I think I first really cottoned-on to the impact that Covid-19 was going to have on society in March 2020. I’d spent the first few months of the year living in Heavenly in South Lake Tahoe, enjoying the California skiing and Nevada nightlife, but when Vail Resorts closed all their mountains in late March terminating my ski season a few weeks early, it was clear that Covid-19 was shaping-up to have a lasting impact on the world economy.
Albert and I invest in mega-trends, the forces and innovations that shape the future needs of society. The world needed to rapidly adapt to the Coronaconomy, and it was clear that our portfolios needed to be reshaped to withstand the worst of the impacts, particularly the broad-base lockdowns that were beginning to be instituted in many countries and that would wreck-havoc on bricks-and-mortar businesses.
I began the year with a number of existing ‘work from home’ and ‘shop from home’ investments, notably having 28% of my portfolio in the retail e-commerce giants Amazon, Shopify, and MercadoLibre, and smaller positions in StitchFix and Upwork. To prepare for the pandemic, I opened positions in Zoom, Teladoc, DocuSign, and most recently Fiverr.
The large majority of these investments have done incredibly well, outperforming the market and accelerating my portfolio to an 86% gain 2020 year-to-date. Following my principle of ‘buying in thirds‘, I’ve gained confidence in two of these companies, recently increasing my exposure to Teladoc and DocuSign.
As 2020 draws to a close and I consider what next year may hold, it thankfully seems likely that we’ll put the Coronaconomy behind us. A number of strong vaccine candidates are starting to roll-out, and although it’ll take at least a quarter or two, I’m optimistic that by mid-year, normal service will largely be restored.
Although I have firm faith in the majority of the companies listed in this article, with an eye to the future my current 40% exposure to the Covid-19 mega-trend is now beginning to feel a little outsized at least relative to the other trends I’m following, so I’ve elected to exit a couple of the companies that I’m less confident in.
Today, I plan to sell my entire stake in StitchFix and Upwork, and to also use this as an opportunity to trim Tesla for a third time, for a similar rationale to the one shared in this post.
I’m selling StitchFix for a healthy 165% return over two years, after a fairly lacklustre personal experience using the service. Wherever possible, I like to be a customer of the companies I invest in, and although I believe StitchFix will succeed, they had a more fundamental gap around their customer retention and customer service capabilities that led to me closing my account.
Similarly, Upwork have a good business model, but they just feel like a rather fragile company. After a recent Coronaconomy run-up, I’ve gained 110% over the same two-year holding period, but I’m just not paying enough attention to the company for me to warrant holding it any longer, and it feels like an easy decision to exit the position as part of clearing out some of the weeds, and creating a bit of capital to invest in other mega-trends that will persist after the Coronavirus is just a distant memory.
Today’s trades will rebuild my cash position to around 20%, which feels very appropriate given where valuations are at the moment. I like the idea of having this ’emotional hedge’, so that I’m excited whichever way prices move over the short to medium term – which I expect to be increasingly volatile.
