Mazwood Memo #10

$COIN $OKTA $PTON $TWLO $ROKU $AMZN $SPY $ETH

Sep 24, 2021

There’s a lot going on, my portfolio is on fire (not the good kind), so let’s get into it.

But, stay cool.

If I can forecast anything, it is that we will have years in which we underperform and years where we over perform. Across all those years and all those markets, we will strive to eliminate the noise, keep our focus, maintain a long-term view, trade lightly, dig deep, and cover the ground.

-Rajiv Jain, Chairman, CIO & Portfolio Manager at GQG Partners

This Week:

New Buys
Portfolio Recaps
Around the Internet

1. New Buys

I took advantage of the great bear market of 2021 to do a little shopping.

A. Coinbase

Coinbase is a new favorite of mine. I spoke extensively about it in last week’s Memo. As discussed, this podcast was a real catalyst for me in understanding how meaningful Coinbase can become.

Here are my two quick buys. I can see this position getting bigger quickly.

Greg Tusar, Head of Institutional Product (featured on the podcast), penned a blog post this week announcing Coinbase Prime for institutions.

Coinbase Institutional @CoinbaseInsto

We're launching Coinbase Prime to all institutions. →All the tools and services you need to invest at scale, making it the most comprehensive platform for institutional investors. Learn more here ↓ blog.coinbase.com/coinbase-prime…

From the post:

We have been working tirelessly since our beta launch in May to ensure that Coinbase Prime is the most comprehensive platform for institutional investors. Today, we’re officially launching Coinbase Prime to all institutions. Coinbase Prime combines advanced trading, battle-tested custody, and financing in a single solution. Along the way, we’ve continued to add more venues to our smart router which allows clients to achieve the best available price, more assets to our custody capability, enhanced our post-trade reporting capabilities, and added to our post trade credit financing options.

Thanks to Josh for making sure I saw the announcement!

B. Okta

I bumped Okta up to a more meaningful position this week.

I first became interested in Okta last summer, writing a Deep Dive on it here.

As you can see, up 37% from first the tranche is not spectacular, but perfectly nice.

Since breaking through $200, Okta has been trading in this $215-$280ish range.

Year to Date, we are exactly flat.

Here’s a chart I’m excited about:

Here’s a chart I’m less excited about:

Here are some additional charts from Okta’s Q2 Earnings Report I featured in Memo #7:

Revenue up 57% Y/Y

Net Retention at 124%

Total Customers up 46% Y/Y

*(1) Includes one time addition of 1,650 customers from Auth0.

Customers paying more than $100k up 55% Y/Y

*(1) Includes one time addition of 375 customers from Auth0.

From my original Deep Dive, I wrote:

In a lot of ways this is pretty simple: Founder-led business, operating in a growing market, with very strong dollar net retention. Don’t overcomplicate this.

I see this as a lower risk, fairly solid return play.

C. Peloton

What is going on with Peloton?

Since hitting a high of $167 in January, Peloton ain’t riding so hot.

In the last month alone, the stock has swung wildly, getting hit on Earnings…

…popping on the Private Label apparel announcement, then getting whacked again.

A story in three parts:

1) After the earnings drop, I texted a friend:

2) But before I knew it, the stock was up close to 20% to $114. That was fast!

3) Whack! Down again, I get my chance to buy.

Yet down 7% already since Tuesday!

Who said investing was easy!?

After the initial drop two weeks ago, Evergreen and Bill were tweeting words of encouragement.

I’m expecting a lot of short-term volatility here. But, if you have a long time horizon, I think there’s a lot to like.

D. Twilio

I’ve spoken at length on Twilio, most recently last week, answering if I felt now was a good time to buy.

Well, apparently!

E. Roku

Roku has quickly fallen out of favor, but is no stranger to a swift 30% fall from high.

This is a very long-term hold for me.

Gosh, should’ve bought more in March 2020, right?

F. Amazon

Some charts on FAAMG.

A) In the last year, Amazon is the only one to underperform the market.

B) The only one whose valuation has become more attractive.

C) Yet it has not lagged in revenue growth.

D) Nor profitability.

What’s going to give?

G. SPY

Look, I’m not a total monster, I’ve got some index funds!

If it’s good enough for Morgan Housel, it should probably be good enough for me.

H. ETH

I’m also not better than an occasional dip into crypto.

And I feel even better when I bottom tick it!

Three of my favorite pieces of content on Ethereum, and how to think about it:

1) James comparing it to AWS:

James Wang @draecomino

If you can understand AWS, you can understand Ethereum. It's just a cloud computing platform. Like AWS, you build and deploy apps to it. Instead of $, you pay in ETH. It has tiny throughput but a unique kind of security. And many people find that valuable. cc: @TrustlessState

2) Packy writing in his piece “Own the Internet”:

What if I told you about a business with strong network effects and 200x YoY revenue growth that was preparing to offer a 25% dividend and implement a permanent share buyback program? Is that something you might be interested in?
That’s pretty much Ethereum. It’s one of the most fascinating and compelling assets in the world, but its story is obfuscated by complexity and the specter of crypto.

3) Justin Drake on Business Breakdowns with Patrick O’Shaughnessy:

Colossus @joincolossus

Today, @drakefjustin breaks down Ethereum. Learn about: - Building on Ethereum - Why ETH might be ultrasound money - How it's optimized to become an economic engine - Lessons for inve… 280 characters can't do it justice – go listen to Justin.

joincolossus.comEthereum: Into the EtherJustin is a researcher at the Ethereum Foundation. We cover what differentiates Ethereum from Bitcoin, the increasing number of projects being built on the Ethereum platform, and what a shift from proof of work to proof of stake means for Ethereum.

2. Portfolio Recaps

I love reading portfolio recaps from some of my friends. StockNovice’s monthly portfolio updates are the gold standard.

The wonderful thing about writing in public is it can serve yourself and your community. You can’t help but learn a lot from people that are open with their time, thoughts and insights.

This week, I learned from Sean and Brad as they each debuted their own versions of a quarterly update.

A. Jiggy Capital Newsletter

In his Jiggy Capital Newsletter, Sean presented his “Q3 2021: My Portfolio and What I Learned.”

He explains:

The goal of this newsletter was something very similar: to force me to become a better investor through being vulnerable and articulating my thoughts.

He shares insightful analysis into what he’s bought, sold and why.

Here is Sean’s portfolio: