Portfolio Review 2022

I do not actually have a 2021 review, so this might be a follow-up post to my previous 2020 SaaS review post linked below. The majority of my stock holdings in 2022 were in this list, and my holdings haven't changed much anyway. So this post should provide some reasoning about what I do and why I think they make sense.

Also, I do not own all of the stocks mentioned in the list or on this page. In fact, I usually hold less than 5 stocks at once. I usually only invest in things that I know well or have used in the past either for work or for other purposes. This is why monitoring too many stocks is impossible for me because there simply aren't that many stocks that I am familiar with. So I do not bother, and that also means I do not need to lose money in trades that I would regret. And I think you should also do the same thing, too.

2022 was a bad year for tech or growth (or me). We had a great tech bull-run in 2020 and early 2021, and it came to a sudden stop and reversed later in the year. While there were signs that the market could peak in 2021, there's very little guidance how much of a pullback you will get and when it would happen. And by late Feb 2022 my portfolio was already down 30% from all-time-high and it wouldn't make a lot of sense to sell after that. What if the maximum retracement happens to be 30%? And it turned out that's the beginning of my misery.

And then the Russia-Ukrainian war broke out, and the Fed started aggressively raising rates. There were talks of inflation in late 2021, but no one expected it to reach 6-10% in major economies by mid 2022 that leads to a 25x hike by mid-2023. And then Jarome Powell has been literally talking non-stop everyday since then. My portfolio has been shrinking a little bit every day since March 2022 toward the end of the year. It's a painful period in tech investing that I will remember forever.

On the companies' side, we have tech companies talking about elongated sales cycles or lowering guidance. It seemed likely that we are going to have a recession, and companies become cautious in their spending and tried to optimize their spending, and this caused cloud to suffer quite a bit. Tech companies have also implemented many cost-cutting measures, and that caused mass layoffs for tech. Everything looked so miserable that time. Additionally, when it comes to layoffs in North America, it seems that most companies chose to provide 3-6 months' severance for the employees they let go. As a result, the earnings numbers have been severely impacted, and that drove all the ratios (p/e) to high or negative numbers.

While some companies get greatly impacted by macroeconomic shocks, there isn't really much of a change in fundamentals for most of the companies I invest in. I haven't made many changes to my holdings for the year 2022 (and actually not much change in 2019) because I was already too late to do anything. In retrospect, I wish I had been able to at least hedge a bit; then I might not have experienced this level of misery.

However, while the overall market is in a recession / inflation selloff, the companies in which I am investing are still showing good growth in their core business metrics like revenue, MAU, DAO, RPO, retention, hours, headcounts and such. So, if they can survive the macro downturn maybe there is a chance they will emerge stronger then before the rate hikes and recession.

Tesla is a great example of that. Despite Elon Musk doing all kinds of stupid(?) things on Twitter and so on in 2022, it also appears that the sales numbers are just going up every quarter for Tesla, and he's able to build one gigafactory after another. And you can see there's more and more Tesla running on the streets, so it's expected that they're gonna have a good future and might dominate in many areas like EV, AI or robotaxi. Also, at the bottom of the selloff Tesla was traded at around forward p/e or 20! It was insanity. Imagine you can invest the future of EV, AI or robotaxi at this level of valuation. In retrospect we should thank Elon for the mess he has done to Twitter. That said I have very tiny positions in this one and I wished I had more of this during the bull run.

Meta has also shown a strong comeback since late 2022. On the outside, you see Mark wasted 2B in his metaverse project and failed. However, what you don't see the mainstream media would tell you, is that, as wealthy and successful as Mark is, he is willing to do whatever it takes to make his company successful. Meta has actually quickly bounced back 350% off the bottom in a year as of today, also maybe because, at the end of the day, they're still the no.1 marketing platform for marketers. Google and Snap doesn't even come close. Keep in mind there's a chance Meta stock price can continue to go up in the coming years because maybe there are still some takeaways from a 2B failure that enable you to build something greater with their Meta Quest or Threads offerings. You never know.

