February 2021 Month End Portfolio Recap

Wow. What a f’ing terrible week. Good grief. 🤦‍♂️🤦‍♂️🤦‍♂️🤦‍♂️🤦‍♂️

Remember when I wrote that in my “Reasons Why I Invest in Individual Stocks” post and noted that investing can be a humbling process? Yeah, this was definitely a week that humbled me and made me rethink my entire portfolio strategy.

After weeks of huge market returns this year, my portfolio got beat up really bad this week and gave up all of February’s earlier gains and then some. This was the first month where my monthly return was negative since March 2020 of last year! Thursday, wow, Thursday was a bad bad day that basically decimated my portfolio AFTER the beating it took on Monday and Tuesday of this week. 

Not going to lie, I was definitely worried at one point on Thursday whether or not I was going to get margin called in the coming days if the market kept tanking.

So on Friday, since the market started green, I basically spent the first half hour after the market opened to restructure my portfolio. I closed a lot of short puts and closed synthetic long positions on a lot of interesting companies that I decided to take a flier position in. After everything was said and done, I was able to effectively deleverage (by closing a lot of short puts) a significant portion of my portfolio. I definitely wracked up some margin debt doing this, but for the added peace of mind should we get hit with a bear market due to fear of rising interest rates made this a worthwhile process.

So, what in the heck is going on?!

Well, it seems that investors are freaking out that soaring yields in the 10-year US Treasury will put an end to our low interest environment since it will force the Fed to stop printing money sooner than investors would want and potentially increase interest rates sooner than investors would want. CNBC has an interesting article on this for more insight. There were other reports that what was going on was reminiscent of the Taper Tantrum of 2013 where then Fed Chief Ben Bernanke noted that they may slow down their bond purchasing program. This resulted in treasury yields skyrocketing and the market tanking 6%+ (see graph below).

Ultimately, who knows what will happen. I personally think there’s still way too much work to do to even think about raising interest rates and the market will eventually “get over” these soaring yields. It’s crazy how 10+ years of a low interest rate environment has made the market so “soft” to even the slightest hint of raising interest rates. The market was just fine in the 1970s through early 2000s when interest rates were sky high. Sure, there were a few bad years, but the averages were still super strong and it could be argued that the market returns during this high interest rate environment were better than the returns we’re seeing now. I digress.

Portfolio Update

S&P 500 return YTD: 1.47%
NASDAQ return YTD: 2.36%
S&P 500 return last week of February: -2.44%
NASDAQ return last week of February: -4.91%
My portfolio YTD: 13 to 15%*
January’s performance: 23.5%

* Fidelity doesn’t provide updated YTD performance until a few days into the next month

It’s been a good year despite February’s poor ending. It’s crazy how my portfolio was up as much as 40% in mid-February and then it came tumbling down after a slew of bad earnings and interest rates going crazy.

There were a lot of good earnings reports this month, such as Etsy’s to close out the month, and a few duds that resulted in me quickly exiting those positions.

I mentioned earlier in this post and in previous weeks, I’ve definitely adjusted my portfolio pretty significantly since January’s update to reduce leverage from synthetic longs and I started consolidating a lot of my holdings but after I reviewed my portfolio’s positions this month, I realized that I still have a lot of work to do. For example, when I list my holdings by % weight, you’ll see that I have 6% in stocks that make up < 1% of my portfolio. Granted, there’s a few that make up 0.95%, but I decided to throw them in the < 1% bucket. I think I need to re-allocate those investment dollars to my more confident positions. I also still have a few meme stocks that I’m trying to unwind but given how big of a position they were last month, it’s a work in progress.

As I think about my journey to FIRE, I anticipate I will be invested in significantly fewer stocks and will have a lot less leverage in my portfolio since leverage can really cause a portfolio’s value to fluctuate pretty significantly. In addition, I am in the process of building up a dividend ETF position in order to generate guaranteed income on a quarterly basis.

My Portfolio Breakdown

ETSY8.8%
CRWD8.7%
DOCU8.3%
ZM7.2%
FVRR6.7%
ENPH6.5%
ROKU5.7%
PINS5.4%
MELI4.5%
PTON4.0%
DDOG3.6%
TWLO3.2%
OKTA2.5%
NET2.5%
TDOC2.4%
TEAM2.4%
TCS2.3%
NVDA2.2%
FSLY1.8%
SNAP1.3%
SHOP1.1%
Mining & Meme Stocks2.8%
Less than 1%6.0%

Position Notes

Argo Blockchain ($ARBKF)

This is a new position that I started this month and added aggressively to throughout the month of February. Argo Blockchain is one of the largest bitcoin mining companies in the world, it is an incredibly speculative position in the grand scheme of things, but I did a ton of due diligence and research into their financials and bitcoin mining operations and I feel confident enough about my investment.

