Since our last updated in mid-February (approximately the market “top”), the value of our positions has declined by about 5% overall, with some portfolios hardly moving and others declining over 10%. The differences were driven by:
- What percent of the portfolio is in cash or bonds – 25+% portfolio two, 30+% portfolio three, 20%+ portfolio four, with the heavier the cash and bond weighting the lower the decline
- Amount of high growth stocks in portfolio – certain stocks that have been great performers that are considered “growth” and generally trade as a multiple of sales (say 20-30x sales) such as Tesla (TSLA) and Cloudflare (NET) and Sumo (SUMO) fell as the market moved from growth to value in the first quarter
Given that these portfolios represent a log-term investment for each of the participants and would be a portion of their total net worth (i.e. they often hold other cash in savings or other accounts), we try to be reasonably heavily invested in the market, but each participant has their own risk tolerance.
During this rotation into value stocks, some sectors which had been battered such as energy (Exxon-Mobil and Chevron) and Financials and some general retail have come back strong. There are many of these stocks in the portfolios (such as Coca-Cola, Procter and Gamble, and many others) but they generally represent a lower portion of the total “value” because the tech stocks have risen so much that their position size is much bigger.
We also see variances by region, with Chinese stocks rising and US stocks generally rising (at least in some sectors) but European stocks stagnant. Since these portfolios seek to choose both US and overseas stocks, we also will see changes in value based on changes in currencies and country-specific dynamics. We do not intend to “predict” which ones will rise and fall, but we encourage a balanced mix of stocks by sector and region / currency where possible.
Some specific stocks have fallen and are “on watch”, including:
- Alibaba (BABA) – a well run Chinese company with huge cloud presence (like AWS) and a giant financial arm (called ANT), this group has run afoul of regulators and Chinese politics. It is down about 25% from its high
- Cloudflare (NET) – Cloudflare runs an advanced online system and trades for more than 30x revenues… making it susceptible to falling when it doesn’t perform exceedingly well in revenue growth or when interest rates increase. It is down about 20% off its high
- Tesla (TSLA) – the grand-daddy of all stock high flyers is down about 20% from recent peaks
- Sumo Logic (SUMO) – SUMO has lost about half its value from peak recently. While SUMO is still growing quickly, it recently acquired a company and is not exceeding expectations
- Baozun (BZUN) – Baozun, the Chinese e-commerce support company, is down about 30% off recent highs. The company was part of a short squeeze and impacted by US / China relations overall, but core operations are solid
- Gilead (GILD) – this large pharma stock has lost about 20% of its value, despite having high earnings and dividends. It does not play significantly in the covid space and is a bet for focus on other drugs and treatments in the post-covid era.
- Portfolio one -BABA, NET
- Portfolio two – BABA, NET
- Portfolio four – TSLA, NET
- Portfolio five – SUMO, NET, BABA, BZUN
- Portfolio six – BZUN, GILD, SUMO
- Portfolio seven – BABA, BZUN, SUMO
- Portfolio eight – BZUN, SUMO