Henderson Capital 7 Month Update

Doubling My Spotify position

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Maybe I’m good at timing after all. Since October 18th, 2019, Henderson Capital is up 28.33% vs. the S&P 500’s -1.89%. If you recall, last month I doubled down on my portfolio by adding $10,000 of outside capital. To the common person, this funding of outside capital may look like I’m just mooching off of my parents. However, I prefer to think of this bit of resourcefulness as a small liquidity pump from my first LP’s. At least that’s what I told them.

In all honestly, I’m incredibly grateful for my parents contributions/no-interest loan, as it allowed me the freedom to buy great businesses at good prices. Here’s my portfolio and performance as of today:

The only significant change this month was doubling my position in Spotify.

Spotify: After careful consideration, I came to the realization that Spotify was one of the businesses that I have the most conviction and confidence in moving forward. Last month Spotify made up 4.35% of my portfolio, while today it makes up 8.59%.

Spotify has become an audio streaming giant (286 million Monthly Active Users). With the prominent lead as an audio consumption platform, they continue addressing new initiatives on the content side as well. From original and exclusive podcasts, to a direct to listener platform for artists, Spotify is leveraging their extensive reach to build out the much desired, 2 sided platform.

Unfortunately, I wasn’t able to add at a more favorable price point and therefore had to increase my cost basis from $115.10 to $133.41. This is my first real attempt at adding to my winners, as Spotify’s strong operational performance has been reflected in its stock price. I suspect Spotify’s business will remain largely unaffected by COVID, and I intend to hold or even add to my position moving forward.

Cash: I’ve been investing for almost 2 years now, and when I started this I knew basically nothing. I still know nothing. I’m better off than I was 2 years ago, but the best investors are perpetual learners, and that’s an attitude I’m striving to adopt.

As I started investing, my money was primarily in ETF’s. However, as my conviction in certain businesses grew, so did my confidence. As of this month, I’ve been periodically liquidating the capital that I had invested in a Schwab Broad Market ETF. Due to this sale, I’ve been left with roughly 20% of my whole portfolio in straight cash.

As of right now, I’m being patient with my cash. This is not an attempt to time the overall market, but more of a chance to target individual companies at more attractive prices. There’s an obvious disconnect between the economy and the stock market right now, but what concerns me more is the rising disconnect between individual stocks and their underlying fundamentals. This is going to be a time of overwhelming uncertainty and struggle for many businesses (as they’ve said a million times in conference calls), and as that begins to present itself in coming earnings, I don’t see those businesses maintaining their current valuations.

If the opportunities present themselves, I look forward to deploying that cash.

Thanks to everyone for checking in, see you next month.