August 2024 Portfolio Review
Total Return: +28.1% YTD (+9.7% vs S&P)
2024 Results:
2024 Monthly Allocations:
Key:
darker green: started during month
lighter green: added during month
yellow: trimmed during month
red: position exits
positions >10% in bold
*Please note: I rolled an old 401K worth ~2.5% into the cash balance of this portfolio to start 2024. I’ve shaded the January cash cell to make sure the new cash is represented accurately (and honestly to remind myself as well).
Past recaps:
December 2018 (the one that got things started)
December 2019 (contains links to all 2019 monthly reports)
December 2020 (contains links to all 2020 monthly reports)
December 2021 (contains links to all 2021 monthly reports)
December 2022 (contains links to all 2022 monthly reports)
December 2023 (contains links to all 2023 monthly reports)
Stock Comments:
And away we go with another earnings season…
AXON 0.00%↑ – Axon began the month with another quality report August 6. The company continues to show consistent growth with an ecosystem that is increasing stickiness across the board. There are now more than 100,000 Taser 10’s and 200,000 Body 4 cameras in the field. Likewise, Axon’s digital evidence products have been adopted by 20,000+ agencies in 90 countries. With additional moves toward electronic evidence and record keeping, the company appears to have plenty of room left to run.
Later Axon announced a partnership with LiveView Technologies (LVT) to provide mobile security solutions for retail parking lots. LVT’s products include mobile video towers for real-time security monitoring in large parking lots. This deal will integrate Axon’s law enforcement notification and evidence storage technologies into LVT’s video systems to “augment security coverage, identify potential incidents more quickly, enact deterrence strategies and aid law enforcement with evidence collection needs in retail crimes.”
Steady as she goes with Axon, and I exit the quarter seeing no reason it shouldn’t remain a core holding.
CELH 0.00%↑ – Unfortunately, Celsius’s August 6 report wasn’t as inspiring. As in Q1, the company seems to be handling what it can control and deserves credit for doing so. However, the continuing slowdown in energy drinks is a problem. The category decreased 9% YoY last quarter and 14% YoY this one. That’s a major headwind.
If this is a blip that turns around as high school and college kids return to campus, things are probably OK as long as international expansion remains on track. However, if energy drinks on the whole are falling out of favor in the US, this thesis might be broken. Unlike main distribution partner Pepsi, Celsius doesn’t have much in the way of product variety to fall back on. There’s limited investment value if CELH is doing nothing more than grinding its way to a bigger piece of a shrinking pie. That’s the dilemma I’m pondering coming out of the quarter, and I’m glad this is one of our smaller positions.
CRWD 0.00%↑ – CrowdStrike’s carelessness in a widespread global computer crash July 19 created plenty of questions heading into its August 28 report. With most of Q2 already booked when the crash occurred (the quarter ended July 31), I was cautiously optimistic the headline numbers would be OK. Thankfully, they were. The important thing is the understandably lowered FY guides suggest more second-half stumble than fatal blow for now.
Considering all the uncertainty, I’d call this a reasonable outcome. CrowdStrike was 100% going to take a goodwill hit and deservedly so. The question was how much business credibility would be left over. After looking at the numbers and listening to the comments, it sounds as if there’s quite a bit. Despite the self-inflicted error, CRWD’s products are still among the best around. Management is estimating short-term headwinds of “about a year” while emphasizing long-term targets for TAM and market opportunity remain intact. This includes reaffirming the $10B ARR target by the end of FY31, though the possibility of significantly exceeding that timeline has undoubtedly evaporated with this misstep. CRWD was already well on its way to maturing from a core driver to at best a supporting cast member in our portfolio. In my opinion, this quarter cements that transition. I’ve therefore adjusted the size to match that conviction.
DDOG 0.00%↑ – Datadog posted what I would call another just-OK quarter August 8. While its penetration and leverage with existing customers continues to impress, I just don’t understand why new customer adds and RPO keep seeing pressure on the front end. Those are trends I would have expected to stabilize by now, but it just hasn’t happened. My gut says there’s either some customer saturation setting in or Datadog’s products aren’t quite as useful in the move to AI as they were in the initial rush to the cloud. Either way, the ongoing customer weakness continues to chip away at my conviction. At least it’s our smallest position…
ELF 0.00%↑ – Despite passable headline numbers, I found e.l.f. Beauty’s August 8 report very disappointing. While 50% headline growth looks good at first glance, backing out the Naturium contribution puts organic growth closer to 34%. Comps will only get tougher as we lap that acquisition, and just meeting current guides could even bring a slowdown in the second half. That would be a major change from ELF’s recent performance.
Part of the issue appears to be a consumer cosmetics category which has suddenly run out of steam. A recent earnings miss on both the top and bottom line by competitor Ulta only strengthens this narrative. That means ELF’s present market share gains are simply a bigger piece of a stagnant pie.
