliveries in the US and deliveries in China ramping up earlier than expected seemed to be enough to send shorts scurrying for the exit. Even the widely panned (at the time) Cybertruck demonstration didn’t seem to hurt the stock momentum much (possibly because of the higher than expected number of reservations that Elon Musk announced?). There are still plenty of risks with Tesla, but much like the end of the year last year, they seem to be going into the new year with the good news outweighing the bad… for now.

CRISPR Therapeutics (CRSP): The fourth quarter of 2019 saw some promising news in terms of the types of benefits people were hoping to see from CRISPR (the technology, not the company). That appears to be the biggest reason why CRISPR (the company, not the technology) and Editas (EDIT) both saw big bumps over the past few months. In the case of CRISPR, it was enough of a bump to push it from a Millenium Falcon position to a Serenity level position.

ShockWave Medical (SWAV): It’s a little unclear to me exactly what happened with ShockWave Medical over the past quarter, since there didn’t appear to be any significant news which should’ve moved the stock. My best guess is that, because the IPO lockup period ended on September 3rd, it’s possible a lot of insiders sold their shares (which depressed the price of the stock) and once the selling was over (coincidentally right around the start of the quarter), the stock rebounded some.

ShockWave is actually an interesting case study regarding the dangers of investing in recently IPO’d companies. I typically try to wait before investing in recent IPOs, but broke my rule twice in 2019 (Jumia and ShockWave) and got burned both times. It’s easy to get caught up in the euphoria surrounding an IPO and then get caught owning a stock that plummets once that euphoria wears off. The same pattern happened a lot with IPOs in 2019 where the stock went crazy in the first few months before crashing back down to Earth. Just look at Beyond Meat (BYND)!

The lesson learned for me? Don’t get caught up in the excitement around an IPO, and especially don’t get caught up in feelings of FOMO when an interesting stock keeps going up to ridiculous heights. Chances are good there will be a better entry price once the lockup period ends and the excitement wears off. I’m still bullish on ShockWave, but I do wish I had waited longer to start my position.

The Trade Desk (TTD): Another head-scratcher. While The Trade Desk was up 40%+ the past quarter, if you zoom out a little more you would see that appreciation just about brings it back to where it was in the middle of 2019. A number of high-growth, high-valuation software as a service (SaaS) companies saw some dips in the third quarter of 2019, so this rebound seems like it’s just a recovery from that previous dip.

Worst Performers

Baozun (BZUN): Baozun’s most recent earnings report was pretty good, and contained some strong growth across the board, but it also contained forward guidance which seemed to disappoint investors. I knew that Baozun was likely to be a volatile stock, and the past few years has likely been tough in terms of a slowing Chinese economy and the trade war, so I’m not overly concerned. Still, I’ll be interested to see what their next earnings report looks like. If it looks like there are signs of permanently slowing growth, then it might be time to consider selling.

Invitae (NVTA): Invitae is another stock that I expected volatility from. As of mid-2019 it had almost doubled, so I’m not surprised to see it give some of those gains back later in the year. No huge concerns for me here.

Jumia Technologies (JMIA): Jumia falls squarely into the “recent IPO that I should’ve waited longer to invest in” camp that I mentioned above. I’m still a believer in the eCommerce opportunity in Africa, but in retrospect Jumia was clearly way overvalued and is now sitting considerably below its IPO price. I should’ve waited to see how the company performed for a few quarters instead of jumping in so soon. I excepted a ton of volatility from Jumia (even more than from the companies above), so the drop in stock price doesn’t concern me, although I’ll definitely be keeping an eye on how the company continues to perform. They’re burning through a lot of cash and profitability seems very far away. This remains possibly the riskiest position in the Freedom Portfolio.

Changes in the Portfolio

There was a saying I came across recently which essentially said that every new addition to your portfolio should be better than what you already own, or else you are diluting your returns. It was something that really spoke to me. I always envisioned the ideal number of positions for the Freedom Portfolio being somewhere between 20 and 25, even though I knew that would be hard to stick to. Sure enough, the Freedom Portfolio had ballooned to over 30 positions as of the last check-in. As a result, for the past few months I’ve tried to focus on reducing the number of positions I have by eliminating those I have lower conviction in. You’ll probably see that reflected below.

Sells

Twilio (TWLO): One concern that I have had over the past few months is the performance of software as a service (SaaS) stocks possibly getting ahead of the underlying businesses. I sold my entire position in Twilio because it was one of my lower conviction SaaS companies where I felt like I didn’t fully understand their competitive advantage enough.

Intuitive Surgical (ISRG): Another lower conviction positions that I sold completely out of. I’m still really interested in the robotic assisted surgery space, but there are other opportunities I’m more excited about right now.

Illumina (ILMN): It’s a similar story with Illumina. They’ve run into some slower growth and some speed bumps with their Pacific Bio acquisition. There are enough dark clouds around the company right now that I just didn’t want to have to deal with.

Prosus (PROSY) and Naspers (NPSNY): Prosus was a spin-off of Naspers that happened earlier in the year. Both were intended to be indirect ways to invest in Tencent while getting some exposure to other companies as well. It’s hard to think of a better way to simplify my portfolio than to drop Prosus and Naspers. It helps that I have become concerned about the Chinese government’s increasing scrutiny of Tencent’s gaming business.

Buys

Roku (ROKU): Most people probably only think of the small hardware devices when they think of Roku, but they also have a growing advertising business. With the streaming video wars seemingly heating up with the release of Disney + and Apple TV +, I’ve become more interested in different ways to invest in the connected TV space and Roku seems like a good one.

Telaria (TLRA): Like Roku, Telaria is another way to invest in advertising in the connected TV future. It’s a small company, so I’m starting with a small position right now while I see how the company performs and learn more about the business.

Yext (YEXT): Although it’s a new position, Yext has been on my radar for a few years now. I used to work with some people who now work at Yext, so I was familiar with the company even before they went public. Some investors that I really respect are pretty bullish on Yext, and that has played a big role in why I have opened a small position.

