My portfolio got its shirt ripped off this past week, but luckily it kept its pants. This past week was probably the worst week for most investors since March of 2020 with the world finally realizing the impacts of COVID. Since the bottom in March, the market saw an unprecedented rise in many of the publicly traded companies. It didn’t make sense, people were losing their jobs and there was no vaccine in sight. No one knew how long COVID would remain a threat to society. Now, COVID cases and hospitalizations have seen a tremendous decrease and the White House came out to say that every American over the age of 16 should have a vaccine available to them by the end of May. There is finally light at the end of the tunnel with the chance of there being no more hindrance on economic activity, but we are seeing a pullback in the market due to the threat of inflation and the rise of interest rates.
Just like most other young investors, my portfolio is weighted heavily in the high-flying growth stocks which had exceedingly outperformed this past year. Well, this past week was the week to give some of that profit back due to some significant selling in the market. Stocks like Zoom, Tesla, and Teladoc are all down around 30% from their all-time highs.
So when I saw some of the darlings of the recent bull market pullback 8-10% from their previous all-time highs, I started to scoop up some additional shares during the last week of February. We saw a slight uptick during the 1st and 2nd day of March and I felt like I did the impossible, I timed the market. Foolish! The only timing of the market you can actually do is expect that the whole market will be up higher 20-30 years into the future compared to where we are now. These high growth stocks started to slide at an even greater rate as we got further into March and were below the levels that I bought in late February.
Over the past couple weeks, I’ve added to the following positions in my portfolio – $AAPL, $ACTC, $APPN, $DKNG, $SE, $SQ, and $TRUP. These past couple of weeks have given me an opportunity to really look at my portfolio and reevaluate my thesis on why I own these stocks. Do I really think that these companies will be more valuable 5-10 years into the future compared to where they are now? If I think the answer is yes, then this would be a great time to go shopping as I did. Even though this is easy to say, you still have to have the slight pain of seeing multiple stocks in your portfolio down 10% in a day.
The stocks that I bought these past couple of weeks vary in their risk levels. I am a believer in Warren Buffett’s line of thinking that you first need to select the right type of industry to invest your money. The thought is that even a poor company in a booming industry will do well, even though the goal is to invest in the best company in the industry. You won’t always be able to pick the best business in the long term, but your returns can be greatly enhanced by being in the right ballpark by selecting growing industries.
For me, I think all of the industries that these companies operate in will be even larger in 5-10 years into the future. Here are my thoughts below:
- Apple ($AAPL) – The safest company I added to during the pullback. Even at a $2 trillion market cap, I think there is still more room for them to grow in the services and wearable technology space. If I had to bet, I would most likely also get 1-2 more iPhones in the next 10 years. I wouldn’t be surprised if I added an Apple Watch as well.
- Proterra ($ACTC) – Proterra works in the Commercial Electric Vehicle space and went public via a SPAC recently. They got the double whammy of being an EV company and a SPAC, which were two parts of the market that have been unstanstainabily hot and pulled back significant amounts. This is the riskiest company that I added to, but this is my one exposure to EV’s and I don’t see a future where we have less of them 10 years from now compared to what we have today.
- Appian ($APPN) – Appian is a recent addition to my portfolio, joining the family on the last trading day of 2020. It had the hottest start to the year in my portfolio being up over 40% at one point, but it has since fallen below my initial purchase level. Appian provides a low code platform allowing for other businesses and enterprises to quickly build applications to increase productivity. The world will continue to go digital and processes will need to be streamlined and automated which is where Appian can step in to help.
- DraftKings ($DKNG) – Currently, online sports betting is only allowed in 12 states, but more states will be added to that number after the results from the 2020 election. DraftKings is one of the two main destinations for Daily Fantasy which is what put them on the map, but with more states legalizing sports betting they can open their sportsbook across the US. I know I’ll partake in betting from my couch.
- Sea ($SE) – Another darling of the market this past year. Sea operates an E-commerce platform in South East Asia and Latin America, in addition to working in the video game and payments industries. Video games will continue to grow in the immediate near future and it’s hard to think e-commerce will retract any of the market share it has gobbled up during COVID.
- Square ($SQ) – Square has been my best investment in terms of percent return. I bought them nearly at the bottom of the COVID crash, and they have continuously outperformed. This was actually the first time I’ve added to my position from my initial investment back in March. They recently came out with strong earnings, specifically around how they are growing and monetizing their Cash App ecosystem. In addition to their digital capabilities, they officially chartered a bank to provide loans to their customers this past week.
- Trupanion ($TRUP) – I wrote about Trupanion in a previous blog post here. They provide pet insurance to dogs and cats. They are one of the few publicly traded pet insurance companies and they saw a significant drop since I did my initial research on them. I’m glad I didn’t immediately buy and was able to enter in at a lower price point.
I am usually fully invested in the stock market. I don’t sit on too much cash and that has done me wonders over the past year. We had a historic run-up from the bottom of the COVID crash, so it was helpful that I was almost always fully invested. This past week made me want to have a larger percent of my portfolio in cash. I wish I had more capital to go on a larger shopping spree than I did. At the same time, I don’t want to try to time the market. I invest in companies with the intention of holding them for years on end. So to me, if I’m going to commit more money to stocks, I might as well do it when I have some extra money instead of waiting around. Time in the market > time out of the market.
We could have a further sell-off in the future and the stocks could stay down for a prolonged period of time. We could also see a relatively fast rebound as we saw in March of 2020. To me, the companies which I own have all had very solid earnings this past quarter. I expect them to do the same in the future quarters to come and I also expect that their valuations will be bigger 10 years from now. I’ll continue to do my best to invest in excellent businesses that will return value to their shareholders over long periods of time. If prices stay this far off from all-time highs, I’ll be sure to continue to pick up more shares in the coming weeks and months.
Peace and Love.