What are you buying today?

[Spekulatius]

On 5/26/2021 at 1:48 PM, rkbabang said:

 

ABNB at $81B still looks rich to me.  I want to buy it at under $60B which would be somewhere under $100/sh, I'm hoping I get the chance.

ETH is a good buy here I think, but even after selling almost half of mine and the price drop it is still my 2nd biggest holding (BTC is still my largest) so I'm not buying more right now.  Just wait and see for crypto for a while, unless it really crashes, at some point I won't be able to help myself.

I agree that ABNB ‘s valuation looks rich here north of 20x revenues. I can make the math work at the IPO price and maybe a bit more,  but the math looks challenging around $120 or more.

[bizaro86]

3 hours ago, Spekulatius said:

I agree that ABNB ‘s valuation looks rich here north of 20x revenues. I can make the math work at the IPO price and maybe a bit more,  but the math looks challenging around $120 or more.

It is. I've added some here (offset with a few very far out of the money covered calls) anyway. Every time I've bought a truly great business at an "almost" reasonable price I've been happy I did so. 

Their multiple is very high, but this is a business with huge growth and huge pricing power. I rent on airbnb and the market there is so much better than their competitors I'd pay 3x what they currently charge me for fees and still feel I was getting good value.

I am still disappointed about the IPO allocation. They gave hosts with enough transactions (I would have qualified) access to a $50k allotment at the IPO price. I tried to subscribe but it was US residents only.

 

[Spekulatius]

ABNB certainly has the potential to be a great business, but it hasn’t proven itself yet to generate earnings. I am always amazed by the stuff these IPO‘s are spending on for what seems like pretty mature products/ platforms.

I have never used ABNB. This is mostly because the cost is too high - we typically spent just a few days in each location and then when we add it up, the various fees makes using ABNB fairly uneconomic compared to Hotels. We have used VRBO several years ago to rent a skiing lodge NAND two years ago, we rented an apartment in downtown Montreal via Hotel.com that was hosted like ABNB. What I liked about Hotel.com is that the fees were included so you could directly compare it to Hotels vs ABNB tagging all sorts of fees on it after you made your choice ( I suspect they do This buy design and it is not customer friendly at all). ( ABNB rant over).

 

Anyways, i keep my valuation discipline. I watch these new IPO and from time to time, I see some where subsequent drops bring the valuation into a range where it makes sense and then I buy a few shares. I haven’t really seen fat pitches from my perspective, but I have seen some where you don’t need 20 years of 20%+ growth and heroic margin assumption to see value.

Edited May 29, 2021 by Spekulatius

[Caleb Leal]

I'm looking into $STCN as a potential special situation investment. Besides that, I am buying $STMP and $SODI.

[gokou3]

British American Tobacco BTI for sub-$39, ~8% yield.

[cubsfan]

On 5/26/2021 at 9:56 AM, cubsfan said:

SPLK, Splunk - $121.25

Added on SPLK - $114.00

[Spekulatius]

3 hours ago, cubsfan said:

Added on SPLK - $114.00

I am tracking this one too, as they are getting some traction on the cloud conversion, but how can you justify the out of control SBC? They had about $180M in SBC on ~$500M in revenues so that's ~36%.

Those are not old grants either - their quarterly dilution was only ~1.1M shares, so I am guessing they must be handing out new grants a lower strike prices like confetti.

No position.

[thepupil]

A smidge of Prosus and Softbank. 

[SleepyCapital]

I am making an initial and long-term foray into Amazon.

Better late than never, I guess!

[hasilp89]

GOED warrants and some eDreams.

[Gregmal]

$20 CLF calls a few months out.

[cubsfan]

On 6/3/2021 at 11:59 AM, Spekulatius said:

I am tracking this one too, as they are getting some traction on the cloud conversion, but how can you justify the out of control SBC? They had about $180M in SBC on ~$500M in revenues so that's ~36%.

Those are not old grants either - their quarterly dilution was only ~1.1M shares, so I am guessing they must be handing out new grants a lower strike prices like confetti.

No position.

No, it's a great point. The share-based-comp of these hyper-growth software/cloud companies is out of control. Can't justify it, other than it's industry wide and worse for the real high flyers. I'm trying to assemble a few of the really strong cloud services guys into my portfolio. Back in 2012, I held my nose and bought 2000 shares of Service-Now, a company I knew well. Paid $21 at IPO - egregious price. Sold it at around $50 - nosebleed valuation. Now it's $500. 

Anyway, I picked up PaloAlto a few months ago on a dip. Been waiting for the opportunity to grab Splunk. This licensing/rev rec change is the opportunity for me to do it. Both PANW and SPLK have established their dominance (like NOW) in cloud based security/event management. They have the opportunity to be like CRM and NOW - just dominate in cloud tools and deployment.  This whole area is in in infancy. 