Additions to already existing positions: Sea Limited (SE), NovoCure (NVCR), Abiomed (ABMD), Guardant Health (GH), Baozun (BZUN), CRISPR Therapeutics (CRSP).

Watchlist

One thing I want to improve on in 2020 is being less impulsive in terms of starting new positions and selling current ones. One idea I have of enforcing that is to have a watchlist of stocks every quarter that I am considering buying or selling. Ideally I wouldn’t buy or sell any stock unless it was on my watchlist from the previous quarterly update. I don’t want to make it a hard and fast rule quite yet, but wanted to give it a try to see how it works. Here is my first watchlist:

Livongo Health (LVGO) – Interesting looking healthcare company which uses AI to provide “nudges” to people dealing with chronic diseases. Has a relatively unique subscription model as well.

MondoDB (MDB) – One of my lower conviction holdings (and I’m trying to concentrate my portfolio more). I’m still concerned by their ability to grow in a world with big players like AWS (Amazon Web Services). A contender for selling to deploy capital elsewhere.

Alibaba (BABA) – Another lower conviction holding. It’s already a big player in China. How much larger can they get? How do they perform with a possibly slowing Chinese economy?

Roku (ROKU) – I know I just started this position, but I hadn’t added it to the Freedom Portfolio until now because I had concerns about its ability to differentiate itself in the connected TV future. I’m not sure they have a defensible moat and am willing to sell if it looks like they’re losing ground to competitors or the landscape is changing.

Abiomed (ABMD) – Again, this was a position I just added to, but I think there are a lot of questions swirling around Abiomed that will get answered in the next quarter or two. Can they turn things around and get growth back on track? I think so, but if I end up being wrong then I want to be able to get out quickly.

The Freedom Portfolio – January 2020

So where does the Freedom Portfolio stand going into 2020? Well, thanks to the incredible performance of Shopify and Mercado Libre, it’s interestingly top-heavy with 3 Babylon 5 level positions yet no Enterprise level positions. I don’t expect this to last for too long, however, as Disney and Netflix are right on the cusp and both feel primed to have a strong 2020. Need a reminder of what these terms mean? Check out: Defining my Terms.

Ticker	Company Name	Allocation
SHOP	Shopify	Babylon 5
AMZN	Amazon	Babylon 5
MELI	MercadoLibre	Babylon 5
DIS	Walt Disney	Serenity
NFLX	Netflix	Serenity
SQ	Square	Serenity
NVCR	NovoCure	Serenity
TSLA	Tesla Motors	Serenity
JD	JD.com	Serenity
RDFN	Redfin	Serenity
TDOC	Teladoc	Serenity
BABA	Alibaba	Serenity
IQ	iQiyi	Serenity
CRSP	CRISPR Therapeutics	Serenity
BZUN	Baozun	Serenity
TTD	The Trade Desk	Serenity
EDIT	Editas Medicine	M. Falcon
NVTA	Invitae	M. Falcon
ROKU	Roku	M. Falcon
ABMD	Abiomed	M. Falcon
STNE	Stoneco	M. Falcon
SWAV	ShockWave Medical	M. Falcon
SE	Sea Limited	M. Falcon
MDB	Mongo DB	M. Falcon
GH	Guardant Health	M. Falcon
TLRA	Telaria	M. Falcon
YEXT	Yext	M. Falcon
JMIA	Jumia Technologies	M. Falcon
KSHB	KushCo	M. Falcon

Thanks, as always, for reading, and here’s to a prosperous new decade for all investors.

Revisiting the JIB

November 12, 2019 paul.essen Comments 0 Comment

Approximately one year ago today, I wrote about the FANG and BAT stocks: baskets of large tech companies in the United States and China. I responded with my own basket of Chinese companies that I dubbed the JIB, which consisted of JD.com (JD), iQiyi (IQ), and Baozun (BZUN). A year ago, I wrote, “over the long term, I like their chances of being big winners”. A year hardly counts as “the long term”, but I was still thought it could be interesting to see where things stand today. Over the past 12 months, the S&P 500 index is up roughly 12%. How have the FANG, BAT, and JIB stocks done during that same time? Check it out below:

FANG (18%)

Name	Ticker	Starting	Ending	Change
Facebook	FB	144.48	194.47	35%
Amazon	AMZN	1698.24	1778.00	5%
Apple	AAPL	199	261.96	32%
Netflix	NFLX	300	292.01	-3%
Alphabet	GOOG	1061.39	1298.80	22%

BAT (6%)

Name	Ticker	Starting	Ending	Change
Baidu	BIDU	183.47	121.80	-33%
Alibaba	BABA	145.01	186.97	29%
Tencent	TCEHY	34.29	42.20	23%

JIB (27%)

Name	Ticker	Starting	Ending	Change
JD.com	JD	21.92	33.57	53%
iQiyi	IQ	19.95	19.11	-4%
Baozun	BZUN	34.00	44.50	31%

The BAT stocks are trailing the S&P by a decent amount, courtesy of Baidu’s pretty miserable -33% return (easily the worst performer of the entire group of stocks). the FANG stocks are beating the S&P by six percentage points thanks to solid returns by Facebook, Apple, and Alphabet. But it’s the JIB stocks that have really excelled and more than doubled the return of the S&P. The star performer has been JD.com with a 53% return, but Baozun has been no slouch with a 31% return of its own.

I find it interesting that the 3 biggest under-performers (NFLX, BIDU, IQ) are all either primarily video streaming services or have strong ties to one (Baidu owns a large stake in iQiyi). It’s been an interesting year in the video streaming space in the United States with the escalation of the video streaming wars courtesy of Apple and Disney (DIS) launching their new offerings and other content producers beginning to pull their content to prep their own. It’ll be interesting to watch the video streaming space over the next few years to see if it will be a case of a rising tide lifting all boats, or if a few winners will emerge while the others fade away. I’m certainly looking at iQiyi with a slightly more critical eye than I have in the past, considering their slowing growth and intense competition in the space.

