July 2024 Portfolio Review
Total Return: +17.9% YTD (+2.1% vs S&P)
2024 Results:
2024 Monthly Allocations:
Key:
darker green: started during month
lighter green: added during month
yellow: trimmed during month
blue: bought and sold 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:
I thought the month between earnings season was supposed to be quiet…
AXON 0.00%↑ – Axon itself didn’t announce any news, but I did see a release by wearable safety tech company CENTEGIX announcing a partnership. Under this agreement, CENTEGIX’s wearable panic button badge will be integrated into Axon’s real-time security camera feeds to more rapidly activate cameras and decrease security response times. This deal likely increases stickiness as opposed to creating new revenue streams, but it at least seems worth noting.
We’ll get a broader update when Axon releases earnings August 6.
CELH 0.00%↑ – I saw no direct July news from Celsius, though distribution partner PepsiCo released earnings July 11. The call had the following exchange regarding the energy drink category:
Robert Moskow
A couple of questions. One is, I was hoping you could give a little more color on the energy drinks category. Growth has slowed dramatically in the U.S. I just wanted to get your perspective and ask, do you think that consumers there are making a value decision as well? There's a lot of premium priced drinks there. Do you see any evidence of trading down to maybe higher caffeine carbonated drinks?
Ramon Laguarta
Listen, I think fundamentally, the energy category continues to provide long-term good prospects for our industry. I think it's a consumer need that will continue to be there. And whether we are able to satisfy that through multiple options, that will continue to grow.
There's always small ups and downs of subcategories within LRB that you could argue. Is it because of channel dynamics? Is it because it's very hot and people are moving to other parts of the portfolio? Like we're seeing, for example, in our case, in the recent 6 weeks, a massive growth in our hydration portfolio because, obviously, it's been very hot in the U.S.
So I guess, there is some cannibalization between energy and hydration for some consumers, and they prefer to do that. So I wouldn't overread into the short term of the category. I would try to think about this as if the consumer needs energy. If we're able to provide energy in a consumer-friendly way, including price, probably as you mentioned.
But I would say functionality, clean labels, like a lot of things that I think the category has been working on, there should be a good runway for that segment of the category. And it's been value creating for a lot of us that participate in it, including the retailer partners and the brand owners.
So, not as enthusiastic as some past comments but not quite doom and gloom either. We already know Pepsi optimized its inventory purchases to the tune of a $25M revenue hit to CELH in Q1 with another $20-$30M expected in Q2. The question here is just how much upcoming shelf resets and international launches will affect inventories going forward. With no quarterly or full-year guide, there’s a little flying blind with CELH especially while the energy drink category remains unsettled. At the end of the day, however, it’s hard to see all the momentum Celsius has made in the category disappear overnight. I guess we’ll find out soon enough.
Earnings August 6 pre-market. Caveat emptor.
CRWD 0.00%↑ – Yeesh. CrowdStrike began July by winning a Customers’ Choice award from Gartner Research and ended the month having caused a global computer shutdown.
The chaos occurred when CrowdStrike released a faulty Microsoft Windows update which crashed a huge number of machines receiving it. Despite getting most of those systems up and running again, the outage cause considerable damage around the world.
CRWD’s initial response got mixed reviews. While tech sources didn’t seem to like the transparency of the response, I saw anecdotal statements CEO George Kurtz’s initial comments and media appearances took the right tack. Unfortunately, the breadcrumbs we’ve gotten since have not been great.
First, CrowdStrike tried to make amends with a $10 Uber Eats gift card sent to teams working overtime on the recovery efforts. Not only is that gesture almost meaningless given the carnage – hey, here’s a free coffee in gratitude for pulling a bunch of panicked all-nighters on our behalf!! – but apparently some of the links didn’t work when fraud alerts kicked in during a flood of attempts to redeem the cards. That's a surprisingly tone-deaf effort. In a response where the EQ/humility matters, I’d call this a whiff.
The month ended with Delta hiring lawyers to look into suing CrowdStrike and Microsoft. This is not surprising at all given Delta had to cancel over 6,000 flights during the outage. There’s several pounds of flesh at stake here, and I doubt this will be the last lawsuit. In the meantime, CrowdStrike has set up a response hub to manage incident reviews and guide affected customers through remediation and recovery steps.
The more I see, the more I think this is either the most fixable blip ever or so basic an oversight error it starts the fall of a house of cards. The preventable nature of this outage seems ridiculous in hindsight. The incompetence is regrettable, but if it's technically negligence with whatever legal liability that carries that’s even worse. I can only imagine the parsing of contract language and insurance policies that is about to ensue.
I trimmed roughly 10% of our shares initially with the intent of waiting for the dust to settle but now realize this is going to take months or maybe even years to fully unwind. Holding a down stock in what has lately been a down market is a tough pill to swallow. I’ll likely sell some covered calls into August to start cutting this position further. We will receive what I’d have to think will be a very interesting update when CrowdStrike reports August 28.
