Portfolio - March Review - Cash is King

One of the most eventful months is behind us.

March has been a crazy month.

  1. The Federal Reserve announced its first emergency rate cut since the '08 financial crisis, slashing interest rates by half a percentage point. A couple of days after, rates were cut to zero.

  2. All three major US stock indexes closed down over 7% for the market's worst day in over a decade. Trading was halted, and a couple of days later, indices lost another 10%.

  3. Oil demand is low since coronavirus has slowed travel. Russia and Saudi Arabia felt this is an excellent time to get into an oil-pumping contest, driving prices even lower.

  4. We entered the technical definition of a "bear market" after a historic 11-year bull run, only for it to end again after a couple of days. Perhaps it's time to re-think the definition.

  5. 3.3M Americans filed for unemployment in just one week. The White House and Senate agreed on a deal for a $2T economic stimulus package. That's 2.5X bigger than the stimulus given after the 2008 financial crisis.

Portfolio

I hold 10-20 individual stocks in my portfolio at any given time.

It was an unusually active month for me. I don't trade in and out of positions frequently, and it is not unusual for me to go a couple of months without changing a single thing.

This market volatility presented me with opportunities to:

  • open three new positions that I've had on my watchlist for a while

  • add shares to six existing positions

I also sold out of several positions to increase my cash position to deploy it over the next weeks and months.

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New Positions:

  • Nutanix

  • Alteryx

  • Square

Added To:

  • The Trade Desk

  • Baidu

  • Pluralsight

  • Opera

  • HubSpot

  • Twitter

Sold:

  • AT&T - I became a shareholder via the acquisition of Time Warner. AT&T doesn't fit my portfolio strategy and am not a fan of the company. I sold all my shares.

  • Geely - Closed my position at a 20% loss.

  • Etsy - Closed my position for a 15% gain. I like the company but wanted cash for more interesting opportunities.

  • IGG - Closed my position at a 45% loss.

  • iRobot - Closed my position at a 15% loss. The company became attractive to me after the trade war hammered the share price down. In the current times, there will be better opportunities to invest in with now attractive valuations.

  • Amazon - I sold a small fraction of my holdings. Amazon is by far my most significant position, which I have held for over a decade. Will funnel the cash into smaller, high growth companies.

  • Cisco - I sold a small fraction of my holdings. Cisco is my second-largest holding. I have been a shareholder for over a decade. Will funnel the cash into smaller, high growth companies.

  • MongoDB - I like the company but wanted to increase my cash position even further. Founder CTO leaving is a concern, and their debt level is high if you add convertible notes to debt. I sold for a 10% gain.

Portfolio Performance - March

Like everyone else, my portfolio got hammered. Since dropping 25%, it has recovered remarkably in the last week of March.

I only pick stocks with a portion of my net worth because I believe that it is possible to beat the market. It makes me happy that my portfolio has so far outperformed my investment into the Vanguard Developed World ETF.

Quality companies do bounce back, often quickly.

For my smaller, high growth companies, I tend to hold companies with no to low debt and prioritize free cash flow over current profits.

Nutanix and Pluralsight are two exceptions, where free cash flow has been negative. I believe both can turn this around in the future.

Current Portfolio

Amazon has been pretty stable during this market downturn. As most of the portfolio has been getting hammered, Amazon has become almost 20% of my overall portfolio. I am ok with that.

Year to date, six companies are currently performing in the green.

  • Square (38%)

  • ZScaler (23%)

  • Nvidia (15%)

  • Amazon (7.5%)

  • Alteryx (6.5%)

  • Netease (0.5%)

The purchases of Square and Alteryx in March seem to have been at good entry points. Particularly Square recovered massively from where I bought it.

Oracle has been surprisingly stable, at just a 5% loss YTD. Everything else got murdered, in particular Porsche (-45%) and Disney (-35%).

I am very much looking forward to April, staying calm and sticking to my strategy during these turbulent times.

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Thank you for reading. Stay safe and healthy!