SHOP – Page 2 – Paul Vs The Market

Jan 2021 Portfolio Tweaks

January 26, 2021 paul.essen Comments 0 Comment

Looks like the stock market in 2021 is picking up where the 2020 stock market left off. Maybe one day I’ll write about the day I almost bought some $7 Gamestop (GME) calls in August of 2020 and do the math to figure out exactly how much of a gain I lost out on. Maybe it will top my previous biggest investing mistake that I made with Netflix (NFLX) which at last check was at $2.3+ million.

I’ve made a few tweaks to the Freedom Portfolio over the past few weeks and wanted to briefly outline my thought process below:

Sells

Tesla (TSLA) – Tesla has been so difficult for me to deal with. I strongly believe in letting my winners run and doing so has paid off handsomely with companies like Shopify (SHOP) and not doing so has been incredibly painful (see: Netflix example above). At the same time, I find the current valuation to be completely indefensible and am having an incredibly difficult time seeing how there can still be a significant amount of upside left at these levels. And yet, every time I have trimmed my position, the stock continues to go up. The simple fact of the matter is that I am uncomfortable letting Tesla grow to be too big of a position in my portfolio, which is why I have continued to trim. It still remains a Babylon 5 level position (RIP, Mira Furlan), but I intend to keep trimming for now to avoid letting it get to be too large.

Fastly (FSLY) – I haven’t felt like I’ve had the time to do any deep dives into any of my holdings lately and, as a result, I haven’t mentioned the P.A.U.L. System recently. However, I absolutely have still been using my system to mentally score my positions. When it came to Fastly, I had been getting more and more concerned the “Understanding” score. Put simply, I found that I couldn’t articulate why Fastly was better or even different from Cloudflare (NET), one of its main competitors. Without that level of understanding, it’s hard to have high conviction, and so I decided it was time to redeploy that capital into higher conviction picks.

Buys

Zoom (ZM) – Over the past 3 months, Zoom has fallen around 30% from its all time highs. Presumably the reason is because people think that once everybody is vaccinated and COVID is “over”, that Zoom won’t be nearly as ubiquitous. I think that could be short-sighted and an over-simplification. I believe that the lockdowns have permanently altered some business behavior and that a certain level of video conferencing that didn’t exist before is here to stay, and I believe Zoom is the primary beneficiary of that. For that reason, I wanted to take advantage of the dip in price.

Etsy (ETSY) and Fiverr (FVRR) – I initiated these positions last year based on the idea that a growing “side-hustle” movement and maturing ecommerce space would greatly benefit these companies. The more research that I do, the higher my conviction has grown on these two companies and I wanted to increase my position size. Both companies are now solidly Serenity level positions.

Nano-X (NNOX) – Despite being excited about the potential with Nano-X, I had decided to not add to my position because a series of short reports had me wondering if there was a possibility that the company was a fraud. The jury is still out, and likely will continue to be out until FDA approval either comes or doesn’t. A decision is expected in the first half of 2021. Until then, though, I’m becoming less and less concerned over the idea that the company is a complete fraud. As a result, I added slightly to my position, although it remains a Millennium Falcon level position.

Skillz (SKLZ) and fuboTV (FUBO) – Two new positions that I have added to try to get additional exposure to live sports streaming and online gambling. Both are tiny positions and if my conviction grows (or the position does), then I might consider writing more about what excites me about the companies. For now, though, I just wanted to get a little skin in the game.

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!

Recklessly Bold Predictions for 2021

December 22, 2020 paul.essen Comments 7 comments

One year ago, I made a set of bold predictions for what 2020 would bring.

I, like the rest of the world, had no idea what was coming.

Had you told me in advance that we would be seeing a worldwide pandemic that would be leading to months long lockdowns across the globe that would devastate parts of the economy, then I would have told you that my predictions were going to be laughably wrong. Perhaps the only thing more unexpected than the pandemic was how markets have seemed to react to it. Somehow, against all odds, I had an incredible hit rate on my overly bullish predictions.

Note: I know there’s still a little over a week left in 2020, but I generally run my bold predictions from mid-December to mid-December so it doesn’t overlap with my quarterly recaps and fantasy investing so I’m going to call most of these a little early. Some of these numbers were pulled a few days ago and thus might be slightly out of date by the time this post is published.

2020 Predictions

Disney and Netflix both gain 20%+

The Prediction: Disney (DIS) goes from $144.63 to $173.56 and Netflix (NFLX) goes from $323.57 to $388.28.

