The Rookie Lineup
It’s been awhile. So let’s freshen up a bit. The Rookie Lineup is an experiment against myself. The experiment goes like this: If I was given $10,000 fictitious dollars, and given the opportunity to choose 10 companies to invest into, what would my ‘Coffee Can’ portfolio look like AND how would it perform over a longer time horizon?
I ended up with the 10 companies above and allocating $1,000 fake dollars to each investment. Each company was ran through my Rookie Checklist (Part 1 and Part 2), and given a score.
Disclaimer: This is NOT investment and/or financial advice and shouldn’t be used as such. This is for entertainment purposes only.
Now that we’re all caught up, let’s see how we’ve done.
In short, poorly.
The Rookie Checklist started in Feb 2022, and since inception, total returns have been -41.45%. BAD. Comparatively, the QQQ is down -12% and the SPY is down -8%. BIG OUCH.
Where did I go wrong…
Being too heavily weighted towards high-growth tech. 7 out of 10 companies are tilted towards High-Growth Tech. This was not smart.
Not having enough uncorrelated investments in terms of trading behavior. I needed to select more diversified and asymmetrical behaving investments
I was too optimistic in my growth assumptions for revenue and cash flow growth. This led to not having a large enough ‘margin of safety’ on my intrinsic value calculations
Valuations matter! At 0% Federal Funds Rate valuations don’t, but at 5%, they very much do. So what does this mean? It means every growth assumption is more conservative and applying a larger discount on future cash flows.
I did not assess MOATs effectively and correctly. Some of these companies are too fragile.
I did not anticipate the incredible pace of Interest Rate Hikes - see image below. (Source).
Where did I go right…
I still LIKE and believe in these companies. They are operating and executing.
What’s Next…
Earnings Season. Here is what we have on the calendar:
TEAM 0.00%↑ - May 4th
U 0.00%↑ - May 10th
ZS 0.00%↑ - May 24th
SHOP 0.00%↑ - May 4th
COST 0.00%↑ - May 25th
HD 0.00%↑ - May 16th
CFLT 0.00%↑ - May 3rd
DDOG 0.00%↑ - May 4th
DIS 0.00%↑ - May 10th
I plan to cover these earning releases as they come out. Stay tuned and carry on.