- Sean Rapley
December 2020 - Luke's Global Fund Performance Update
Luke's Global Fund achieved a return of 16.2% (in constant currency) return over the month of October, and a 43.9% gain to date for FY21 on a constant currency basis. International markets also ended December generally up over the month, with the S & P 500 returning 3.1% for the month.
Our portfolio as at December 31, 2020:
The big news this month was centred around our largest position, Crowdstrike. Firstly, Crowdstrike reported outstanding Q3 results, with the following key metrics reported:
86% increase in revenue on Previous Corresponding Period (PCP).
81% in Annual Recurring Revenue (ARR) on PCP.
Net cash flow more than doubled on PCP to $88.5 million.
1186 net new customers.
Strong module roll out and adoption by customers.
CEO Kurtz concluded in the Q3 earnings release:
“Our industry-leading cloud-native platform powered by Threat Graph enables us to rapidly bring new modules to market and drive customer adoption. With our expanding portfolio of capabilities, which includes three recently announced new modules and the addition of leading Zero Trust capabilities through our acquisition of Preempt Security, we believe we are well positioned to continue our momentum and extend our Security Cloud leadership,"
With each customer addition, Crowdstrike is building on its network “Borg like” effect, and with each module, Crowdstrike broadens its offerings and deepens its relationships with its customers.
Secondly, the major cyber attack was executed on SolarWinds. The cyber attack prompted SolarWinds to deploy Crowdstrike endpoint security to secure their systems/network. This decision which was seen by many as confirmation that Crowdstrike is the leader in end point security.
Crowdstrike has appreciated 37% in value over the month of December. We feel the valuation is rather stretched and we sold 15% of our position. We are a little uncomfortable with the portfolio weighting, given its stretched valuation, and will seek to further reduce our position over the coming few weeks.
In terms of our cash position, we have converted all our US denominated cash to Australian dollars, as we consider the Australian dollar is more likely to rise against the US dollar in the short term – Why? We expect commodity prices are likely to rise in an economy recovering from a pandemic (as it did after the Spanish flu).
KEY LEARNINGS THIS MONTH:
The greatest lesson we reminded of this month was to let your winners run. Having brought Crowdstrike at $46-49 per share range, some may consider trimming the position over time a reasonable strategy. This is not necessarily the wisest move, particularly with a business that has such a clear competitive advantage, and proven execution. To hold onto Crowdstrike until it reached a 30% position and $221 was a an achievement for us, and this one decision to not take profits, is the primary cause of the portfolios success in the year to date. Of course, portfolio position sizing is a constant balancing act, and at this time, we consider a re-balance to be prudent.
If you have any opinions on the companies we hold, or would like to know more about our investments, we would love to hear your feedback.