So, yeah, they are pigs, just like the guys at CRM were 15 years ago. 

It sucks paying up for these hyper growth companies - but I do not expect SPLK's competitive position to deteriorate any time soon. Keep an eye on them. PANW too.

[cubsfan]

On 5/19/2021 at 2:50 PM, cubsfan said:

Buying TEN @ $13.75 - looks like the right time in the auto cycle for this one. Had a blowout Q1. With pent-up demand & low interest rates - the biggest issue seems to be the leverage. 

Sold TEN - $20.50

[Castanza]

3 hours ago, cubsfan said:

No, it's a great point. The share-based-comp of these hyper-growth software/cloud companies is out of control. Can't justify it, other than it's industry wide and worse for the real high flyers. I'm trying to assemble a few of the really strong cloud services guys into my portfolio. Back in 2012, I held my nose and bought 2000 shares of Service-Now, a company I knew well. Paid $21 at IPO - egregious price. Sold it at around $50 - nosebleed valuation. Now it's $500. 

Anyway, I picked up PaloAlto a few months ago on a dip. Been waiting for the opportunity to grab Splunk. This licensing/rev rec change is the opportunity for me to do it. Both PANW and SPLK have established their dominance (like NOW) in cloud based security/event management. They have the opportunity to be like CRM and NOW - just dominate in cloud tools and deployment.  This whole area is in in infancy. 

So, yeah, they are pigs, just like the guys at CRM were 15 years ago. 

It sucks paying up for these hyper growth companies - but I do not expect SPLK's competitive position to deteriorate any time soon. Keep an eye on them. PANW too.

Cubs you used to work in software sales right? 
 

Small position in $FNMAS why not...perhaps the reckoning day has arrived?

Edited June 4, 2021 by Castanza

[fareastwarriors]

Picked up some more $PSTH.

[Spekulatius]

4 hours ago, cubsfan said:

No, it's a great point. The share-based-comp of these hyper-growth software/cloud companies is out of control. Can't justify it, other than it's industry wide and worse for the real high flyers. I'm trying to assemble a few of the really strong cloud services guys into my portfolio. Back in 2012, I held my nose and bought 2000 shares of Service-Now, a company I knew well. Paid $21 at IPO - egregious price. Sold it at around $50 - nosebleed valuation. Now it's $500. 

Anyway, I picked up PaloAlto a few months ago on a dip. Been waiting for the opportunity to grab Splunk. This licensing/rev rec change is the opportunity for me to do it. Both PANW and SPLK have established their dominance (like NOW) in cloud based security/event management. They have the opportunity to be like CRM and NOW - just dominate in cloud tools and deployment.  This whole area is in in infancy. 

So, yeah, they are pigs, just like the guys at CRM were 15 years ago. 

It sucks paying up for these hyper growth companies - but I do not expect SPLK's competitive position to deteriorate any time soon. Keep an eye on them. PANW too.

Thanks for the color. SPLK for me is particularly egregious because they have high dilution (5-6% annually) while not growing all that much. Other serial diluters are PLTR, WDAY, ESTC and I am sure there are many more.

At least those have been growing at a recent clip, while SPLK has not.

NOW is actually reasonably attractive here and I think I might enter a smallish position on a correction. They are superbly  managed should be able  to keep growing for quite some time.

Edited June 4, 2021 by Spekulatius

[cubsfan]

1 hour ago, Castanza said:

Cubs you used to work in software sales right? 
 

Small position in $FNMAS why not...perhaps the reckoning day has arrived?

Yes - 30 years in enterprise software sales in the F1000 market. All selling to corp IT departments. Seen a few paradigm changes. This last generation of SAAS & Cloud software is the real deal. Enormous savings in deployment costs for IT departments and business lines. Controlling this shit is another story. It's hair raising for IT departments, but they have no choice. Like most of these paradigm shifts, security and management control tools are the last to mature. The cloud opens up tremendous security concerns.

Where's my data? How do I know it's really secure? Who else can see this shit?  The IT departments lose control - at the same time they are responsible for the data leaks, breaches, etc. It's a nightmare.

So PANW, SPLK, NOW, CRWD are winning the IT business and are going to dominate as they crush the legacy vendors who can't cloud enable the old stuff.

[cubsfan]

31 minutes ago, Spekulatius said:

Thanks for the color. SPLK for me is particularly egregious because they have high dilution (5-6% annually) while not growing all that much. Other serial diluters are PLTR, WDAY, ESTC and I am sure there are many more.

At least those have been growing at a recent clip, while SPLK has not.

NOW is actually reasonably attractive here and I think I might enter a smallish position on a correction. They are superbly  managed should be able  to keep growing for quite some time.

