Business
My experience with Zoom since it became a publicly traded company (since it IPO’d) in April is a great learning opportunity. I have probably displayed every bad investor tendency with this company so far. I just bought 80 shares of Zoom at $101/share for a total cost basis of $8,008. A 1.25% position in my portfolio.Now let’s rewind a take a look at how ridiculous my decision making has been with this company so far.Zoom IPO Day: April 18 Bought 160 shares at $62.50 = $10,000: those shares are now worth $16,000 so that’s our comparisonHere is what I said at the time:I added ZM despite it’s incredible 70%+ rise and its extremely high price to sales ratio that apparently even CEO Eric Yuan thinks is a bit excessive (NY Times article). He and many who are saying the company is overvalued right now are probably correct. I’m a big fan of this company and I plan to be an investor long term. I started a 2.5% position in the company so it is relatively small. I invested because I think this company will be much larger in 5-10 years than it is now and I wanted to have at least a small position.April 22: Sold 160 shares at $59.04 = $9,446. So I was at -$554 with Zoom. A 5% loss.Here is what I said at the time:I think an important part of investing (and life) is to be able to admit when we're wrong. Or at least when we made a bad decision.I love Zoom's business but I like many others think it's too expensive and the risk/reward is not worth it at this point.I am confident I'll own shares at some point, but will wait for some volatility either in the market or in ZM individually to buy.There are a lot of other great businesses with a bit slower growth but much lower Price to Sales ratios.Keeping the proceeds in cash for now to see if we get that volatility soon.So then I decided to get “smart” and sell two $75 Strike August 16,2019 Puts. This meant that if Zoom went lower than $75 before August 16, I would be obligated to buy 200 shares at $75 because each contract represents 100 shares. I was paid a premium of $10.5 for each contract so $2,100 total.May 10: SOLD 2 ZM Aug16'19 75 PUT @ 10.5But then I got scared for whatever reason and wanted a lower strike price. To get that, I had to buy back the Puts I sold with a $75 strike and sell new Puts at $70. May 13: BOUGHT 2 ZM Aug16'19 75 PUT @ 12 So I had sold the $75 Puts for a total of $2,100 and bought them back for a total of $2,400. My total loss on Zoom at this point (adding my loss from the shares back in) at this point was $854.May 14: SOLD 2 ZM Aug16'19 70 PUT @ 8.49 On June 6, I got really foolish and decided to try some short-term earnings based options gambles. I figured the stock would move a lot in one direction or the other so I wanted to try and profit from that volatility. Before doing that, I wanted to purchase the $70 Puts I had sold to get rid of that obligation to buy shares if they dropped significantly. June 6: BOUGHT 2 ZM Aug16'19 70 PUT @ 6.4 I sold those puts on May 14 for $1,698 and bought them back (closed them) on June 6 for $1,280. This brings my total loss on Zoom down from $854 to $436.Now for the earnings gamble. I bought Puts and Calls so you’ll see the Buys/Sells reversed from when I sold Puts previously. It’s confusing which is a great reason not to get involved with options strategies like these (if you have not already picked that up!).BOUGHT 10 ZM-COMB @ 5.1 = $5,100June 7: Earnings came out, stock popped something like 30% and I got lucky.SOLD 10 ZM-COMB @ 10.58 = $10,580Here is what I said on that day:So again, reiterated that I believe the company could 5x or 10x in 10yrs. Why in the world would I not just own shares of a company if that’s what I think? That brought me to:Total loss/gain on Zoom = +$5,044 Remember, if I would have just held the $10,000 position I initially started, I would own $160 shares with a $6,000 unrealized gain. That means no taxes (which are going to take a big chunk out of that $5,044 gain I currently have and a heck of a lot less stress.So again.. reminder to myself. Get back to investing with a long-term ownership mindset in the absolute best founder-led companies I can find.This lesson is painful and a bit embarrassing to share. Like I said before, just about every common investing mistake is there. Greed, fear, action-bias, herd mentality, all of it. I don’t know what is going to happen to Zoom’s share price (or the market) today, next week, or next year. But I do know this is one of the best businesses from a fundamental, cultural, and leadership stand point I have ever seen. I believe Zoom is going to innovate and come up with new products we never imagined. The best companies always do. I also think Zoom is far more than just a video teleconferencing company. So I am going to be a long-term owner of this business.Some recent material I’ve read/listened to on Zoom that helped me be informed:Acquired Podcast: The Zoom IPO - With Santi SubotovskyMedium Article: Zoom IPO | S-1 BreakdownAnd finally - Zoom Founder/CEO Eric S. Yuan delivering customer happiness: Get full access to Founder Stock Investing at austin.substack.com/subscribe