Weekly Notes #2
Weekly Notes #2
Thoughts on specific stocks and general investing and life wisdom
Stocks in this episode:
Alteryx (AYX), Splunk (SPLK), Airbnb (ABNB) Global Payments (GPN)
If you don’t follow me on Twitter yet, today is your chance. You can find me here:
https://twitter.com/41investments
Alteryx: Growing top and bottom line (in the wrong direction)
I’ve watched Alteryx for a while because the product looks promising and the revenue growth has always been strong. What I don’t like at all, is the even faster growing operating expenses of the company.
While the top line is growing very nicely and doubled revenue in the last three years, unfortunately the operating expenses almost tripled. All this growth does not help you, if you spend more money than you earn.
Operating cash flow stays negative for the last two years even after (!) adjusting for the outrageous high stock based compensation. Question: How can the share based compensation be more than 1/4 of your overall revenue?
Needless to say, that free cash flow looks even worse.
Splunk:
Quite the opposite to Alteryx is Splunk. Splunk’s free cash flow continues to rise. Management guided for a free cash flow of 475m in the quarter which ended on April 30th. I can’t wait for the final numbers to be released.
With the guided FCF of 785m for the current fiscal year we are looking at an EV/FCF of only 21.6 for a company with a strong record and strong growth. Let’s hope that the shares come down to the October lows of 65$
Airbnb
I lobby for Airbnb to be seen more as a SaaS company than a travel company. Free cash flow margins of 44%, incredible revenue growth and a money printer in the basement. That’s at least what it feels like. Thanks to the TTM FCF of 3.8bn, the company has 8.3bn more cash than debt.
With these numbers Airbnb has an EV/FCF of 16.6. Needless to say, that I believe Airbnb is very interesting at these levels.
Global Payments
I wrote my thoughts on the current state of Global Payments in this post:
Long term stock performance
Without revenue growth, it is hard to deliver long term out performance. That’s why I am always searching for growing, profitable businesses.
I love this picture. There is and will be always some form of macro uncertainty and this drives people into selling their stocks. As a long term investor I know, that the next reason to sell will be always around the corner. At the same time I know, that my long term holdings will continue to perform despite these uncertainties.
Stocks are the best performing asset class over the last centuries. Gold is known as a heaven of safety and truly performs its goal. If you want to grow your assets, then you have to invest in good companies for the long run.
Some wisdom at the end of no other than Charlie:
Additional reading:
The great Jason Zweig wrote about the seven virtues of great investors. It’s a very short read and I highly recommend you to read it as well:
Some wise words from Boyd Varty
Bonus
My favorite picture of the week has been created by AI, to be more precise by Midjourney. I’ve seen it on Twitter and really like the idea and result:
41
Invest at your own risk, this is not financial advice!