The Freedom Portfolio – January 2022

January 20, 2022 paul.essen Comments 1 comment

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

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

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

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

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

Ticker	Quarterly Change
TSLA	36%
TTD	30%
SNOW	12%
ETSY	7%
SHOP	2%
SWAV	-11%
DIS	-12%
AXON	-12%
CRWD	-18%
MELI	-19%
CELH	-21%
RDFN	-25%
ROKU	-27%
TDOC	-28%
SE	-30%
ZM	-31%
SQ	-33%
NVCR	-35%
FUBO	-36%
NNOX	-36%
FVRR	-38%
TMDX	-41%
DMTK	-50%

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

The Best Performers:

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

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

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

The Worst Performers:

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

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

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

Changes in the Portfolio

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

Another exciting fourth quarter