August 2020 - Luke's Global Fund Update
Updated: Oct 5, 2020
We are pleased to report Luke's Global Fund achieved a return of 2.5% (in constant currency) return over the month of August, and a 11.4% gain for the financial year. The top three contributors to the performance over the month were:
Blue Prism, which contributed 20% of the returns this month. Blue Prism was named the best RPA company in 2020 by the AI Breakthrough Awards Program, and this appears to be the key catalyst for the recent share price appreciation.
Crowdstrike Holdings, which contributed 17% of the returns this month. Crowdstrike has been a beneficiary of the working from home disruption to the way we work, and continue to expand their market leading platform.
Tradedesk, which contributed 5% of the returns despite revenue falling 13% y.o.y. for the quarter. Jeff Green is a master salesman, and is selling the opportunity before Tradedesk, and the market is buying it for now.
The key detractor for the month was Alteryx, which contributed -43% to the portfolio performance. Alteryx typically sign enterprise to 3 year deals, and book 30% of that revenue in the quarter the deal is converted. It was clear revenue wins were going to be heavily disrupted, and a comparison between a booming Q3 2019 and Q3 2020 quarter forecast was looming. It was remarkable Alteryx's valuation was so high in the led up to Q2 2020 results. We sold 20% of our holding prior to the earnings announcement. This was a mistake. We should of spent more time on assessing the quantum of our sell down, given the likelihood of a significant sell off after the call. Our global fund is very concentrated, and as a result, we need to be more active in position size management. In hindsight, it would of been prudent to sell 50% of our position, given the near certainty of the ensuing sell off.
Notable changes to the portfolio included:
We trimmed Alteryx positions, based on earnings headwinds.
We increased our position in Datadog, following the earnings release, as it was sold down despite what we thought were strong results.
We opened a small position in Teladoc Health, following the announcement it was to acquire Livongo Health. The market treated the announcement as a lose-lose scenario, as Teledoc Health shareholders were being diluted, and Livongo Health shareholders were now holding a business with slower revenue growth. We took the opportunity to open a position around $190 per share.
If you have any opinions on the companies we hold, or what like to know more, we would love to hear your feedback.