US technology counters continue to feel the pressure over the past few weeks. Despite reporting a strong last quarter, the expected lower growth for the remaining year (as compared to last year’s extraordinary performance) is not well received by the market. At the time of writing, my US portfolio trails SPY at a whooping 15% for the year! The consolation is if I zoomed out and looked at the return from beginning 2020, I am still 2% ahead.
I see this as an opportunity for me to add on to counters which I like and am confident of in the long term. As such, I used about 15% of my opportunity fund to add the following counters.
Why, Oh Why?
I continue to like how sticky Apple is for its customers. While one can argue that the company is not as innovative as it was, its products still have an edge over its rival. Being an Apple convert more than a decade ago, I still think its product are reliable (I am still using a macbook bought 8 years ago and iphone 7+) and am comfortable with its eco-system, that the next product I am going to buy will still be Apple. And that is where its advantage lies as its recurring revenue will continue to grow with its installed base.
As for Shopify, I simply like their huge potential and long runway. Entrepreneurs and big businesses are using their platforms and doing well. Which means they will continue to stay with Shopify and use more of their products. Its valuation has never been cheap and while it has made an earning last year and in the latest quarter, Shopify has guided for a loss this year due to its expansion plan. With $6.8B of cash in their balance sheet, they can definitely afford to be in the red for many years to come as they continue to expand their business.
|Counter||2020 REV||2020 NP||2020 FCF||2020 EPS||21Q1 REV||21Q1 NP||21Q1 FCF||21Q1 EPS||21Q1 |
*For Apple, it’s 2021 1H results.
Fiverr and Etsy have established themselves as leader for platform services of niche market. Fiverr for freelance workers and Etsy for homemade goods. Both have a fantastic Q1 results with growth in active users. While growth might slow in the coming quarters due to phenomenon growth last year, their prospects continue to look bright in the coming years.
Starting with app for inbound marketing, Hubspot is now providing a customer relationship management (CRM) platform. With its latest guidance of $1.24B revenue for the year and EPS of about $1.6, it looks set to continue its growth path. Its track record is impressive as it grows its annual recurring revenue of 50M in 2012 to $1.2B in 2021. Looks like this is a company that I will continue to add in the coming years.
Average Price and Position Size
With the exception of Upstart, I am in the green for all the counters. The position size reflects my current confidence and understanding of the counters.
|Counter||Average Price |
(2020 New Portfolio)
It is my hope that by 2024, I would get a 2 to 3 times return for Apple and Shopify from my average price. As for the remaining, I hope to get a 4 to 5 times return in the same timeframe. Based on the good run in 2020 and the speed bump this year, I feel that I have at least a 50% chance of hitting the target.