Mixed: With COVID-induced lockdowns leading to a lot of people stuck at home, Netflix was able to pull forward a lot of growth and had no problem at all blowing past my 20% prediction, ending up with a roughly 60% gain for the year. The bigger shocker is Disney. Despite the pandemic wrecking most of their main business lines (movies, theme parks, live sports, cruises), Disney is somehow still in the running at an 18% gain as of this writing. That’s technically a loss for now (although I’m totally counting it if Disney crosses the line before the end of the year), but considering everything that has happened this year, this feels like a moral victory at least. I’ll take an 18% gain after the year Disney has had.

I’m just as excited as ever about Disney going forward. Their theme park and live sports businesses should eventually rebound and while movies is still a bit of a question mark, their Disney+ initiative has been a monstrous success and presents them with a powerful alternative way to monetize their movies and IP. I was especially impressed by the volume of content they are preparing for the coming years and their plans to expand the Star brand internationally and incorporating the Fox content into Disney+. As for Netflix, I’m ever so slightly less bullish on their prospects for strong growth going forward, which is why I trimmed my position some this year. I just worry about how much more they can expand internationally and how much more they can raise prices. I still think they can be a market beater going forward, which is why I still own shares, but I just don’t feel like they will be beating the market as much as they have in the past.

Square will add $20 to its share price

The Prediction: Square (SQ) goes from $62.56 to $82.56.

Win: This one wasn’t even close. Square went crazy in 2020 and ended up adding $170 to its share price… or 8.5x more than I predicted.

It’s pretty incredible to see a company which is probably best known for its terminals utilized by small and mid-sized food establishments do well during a pandemic which has hit those businesses hard. It makes sense, though, once you realize that Square also has a strong play in the digital wallet space with its Cash App. I remain bullish on the company going forward, but the stock has obviously run up a lot and there’s a lot of optimism baked in at this price so I’m clearly not seeing a repeat of this performance in 2021 and wouldn’t even be surprised if it underperformed the market for a stretch while the business fundamentals catch up to the valuation.

Redfin will add $20 to its share price

The Prediction: Redfin (RDFN) goes from $21.14 to $41.14.

Win: Another one that wasn’t that close. Redfin added $60 to its share price in 2020, or 3x my original prediction. That 270% gain is almost as good as Square’s 280% gain for the year.

Again, a company whose mission is to “Redefine real estate in the consumer’s favor” might not seem like an obvious beneficiary lockdowns put in place in reaction to a global pandemic, but it’s not too hard to see why Redfin was a big winner once you look a little deeper. Real estate is being disrupted, and the old model and incumbents are facing serious challenges from new competition that can offer things like lower commissions, virtual tours, instant offers, concierge service, and much more. Between OpenDoor and Zillow, there’s a lot of competition in this space, but I still think Redfin is the most complete challenger and should continue to benefit from low mortgage rates and the migration of people out of cities and into the suburbs as remote work gets more common.

Bonus Prediction #1: Bitcoin to $20k

The Prediction: Bitcoin will hit $20k (duh).

Win: After crashing with the rest of the market in March of this year (so much for a store of value that is uncorrelated with equities), bitcoin had a slow but steady march upward for the rest of the year. It hit the $20k threshold with plenty of time to spare on December 16th and currently stands at a little over $23k.

It’s hard to say anything too intelligent about where something as speculative as bitcoin might go in the future. What I can say is that between historically low interest rates and increases in the monetary supply, it has been fairly unprecedented times for the Federal Reserve, the US economy, and the dollar. I worry a lot about inflation and the future of the US dollar as a reserve currency, and as a result I see a lot of potential in bitcoin. It might never get to a place where it can serve as a currency, but at this point I don’t believe it has to in order to provide a decent return. Bitcoin can still absolutely go to zero, but I also think the sky is the limit as well.

Bonus Prediction #2: Somebody will buy Nintendo

The Prediction: That Nintendo would get acquired by another company in 2020.

Loss: You can’t win ’em all. With the upcoming console cycle refresh and the big emphasis put on gaming by a lot of the tech giants (Alphabet, Amazon, Apple, Microsoft, etc), I thought there could be a ton of interest in acquiring Nintendo and their unmatched gaming IP. I don’t think it would be a stretch to say that any of those above companies that managed to acquire Nintendo would instantly become a gaming powerhouse and potential leader in the space. It didn’t happen in 2020, but I still think there is a chance this gets done in the coming years.

2021 Predictions

Shopify will become 1/8th the size of Amazon

If you’ve been following this blog at all this year (or even just read the results above), you should have a pretty good sense of what a ridiculously good year this has been for the holdings in the Freedom Portfolio and even the market in general. As a result, I’m a little gun-shy predicting any big absolute gains in 2021 and am more keen on making some predictions on relative gains (ie, one company vs another).

