Modern Growth Investing Portfolio 11/01/2021
Portfolio of Micro, Small, and MidCap growth businesses I love and partner with - By partner I mean invest!
Disclaimer: The information provided is not financial, investment, tax or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement or offer to buy or sell any securities or any other financial instruments. For more information read the disclaimer.
Welcome to the Modern Growth Investing newsletter! If you’re new subscribe below so you don’t miss my weekly updates on growth businesses and investing!
Hey Everyone! Hope you are having an awesome Monday and had an awesome Halloween!
In today’s post, I plan on sharing my top 90% portfolio along with my thoughts on why these businesses are good for long-term ownership. The following image shows the businesses I own and their portfolio as a percentage of my entire portfolio.
How do I think of businesses in terms of their growth?
I classify the businesses I own into the following types:
Hyper-growth businesses which grow more than 40% each year
High-growth businesses which grow in the range of 20%-40% each year
Medium-growth businesses which grow in the range of 10%-20% each year
Low-growth businesses which grow in the range of 1%-10% each year
Among these, I have a preference to own hyper and high growth businesses. I do own some medium-growth businesses too. Low growth is not my preference. This is because I want to own a business, learn everything about it and ride the business through its upward trajectory for 3-5 years at a minimum if possible. While doing this, as I am early in life, I want to build significant capital appreciation from my investments over the next 20 years. Low-growth and to some degree medium growth, simply does not fit my goals(So my discussion on these will be very limited).
So let’s dive into the businesses I own, the percentage they occupy in my portfolio, and my perspective on owning that particular business.
Servicenow(NOW) - 5.5%
Servicenow came public nearly a decade ago and has dominated the IT industry by developing differentiated products and a massive platform with its own product ecosystem. They are the definition of the IT Cloud. They have been a true winner for a decade and are likely to keep winning for another decade. This business machine compounds more than 30% every year and I think they will be compounding at more than 25% for another decade. Servicenow is the safety cushion for my portfolio and a role model for the newer businesses I own to look up to, sort of a benchmark for growth, acquisitions, culture, quality, and execution.
TheTradeDesk(TTD) - 5.42%
TheTradeDesk came public 5 years ago and basically defined the programmatic advertising business. They are a first mover and an industry leader. They have shown promising signs of adaptability in the face of change and I feel their founder-led culture will help them to keep on winning for a long time. The programmatic advertising industry is growing at 20% every year and I believe TheTradeDesk will definitely exceed the industry performance and grab more market share for themselves. Their success, dominance in a big market, and a high growth industry have resulted in some upcoming competition trying to get a seat at their lunch table. I am not bothered by the competition for at least the next 3 years, but I will keep an eye out and keep myself updated about them.
Salesforce(CRM) - 4.33%
Salesforce needs no description.
Affirm(AFRM) - 3.95%
Affirm is founded by Max Levichin who previously has founded Paypal. He owns 20% of the company. Affirm was founded on the belief of stopping predatory practices in lending and their business model and products are a reflection of that. He is intelligent, honest, has high integrity, and loves working on hard problems. Affirm has been flying with the partnerships they established with top merchants like Amazon, Walmart, Shopify, Peloton, etc. Merchants see Affirm as alternative marketing spend that helps them build a good relationship with their customers and convert a lot more people into consumers. Consumers get credit from a very fair partner who actually cares for them and lends on very simple terms. Affirm is taking a stab at Visa and Mastercard indirectly now, and in 10 years I believe they will be a very large player in the payments ecosystem. I will keep adding to my AFRM position.
IronSource(IS) - 3.94%
Ironsource is a rapid consolidator in the mobile advertising ecosystem. They are providing full-stack solutions for game and app developers to help them monetize their apps and games. The market is huge and growing fast, similar to the programmatic advertising space. Again a founder lead, a differentiated team with very high retention, hyper-growth, and a long runway for growth provides me with a lot of confidence in their success. I think they will end up among the top two or at worst in the top 3 for their industry in terms of market share.
Applovin(APP) - 3.87%
People usually poke fun at their name, but I believe they are a sleeping monster that is soon going to pop. Extreme hyper-growth at tremendously cheap valuation is the name of the game for Applovin. I plan to add more to them ASAP. They provide full-stack app monetization solutions using their differentiated machine learning engine which they trained with their own first-party data from 20 gaming studios that they own and partner with. I know, a lot to peel in this name, this will be a deep dive of its own. I think they will take the number one position in their market in terms of market share. And, oh yeah, founder-led differentiated culture runs at Applovin. The founder Adam has $2.8B invested in his own business, let me repeat, $2.8B. Oh forgot to mention they are KKR’s baby.
Rover(ROVR) - 3.68%
Founder-led pet marketplace and services app. They have no competition. The business was down due to COVID, already picking up again. This one is mature in terms of the business but not in terms of the market they own. I feel they have a long runway for growth and no competition. If I had a dog I would definitely use them for finding sitters, overnight stays etc.
Hims(HIMS) - 3.33%
I wrote about them here
WM Technology Aka. WeedMaps(MAPS) - 3.28%
Cult cannabis ecosystem company which provides a marketplace for consumers and enterprise software for businesses. No competition here. Highly differentiated. The founding team has decades of experience in the sector and has deep connections in the industry.
Blend Labs Inc. (BLND) - 3.14%
I wrote about them here
So we covered my top 10 positions currently and I plan to write a deep dive on all of them.
I will write about the other positions, let’s say the next 10 positions in my future update about my portfolio.
From the above 10 positions, AFRM, IS, APP, ROVR, HIMS, MAPS, and BLND are hyper-growth businesses, most of them are breakeven and profitable too and CRM, TTD, and NOW are high-growth super profitable businesses.
Who says you have to burn excessive amounts of money to enjoy hypergrowth?
I am planning on publishing my portfolio again in a few weeks as I am increasing my concentration in a few businesses I have a lot of conviction in and I am trimming the ones I don’t want to devote my time to. Let me know if you have questions, would love to provide my perspective!
If you love this article and my work, I urge you to subscribe and share.
Thanks, take care.
Modern Growth Investing