September 2021 - Luke's Global Fund Performance Update
Luke's Global Fund achieved a return of 4.5% (in constant currency) return over the month of September, and a 24.5% gain to date for FY22 on a constant currency basis Our International Benchmark, the S & P 500, returned -4.7% for the month of September, and the International Benchmark returned 0.0% to date this financial year.
Our portfolio as at September 30, 2021 is outlined in Figure 1 below::
Figure 1 - Portfolio Pie Chart
Our contribution analysis for the month of September is outlined in Figure 2 below:
Upstart Inc. continued to rally, and contributed virtually all the portfolio gains for the month of September. Upstart Inc. returns reinforce yet again the reality that slugging percentage is far more important than batting average.
During the month of September, we trimmed Crowdstrike Holdings and Snowflake Inc. We trimmed Crowdstrike Holdings, as there are signs of a deceleration in revenue growth, which in turn impacts our valuation of the business.
We trimmed Snowflake Inc, as there are also signs of a slowdown in their revenue pipeline with RPO growth slowing significantly.
We had a significant cash position in mid-September, but some investment ideas we have are just too expensive at this time, however, the businesses in question will experience lock-up expiries in November which we expect to present good buying opportunities.
We decided to park the cash in the Purpose Bitcoin and Ethereum ETFs, which we consider a special situation / opportunity. The reasons for this decision we outline in our quarterly crypto fund update.
COMPANY NEWS & REPORTS
September was a relatively quiet month, with Crowdstrike reporting Q2 earnings on August 31, 2021:
Key takeaways were:
Q2 revenue up 70% on pcp, and 12% on the prior quarter (noting Q2 tends to be a seasonally slower quarter with 12% quarter on quarter growth consistent with Q2 2019, and Q2 2020).
Annual Recurring Revenue reached $1.34 Billion, up 70% on pcp.
Operating cashflow of $108.5 million, up form $55 million on pcp.
1660 new customers added in the quarter, achieving a total of 13 080 subscriptions.
Over September, Upstart continued to win new lending partners, adding Water and Power Community Credit Union, and WSFS Bank to the Upstart platform.
KEY LEARNINGS THIS MONTH:
Slugging percentage is far more important than batting average. What matters is how big your winners will be, not how many winners you have. Importantly, you need to be able to let your winners run, which in turns requires a strong conviction and understanding of the underlying business that enables you to understand the value of the business and to withstand the high volatility of high growth, disruptive businesses.
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.