Year-end Portfolio Health Check:

It’s always a good idea to periodically review valuations – especially after a run-up like we have experienced over the past months. Valuations don’t matter to the market – until they do so you have to know where the risks may be.

My favorite measure for this is using 3 year forward EV/GP.
- Why EV vs Market Cap? Normalizes for Debt + Cash on the Balance Sheet.
- Why GP vs Sales? Normalizes for difference in Margins
- Why 3 year forward vs 1 year forward? Normalizes for differences in growth

1)E-Commerce:
-$SHOP 39x
-$KHOTF 35x
-$SE 16x
-$MELI 18x
-$PINS 14x
-$FTCH 13x
-$ETSY 12x
-$JMIA 12x
-$BABA 9x
-$AMZN 6x

Still doing DD on $OZON and but just based on 3Q numbers, it appears the stock is extremely cheap – albeit cheap is a relative term these days

2)Digital Payments
-$AFTPY 24x
-$STNE 21x
-$V 19x
-$SQ 18x
-$PYPL 15x
-$PAGS 14x

$SQ and $PYPL continue to look good

3)Programmatic Ads
-$TTD 31x
-$APPS 25x
-$ROKU 20x
-$ACUIF 9x
-$MGNI 6x

$MGNI and $ACUIF remain highest conviction positions despite run-up. The valuation discount at this point is well-deserved as they still need to prove themselves – but my bet is they will

4)SaaS
-$SNOW 72x
-$ZM 37x
-$DOCU 24x
-$TWLO 22x
-$ESTC 15x
-$ASAN 15x
-$PD 12x
-$AYX 11x
-$NTNX 5x

Tracking around 74 SaaS stocks at the moment so just listing some select companies. Have to think what-if with $AYX here

5)Cyber Security
-$CRWD 33x
-$ZS 30x
-$DDOG 28x
-$OKTA 22x
-$PANW 7.5x

No position but $PANW is a surprise for me. Market says it’s a dying business. Quarterly growth numbers indicate otherwise

6)Edge Computing
-$NET 34x
-$FSLY 27x
-$AKAM 6x
-$LLNW 4x

Thought $FSLY would have been cheaper given the roller-coaster we have been on

7)Health Tech
-$AMWL 36x
-$SDGR 16x
-$TDOC 15x
-$PGNY 15x
-$NNOX 9x
-$OTRK 5x
-$INMD 5x

Valuations look relatively cheap here but this sector doesn’t come without risk – ie $NNOX, $OTRK - so position sizing key

8)Bio-tech
-$CRSP 67x
-$EDIT 66x
-$TWST 62x
-$PSNL 39x
-$PACB 38x
-$BFLS 17x
-$NVTA 15x
-$ARCT 8x
-$EXAS 7x

Admittedly not an expert here but I hold $NVTA. One new discovery/failure would deem these valuations irrelevant so maybe better to just allocate 5% to $ARKG

9)Alt Energy
-$PLUG 85x
-$RUN 32x
-$ENPH 25x
-$ARRY 19x
-$FSLR 11x
-$BE 10x
-$NEE 10x
-$JKS 5x

Never owned a solar company. I think I should own one.

10)EV’s
-$TSLA 38x
-$NIO 31x
-$XPEV 26x
-$WKHS 24x
-$SOLO 22x
-$GM 2x

Slightly surprised here. Thought valuations would be even more extended given the huge run-up in some of these. New opinion, if EV’s are in a bubble then so are stocks across other themes and sectors

11)IPO’s
-$SNOW 73x
-$NCNO 36x
-$LMND 33x
-$PLTR 25x
-$FROG 21x
-$ABNB 15x
-$ASAN 15x
-$SUMO 12x

Again, despite huge Day 1 pops longer-term valuation for most recent IPO’s looks in-line with the rest of the market. $SNOW is obviously the outlier.

12)FANGMAN
-$FB 6x
-$AAPL 15x
-$NFLX 14x
-$GOOGL 7x
-$MSFT 12x
-$AMZN 6x
-$NVDA 22x

Not sure how one can go wrong with $AMZN.

13)My Safety Stocks
-$NOW 15x
-$PYPL 15x
-$ADBE 13x
-$BABA 9x
-$CRM 9x

Just wanted to see how these looks as considered them in my safety basket. $CRM looks like it is at an unfair discount while $BABA is at a fair discount

14)Honorable mentions
-$SPCE 36x
-$LSPD 27x
-$DKNG 24x
-$CELH 20x
-$GRWG 16x
-$RDFN 15x
-$EXPI 17x

As highlighted earlier, these are not recommendations and I will not be making dramatic changes to portfolio on the basis of only valuation. In a fast moving market, this is more an exercise to understand what I own, at what price, where the risk may be and where to look to add

The above are based on consensus analyst estimates which are constantly being revised. Analysts, for the purposes of prudence, need to be conservative and will only incorporate info based on what they see. But investors need to make decision based on what's not seen and can be

For example, a few stocks where I expect major upgrades next year are $MGNI, $ACUIF, $AYX, $INMD and $ETSY. Also, looking forward to first coverage on $OZON

I want to do something similar with all the SPACs I track but that will take a lot more work as one needs to go through the investor presentations to find estimated GP’s (probably inflated by the company) and then find the actual ownership percentage - $SBE $CIIC $IPOC

Finally, a word of caution on valuations. We are undoubtedly in uncharted waters in terms of valuations due to ZIRP, interest rates and positive vaccine news. Looks like it will continue for the forseeable future but the EV to 3 year forward GP for $AMZN was 27x in 1999