As I said before, a year hardly counts as “the long term”, and while I’m pleased to see the JIB outperform so far, I realize the competition isn’t over. It’ll be interesting to see if the JIB can continue to outperform 2, 3, and 5 years down the line, and I’m looking forward to checking up on all of these stocks another year down the line.

The Freedom Portfolio – October 2019

October 11, 2019 paul.essen Comments 4 comments

It’s the one year anniversary of Paul vs the Market and the Freedom Portfolio! I just wish it could’ve coincided with a better performing quarter. The third quarter of 2019 was brutal, and saw the Freedom Portfolio essentially give back all of the gains from the 2nd quarter. The Freedom Portfolio was down 10.5% for the quarter, compared to the S&P being up around 1.7%. I’m still up versus the market year-to-date 22.9% to 20.5%, but am now back to losing to the market since inception (October of 2018) -4.1% to 3.9%.

Which brings me to something different that I want to do for this update: Instead of talking about the past quarter, I want to take a slightly longer term view and look at the performance since inception, which in this case is one year ago.

Below is table of the performance of the current positions in the Freedom Portfolio for the past year. For positions that I owned prior to October 2018, the starting price is the price on October 1st, 2018. For the positions that I acquired afterwards, the starting price is the price from the earliest date of purchase (since in some cases I bought shares multiple times). Here are the results:

Ticker	Start Price	Current Price	Percent Change
ABMD	191.68	177.89	-7.2%
AMZN	2021.99	1735.91	-14.1%
BABA	192.37	167.23	-13.1%
BZUN	49.3	42.7	-13.4%
CRSP	38.89	40.99	5.4%
DIS	117.28	130.32	11.1%
EDIT	23.43	22.74	-2.9%
GH	93.87	63.83	-32.0%
ILMN	369.15	304.22	-17.6%
IQ	27	16.13	-40%
ISRG	575.17	539.93	-6.1%
JD	26.03	28.21	8.4%
JMIA	18.91	7.93	-58.1%
KSHB	5.97	1.48	-75.2%
MDB	155.01	120.48	-22.3%
MELI	343.84	551.23	60.3%
NFLX	375.85	267.62	-28.8%
NPSNY	40.16	29.96	-25.4%
NVCR	52.94	74.78	41.3%
NVTA	17.6	19.27	9.5%
RDFN	18.56	16.84	-9.3%
SE	32.51	30.95	-4.8%
SHOP	166.44	311.66	87.3%
SQ	100.8	61.95	-38.5%
STNE	41.69	34.78	-16.6%
SWAV	53.12	29.93	-43.7%
TDOC	86.78	67.72	-22.0%
TSLA	305.77	240.87	-21.2%
TTD	214.75	187.55	-12.7%
TWLO	140.44	109.96	-21.7%

First, I want to point out an omission that I had trouble accounting for in the table above. Naspers (NPSNY) had an interesting (and complicated) quarter where they effectively spun off part of their business into another company called “Prosus” (PROSY) which is listing on the Amsterdam stock exchange (versus the Johannesburg stock exchange that Naspers is listed on). I won’t go into the details, but for each share of Naspers that I owned I now also own a share of Prosus as a result of the spin-off. However, when the split happened, the price of Naspers shares dropped a great deal (as one would expect). Therefore, the performance of Naspers above isn’t nearly as bad as it may seem.

Secondly, when looking at the performance of my positions over the past year, some of the numbers surprised me. There are typically three ways I look at the performance of my stocks: Daily (checking in on performance during my lunch break), Quarterly (during Freedom Portfolio check-ins), and Lifetime (since I bought the stock and not just from the beginning of the Freedom Portfolio).

So while I obviously know Netflix (NFLX) has had a rough past 6 months or so, it was still jarring to see the nearly 30% decline since the inception of the Freedom Portfolio. Why? Because I originally bought my shares of Netflix many years ago and so I’m used to thinking of it as a 400%+ out-performer and not an under-performer like it has been recently.

Netflix was probably the biggest discrepancy, but the story was similar across the board: Amazon (AMZN) was down 14% instead of being 300% up like I am used to seeing. Illumina (ILMN) down 17% instead of up 100%. There was even a big difference in the winners over the past year as well: Shopify (SHOP) was “only” up 87% instead of 600%+. It really drove home to me the important of a long term mindset that goes well beyond a single year. If I were to judge Netflix or Amazon on the performance over a single year, I probably would’ve sold it well before it had time to double, triple, and quadruple.

The first year I started closely following my investment returns, I just barely beat the S&P, but in the two years after I more than doubled the S&P 500’s return. I have consistently said, “I fully expect that there will be years where I lose to the market, sometimes badly.” While I didn’t lose to the market badly this first year, I did lose to it. Obviously I would’ve rather had a different outcome, but I am absolutely not deterred. I like the companies in the Freedom Portfolio right now even though many have seen pretty severe drops recently. I’m confidently that many of them will outperform over the next 5+ years and that some of them will outperform by a lot. I have a long term time horizon and that hasn’t changed at all with one disappointing year.

Now that that is out of the way, let’s get into some notable performers over the past year.

Notable Performers

Best Performers

Shopify (SHOP): It’s not a surprise to see Shopify as the top performer over the past year, as they’ve had quite an amazing run which saw the stock nearly triple in 2019 before giving back some of the gains in recent months. An 87% gain in a single year sounds impressive, but what’s even more impressive is that it’s up 600%+ since I bought it in 2017. The best might still be yet to come, too, with third party vendors looking for alternatives to Amazon and the building out of their fulfillment network. Looking forward to this being a major part of my portfolio for many years to come.

MercadoLibre (MELI): Also not surprising to see Mercado Libre up here, as it has also had an incredible run in 2019. The unrest in Argentina has hit the stock some recently, and the geo-political risk is as present as ever, but Mercado Libre still keeps finding a way to grow despite all the headwinds. I love being able to get an eCommerce play and digital payments play in the same company, and I also love getting exposure to the developing markets of South America. Can’t wait to see this company really soar once the situations in places like Argentina and Venezuela stabilize.

