The Rookie Challenge (Mar 18 - 31)
Jams first:
This note from James Clear hit home this week:
In the middle, it feels slow.
In hindsight, it feels fast.
–James Clear
I love a good truth bomb with my morning coffee.
Here are two more truth bombs that didn’t go down so well over breakfast. Both charts came from Charlie Bilello and his Charts Newsletter (highly recommend subscribing).
The average price of a new home sold in the US has hit a record $511,000, up 25% over the last year alone.
The surge in prices is coming at the same time that borrowing costs are skyrocketing, with the 30-Year mortgage rate moving up to 4.42%. This is its highest level since January 2019. In the last three months we’ve seen a 1.37% increase in 30-year rate, the largest 3-month spike since May 1994.
While the mortgage rate is the same as it was in January 2019, the average home price is now 42% higher. That means a 42% jump in the monthly payment, making the average house unaffordable for an increasing number of Americans.
I don’t think this is healthy for America. I don’t think this is good for our future generations. I don’t think it’s good for the working class, for young professionals, for immigrants, and/or for social + economic mobility.
Increasing mortgage rates should temper the housing market, but that will take time. And the American consumer is FEELING the pain.
(Source)
On average, the American consumer is ending up with less money, and sentiment is cratering.
The University of Michigan consumer sentiment for the US was revised slightly lower to 59.4 in March of 2022 from a preliminary of 59.7, the lowest reading since August of 2011.
What a weird paradox the average American is experiencing. On one hand, the average American wants to go enjoy life, but on the other hand, everything around them (i.e. Gas, Food, Housing, Rent, Cars) is increasing in price faster than they can can increase their salary / savings. The average American is drowning - no matter how fast we swim, the tide continues to drag us out to sea.
The rat race is a gruel game…choose your race wisely.
On top of that, employees are experiencing Burn Out like never before: This Is What Happens When There Are Too Many Meetings
See that little ‘work’ spike in the late evening:
For the new study, workers allowed Microsoft to track their “keyboard events”—a funny euphemism for sending emails or engaging with productivity applications on a work computer. While most people didn’t show a third mountain of work in the evening, 30 percent did. They were working almost as much at 10 p.m. as they were at 8 a.m.
Choose your race wisely.
Starting Lineup Performance and Valuation
How are we doing? Better than last month. The big winners have been $COST (god I love this company), $ZS, and $COIN. We’ll dive into news / updates on the individual companies a bit later.
But how is the overall market doing? The market has officially rebounded 9% off it’s lows in early March, and is pushing for all-time highs. Is this a true rally or a dead-cat bounce?
I’m not really sure and I don’t really care. There are always times to be bearish and bullish. There will always be signals for a pending recessions or economic growth.
All I focus on is holding a diverse set of wonderful companies at relatively attractive prices for a long time, and to continue verifying the wonderfulness of those companies.
The Starting Lineup:
Atlassian (TEAM)
Unity (U)
Zscaler (ZS)
Shopify (SHOP)
Costco (COST)
Coinbase (COIN)
Home Depot (HD)
Confluent (CFLT)
Datadog (DDOG)
Teladoc (TDOC)
Disney (DIS)
Atlassian (Team)
Loved their recent letters: “Our Q2 FY22 letter to shareholders” - “Doubling down on Atlassian Ventures”
They announced that CTO Sri Viswanath will be leaving at the end of FY22, and his replacement is TDB. His replacement will have big shoes to fill.
My Take: I am all aboard. $TEAM continues to double down on Cloud, is expanding their product moat, and continuing to sign larger customer - count me in.
Unity (U)
Not much news from Unity in Q1’22. I look forward to seeing their earnings report.
Zscaler (ZS)
Zscaler Positioned as a Leader in the 2022 Gartner® Magic Quadrant™ for Security Service Edge (SSE)
My Take: $ZS is a ZTNA juggernaut and the leader in the space. It’s fantastic to see them as a ‘leader’ on the Gartner Magic Quadrant. A few things to monitor is how SG&A + R&D spend continue to translate into revenue $$ and how $ZS expands their Enterprise customer base.
Shopify (SHOP)
2021 was a huge year for Shopify (source) and 2022 will be a test as the ‘law of large’ numbers may start to impact growth
“For the first time, Shopify brought in more than $1 billion in Merchant Solutions revenue in a single quarter (Q4). Only six months earlier, we hit $1 billion in a quarter for total revenue. Shopify’s total revenue for 2021 was $4.6 billion (an increase of 57% year-over-year), and our merchants sold $175.4 billion on our platform—up 47% from 2020.”
Shopify and JD.com unlock world’s largest ecommerce market for merchants (Source) - Great to see Shopify expanding it’s market exposure to China + internationally
My Take: $SHOP has had a rough Q1’22. It’s down -46.60% YTD and they are still at a premium valuation. Valuation does matter, and I may have overlooked this. Shopify is a wonderful business, but extremely ‘rich’
Costco (COST)
No major news
My Take: Costco is a stalwart and may be the best business in America. It’s valuation needs to be watched as it’s exceedingly expensive.
Coinbase (COIN)
Great to see that $COIN continues to expand Product offerings - here’s one example: Coinbase Expands Staking Offerings to Include Cardano
My Take: I want more revenue diversification from $COIN and for them to stop being SO reliant on transaction fees. We will see how their ‘side-bets’ are going in the upcoming earnings report.
Home Depot (HD)
Not a huge amount of news from Home Depot in Q1’22. It will be interesting to see how the housing crisis and the re-opening impacts Home Depot’s revenue.
Are people spending more on leisure / vacation now that things have opened up and stopped spending on home improvement projects?
Datadog (DDOG)
Datadog Partners with Microsoft for the Azure Cloud Adoption Framework - this is big. It’s always great to see companies like Datadog being ‘invited’ to the adult table.
Teladoc (TDOC)
Big win for $TDOC with - Teladoc Health and Amazon Team Up to Launch Teladoc on Alexa.
My Take: I am not sure the partnership with Amazon generates a significant amount of revenue for $TDOC, but it does show that $TDOC has a best-of-breed platform. Amazon could've done / built this themselves, but they decided to partner with $TDOC which shows some sort of technological moat from $TDOC.
Disney (DIS) / Confluent (CFLT)
Nothing major to report here.
Disclosures: Not investing and/or financial advice.