Hey there Reader,
I know I missed a couple weeks again. No excuses, just going through a lot of change right now and trying to keep everything afloat as best I can. But I hope you can forgive me, because I think this is one of my favorite issues (you tell me).
Welcome to the October Money Issue. And rather than September's Money Issue which focused a lot on news, this one is going to focus on a more personal angle. I think this is a better fit for my newsletter, as I don't necessarily like doing more news-oriented content, and plenty of others do that better than I do anyways.
As always, if you enjoy (or don't enjoy) this issue, let me know with a reply email. I love reading your feedback!
My best and worst assets (from April 2022 to now)
Shortly after I liquidated my crypto investments, I eventually turned around and put some of that money into traditional equity investments. Today, I'm going to share with you my best and worst performing equities and dive into why I invested in them in the first place, why they've performed as they have, and, of course, how much money I've made/lost on them.
The worst: OKTA
Okta has had a rough year. From a high of almost $300 at the beginning of 2021, and a $220-250 price at the beginning of this year, Okta is now trading at just ~$49! That's a ~80% fall from all-time-highs. And what's really amazing is that during all of this price falling, Okta actually continually reported increasing revenues every quarter, often 60% higher YoY!!
But let's back up a second to why I invested in Okta in the first place. The reason is pretty simple: their product is amazing. Both companies I've worked for have employed Okta for managing employee credentials and single-sign-on which is becoming basically a corporate standard to have these days. And Okta simply has the best single-sign-on experience out there.
Further, Okta's been expanding into customer authentication as well, powering companies' entire application login/signup flows. Choice Hotels, my last employer, even migrated their entire ecommerce authentication to Okta (I was part of the project actually). There are numerous benefits for companies to outsource authentication to a specialized provider like Okta, and when Okta purchased Auth0, their biggest competitor in this outsourced-authentication market, they cemented their strategy moving forward.
Here's where I messed up: since Okta has a history of staggering YoY growth, it's been trading at absolutely *ludicrous* multiples of its revenue! Some quick math: in the beginning of 2021 when Okta hit it's all-time-high of $300, it's market cap would have been about $47-48B. At that same time, their forward-looking annual revenue would have been about $700M. That's a price-to-sales (P/S) ratio of nearly 70!!!!!
That is just pure insanity. For comparison, Okta's current P/S is 5.6.
So, I didn't invest at $300, hell no. Here's the math on my investment: I bought shares at $158, $149, $140, $88, and $77, for an average cost basis of $119. When I closed my position this week, I ended up losing about 56% on this investment. Ouch.
When I first bought some shares, I was buying at a P/S of about 20, and then I bought more on the way down at lower P/S ratios. In hindsight, I wish I would have taken a more conservative estimate of the company. I wanted to invest in it so badly, because I loved the product, that I failed to consider that the company was simply very highly valued given its current revenue and the fact that it's not even profitable yet.
In this case, I let my emotions drive me to purchase shares when I should have just waited for it to be better priced. Lesson learned.
For what it's worth, I do think Okta is a decent buy right now. Maybe still slightly over-valued, but I definitely don't think we'll see another 50%+ drop from here. That said, like I mentioned, I exited my position and took the losses, which will offset my crypto gains and save me close to $1,000 on taxes, and I'll redeploy that cash elsewhere for now. I'll probably invest in Okta again next year, but I want to see how the stock trades after the holiday season.
The best: SQSP
If you listen to any podcasts or have watched much YouTube in the last few years, you definitely know about Squarespace and their "beautifully designed templates" and "award-winning customer support." Well, so far, they've also been my best-performing investment.
Squarespace is a website builder platform that aims to help businesses (particularly small and medium sized businesses) build their website more easily. They have a great product, and I believe they are a good long-term bet.
My net cost basis (over multiple buys) is about $20, while the shares are trading at about $21 right now, for a whopping 4% profit haha. Okay, so not very impressive, but the markets have been real red, so just having one position in the black is nice.
Here's why I invested in Squarespace: as I mentioned, they have a great product with additional growth runway, and their financials are pretty solid for a growth stock. While revenue growth has slowed this year versus last, they are starting to post some profits lately. This is a good sign of a company that's looking to become sustainable. Further, their P/S ratio is pretty healthy at just 3.7, and their cost of revenue is very small, so the bulk of their expenses are discretionary (sales and engineering primarily I would imagine) and further revenue growth is unlikely to get cut into with greater expenses.
And finally, at a $3B market cap, they're still pretty small for the market they're in.
Overall, I think SQSP is a good investment, and you should consider it.
A few quick crypto headlines
Crypto.com has continued to lay off employees following the crypto market crash. Probably won't be seeing any more Matt Damon commercials or stadium advertising rights purchases from them any time soon: https://ihodl.com/topnews/2022-10-10/cryptocom-lays-more-2000-employees/.
This is actually from last month, but Latin Americans are embracing USD stablecoins in light of their national currencies experiencing massive inflation. As I've written before, stablecoins are the most important asset in crypto right now and will drive the next wave of adoption: https://www.coindesk.com/policy/2022/09/13/latin-americans-turning-to-dollar-stablecoins-amid-inflation-surge-paxos/.
Coinbase has launched a developer-friendly service for accessing read/write on the blockchain. This kind of tooling makes it much easier for developers to create applications that use the blockchain: https://www.coinbase.com/blog/coinbase-cloud-launches-platform-for-web3-developers.
Feels like the weeks are flying by lately. I've gotten bored of playing Assassin's Creed, and so I've been figuring out how to start moving toward where I want to be in my career.
I wrote last week about how I was pursuing a consulting career working with personal services businesses. Well, that's what I've been working on: developing my offerings, better defining my audience, and trying out some platforms to build a client portal for these kinds of businesses.
But truthfully, I've kinda been procrastinating the one thing that I really need to do to make this career path work: talk to potential customers. So today I did a quick survey around my area for potential clients and made a list of places to visit next week and see if I can strike up some business.
So by the next time you read an issue of A Hero's Journey, I should have my first client (or maybe two).
That's all for this week's issue. Thanks for reading, and you'll see me in your inbox again next week!
If I can ask you to do just one thing, consider sharing this newsletter with a friend or family member. Here's the link so you can pass it along: https://aherosjourney.co/.