NovoCure (NVCR): This one might be a little bit of a surprise, since I don’t recall writing too much about Novocure in the past. The science fiction fan in me was initially attracted to the idea of fighting cancerous tumors with forcefields (or at least that’s how I prefer to think of them), but the investor in me loves how they continue to execute in getting their devices approved for more and more conditions.

Disney (DIS): A 10% gain might not seem that impressive, especially considering the ridiculous record breaking box office that Disney has had and all the hype around Disney+, but it was enough to make it a top 4 performer. Disney has weathered the market volatility better than most of my positions, and I’m excited to see what the next 12 months brings. Next year’s box office will almost certainly be considerably lower than this year’s, which could weigh on the stock, but we’ll also see the launch of Disney+ in November and start getting some subscriber numbers. I expect Disney is going to crush it with their numbers and beat even the optimistic expectations. We’ll find out in a few months.

Worst Performers

KushCo Holdings (KSHB): Thank goodness KushCo started off as one of my smaller holdings. The stock has gotten crushed recently, losing half its value in just a few months. The main culprit seems to be the sudden backlash to vaping, but I also have some slight concerns about solvency based on some of the recent actions the company has taken. I’m still holding on for now, as the long term thesis could still be intact assuming we don’t see a full on ban on vaping and the movement towards marijuana legalization continues, but the risks have definitely increased with this one.

Jumia Technologies (JMIA): Jumia is the poster child for not getting caught up in a recent IPO and waiting a few months before jumping in. Luckily, I didn’t buy anywhere near the high of around $40 a share because I realized it was an absurd valuation for such an unproven company. Still, I’m down on all of my purchases so I should’ve been even more cautious. Also, maybe I should give more thought to when lock-up periods end. Still, I am a sucker for eCommerce and developing markets, so I’m still holding onto my shares and looking for better days (and years) ahead.

ShockWave Medical (SWAV): Another cautionary tale of buying a recent IPO too soon. This time I unfortunately bought much closer to the high. I suspect I saw a lot of similarities to NovoCure (one of my top performers above) and got too carried away. Both are medical device companies with really innovative solutions to widespread problems. I still like the future prospects of the company and plan on holding, I just wish I had been more patient so I could’ve bought shares cheaper.

iQiyi (IQ): I suppose iQiyi could also be considered a relatively recent IPO (early 2018) that in retrospect I should’ve waited longer to buy. It’s hard to disentangle how much of iQiyi’s performance lately is due to the performance of the company or larger concerns over China. I haven’t seen anything in the company’s performance which overly concerns me yet, although the competition remains a concern.

Square (SQ): This one is a head scratcher to me. I’m having a hard time understanding why Square has floundered so much recently, especially in comparison to Shopify, which has soared. Square seems to be in a great position, with their Cash app, to appeal to the un-banked and under-banked and be a major player in the digital payments space. Hard to see how this is anything more than just a temporary setback.

Changes in the Portfolio

Sells

Uxin (UXIN): The short story is that I found other investments that I preferred having my money in. I still think Uxin is an interesting story and will keep tabs on it and may return at some point in the future, but there were more interesting companies that I wanted to be invested in. As a result, I sold my entire position.

Markel (MKL): Similar to Uxin, I saw better opportunities elsewhere. I do think Markel will be a market beater long term, but there are other companies that I think will beat the market by an even larger margin, and I wanted to invest in those instead. I sold my entire position.

Netflix (NFLX): This one hurt. Netflix has been one of my longest term holdings and is a company that I have a long and storied history with. At points I even swore that I would never sell any shares ever again. I only sold a part of my position, and it still remains a sizeable holding for me. I still believe it will be a long term winner, and I also think the recently correction is overdone, but I do worry that lower cost competition from Disney and Apple will hurt Netflix’s ability to raise prices, which will hamper their growth prospects some.

Intuitive Surgical (ISRG): I sold about a third of my position largely because I wanted some cash to purchase something else and this was one of my lower conviction ideas at the time.

Illumina (ILMN): Similar to Intuitive Surgical above, I also only sold about a third of my Illumina position. I had a more specific reason for Illumina, though. Their most recent earnings report had some warning flags in terms of slowing growth that had me worried.

Buys

Alibaba (BABA): Nothing fancy. Alibaba has been pretty flat for the past year despite posting some pretty nice earnings reports during that time and continuing to grow at an impressive rate. Once sentiment on China turns away from being so negative, this feels like a stock that could really rebound nicely.

Jumia Technologies (JMIA): It wasn’t surprising to see Jumia fall so much after the crazy run-up in the immediate aftermath of their IPO. Even though my initial position is down almost 50%, I’m still intrigued by the potential of the so-called “Amazon of Africa”, and so decided to add a little to my position. It remains one of my smallest positions, though.

The Trade Desk (TTD): The Trade Desk continues to grow like gangbusters, even if the stock has been relatively flat recently. I still like the long term story, though, so I added to my position.

Square (SQ): Square had a rough quarter which saw the stock price plummet after what looked like a pretty good earnings report. I’m not sure I understand what the market is thinking here, and still like a lot of the things they’re working on like the rumored stock trading functionality to the Cash app and acquiring a banking license. I added a bit to my position.

Shockwave Medical (SWAV): Similar to Jumia, Shockwave has also had a big pullback after a huge run-up post-IPO. I see nothing which changes my original investment thesis, and I suspect this is just a little post-IPO enthusiasm wearing off, so I lowered my cost basis some.

Abiomed (ABMD), MongoDB (MDB), Twilio (TWLO), Guardant Health (GH), Sea Limited (SE): All new positions, and all small ones at that. They range from more medical companies (ABMD and GH) to Software as a Service (SaaS) companies (MDB and TWLO) to another eCommerce play (SE). I might write more about some of these later depending on how things go, but for now they’re too small to spend too much time discussing.

Other

Naspers (NPSNY) and Prosus (PROSY): As mentioned previously, I acquired shares of Prosus as a result of a spin-off by Naspers. I plan on holding both for now, although at some point I might end up simplifying things by selling one or the other.

