I’ve made a decision on how to handle my CrowdStrike position heading into earnings. This took a lot of thoughtful back and forth.  This is what I feel balances desired exposure with desired risk management given my approach. To paid subscribers, here’s what I did:

Note, if you’re a paid sub and having trouble reading this, make sure you’re using the email you used to pay. If you still can’t access it, please reach out and I will personally, promptly email you the content while this issue is figured out. If you’re a plus tier subscriber, you will not be able to read these types of portfolio management issues going forward. They will be for Max subscribers only. Beehiiv is working through a bit of a bug pertaining to sectioning content for individual tiers. Consider this a bonus post.

As telegraphed in previous issues, I’ve decided to hedge my CrowdStrike holding heading into this week’s report. The hedge is worth about 6% of my total position here, and my net exposure remains firmly long. I did this through puts expiring this Friday with a $280 strike.

Why did I make this decision? It has nothing to do with the company. The profitable growth engine at scale is second to none. The tech is elite, the team is elite and the go-to-market is equally elite. This all comes down to valuation and risk/reward.  I still view CrowdStrike as being much larger in the future, but perhaps ahead of itself today.  And? I have eyes. I have seen countless growth stock blowups this season, and CrowdStrike must be perfect and then some, to avoid that potential outcome. It’s usually perfect, but this backdrop has quickly become more difficult to deliver perfection in. This is also my second longest-tenured holding behind Meta. I’d like to protect the gains I’ve been accumulating since the IPO during this viciously ugly earnings season. It’s not because the stock is higher, but because the EBIT multiple has expanded by several turns over a short period of time.

The firm is very fully valued, but still has a lengthy runway and a demonstrated ability to capture that runway better than the rest. I don’t want to sell and bet that I can buy it back for less than the taxes that would be due. In light of the unpredictable and sometimes punishing price action in great tech names, I elected to hedge against a decline.  You may wonder why I don’t simply sell calls instead. Well candidly, my portfolio is not large enough to rationally tie up $30,000+ on a single contract. That will be what I decide to do in the future, when I can. It’s not doable today.

I hope these puts expire worthless.