2 year follow-up on buying the dip on pandemic stocks

For context, I bought several ‘pandemic stocks’ following the dip in 2022. Previous updates:

TL;DR I planned on holding those stocks for a few years, but ended up parlaying into AI when I developed strong conviction. I’m also working full-time on an AI startup now. The returns have given me the runway to work on my startup full-time for the foreseeable future.

In previous posts (linked above), I shared more about the ‘why’ behind the investment decisions and reallocation. Overall, I’m very happy with the investment returns so far.

Tracking progress

Below are the gains for this portfolio (opened in 2022) as of May 31, 2024.

Realized (sold)

2023 Totals

Affirm (AFRM): +18.09%
Allbirds (BIRD): +6.89%
Coinbase (COIN): +6.42%
Carvana (CVNA): +845.57%
Meta (META): +256.36%
Cloudflare (NET): +50.67%
Netflix (NFLX): +122.39%
Peloton (PTON): -71.51%
Roblox (RBLX): +25.57%
Shopify (SHOP): +51.27%
Snapchat (SNAP): -1.99%
Unity (U): +27.57%

All realized gains/losses were long-term (capital gains rate) except Carvana (CVNA) and Allbirds (BIRD).

Peloton was a big loser and the only one I almost immediately regretted, but it was a relatively small investment that was more than offset by others.

2024 YTD

Roblox (RBLX): +42.66%
Snowflake (SNOW): +51.57%
Unity (U): -8.73%

Unrealized (current investments)

Amazon (AMZN): +75.50%
Alphabet/Google (GOOGL): +81.73%
Meta (META): +367.97%
Netflix (NFLX): +229.81%
Nvidia (NVDA): +117.05%
Shopify (SHOP): +46.37%
Taiwan Semiconductor (TSM): +60.76%

Purchased in the last week/month

I had extra cash, so I purchased small amounts of these in the last week or so:

Advanced Micro Devices (AMD): -2.98%
ARM (ARM): -1.88%
Intel (INTC): -1.42%
Microsoft (MSFT): +2.32%
Tesla (TSLA): -0.54%

I know these are all less impactful without the values or relative weights, but I’d like to maintain some anonymity around it.

Rate of return

The total rate of return since inception (June 2022 to May 2024) is 77.90%.

Reasoning

To paraphrase previous updates, I largely reallocated from things I guessed wouldn’t benefit from AI as much to things that did.

I especially doubled down on companies I had deep conviction in, like Nvidia, despite the majority saying Nvidia was significantly overpriced. Here’s the excerpt from the last update on why:

“…AI is another secular trend like PCs (Windows, Mac), the internet (browsers, search, social) and mobile (iOS, Android, wearables). The difference is that new technology like AI can now spread faster than ever before and get used in new ways. Every new epoch uniquely benefits from the past, potentially bending the growth curve in new ways.
The other difference is that NVIDIA has a monopoly position on the core technology driving this innovation. Therefore, the ~350% run up over the last 12 months doesn’t make NVIDIA the stock of the last year, but rather it’s the stock of the next decade. The recent 3X gain will be a blip compared to what’s coming thanks to NVIDIA’s CUDA (moat), among other things.”
1.5 year follow-up on buying the dip on pandemic stocks – Nov. 2023

3 ways my investing evolved

I’m still well within the ‘maybe I’m just lucky’ phase since it’s only been a couple years, but I’ve noticed I invest differently now than I have in the past:

Insight
Conviction
Patience

Insight

I’ve learned to largely ignore headlines and talking heads, which seem more reactionary than insightful and optimizing for entertainment (clicks/views).

Ben Graham’s quote rings true:

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
Benjamin Graham

Perhaps counterintuitively, I’ve found it more useful to read/listen to tech/business analysts who focus on strategy and how that interacts with macro trends (along with financials) than solely financial analysts and stock pickers.

Financials are a good indicator of fundamentals, but are backward-looking. However, valuation is forward-looking, thus driven by strategy x trends x structural advantages, so we must consider both.

Math

In 2023 I also started practicing math daily (243 days straight as of this morning) in order to better understand the mathematics behind AI. As part of that, I had to take remedial coursework to build my foundations since it had been so long since I’d done any meaningful math.

I’m not sure how much, but it feels like it helped with the reallocation decisions I made in late 2023 and early 2024. I felt more confident and deliberate in making trades. The math journey has been quite challenging, but personally rewarding, whether it has helped or not.

Conviction

A big part of this is just a better understanding of myself and what kind of investor I am. I invest in what I believe in long-term.

However, someone trading on volatility with a much shorter timeline may not care about conviction. You must understand what investment philosophy aligns with your psychology and your strengths.

Conviction investing works for me because, even when building products (my day job), I’ve always been strong with product vision/strategy and always building for the future, so it makes sense that I invest the same way. I’m not sure why it took me so long to connect those dots, but I’m happy I did.

A big part of this is also timing. AI seems to be a once-in-a-generation opportunity. Whereas 5 years ago I might have tried to force myself to believe crypto was the next big thing in the absence of anything substantial.

This is another reminder that success (in investing or otherwise) is all about timing and opportunity. When opportunities arise, you must seize them.

Patience

As a result of my convictions, I’m much more patient in my investing these days and don’t react to the day-to-day.

I wouldn’t be surprised if I don’t make another trade for the rest of 2024.

What’s next

So, what’s next? Well, not much. My convictions remain the same, so I’ll continue to bet on AI and expect to for years (at least until my convictions change 😉).