Yes, but SPLK is dominating the event management area. The SPLK stuff grows like crazy. It's tough to deploy and requires lots of prof services (Like the SAP days). But you can customize it to your IT environment and that puts them squarely in the F1000 wheelhouse. So like an Oracle deployment or SAP deployment, once you get that animal customized to your environment - it's NOT coming out - ever. In the meantime, when the reporting and data proves it's value - revenues grow like crazy - hence their extremely high renewal rate and $$ based renewals in excess of 100%. 

Service Now is a fabulous company. I'll take a 2nd look. Thanks. They need to buy SPLK.

[Castanza]

1 hour ago, cubsfan said:

Yes - 30 years in enterprise software sales in the F1000 market. All selling to corp IT departments. Seen a few paradigm changes. This last generation of SAAS & Cloud software is the real deal. Enormous savings in deployment costs for IT departments and business lines. Controlling this shit is another story. It's hair raising for IT departments, but they have no choice. Like most of these paradigm shifts, security and management control tools are the last to mature. The cloud opens up tremendous security concerns.

Where's my data? How do I know it's really secure? Who else can see this shit?  The IT departments lose control - at the same time they are responsible for the data leaks, breaches, etc. It's a nightmare.

So PANW, SPLK, NOW, CRWD are winning the IT business and are going to dominate as they crush the legacy vendors who can't cloud enable the old stuff.

All of what you say sounds very familiar. My company uses NOW and also Splunk (which I’ve helped to deploy). Definitely can be a major pita. It’s a good product though, and certainly offers a lot of visibility and customization. My one grip, and I’m sure other companies are the same way, but it’s a lot to maintain. Our company decided to hire some dedicated Splunk resources since it became unmanageable for the typical IT teams. Definitely a sticky business though. Gives upper management more to bitch and moan about 

I wish I would have bought NOW a few years ago. I saw how engrained the software was to companies once implemented. 

[Spekulatius]

On 6/4/2021 at 8:41 PM, Castanza said:

All of what you say sounds very familiar. My company uses NOW and also Splunk (which I’ve helped to deploy). Definitely can be a major pita. It’s a good product though, and certainly offers a lot of visibility and customization. My one grip, and I’m sure other companies are the same way, but it’s a lot to maintain. Our company decided to hire some dedicated Splunk resources since it became unmanageable for the typical IT teams. Definitely a sticky business though. Gives upper management more to bitch and moan about 

I wish I would have bought NOW a few years ago. I saw how engrained the software was to companies once implemented. 

@cubsfan and @Castanza This is actually very valuable information. I never thought of SPLK software category having an extremely wide moat. That changes the thesis for the better, despite the somewhat ugly looking financials.

[Broeb22]

Bought some ARLO and VZIO. 

[Castanza]

14 hours ago, Spekulatius said:

@cubsfan and @Castanza This is actually very valuable information. I never thought of SPLK software category having an extremely wide moat. That changes the thesis for the better, despite the somewhat ugly looking financials.

I would say the moat of NOW is greater than Splunk. The difference is, one is a foundation for ticketing, event monitoring, external documentation db reference, team organization (think corporate teams, IT depts, engineering depts.), external tool building db reference. Where the other tool (Splunk) is more of a bolt on/ external tool. Both are sticky, but I think the Splunk segment is a bit less “rootable”. It will be interesting to see what companies like Palantir push out for corps. 

[cubsfan]

^ I wouldn't argue with that at all. NOW has a massive moat since it gets so tied into IT operations and the automation/customization benefits are huge. But Splunk definitely has a moat. Trying to make sense of billions of security and operational events into something that makes sense is a massive problem for IT departments. These types of tools have been around forever, but Splunk's ability to tie many of these collector tools together and generate meaningful information makes it the leader. Once you do that, you find more to do, and like NOW - it's not going to get ripped out. Most Splunk customers seem to double/triple their initial usage within a year or so. So I think a few years from now - like NOW and Palo Alto - Splunk will have enough critical mass with it's sales force and total offering (acquisitions) that they will be the undisputed leader.   We will see.  I might be too early, as that seems to be my curse.

 

Splunk is undergoing a switch in their pricing model from data based pricing to usage based, as well as cloud enablement.  Most of the users hated the data pricing, as you loaded up your data and paid for that regardless of processing. Now you can load all you want - and pay for what you process. This should make it much easier for companies to see what SPLK can do for them - and just pay for that. You'll see Splunk usage skyrocket in my opinion. Add the cloud enablement in, and that will make it easier for many companies to get started with Splunk. 

 

So, yeah, it's expensive - but this pricing model change slows revenue growth down in the short term (1-2yrs?) and hence the hit to the stock.

[Gregmal]

Shorted some PSTH 6/18 $22 and 22.5 puts

[ASTA]

sold schw bought more baba