The Freedom Portfolio – October 2019

So where does the Freedom Portfolio stand at one year old? Take a look below. Need a reminder of what these terms mean? Check out: Defining my Terms.

Ticker	Company Name	Allocation
SHOP	Shopify	Babylon 5
AMZN	Amazon	Babylon 5
MELI	MercadoLibre	Babylon 5
DIS	Walt Disney	Enterprise
NFLX	Netflix	Serenity
SQ	Square	Serenity
JD	JD.com	Serenity
TDOC	Teladoc	Serenity
NVCR	NovoCure	Serenity
BZUN	Baozun	Serenity
BABA	Alibaba	Serenity
TSLA	Tesla Motors	Serenity
RDFN	Redfin	Serenity
IQ	iQiyi	Serenity
ISRG	Intuitive Surgical	Serenity
TTD	The Trade Desk	Serenity
NPSNY	Naspers	Serenity
ILMN	Illumina	M. Falcon
NVTA	Invitae	M. Falcon
CRSP	CRISPR Therapeutics	M. Falcon
EDIT	Editas Medicine	M. Falcon
STNE	Stoneco	M. Falcon
MDB	Mongo DB	M. Falcon
SWAV	ShockWave Medical	M. Falcon
PROSY	Prosus	M. Falcon
TWLO	Twilio	M. Falcon
JMIA	Jumia Technologies	M. Falcon
ABMD	Abiomed	M. Falcon
SE	Sea Limited	M. Falcon
GH	Guardant Health	M. Falcon
KSHB	KushCo	M. Falcon

So that’s my year one recap of the Freedom Portfolio. The past 12 months hasn’t seen the out-performance that I was hoping or expecting, but as I mentioned earlier, I remain undeterred. Thanks for following me on my journey to beat the market. Here’s hoping for a better year two.

The Freedom Portfolio – July 2019

June 30, 2019 paul.essen Comments 5 comments

Another really solid performance for the Freedom Portfolio is in the books. For the 2nd quarter of 2019, the Freedom Portfolio returned 9.5%, more than doubling the S&P’s 4.3% return. Since inception, the Freedom Portfolio is now up 7.3% compared to the S&P being up 2.2%. Again, it’s still an incredibly small sample size, but I’m heartened to see that the portfolio is doing what I expected it to do based on previous performance: under-perform when the market is going down, but also out-perform when the market is going up.

Here are the numbers from last quarter:

Ticker	April 2019	July 2019	Percent Change
SWAV	33.25	57.09	71.70%
SHOP	208.43	300.15	44.01%
JMIA	18.95	26.42	39.42%
NVCR	48.58	63.23	30.16%
CRSP	36.25	47.1	29.93%
DIS	111.59	139.64	25.14%
MELI	516.28	611.77	18.50%
TDOC	56.25	66.41	18.06%
ILMN	314.45	368.15	17.08%
BZUN	42.69	49.86	16.80%
TTD	201.56	227.78	13.01%
MKL	999.03	1089.6	9.07%
AMZN	1800.11	1893.63	5.20%
NFLX	359	367.32	2.32%
NPSNY	47.49	48.43	1.98%
EDIT	24.73	24.74	0.04%
NVTA	23.85	23.5	-1.47%
JD	30.93	30.29	-2.07%
SQ	75.59	72.53	-4.05%
BABA	185.09	169.45	-8.45%
ISRG	575	524.55	-8.77%
RDFN	20.67	17.98	-13.01%
KSHB	6.075	5.07	-16.54%
IQ	24.9	20.65	-17.07%
TSLA	282.62	223.46	-20.93%
STNE	41	29.58	-27.85%
UXIN	3.88	2.2	-43.30%

The big story this past quarter was the performance of the Enterprise level positions, or perhaps I should say the former-Enterprise level positions, because two of them (Shopify and MercadoLibre) did so well that they got upgraded to Babylon 5 level positions. That’s a great segue to talking about…

Notable Performers

Best Performers

Shopify (SHOP): Shopify has been on an absolute tear recently. Not only was it up 44% this past quarter, but it has more than doubled year-to-date. Shopify alone accounted for about a third of the Freedom Portfolio’s gains this quarter. It has gone up so far so fast that I even wrote about my concerns regarding how Shopify seems to have gotten ahead of itself a bit in terms of valuation.

MercadoLibre (MELI): While not quite as impressive as Shopify, MercadoLibre has also been doing very well in 2019. While it was “only” up 18% this past quarter, it was still good for almost 20% of the Freedom Portfolio’s gains and also good enough to move MercadoLibre into Babylon 5 level territory. Like Shopify, MercadoLibre has also been an amazing performer year-to-date and has more than doubled.

Disney (DIS): A gain of 25% in the quarter might seem relatively modest, but it was a welcome sight considering Disney shares have been fairly flat for the past 4 years or so. I was glad to finally see some life in the stock. Disney’s 25% gain this quarter was good for around 13% of the Freedom Portfolio’s gains.

ShockWave Medical (SWAV): A clarification here. While ShockWave is up 72% this quarter, I didn’t buy it until later in the quarter and thus my own position is actually basically flat right now.

Worst Performers

Uxin (UXIN): The smallest position in the Freedom Portfolio continues to struggle mightily and is now down over 50% from where I bought it. Clearly I’m not happy with the performance, but I expected this to be a very volatile position and that’s why I only invested a small amount of money. I’m still holding on to see how Uxin performs when the situation in China becomes a little more stable, but this is clearly a big miss so far.

Tesla (TSLA): Down around 21% for the quarter and it could’ve been a lot worse had it not rallied in the last few weeks. I’m not shocked by the poor performance, as I suspected Tesla could have a rough few months (which is why I sold some of my position previously), but even I didn’t expect it to be this bad. I think brighter days are ahead, so I have no intention of selling any more shares at this time.