For all the crazy run-up that Shopify has had over the past 2 years, it’s still “only” around a $145 billion market cap, which is around 9% the size of Amazon. Shopify is fond of casting themselves as “arming the rebels” against the “Empire” that is Amazon.

Amazon has lots of other business lines (AWS and advertising in particular) that help set it apart from companies like Shopify, but I do believe 2020 showed that ecommerce is too big for Amazon alone to own. I suspect Shopify continues to aggressively take ecommerce market share away from Amazon and grows to become 1/8th the size of Amazon. Assuming no growth in Amazon at all in 2021, that would equate to a roughly 40% gain for Shopify in the coming year. Obviously, if Amazon grows at all, that’s even more growth required out of Shopify.

Etsy will grow to 3% the size of Amazon

This is piggy backing on the same concept above. Again, understanding that Amazon goes well beyond just ecommerce, I was still shocked to discover just how much smaller than Amazon Etsy was. Etsy is currently 1.5% the size of Amazon. Put another way, Amazon is over 60 times larger. As mentioned before, I think 2020 is the year we find out that ecommerce is larger than a single company, and I believe Etsy is one of the big beneficiaries. Etsy getting to be 3% the size of Amazon sounds reasonable, but it would mean the stock doubles in 2021 (assuming Amazon stays flat). I look forward to seeing if that can happen.

Mercado Libre plus Sea Limited market caps combined to $300 billion

The ecommerce trend continues. I still believe we are in the early innings of the transition to ecommerce and I believe that is especially true for some of the more developing markets in Latin America and Southeast Asia. Both markets have large populations with growing middle classes where internet access is also growing. Bonus? Both companies are also moving strongly into digital wallets and other business lines.

Right now, the market cap of both companies combined is around $187 billion. I believe the combined market caps of both companies can reach $300 billion in 2021, which would be an average of a 60% gain. That’s a pretty strong gain for a year, but it also pales in comparison to the nearly 400% and 200% gains respectively that Sea Limited and Mercado Libre for 2020. Regardless of where they end up in 2021, I believe the future is bright for both companies.

Either Fiverr or Redfin will double

Redfin and Fiverr are companies that both had a particularly ridiculous 2020. Redfin has more than tripled and Fiverr is up over 9 times. At the same time, both companies still seem very small to me compared to their total addressable markets. I believe both companies are capable of doubling in 2021, but for the purposes of this particular bold prediction, I am just predicting that one of them will double. Both companies currently have market caps of under $8 billion, so even after potentially doubling they would still be a fairly reasonable size.

Somebody will acquire Teladoc

Teladoc is certainly no stranger to acquisitions to fuel its growth, most recently with their acquisition of Livongo. And yet despite all of that growth, Teladoc is still a dub $30 billion company. At the same time, there are a bunch of deep-pocketed technology companies like Amazon and Apple that have indicated a desire to get into the healthcare space. Both companies could easily afford to get a huge head start by acquiring Teladoc. There are also companies in the healthcare space which would love to get a boost in telehealth.

I think the odds are probably against Teladoc getting acquired, but as a bold prediction, I think it fits pretty well.

What do you all think? Do you like my picks, or did I completely miss the mark? Do you have any bold predictions of your own? Let me know in the comments!

A new investment distracting me from earnings season

November 18, 2020 paul.essen Comments 0 Comment

I’ve been a little quiet here recently despite a ton of earnings reports coming out. Over the past few weeks, there’s been some pretty spectacular earnings reports from major holdings in the Freedom Portfolio:

Shopify (SHOP)
Mercado Libre (MELI)
Square (SQ)
Sea Limited (SE)

And a bunch more. So why the radio silence? Because I’ve been a bit distracted by a recent investment of a different type.

Earlier this month, we were blessed to welcome our third daughter to our family. All things considered, she’s been a pretty mellow baby, but anybody who has every dealt with a newborn before can tell you that they are incredible drains on free time and sleep. So even though I have continued to keep my eye on the companies in the Freedom Portfolio, I have struggled to find the time to write about them as much. I didn’t want to have this earnings season pass without anything written, though, so here’s a few thoughts on recent developments:

Great companies dropping in the immediate aftermath of amazing earnings. One theme I have noticed this earnings season is how often stocks have dropped despite really strong earnings being reported. It happened previously with Shopify and Mercado Libre and it happened yesterday with Sea Limited. I’m not at all concerned and would go even further and say it even makes sense. Shopify and Mercado Libre has more than doubled this year. Sea Limited has more than quadrupled. That’s really strong performance which drove up the valuation (and expectations) for those companies. It seems perfectly reasonable for those stocks to “take a breather” to let the financials catch up to the valuation. I still strongly believe in all of those companies going forward and, if anything, my conviction is strengthened by seeing them put up these great numbers. I wouldn’t be surprised to see some of these companies be flat for a few more months or quarters, but I remain really excited to see where these companies are 5+ years down the line.

