Portfolio Update (February 2020)

February 19th, 2020

• Quick update on my Alpha Fund portfolio
• Innovation focused
• 6 holdings: Tesla, NIO, Stitch Fix, Okta, Alteryx, Nividia

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I believe investing in innovation is the key to bringing in substantial returns in the markets.

The fundamentals of innovative growth companies do not fit in line with the traditional value investing philosophy, so I will not mention these metrics, as I believe long gone are the days of investing in sub-8.5 PE ratio companies that made Warren Buffett his fortune. Buffett in his own right is a genius investor. But what many economists and forecasters fail to account for is the exponential growth and scale of modern-day technological paradigm shifts. Linear growth companies with steady dividends are simpler to value, more certain and reserved for my retirement portfolio. Exponential technology is riskier but offers greater returns if you can stomach the cyclical swings.

My current Alpha fund portfolio consists of 6 stocks that are looking to capitalize on innovation and technology. I will outline them down below with brief descriptions of their competitive landscape advantages/growth potential. I may write more detailed reports on these stocks in the future. (Let me know if you want a more in-depth analysis on a particular stock).

Disclaimer: This is not investment advice and all the information provided in this article and on my website should be taken as entertainment only.

Tesla ($TSLA)

I first wrote about Tesla last year when its shares dipped below $200/share, which completely boggled my mind. Today, it seems everyone and their grandmother is talking about Tesla’s recent rise in stock price. I’m not too worried about the volatility short-term, as I’ve taken my profits, but still have skin in the game. Instead, Tesla’s competitive advantages are numerous and will push them further up in the long-term, backed by one of today’s greatest innovators.

• Battery Optimization: Tesla makes their own batteries, optimizing them for vehicles and also lowering the cost significantly. When Elon Musk decided to use Lithium-ion batteries, traditionally used in phones and put them in a car, he took efficiency to the next level while the media criticized him for his mad-scientist ideas. Tesla cars offer superior range 400+ miles, beating some major competitors by over 100 miles or more.
• Personal AI Chip: While other smart-vehicles will use an NVIDIA AI chip, Tesla has its own artificial intelligence chip and its 3+ years ahead of traditional AI chips because it is specifically optimized for automobiles rather than general-purpose.
• 14 Billion vs. 200 Million: The number of miles driven by Tesla auto-pilot compared to the next big competitor, Google’s Waymo. In the race to autonomous-driving, the companies with the most data will win in terms of rolling out efficient systems. The reason Tesla is far ahead in this category is that they continuously gather data from its customers. Watch out for a roll-out of autonomous vehicle taxi fleets in the next 3-5 years which will capitalize on higher margins and as a major service feature.

 

NIO Inc. ($NIO)

• NIO continues to face cash problems. However, given China’s track record of favoring Chinese companies, there is some hope for NIO in the EV market in China.
• Smart Car. I also genuinely like their cars and believe their ‘smart’ car feature is very cool, with a mini-assistant robot on your dashboard that is surprisingly cute and practical.
• Read my more in-depth article on NIO I wrote last year here.

 

Stitch Fix ($SFIX)

• 3+ million subscribers in America, and newly launched UK last year, Stitch Fix offers subscription clothing boxes sent to your home with free returns and pay-what-you-keep option. Stitch Fix gathers data on your preferences and continues to cater to your looks based on selections, personal input on their site, and consumer data.
• Growth Lever: Stitch Fix grew revenues by 28% annually in the past 3 years, and is expected to grow a further 15-20% annually in the next 3-5 years.

 

Okta ($OKTA)

• Cybersecurity is significantly important in today’s landscape of data and privacy. Okta offers password, IT, and data protection solutions for enterprises.
• Growth Lever: Okta is expected to see 25% annual growth in the next 3-5 years as the cybersecurity industry grows

 

Alteryx ($AYX)

• Fast-growth data solutions and software modeling platform that I’ve heard mentioned at every business conference or networking event I’ve been to in recent memory. As data continues to drive businesses and society, data platform solutions continue to rise in importance.
• Growth Lever: AYX grew at an absurd 60% historical annual growth in the past 5 years, and is expected to capture further 30-60% annual growth in the next 3-5 years, based on analyst estimates.

 

Nivida ($NVDA)

• Powering disruptive technology. NVDA is a leading provider in hardware and software and is leading the semiconductor industry in some of the most disruptive technology trends.
• AI revolution: NVDA is a leading provider in AI chips, with a dominating 99% market share in deep-learning program chips.
• Blockchain: Despite NVDA’s cryptocurrency fiasco two-years ago, NVDA is still set to capitalize on blockchain technology by providing the hardware for computers in a decentralized ecosystem.
• Super Computers: NVDA’s infrastructure powers 136 of the top 500 supercomputers in the world.
• Gaming: With one of the most powerful GPU’s, NVDA has captured roughly 70% of the global video gaming market share

 

I am a long-term investor in Tesla, NIO, Stitch Fix, and Okta, with Altreyx and Nvidia being recently new positions I’ve added.

Compared to my holdings in January 2019, I cut out Toll Brothers ($TOL), Canopy Growth ($CGC), Amazon ($AMZN), and Softbank ($SFTBY), and iQiyi ($IQ)

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