Snap. So Snapchat is what kids do to get a date and be social these days. I had to use it a few times per month with my kids. Prior to their crash, they mentioned they want to double their revenue in the next (or every, I forgot) three years. And yes, that claim itself could have justified maybe $20 or $40 or $80 per share. 2x every 3 years is a lot! And then the bear market, plus the Apple Privacy tracking, drove the price way down to around $10 per share. But that aside, almost all of their core metrics are growing, and people love them. I don't see myself using other silly apps with my kids anyways. I traded it a few times but most of them but the net result is like 0 again for this one.

Now, Netflix stocks. I actually placed a few bets on Netflix stock on the way down and on the way up. And the total profit from those bets was about 0. On the business side, Netflix rolled out the ad-supported tiers and wants to charge you extra for sharing accounts. The media criticize them for doing that, and some analysts even claim they're the losers in streaming on TV. What a joke! If Netflix is a service that 4-5 people are willing to share accounts with in the first place, there's a chance that when you charge extra, you would end up getting 2x or more revenue. Having an ad-supported tier is also seems right thing to do. If you compare it with traditional TVs that give you tons of ad time, you'll know what Netflix do is way less annoying. No one can justify going back to traditional TVs and tolerate such annoyance when you have to pay for subscriptions. However, it would be much nicer if I hadn't bet Netflix stock on the way down but at least I am not losing money on this one in a bear market.

I have also traded Airbnb stocks a few times, and then I lose money lol. People go on TV and talk about pent-up demands in 2021 and 2022, yet this never materialized and Airbnb stock just kept going down. What a shame. Recently their stock price seems to be going back up again. I wonder could it be that they are still a cheaper alternative to hotels and experiences, and competition is non-existent in the bed and breakfast space. No one uses VRBO now btw. Although they may not be known for innovation, their cashflows are great. Investing in them seem like a good idea.

I've also invested in Square and Roblox because they're extremely popular applications that people use in gaming / education / finance. Their DAUs are constantly going up, and they have been successful in either scaling up their revenue streams or enhancing their economy. They should continue to be good companies to look into in the future if we decide to move towards a blockchain future or a metaverse, if one ever exists.

Roblox is especially interesting to me because I was thinking what I would do if I were to create a coding platform like Roblox. And then I realized how difficult it would be. In order for people to create games, you need to have players on the platform first. Also, if the platform doesn't have good games, there won't be any players joining. Therefore, it becomes a significant chicken and egg problem that not many companies can overcome. However, I ended up not holding this stock at the end of 2022 since I do not have high confidence in the metavese taking shape. I intend to buy it back if necessary and I can see this stock going much higher if a few catalysts happen.

A few other companies worth mentioning are Datadog, Cloudflare, Snowflake, Hashicorp, HubSpot, Atlassian, Monday.com and many others. You can see the user count, revenue, and RPO of these companies continue to grow in 2022. dog and net has been a tool that I have always used. It is a tool that I have no interest in switching from, nor do I believe it is easy to switch away from. And I suspect that is also true for tech companies in general and it might be semi-standard devops tools for software companies nowadays.

And since those companies have achieved economies of scale there are many more things they can potentially do now. Many start to have cybersecurity offerings and use cases, and their valuation started to seem reasonable at this level. Cloudflare for example continues to roll out features that could bring compute over from other cloud providers, and even my website has things built on top of their service. Those are very important things that, if played well, could bring in significant revenue in the future.

Hopefully, the market will be less harsh on those SaaS names in 2023 and their stock price can climb back up a bit. This is where most of my losses come from in 2022, unfortunately.

2022 has been harsh for investing for me. I learned a lot during that year, and it was the first time I experienced a large bear market while all the companies were still growing without limits. So far in 2023, I am doing okay, and I hope that the tech companies can continue to cover losses and climb higher later in the year.

$tsla $meta $nflx $mndy $abnb $snow $rblx $sq $hubs $shop $hcp $ddog $net $snap $upst

p.s: 2020 SaaS review: https://www.stockideashq.com/posts/IzMNNdck/2020-saas-review/.