Tesla to the S&P 500. News broke a few days ago that Tesla (TSLA) was getting added to the S&P 500 index in December. In the two days since, the stock has popped, leading to a few near spiffy pops for me. I get the reason for the short term stock movement, and it will be interesting to see how the stock reacts to so many index funds being required to add so many shares of Tesla in the coming months, but I honestly don’t know if this impacts the company itself very much. I love the company whether it is in the S&P 500 or not.

Buying more Etsy. The Teladoc / Livongo merger went through recently. As part of it, my Livongo shares got converted to some Teladoc shares but I also got paid out some cash for them as well. I used those proceeds to add a bit to my Etsy (ETSY) position after it dropped a bit on the positive COVID-19 vaccine news. I didn’t add much. It remains a Millennium Falcon level position. Coincidentally, I saw my first Etsy commercial just a few days after adding to my position. I know Etsy has had a great 2020 so far, but I really think they can keep their momentum going with the upcoming holiday season and can expand their business beyond just birthdays and anniversaries. Really interested in seeing how the company performs over the coming quarters.

Volatile earnings; Trimming Tesla to add to Teladoc

November 1, 2020 paul.essen Comments 0 Comment

The past week has been a bit hectic (and the coming week looks to be even more so), so I haven’t been able to cover earnings season as much as I would have liked, but I wanted to get something quick out even if it was entirely too short and inadequate.

A number of Freedom Portfolio companies reported earnings this past week and while there were a few blemishes (looking at you, Fastly (FSLY)), I was ultimately very pleased with what I saw at of those companies. I was particularly encouraged by the incredible results from the eCommerce plays: Shopify (SHOP), Amazon (AMZN), and Etsy (ETSY). I’m really looking forward to seeing what these companies can do over the coming holiday season.

So why did nearly all of the companies which reported great results drop on earnings and fall a ton on Friday? It’s always hard for me to predict short term market movements, but some of it is undoubtedly due to pessimism surrounding the increase in Coronavirus cases around the world and the new lockdown measures being enacted. I believe some perspective is also in order:

Shopify (SHOP) is up roughly 140% YTD
Novocure (NVCR) is up roughly 40% YTD
Teladoc (TDOC) is up roughly 140% YTD
Livongo Health (LVGO) is up roughly 350% YTD
Fastly (FSLY) is up roughly 200% YTD
Etsy (ETSY) is up roughly 170% YTD
Amazon (AMZN) is up roughly 60% YTD

That is incredible performance across the board for under a year. It is not at all surprising to see some profit taking after even the best of earnings reports after run-ups like that. Contrary to popular belief, stocks don’t always go up and I am absolutely not concerned to see some of these stocks pull back a bit after the amazing run they have had. Not only is the long term thesis still intact, but I think these earnings reports have largely confirmed them.

Between Coronavirus, the US Presidential election, and the holiday season, I expect a lot of volatility in stocks over the coming months. My plan is to be laser focused on what the companies I have invested in are doing and to do my best to tune out the noise. I do not plan on doing any buying or selling based on who wins the election or weekly Coronavirus numbers or other macro conditions. If something happens that fundamentally changes my investment thesis in one of my companies, then I will act.

With that being said, I do have one tiny allocation change to report on. I am trimming my position in Tesla slightly (it remains a Babylon 5 level position) in order to add slightly to my Teladoc position (keeping it at a Serenity level position, although with the merger with Livongo going through, the joint company will be an Enterprise level position). It is a small tweak, with the change in allocation representing roughly 1% of the portfolio. My thinking was largely based around valuation. I love the optionality and runway for Tesla, but the valuation is somewhat crazy right now and it seems to already be priced for total domination of the car market. I still think it will be a market beater going forward, but wouldn’t be surprised if the growth was a little more muted in the coming years.

Originally, I hated the Teladoc / Livongo merger, but I have done a complete 180 after being convinced by some very smart people on Twitter who had some great insight into how the companies can complement each other going forward. Despite the growth that both companies had already seen in 2020, I think much of that momentum can and will continue over the coming years. As such, I wanted to slightly increase my position. I’m not thrilled over a lot of Livongo management leaving the newly combined company, but I also don’t think it is a deal breaker and I do trust Teladoc management to be able to integrate the new acquisition. Really interested in seeing what kind of growth numbers the newly combined company can put up in the coming quarters.