Changes in the Portfolio

Sells

2u (TWOU): A few months ago, when I started my position in 2u, I mentioned believing that there is a bubble in higher education costs and that I was looking out for companies trying to disrupt the education market. I’m no longer convinced that 2u is the company to do that. I’m worried that they are too tied to the current higher education institutions and that could make them too resistant to cutting deals with disruptive upstarts. In short, I worry that a bursting bubble in higher education might take them down too. I’m still on the lookout, but have decided to sell my entire stake in 2u (for a modest gain).

Activision Blizzard (ATVI): The writing has been on the wall for this position for a bit. In the previous Freedom Portfolio update, I said, “The company remains on my watch list for potentially selling, as there has been a lot of negative news around the company recently that has wiped out some of the investing thesis behind it.” That’s pretty much all there is to say. There are no new big franchises in the pipeline, the company seems to be doubling down on existing franchises and on mobile, and there are rumblings of the once great Blizzard losing its shine. I would love to be wrong about this, since Blizzard has made some amazing games and I want them to keep making amazing games, but I’m worried about the ability of this company to beat the market over the long term. I sold my entire position for a modest gain.

Twitter (TWTR): I had enough to say about selling my Twitter shares that I wrote a whole post about it recently.

Spotify (SPOT): When I started my position in Spotify, I was intrigued by the idea that they could become the Netflix of podcasts. I’m less convinced that’s a huge opportunity now. The reasons are varied, but strangely enough one of the biggest ones was listening to the Spotify CEO on an episode of the Freakonomics podcast. It was then that I realized that the vision that the CEO had for the company wasn’t one that I necessarily shared, and that seemed like a great reason to decide to no longer be invested. I sold my entire position for a modest gain.

Altaba (AABA): Altaba recently announced a “Plan of Complete Liquidation and Dissolution“. They are effectively planning on selling the assets that the holding company owns and distributing them to shareholders. It’s all a bit complicated, but as near as I can tell this ends the dream that the company will ever be able to close the discount to net asset value that I was hoping for when I started my position. As a result, I decided to sell my entire position for a modest gain in order to buy…

Buys

Alibaba (BABA): Pretty straightforward buy here: I wanted to retain exposure to the Chinese eCommerce company and not have to deal with whatever process Altaba was going to go through.

Stoneco (STNE): During the last Freedom Portfolio update, I mentioned dipping my toe in with a small position in Stoneco. Well, I ended up buying at near the all-time high and it has ended up coming down a fair bit since then. I ended up adding a bit more on the way down because I like the exposure to the digital payments space in developing markets. I’m down on all my purchases so far, but it’s still a small position so I’m not worried.

Jumia Technologies (JMIA): Described as the “Amazon” of Africa, this company has had a wild ride in the past few months. They IPO’d in mid-April and have already traded between $18 a share and $49 a share. I initially thought it was way overvalued when it skyrocketed immediately after the IPO, but ended up dipping my toe in with a tiny position after the price crashed soon after. I’m a sucker for eCommerce stories in emerging markets, and I’m sure my experience with MercadoLibre influenced my decision making a bit. I fully expect this to be very volatile, which is why I am starting with a small position.

Tesla (TSLA): Earlier in the year I sold some of my Tesla shares because I was concerned with their short term outlook after the reduction in the federal tax credit and pulling forward a lot of demand at the end of last year. Apparently the market agreed, as Tesla stock plunged from over $300 a share earlier in the year to under $200 a share this past quarter. That seemed like too much of an overreaction to me, so I added to my position a bit.

The Trade Desk (TTD): The Trade Desk has been on my radar for around a year now and I’ve seen it pop up on many people’s lists of companies that they believe have a crazy amount of upside. I’ve been kicking myself for not having bought it a year ago since it has nearly tripled in the past year alone. That kind of crazy appreciation is one reason I’ve avoided it so far. I keep thinking I missed the bus and keep waiting for a pullback that hasn’t really come. The other reason I’ve held off? I’ve never been able to fully grasp what gives them a significant competitive advantage in the world of online advertising. How do they compete with behemoths like Alphabet and Facebook? I still don’t know if I have a definitive answer to that question, but I finally decided to open a small position in the company to motivate me to find out more. Hopefully I like what I find.

iQiyi (IQ): iQiyi has had an up and down 2019 so far, but has generally trended down over the past year. I’m still a big believer in the long term prospects of this JIB member, so I decided to add to my position somewhat. I believe the stock will see better performance once all of the concerns over trade wars and a slowing Chinese economy are in the rear-view mirror.

NovoCure (NVCR): NovoCure continues to do a good job in expanding the number of afflictions that their Optune system is cleared to treat. I added to my position to reflect my increased optimism in the size of their future addressable market. I wouldn’t be surprised to see this company being bought out at some point in the near future, as they’ve done a good job demonstrating the effectiveness of their treatments, but that’s not part of my buy thesis and I actually hope they aren’t bought out because I still feel like there’s a lot of upside left.

ShockWave Medical (SWAV): I believe I first heard about ShockWave Medical on a Motley Fool podcast and was immediately intrigued. The company produces a device which uses sonic waves to break up calcium deposits in arteries. As somebody with an extensive family history of heart disease, I felt a strong personal connection to the company and I was also attracted to their unorthodox approach to solving a common problem because it reminded me a bit of the position I just talked about above: NovoCure. ShockWave IPO’d just a few months ago and is already up big. I’m intrigued by the potential of their new treatment, and so I started a small position.

Markel (MKL), Uxin (UXIN), Intuitive Surgical (ISRG), Naspers (NPSNY): I added a small amount to each of these positions mostly to take advantage of lower prices or to moderately increase my exposure.

The Freedom Portfolio – July 2019

So here’s the new Freedom Portfolio! Click here for last quarter’s review.

Need a reminder of what these terms mean? Check out: Defining my Terms.