I think Argo Blockchain is undervalued versus its peers Riot Blockchain ($RIOT) and Marathon Patent Group ($MARA) and is in fact one of the largest bitcoin mining companies that is publicly traded and deserves a higher revenue multiple. It is definitely bigger than $RIOT and $MARA combined from a revenue perspective and at least from my understanding of the three, they currently have the highest hash rate (the amount of processing power you have in order to solve algorithms and earn more bitcoin, the higher hashing rate, the more bitcoin you can mine).

The CEO Peter Wall is incredibly transparent and he has his company provide monthly updates which is interesting to read. Perhaps I’m getting too caught up in the bitcoin craze, but I definitely think there’s potential and will hold on until at least the numbers they put up tell me otherwise.

Etsy ($ETSY)

Etsy had an INCREDIBLE Q4. When I was watching the ticker tape after their earnings, I was utterly SHOCKED that it wasn’t moving after they released their earnings. So what did I do? I bought shares! I bought shares after hours at an average cost basis of around $205 and it turns out after investors got to digest the earnings release, shares skyrocketed and the next day, they went as high as $232!

I’ve been invested in Etsy since $8.34 and it has definitely been an amazing stock to buy & hold and add onto over the years. I personally think that Etsy will be over $1,000/share in the coming years which will put their market cap right around $100 B.

Fiverr ($FVRR)

Despite the massive share pullback which was unfortunate timing since I purchased shares at an average cost basis of $311, I am still incredibly bullish on this company and proceeded to add on the way down. While it’s hard to say what the market will do to Fiverr in the short-term, at a < $10 B market cap, there’s still a lot of upside and given their extraordinary revenue growth rates, I think their share price will continue to appreciate considerably over the years.

Zoom Video Communications ($ZM)

Monday, March 1, 2021 is a BIG day for $ZM and likely for the rest of the WFH stocks/tech stocks. If Zoom crushes earnings to satisfy Wall Street, I can see Zoom bounce 20%+ and a significant green day for all other tech stocks, similar to what we saw back in early September after Zoom announced their Q2 results. I think this earnings release will be the first time they break out Zoom Phone sales given their sneak previews in their press releases and they’ll provide investors with what they think will happen post-pandemic with their guidance for FY 2022 (They are one year ahead in FY). I personally remain as bullish as ever and this is why $ZM still is a top 5 position for me.

Cloudflare ($NET)

Frankly, I have never really liked this stock because it’s just so incredibly overvalued. It is a perfectly fine company that has been firing on all cylinders, but for a company that has been growing 40-50% and guiding for slower growth this year, I just cannot understand why their multiple is as inflated as it is. Even after the massive pullback we saw where Cloudflare shed 20% off its share price, I still think it’s way overvalued given their growth rate. Yes, yes, they will eventually grow into their valuation but I think for this reason, I haven’t added to my position. In fact, I have actually been trimming my position here and there when the share price was in the $85+ range. The reason why I don’t fully sell out is because I got in at $25 and I don’t want to pay short-term capital gains tax. I will probably hold on until August and will re-evaluate.

Teladoc ($TDOC)

It appears they disappointed investors given their share price tanking after earnings. However, full transparency, I have not bothered reading or trying to understand how Teladoc is doing. I don’t understand healthcare stocks very well and I trust other people to do the analysis for me. For this reason, I continue to keep my position on the lower end. Honestly, I might end up trimming some because I don’t like to hold stocks > 1% of my portfolio’s value that I don’t fully understand nor have I bothered doing the due diligence. You can call me lazy, but I’m just simply not interested in trying to understand a space that I have little interest in and is likely going to undergo a lot of changes in the Biden administration. My wife works in healthcare and she’s even mentioned that she rather I avoid healthcare stocks just given her experience in the field.

Fastly ($FSLY)

I still hold onto some options in Fastly but I have actually been selling out of what I can just given how abysmal their earnings were. The reason why I haven’t fully sold out is again due to tax considerations. Once LT capital gains are achieved in May, I will likely re-evaluate especially after they release their Q1 earnings report.

Snap ($SNAP)

This is a stock that I probably should add to given that in their investor’s conference last week, they indicated that they believe they can grow 50%+ for many years. I don’t doubt that given how uniquely engaging their ad products are. I personally am just kicking myself for not buying more when they were at $15. I had shares, but was just hesitant to make it a big position due to their rollercoaster of a ride after their IPO a few years back.

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