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.

Selling Spotify; Snowflake too expensive

September 21, 2020 paul.essen Comments 1 comment

The much-anticipated Snowflake (SNOW) IPO (initial public offering) was this past week, and despite having been burned a bit recently by jumping into an IPO too soon (hello, Jumia!), I was pretty set on at least dipping my toe in for Snowflake since I was so excited for it.

Then, over the course of around 24 hours, the price per share basically tripled.

Needless to say, I’m definitely holding off on buying any shares for now. I’m still going to keep Snowflake on my radar, particularly a few months from now when the lock-up period expires. If we get a pretty significant pullback (and I think it would have to be close to a 50% pullback at this point), then I might take the plunge.

In anticipation for possibly buying some shares of Snowflake, I had sold my shares of Spotify (SPOT). I had bought because I was intrigued by the moves they were making in the podcast space by signing such huge draws like The Ringer and Joe Rogan. I thought having those programs could be a key differentiator that would let them stand apart from Amazon Prime Music or Apple Music or other competitors. I even had dreams of them possibly becoming the Netflix of podcasts.

None of that seems to have happened yet. In fact, it doesn’t seem like Spotify has much of a plan at all when it comes to podcasts yet. I still have some minor concerns that Spotify has the necessary visionary leadership to transform itself into something greater. It doesn’t help that right after they acquired Joe Rogan’s material (a figure they had to have known was mildly controversial) it was discovered that some of his past episodes were no longer available. If they’re planning on censoring a figure like Rogan, that would seem to immediately lessen his appeal.

Since I wasn’t able to get in on Snowflake at a reasonable price, I used some of the proceeds from the sale of Spotify to add to my Nano-X (NNOX) position after it took a tumble in the wake of a short report by Citron Research (check it out here). I always love to hear intelligent bear cases for the companies I hold, and I tried my best not to completely dismiss Citron’s concerns without giving them their due, but it was a little hard given their history with companies in my portfolio. The most egregious is probably back in October of 2017 when Citron had released a short report on Shopify (SHOP) with a price target of $60 (check it out here). Not only did Shopify never even come close to hitting $60, but it is now at ~$900 (or 15X larger than Citron’s price target). So while I always try my best to take any criticism seriously, I am not at all worried about the short report by Citron and was instead happy to get some more shares of Nano-X at a lower price. The rest I will keep in reserve (for now) to deploy a little later.

Closing out Jumia and Yext; Starting positions in Nano-X and Etsy

September 9, 2020 paul.essen Comments 0 Comment

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

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

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

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

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

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

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

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

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

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

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

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

Expectations for Shopify were extremely high… they still blew them away

July 30, 2020 paul.essen Comments 0 Comment

I’ve written a lot about Shopify (SHOP) lately. It’s hard not to when it is one of the largest positions in the Freedom Portfolio and has had such an amazing run (up 30x over the past 5 years and up over 150% this year alone). Shopify was facing some pretty incredible expectations going into their earnings report, and I was bracing myself for disappointment because how could they possibly live up to those expectations? Not only did they not disappoint, but they soundly smashed them:

Non-GAAP EPS of $1.05 (beat expectations by $1.03)
GAAP EPS of $0.29 (beat expectations by $0.87)
Revenue of $714.34M beat expectations by $202.78M and was up 97.3% year over year
Gross merchandise volume +119% to $30.1B vs. consensus of $19.90B

Every one of those bullet points shows an incredible amount of growth which just re-affirms that COVID-19 has caused a huge shift of commerce to move online…. and Shopify is helping to lead that shift.

One interesting piece of news that came out the day before the earnings announcement was that Shopify filed for a pretty massive $7.5 billion capital raise. There’s lots of theories running wild that Shopify might be preparing for a large acquisition. I won’t bother weighing in on any of the speculation until there is more definitive information, but even if they don’t end up buying anything, I like that they have the flexibility that this money provides.

As I mentioned before, I’ve already written a lot about Shopify lately, so I’ll just conclude with this: Shopify has grown to be a fairly significant percentage of my overall portfolio. There’s been plenty of times when I have wondered if I was letting it get to be irresponsibly large. After this quarter, though, I have never been more confident in my investment in this company. I love how they’re working on empowering entrepreneurs and how their incentives are aligned with the customers they work with. Management seems absolutely willing to swing for the fences and appears to be executing brilliantly. There are a number of powerful tailwinds at their back and a huge total addressable market in front of them.

Yes, the stock has been on a crazy run and the valuation is incredibly rich, but I’m hanging on to every one of my shares right now and am very excited to see where this company goes over the next 3+ years.

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.