Ticker	Company Name	Allocation
AMZN	Amazon	Babylon 5
SHOP	Shopify	Babylon 5
MELI	MercadoLibre	Babylon 5
NFLX	Netflix	Enterprise
DIS	Walt Disney	Serenity
TSLA	Tesla Motors	Serenity
TDOC	Teladoc	Serenity
SQ	Square	Serenity
BZUN	Baozun	Serenity
ILMN	Illumina	Serenity
RDFN	Redfin	Serenity
JD	JD.com	Serenity
ISRG	Intuitive Surgical	Serenity
BABA	Alibaba	Serenity
IQ	iQiyi	Serenity
NPSNY	Naspers	Serenity
MKL	Markel	Serenity
NVTA	Invitae	Serenity
NVCR	NovoCure	Serenity
EDIT	Editas Medicine	M. Falcon
CRSP	CRISPR Therapeutics	M. Falcon
STNE	Stoneco	M. Falcon
KSHB	KushCo	M. Falcon
UXIN	Uxin	M. Falcon
SWAV	ShockWave Medical	M. Falcon
JMIA	Jumia Technologies	M. Falcon

So that’s my July 2019 recap of the Freedom Portfolio. It’s been a great 2019 so far, with a 37% gain so far year-to-date. Here’s hoping it keeps up.

The Freedom Portfolio – April 2019

April 4, 2019 paul.essen Comments 5 comments

Now that’s more like it.

You may (or may not) remember that the first ever performance check-in for the Freedom Portfolio was all about explaining why the Freedom Portfolio was under-performing the market and why I wasn’t worried. Here is what I said 3 months ago:

When the market is down, the Freedom Portfolio will do even worse, but my hope and expectation is that when the market is up, the Freedom Portfolio will do better, and over the long run those up periods will more than make up for the down ones.
The Freedom Portfolio January 2019 by Paul Essen, January 1st, 2019

Well, the S&P 500 was up 14% this past quarter. The Freedom Portfolio? It was up 25%. Since inception (October 1st, 2018), the Freedom Portfolio is down 2% compared to the S&P 500 being down 3%.

In other words, the Freedom Portfolio has won the Q1 2019 battle and is currently winning the war.

Here is a breakdown of performance by position:

Ticker	January 2019	April 2019	Percent Change
STNE	18.29	41.11	124.77%
NVTA	10.76	23.42	117.66%
MELI	285.61	507.73	77.77%
IQ	14.56	23.92	64.29%
SHOP	134	206.62	54.19%
JD	20.31	30.15	48.45%
NVCR	32.5	48.17	48.22%
BZUN	28.23	41.54	47.15%
TWOU	48.45	70.85	46.23%
RDFN	14.01	20.27	44.68%
SQ	54.1	74.92	38.48%
NFLX	259.28	356.56	37.52%
AABA	56.78	74.12	30.54%
CRSP	27.84	35.72	28.30%
SPOT	111.66	138.8	24.31%
AMZN	1465.2	1780.75	21.54%
ISRG	469.5	570.58	21.53%
NPSNY	38.335	46.43	21.12%
TWTR	28.26	32.88	16.35%
TDOC	48.19	55.6	15.38%
EDIT	22.03	24.45	10.99%
KSHB	5.47	5.94	8.59%
ILMN	294.71	310.69	5.42%
DIS	108.1	111.03	2.71%
ATVI	45.25	45.53	0.62%
MKL	1021.88	996.24	-2.51%
TSLA	306.1	279.86	-8.57%
UXIN	4.79	3.79	-20.88%

Needless to say, I’m thrilled. I was confident that the Freedom Portfolio would make a comeback, but I certainly didn’t expect it to happen over just one quarter. A 25% gain in a single quarter is pretty ridiculous, even coming off a big drop. However, it’s worth noting that despite the big quarter, the portfolio is still down from where it started. Also, everything I said previously about short time periods is still absolutely true. A half a year is an incredibly short amount of time when it comes to investing, and with signs that the US economy might be slowing down, I wouldn’t at all be surprised to see another bear market where the Freedom Portfolio under-performs soon. I’m definitely not planning any parades yet.

Notable performers

Worst Performers

Note: A position doesn’t have to lose value in order to be a “worst performer”. All it takes to qualify is to under-perform the market. With the S&P 500 up over 14% this past quarter, that’s a high bar that a lot of positions are going to fall short of.

Disney (DIS): Disney is a perfect example of this. Normally a return of 2.7% in a quarter would be pretty respectable, but it falls well short of the performance of the S&P. We’re coming up on 4 years of basically flat performance for the Walt Disney company, which is definitely frustrating, but I’m still holding onto my shares. With the Fox acquisition finally closing, all of the pieces should finally be in place for over-performance over the next few years. This year alone should see an incredible box office performance (Avengers: Endgame, Star Wars: Episode IX), the opening of the new Star Wars theme park, and the launch of Disney+. Should be a fun ride.

Activision Blizzard (ATVI): Basically flat over the quarter, but that’s a pretty major disappointment after the pummeling it took in Q4 of 2018. Many other positions in the Freedom Portfolio rebounded but Activision has not. The company remains on my watch list for potentially selling, as there has been a lot of negative news around the company recently that has wiped out some of the investing thesis behind it.

Tesla (TSLA): After being the best performer in the 4th quarter of 2018, Tesla was down 8.5% for this quarter. I’m honestly a little surprised it has been as relatively stable as it has been considering the controversy swirling around CEO Elon Musk. The stock is down around 5% since the inception of the Freedom Portfolio. While I am still a believer in the company long term, I did sell about 30% of my position early in the quarter for reasons I will lay out further below.

Uxin (UXIN): Uxin was the biggest under-performer on a percentage basis, but the impact on the Freedom Portfolio was relatively minor because it is such a small position. It was a very volatile stock when I purchased it and I anticipated that it would continue to be volatile in the near future. Not at all worried right now and not at all thinking of selling. Uxin has a pretty long leash and I want to see how the company performs when there there isn’t the threat of a slowdown in China going on.

Best Performers

StoneCo (STNE): This is for clarification more than anything else. While StoneCo is up huge the past quarter, I didn’t actually start a position until very recently and after the big gains. In fact, my position is slightly down from where I bought in right now.

