April 2022 Portfolio Review

My update this month will be abbreviated since there were no earnings in April to discuss. My portfolio is up 131% as of writing on 4/29/2022 from when I started tracking my results in January of 2020. This means that, $100 invested in the ExponentialDave portfolio on January 1, 2020 would now be worth $231, which is a bit more than a double. Meanwhile my benchmark, WCLD, is “only” up 32% since January of 2020, and the S&P 500 is only up 28% since January 2020. For the period from January 1st, 2022 through 4/29/2022, my portfolio is down 46%, meanwhile WCLD is down 34%, and the S&P 500 is down 13%.

Monthly YTD performance at the end of each month
Jan 2022: -24%
Feb 2022: -28%
Mar 2022: -30%
Apr 2022: -46%

2020 Performance: 225%
2021 Performance: 30%
Cumulative Performance 1/1/2020 - 4/29/2022: 131%

Note, I do not expect to ever make 225% again, and my goal is 30%-40% annually. Of course, no promises that I will get 30%-40% every year.

Allocation vs Last Portfolio Update on 3/23/2022 (and growth rate):

Conviction Levels:
First Tier: DDOG
Second Tier: BILL, NET, ZS, SNOW, S, MDB
Third Tier: MNDY, ZI

Risk/Reward Categorization
Higher Reward, Higher Risk: SNOW, MNDY, S
Higher Reward, Lower Risk: DDOG, BILL
Lower Reward/Lower Risk: ZS, ZI, NET, MDB

We had no earnings to report on in April, so my thoughts on my holdings have not changed much. And in May, we're going to have lots to talk about! Most of my companies will be reporting earnings then. So I am going to pare down my commentary in this report.

If you want more detailed commentary on any company I own, I have written about each of them collectively between my March and February monthly updates.

And if you want to hear off the cuff thoughts more broadly on a wide range of topics regarding the current bear market in growth stocks, portfolio management, and a number of specific companies, I recommend checking out my “Ask Me Anything” video from last month. People who tuned in asked pretty great questions, so I will certainly be looking to do more AMA’s in the future!

On the Market Right Now

It's pretty clear the bears effectively cornered the market on growth stocks. On the bright side, they can't hold it down forever. If you are shorting a stock, you are technically borrowing, and you pay interest on that every day that you continue to short. So if a stock price is flat and you're shorting it, you're losing money.

No one knows when the bull market will return. This is why it's so damaging to sell now, because you never know when to buy back in. If you're a long term investor considering selling now with the goal of buying later, you are effectively requiring yourself to be correct on market timing twice. The first time is deciding to sell now, and the second time is deciding to buy back in at a later time.

If you're able to consistently time the market well enough to sell before the drop and buy before the big rise, you are far more advanced than anyone I know or have heard of, for that matter.

On Valuation

I don't like posting P/S multiples all that much, because many people have a tendency to over rely on them and treat them like some sort of answer to the big mystery of how to value growth stocks. P/S multiples are only a little helpful at comparing one business to another. However, when comparing a business to itself over a period of time, I think they are a little more helpful to give you a bearing on how the market's perception of a stock has inflated or deflated. Look at the p/s multiple transformation that has happened in high growth names below.

Peak p/s is from around early November and late October for most companies, and current P/S is from the close on 4/29/2022.

The "captain obvious" take is that this is a product of current fire sale conditions and that previously everything got too inflated. If I wasn't fully invested, I would be accumulating shares. Of course, there is no mathematical or fundamental reason why prices can't keep going lower. And panic often begets more panic.

Common sense, if you read through the phrase "panic begets more panic", says that I should sell before more panic arrives. The problem is, selling my shares now would be like selling my home to Mr. Potter in "It's a Wonderful Life" for pennies on the dollar in the infamous bank run scene. This is how the market transfers wealth from those who can't stomach volatility to those who can (the Mr. Potters of the world).

And lastly, someone on Twitter pointed out that this year would be much worse if everything else was booming and having a good year except our specific growth stocks. This is a pretty good point, especially since the Nasdaq is down 22% YTD, the S&P is down 13% YTD, and WCLD is down 34% YTD.

Wrapping Up
Another mind trick I've been using is to remember that these are all paper losses on money that I won't need for a very long time. Although the value fluctuates daily, I still own the same number of shares, and their value will rise in time. I can be patient longer than the market can be irrational.

As always, thanks for reading! Until next time.