2021 is probably one of those years that you would regret if you had followed the advice to sell in May and go away. Despite the U.S. Consumer price index jumped 5.0% in May, the NASDAQ Composite Index brushed off inflation fears and resumed its bull rally. Hence, many of the tech stocks that I have been averaging down the past few months paid off well, and I have achieved my 2023 goal of $583k!
(1) Growth Portfolio
Recently, the value of my Growth portfolio has surpassed my Dividend portfolio due to the recent stock price appreciation and buying the dips. It will probably be my fastest growing asset which will help me achieve Financial Independence, Retire Early (FIRE) by the age of forty. Although it has been a great month for me so far, I am not resting on my laurels. I will continue to hunt for potential multibagger stocks by spending time to do research as well as divesting the ones with limited growth potential. Other than happily cutting my losses on Serba Dinamik shares, I have sold Salesforce at USD 240 for a 11.21% gain due to opportunity costs. Don’t get me wrong- I still believe in the future of this company and its management. It is just that Salesforce might not be able to meet my revenue growth expectations. If the history is any guide, the company has been relying on acquisition to fuel its growth. The CRM leader is projecting growth rate of low to mid 20s (even after acquisition of Slack), which I believe has passed its inflection point in its growth trajectory. With that being said, I may revisit this counter if it drops below USD 200.
I have bought shares of Roblox, Upstart, and Unity this month. Right after my Roblox stock order was filled, came the bad news. The daily active users were down 1% month on month, which some investors believe is a sign of an impending slowdown. The year-on-year growth is still impressive, but given that the stock is trading at a high price to sales ratio, any slight miss in investors’ expectation can send the share price tumbling. Roblox is indeed a beneficiary of Covid 19, as many kids were probably stuck at home during the pandemic and ‘hanging-out’ on Roblox. Hence, last year’s revenue surge was an exceptional one which will likely not be repeated this year, since classes have resumed, and kids may spend more time travelling during the summer break.
However, not all hope is lost. Looking at the quarterly Daily Active Users (DAU) chart, one could easily infer that the quarterly DAU did not increase in a linear fashion. The DAU in 1Q to 4Q 2019 looked somewhat flattish, and only saw a jump in Q1 2020. Likewise, the DAU 3Q to 4Q are languishing in the range of 36-37 mil , and unexpectedly jumped in Q1 2021. The stock may repeat a similar pattern and the next surge could be in the cards or could be in the horizon. We can also see a similar pattern in the total Bookings as well.
If Roblox reports a decline in DAU in Q2 2021 compared to the prior quarter, I won’t be too concerned either. In a grand scheme of things, one quarter of lacklustre performance does not carry much weight. I learned this when I invested in Arista Networks in 2019. I first bought five shares at USD 310 and USD 268 in March and May of 2019, respectively. In November that same year, the share slid 24.2% after the CEO of Arista, Jayshree Ulal, gave a disappointing outlook for its fourth quarter, due to slowdown in orders from a cloud tech titan, which some believed to be Facebook or Microsoft. I adopted an averaging down strategy by adding another 5 shares at USD 195.47 and another 6 shares at USD 210.16 as I am optimistic about the company’s future. After the 24.2% drop, share price continued its decline before it found its bottom at USD 157.04. However, those who had held on tightly to their shares and looked past one quarter of earnings disappointment are handsomely rewarded, as its shares had recently closed near all-time high of US 362 last Friday. I believe that one of the important traits of a successful CEOs is the ability to envision the company’s future, where his/her planning horizon is five to ten years ahead, and not choosing to optimize quarterly results at the expense of long-term disadvantage. I did a write-up on Arista Networks. You can check it out here.
Roblox is similar to the YouTube platform, but the content is games rather than videos. Anyone with limited coding knowledge can develop games and monetize it on its platform. Despite a potential slowdown in its activity as pandemic subsides, I believe there’s a long runway for Roblox. Beyond growing its gaming content, Baszucki hinted that ‘metaverse is coming’, where people will meet virtually like the movie ‘Ready Player One’. Currently we can only experience it on a PC or mobile device, but when AR glasses and 5G become more mainstream, we can experience it in real life.
Similarly, Unity Technologies is another software development company that will benefit greatly when metaverse becomes the new normal. What started as a development platform for online gaming has become a software for companies to design and showcase their product in 3D format. I have added only 10 shares and will buy on the dips.
(2) Dividend Portfolio
Initially, I had thoughts of selling all my REITs for growth stocks. However, after much deliberation, I have decided to keep the REITs in my portfolio, because it will be an asset to generate passive income and provide inflation hedge for my future retirement. The nature of it being low risk and providing recurring dividend can act as a cushion during periods of volatility.
Last month, Mapletree Industrial Trust (MIT) proposed to acquire 29 data centres in the US. To fund the purchase, the REIT announced a $800 mil fundraising exercise which consisted of preferential offering and private placement. The Preferential Offering was 176% subscribed and I was pleasantly surprised to be allotted 1,267 excess rights. Currently, my total shares of MIT stands at 9,700, and has overtaken Ascendas REITs in terms of stock weightage.
For now, I will not be diversifying my dividend portfolio by adding new REITs. However, I may be adding to my existing shares when their valuation gets attractive.
(3) Serba Dinamik
As mentioned in my previous blog post here, I have fully divested Serba Dinamik. It was the right move given that there were more warning signs in the days that followed.
Just last Monday, the company conducted a press conference on Youtube, with Chairman Datuk Mohamed Ilyas Pakeer Mohamed threatening to take legal action against KPMG, and calling the audit firm, ‘Gangsters’. He also claimed that he had spoken with the Securities Commission and Bursa Malaysia. The next day, SC and Bursa came out to deny that they had spoken with him. Personally, I felt that the press conference did more to tarnish Serba Dinamik’s image than to clear the air, as the management did not address any of the concerns raised by KPMG but putting the blame on KPMG and reiterating their stance that the company has strong fundamentals. The press conference did nothing to soothe investor’s fears. If all that was not bad enough, four independent non-executive directors resigned in protest over the company’s decision to sue KPMG. It is indeed a company that is rotten inside out, and we might see further weakness in share price in the upcoming days.
(4) Total Portfolio Value (2022 Goal achieved! 🙂)
Stock Portfolio: $503,097
Total Cash at Hand: $89,922
Total Portfolio Value: $593,019
Portfolio 1 Net Worth: $503,097
Portfolio 2 Net Worth: $192,098
Net Worth (Cash+Equity): $785,177
|Finally I can cross something off my list this year!
Just another update before wrapping up: I will be changing my domain name and shifting my blog from Blogspot to WordPress. You will hear from me soon once my new website in up!
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