MercadoLibre (MELI): The MercadoLibre gain, on the other hand, is very much legitimate. While it started off the quarter as one of the larger Serentiy level holdings, I obviously wish it had been a lot bigger. I thought that even after the huge pop after earnings, which is why I bought after those big gains. I don’t regret it at all, either, as even those later purchases are up a fair amount. In fact, while the earnings jump and adding to my position helped move MercadoLibre from a Serenity level position to an Enterprise level one, the performance since then is threatening to move it into a Babylon 5 level position. Mercado Libre’s gains over the quarter accounts for 15% of the Freedom Portfolio’s gains. That’s how on fire the company has been.

JD.com (JD), iQiyi (IQ), Baozun (BZUN): The JIB had an awesome quarter, up 48.5%, 64.3%, and 47.2% respectively. If the JIB was counted as a single company, it would be a Babylon 5 level holding in the Freedom Portfolio and their gains would’ve accounted for 16% of the gains in the Freedom Portfolio. Positive movement in the trade war between the US and China seems to have outweighed concerns over China’s economy potentially slowing. Regardless, I’m still a big fan of every one of these.

Netflix (NFLX): Another large position and another big gain for the quarter. The 37.5% increase for this Enterprise level position was enough to account for 12% of the Freedom Portfolio’s gains. There wasn’t a lot of news with Netflix over the quarter, although I have seen a lot of people concerned that Netflix could struggle with the entry of some well-funded competition in Apple (AAPL) and Disney (DIS). I believe Disney will have a very strong product, but I’m not worried about either offering hurting Netflix much. I believe there is room for multiple winners in the streaming video space and I am confident that Netflix will be one of those winners.

Shopify (SHOP): Much like Netflix before it, Shopify was an Enterprise level holding which also crushed it this quarter. Its gains accounted for 14% of the Freedom Portfolio’s gains. Not much else to add except that they continue to execute excellently and riding the eCommerce wave.

Changes in the Portfolio

This past quarter saw a lot more turnover in the Freedom Portfolio than usual and I wouldn’t expect to see nearly as many transactions for the rest of the year.

A few weeks ago, during my post on anchoring, I laid out some of the recent buys and sells that I undertook this past quarter. Here’s a quick recap of them:

Sells: Axos Financial (AX), nVidia (NVDA), Bladex (BLX), Baidu (BIDU), Tencent Holdings (TCEHY)
Buys: Baozun (BZUN), CRISPR Therapeutics (CRSP), Editas Medicine (EDIT), MercadoLibre (MELI), Teladoc (TDOC), Naspers (NPSNY), Spotify (SPOT)

Sells

Tesla (TSLA): As mentioned above, I sold around 30% of my position in Tesla earlier in the year. Part of it was locking in some gains that I wanted to deploy elsewhere, but part of it was out of some concern over the short term prospects for the company. Specifically, I was concerned that the late year push for Model 3 sales and the reduction of the federal tax credit for buyers meant that Tesla might’ve pulled forward a lot of demand. In other words, people who might normally have bought a Model 3 in Q1 of 2019 instead rushed to get the purchase in before the end of 2018. If that was the case, it would’ve meant disappointing Q1 numbers. We’ll find out in about a month when Tesla reports earnings.

Buys

StoneCo (STNE): I had my eye on this company before they had an amazing earnings report in mid-March which caused the stock to soar. At the time, I knew it was a digital payments company in Brazil that counted Berkshire Hathaway as an investor, and anybody who has read what I had to say about MercadoLibre knows I am intrigued by the payments space in South America. Unfortunately, I hesitated pulling the trigger. I finally decided to dip my toe in with a small position after the big jump on earnings. I’m looking forward to digging into the company more over the coming quarters and possibly adding to my position if I like what I see.

Kushco (KSHB): Speaking of adding to positions if I like what I see… Kushco Holdings was one of my smallest holdings on account that it was a pretty small company in a very speculative industry (cannabis). For that reason, I decided to start with a very small position. Having liked what I’ve seen of the company since then, I wanted to add a little to my position.

Spin-Offs

Multichoice Group Limited (MCHOY): I’m guessing you haven’t heard of this company. Neither had I until it magically showed up in my portfolio. It turns out that Naspers (NPSNY), my preferred way to indirectly invest in Tencent (TCEHY), had spun off one of its many other holdings as a way to try to unlock value for shareholders. I’ve decided to hold onto it for now until I can do more research into the company, but I’ll likely end up selling this tiny position in the next month or so.

The Freedom Portfolio – April 2019

So here’s the new Freedom Portfolio! Click here for last quarter’s review. A few positions are gone, with the largest being Axos Financial (a longtime holding that I was sad to sell) and there are a few new faces. At the top, Disney (DIS) dropped back down to a Serenity level holding while MercadoLibre jumped up to an Enterprise level holding.

Need a reminder of what these terms mean? Check out: Defining my Terms.

Ticker	Company Name	Allocation
AMZN	Amazon	Babylon 5
NFLX	Netflix	Enterprise
SHOP	Shopify	Enterprise
MELI	MercadoLibre	Enterprise
DIS	Walt Disney	Serenity
TSLA	Tesla Motors	Serenity
TDOC	Teladoc	Serenity
SQ	Square	Serenity
BZUN	Baozun	Serenity
ILMN	Illumina	Serenity
ATVI	Activision Blizzard	Serenity
RDFN	Redfin	Serenity
TWTR	Twitter	Serenity
JD	JD.com	Serenity
ISRG	Intuitive Surgical	Serenity
AABA	Altaba	Serenity
IQ	iQiyi	Serenity
TWOU	2U	Serenity
NPSNY	Naspers	Serenity
MKL	Markel	M. Falcon
SPOT	Spotify	M. Falcon
EDIT	Editas Medicine	M. Falcon
CRSP	CRISPR Therapeutics	M. Falcon
STNE	Stoneco	M. Falcon
NVTA	Invitae	M. Falcon
KSHB	KushCo	M. Falcon
NVCR	NovoCure	M. Falcon
UXIN	Uxin	M. Falcon
MCHOY	Multichoice Group	M. Falcon

Thanks for reading! This was a lot more fun to write than last quarter, although we’re still only two steps in on a journey that I expect to last for well over 100. There’s still plenty of time.