a. Updated Performance vs. the S&P 500
Year-to-date performance has worsened over the last few months. I now trail the S&P by 3% for 2025. I offer these year-to-date return charts based on subscriber requests and because I love transparency. But candidly, I am more interested in zooming out and focused on several year performance. There will be ebbs and flows along the way.
b. Portfolio Changes
Two sizable changes today. First, I've fully exited CrowdStrike. This was a tough decision for me. I've owned shares since the IPO. It has been one of my biggest winners ever. And I greatly appreciate their team's world-class execution. Thanks for making me look smart. But? Unconditional love is not for public equities. I have to remain cold, emotionless, formulaic and robotic when making these decisions. It's never personal.
You've all seen me reducing exposure in the name.
And while I think oh so highly of the company, the valuation has simply become too rich for my blood. I've been trying to stomach it and continue holding a small piece, but that doesn't feel prudent. A 2x growth multiple is considered expensive. This is at 4x when using 2026 and 2027 net income growth estimates.
It's as simple as that. There are few companies I'd like to own at a reasonable multiple more than this one. CRWD is moving from portfolio to watch list and I'd love to own it again in the future. I plan on continuing to cover every earnings review and product launch in full detail so I'm prepared if that moment comes.
The CRWD sales create room for more enterprise software exposure, and I've decided to take advantage of that with a new ServiceNow position. As I've said a few times in the Discord, the forward multiple is finally at a point where I want to dip my toe. I just needed more flexibility with the cash pile and sector exposure to do so.
Aside from Palantir and a few others, NOW is having more success with AI app monetization than anyone in enterprise software. They are deeply insulating themselves from disruptive threats that OpenAI and others represent. They continue to rapidly innovate and briskly build traction for every product they launch. They're a highly sticky workflow platform play in a world where agents are going to exponentially bolster the number of workflows in circulation. NOW has positioned itself to be a big part of that future growth. Their charismatic CEO is highly capable and their margin accretive financial engine is wonderfully smooth. The multiple finally feels reasonable enough for me to dip my toe. It's still at a growth multiple near 2x (35x forward FCF), but for a name like this, that's where I'm comfortable buying the first piece.
Simply put, I've wanted to own NOW for a while and now I do. If you'd like to learn more about the company and investment, the last three earnings reviews offered detailed looks into their products, niche and financials. They can be found below:
c. Updated Holdings
These changes bring the cash pile down to 5.5%. That is a bit uncomfortable for me right now, as I don't expect a deposit in the near-term, but this is a move I wanted to make. So I did.