DDOG 0.00%↑ – Datadog hasn’t released any formal news since its late-June Dash customer conference (recap here). Its blog, however, noted the release of Toto, a new product for observability on time series foundation models. These large models “are the driving force behind the advancement of generative AI applications that cover an ever-growing list of use cases including chatbots, code completion, autonomous agents, image generation and more.”
Datadog’s overall business has stumbled lately as customer optimizations during 2023’s broad downturn have been slow to rebound while companies sort through exactly what workloads to run as they experiment with AI. Like most companies, DDOG is looking to provide customers with whatever tools the AI push might need. Toto looks like a solid step in that direction.
Earnings August 8 before market open.
ELF 0.00%↑ – e.l.f. Beauty made two noticeable July announcements. First, it expanded its collaboration with virtual-world platform Roblox to test an electronic kiosk where online visitors can purchase real-world e.l.f. products. Roblox is yet another digital space in which e.l.f. is carving out a successful marketing presence. The test product is a limited edition sweatshirt celebrating ELF’s commitment to being cruelty free in creating cosmetics. In conjunction with this release, the company is making a separate $50,000 donation to the Humane Society to reinforce its support of animal welfare.
Next, and probably more importantly, ELF announced the expansion of its Naturium skincare brand into Ulta Beauty, the US’s largest beauty retailer. Naturium will be available in all 1,400 Ulta stores nationwide and offer consumers the largest single assortment of Naturium products to date. Hopefully, both parties see a quick return from this deal.
We should find out more when ELF releases earnings August 8.
IOT 0.00%↑ – Samsara held its annual Beyond customer conference at the end of June. At the event it announced several new initiatives including:
Asset Tag
Next-Generation Smart Trailers
Connected Workflows
Connected Training
New AI Detections
Advanced Custom Reports
The most interesting to me were Asset Tag and the Connected offerings. Asset Tag will allow customers to tag and track small assets like equipment and tools as they move around to prevent loss and theft. The Connected offerings are part of IOT’s attempt to leverage its tracking expertise deeper into the operational and training layer of customers. Success in this area should increase both margins and cash flows since Connected revenue would be less attached to hardware like tags and sensors. The entire blog post linked above is worth a read for holders.
TMDX 0.00%↑ – TransMedics began July by purchasing its 15th, 16th, and 17th planes. That already puts the company above its initial target of 11-15 planes and within the current 15-20 estimate by the end of 2024. Even better, management dropped a hint last quarter of potentially needing 25-30 by the end of 2025. The rapid pace of plane purchases has led to nothing but excellent performances since TMDX’s move to in-house logistics.
That string of excellent performances continued July 31 when TransMedics delivered yet another stellar quarter. It continues to sport triple-digit growth at impressive scale with recent profitability simply icing on the cake. CEO Waleed Hassanein and CFO Stephen Gordon have quickly established themselves as one of the better underpromise and overdeliver management teams on the market today. They not only have a firm grasp on the current business but clear enthusiasm about visibility for the rest of 2024 and into 2025. In the end, I see nothing to suggest TransMedics won’t continue firing on all cylinders and exit this report having no problem keeping it our #1 holding.
TTD 0.00%↑ – The Trade Desk’s news this month was a late-June expansion of its partnership with Fox. The deal deepens the companies’ relationship across all Fox properties, including premium content and internet streaming. As part of the agreement, Fox is using both TTD’s Unified ID and OpenPath services to help better match viewers with relevant ads.
I also came across the following headline July 31: "NBCUniversal's ad sales have already exceeded the $1.25 billion generated by the Tokyo Summer Games." This is notable since TTD partners with NBCUniversal and NBCPeacock, which are the main streaming options for the Paris Games. I’m guessing we’ll hear a lot more about Olympic contributions when TTD reports August 8.
ZS 0.00%↑ – I saw no notable Zscaler news during July, but its increasingly busy blog has been hopping. The featured post details how customer Sanmina maximized its Zero Trust spending with Zscaler. Another detailed some of the AI enhancements ZS is using to better protect customer data. A third detailed a new ChatGPT compliance integration helping drive user productivity for enterprise clients.
There’s a little slow-and-steady to Zscaler’s recent approach, but overall things seem business as usual.
My current watch list…
…remains just monday.com (MNDY) and Super Micro Computer (SMCI) with outside interest in MercadoLibre (MELI) and NVIDIA (NVDA). For now though, they remain on the outside looking in.
And there you have it.
Being honest, growth stocks were probably due for a pullback after a hot May and June. Unfortunately for our portfolio, Celsius and CrowdStrike decided to do double duty on the reset. Regardless, a slew of August updates are on tap as another earnings season kicks off. TransMedics got things started with a fabulous report. While I doubt that will be topped, I’m cautiously optimistic we are in line to hear more good than bad over the next few weeks. Here’s hoping that’s the case for everyone here.
As usual, thanks for reading, and I hope everyone has a great August.