Will that pie bounce back? We don’t know, which unfortunately comes with the turf when owning a consumer facing company. ELF continues to execute well, but it exits this quarter with considerably more questions about future growth than it had coming in. I have learned a painfully expensive lesson while riding CELH through a category slowdown and had a similar ding with solar company Enphase in the first half of 2023. I have no interest in trying a third time. Accordingly, I’ve booked our ELF gains and decided to watch from the sidelines a quarter or two until we get more clarity on consumer trends. I can’t say I’m ecstatic about adding another 12% cash to our already too large pile, but at least it will earn 5% interest while it sits around.
IOT 0.00%↑ – Samsara started August by hiring Meagen Eisenbery as new Chief Marketing Officer. With nearly 25 years of experience, Eisenberg joins IOT from cybersecurity firm Lacework where she held the same title. She has also held senior marketing roles with high-growth companies MongoDB and TripActions. She officially joined Samsara August 28.
IOT ended the month by releasing a case study detailing a 72% increase in driver engagement and safety scores after eight months of use by customer Lanes Group. Lanes Group operates a fleet of 4,000 vehicles providing waste, water, and infrastructure services across the UK and Ireland.
We’ll get a further update on the business when Samara reports September 5.
TMDX 0.00%↑ – TransMedics has been on a tear since reporting another excellent quarter July 31. It followed by presenting at the August 14 Canaccord Genuity investor conference. One revelation at this event is the increased use of TMDX’s in-house surgeons to conduct organ removals. After initial hesitancy to use TransMedics surgeons, customers have now progressed from using this option for 12%, 80%, and 95% of removal surgeries the last three quarters. The Chief Commercial Officer stated the current use of TMDX surgeons for initial harvesting is now running at roughly 98% for all three organs.
This increase shows TMDX is not only revolutionizing the storage and transportation of organs, but even how they are harvested in the first place. I hadn’t fully considered that angle to this extent before, though it certainly helps explain some of the continued outperformance. Based on these comments, it sounds like the rapid growth in surgical revenues has surprised even management. With the increased demand management has increased the number of pilots crews it has hired and is looking to double shift its planes where it can. In my opinion, this development only reinforces the strength of the new model TMDX has established.
TMDX is scheduled to present again at the Morgan Stanley 22nd Annual Global Healthcare Conference September 4.
TTD 0.00%↑ – The Trade Desk gonna Trade Desk. The company released yet another solid quarter August 8. It consistently posts strong numbers while grabbing market share along the way. Advertising dollars continue to shift online with TTD leading the way in facilitating that move. With a seasonal bump from Olympic and political spending coming the next two quarters, I’m not sure there’s a more plug-and-play position in our portfolio heading into the back half of the year. I was fortunate to add some shares at $82.60 on the early-August market plunge prior to earnings. I have since trimmed those back off as the stock has rebounded to $100+.
ZS 0.00%↑ – Zscaler’s only formal news this month was confirmation of appearances at three investor conferences in the first half of September. The stock has mostly drifted along with the general skittishness and then slight rebound in the cybersecurity sector since the CrowdStrike incident. ZS will get a chance to stand on its own merit when it reports September 3.
My current watch list…
…remains just monday.com (MNDY) with mild interest in MercadoLibre (MELI) and NVIDIA (NVDA). I’ll admit most of my hesitation is a prior lack of success with:
fintech (the add-on business to MELI’s e-commerce) and
the microchip cycle (a prior profit with NVDA a few years ago but one which shrank considerably when the crypto/gaming bubble burst).
Super Micro Computer (SMCI) falls by the wayside after a surprisingly weak quarter followed by a short report and delayed 10K filing. This company should be absolutely killing it right now, but for some reason it’s not. That’s a simple enough thesis to keep me out. I also took a quick look at Shift4 Payments (FOUR) but just can’t get too excited for now.
And there you have it.
All in all, I’d call it a productive month. Of course, it always helps when three of your top four holdings post strong earnings reports. Unfortunately, ELF put a crimp in my preference for less cash with its surprisingly soft quarter. The initial plan for September is to reassess after Zscaler and Samsara report next week. If nothing else, I might buy a couple percent of MNDY just to put it officially back on board. Oh well, at least money market funds are paying a decent rate while I’m waiting around for more attractive alternatives.
As usual, thanks for reading, and I hope everyone has a great September.
Solid report and performance as always. Regarding the growing cash position. I think it is an indicator of the times. As you said in a comment/reply above, there seem to be fewer attractive true high growth stocks these days. I am also in a large cash position and being patient for the next market opportunity a la Aug 5th. Cheers!
Nice portfolio. How you doing longer term ?