Weekly Update: 12/13/20
Investors are hungry for tech IPOs
Welcome to Beating the Odds. Our goal is to create and curate content on investing, strategy, tech, fashion and anything else we find interesting.
🔍 Tickers mentioned: ABNB, AAPL, LVMUY, DASH, ABCL, IAC, AMZN, GOOGL, MSFT, ADYEY, PAR
Who else bought Airbnb shares?
Apple showing the power of brand equity
Apple: announces $549 headphones—a true luxury product, as similar quality headphones can be found for half the price
*product sells out within 30 minutes*
*headphones immediately resell for $800+ on the aftermarket*
Did Apple severely underestimate consumer demand or intentionally restrict supply to inflate an already insatiable level of demand?
⚡️ Quick links
📈 Bloomberg — Sequoia Capital Warned of a ‘Black Swan.’ Instead, 2020 Is One of Its Best Years Ever
🔐 Ian Rogers on Medium — From LVMH to Ledger. I missed this story a couple weeks ago, but a notable development in crypto land
🤑 CBC News — IPOs this week have DoorDash and Airbnb worth billions of dollars despite not turning a profit
🧬 Financial Post — Vancouver biotech developing COVID-19 drug like the one used to treat Trump soars in blockbuster IPO. AbCellera has a rich valuation, but their ties to the Gates Foundation and Peter Thiel caught my eye. This article has more background on the business and its financials
🔥 IAC — Barry Diller’s holding company announced their November results and they continue to impress. After the Match spinoff earlier this year, IAC has another winner with Vimeo growing revenue at over 50% YoY
📊 Charts of the week
There’s a light at the end of the tunnel…
Per Quartz, if all three of these candidates gain regulatory clearance, four countries—Canada, Japan, the UK, and the US—could vaccinate more than 100% of their entire populations based on the number of these vaccines they’ve already pre-ordered (each requires two doses).
Amazon’s actual annual sales vs what Wall Street analysts thought they’d be three years earlier:
Y Combinator
Since its first cohort in 2005, YC has invested in more than 2400 companies, with Stripe, Twitch, Reddit, Airbnb & DoorDash among some of the most valuable and well known to date. Although YC’s equity stake has been heavily diluted throughout the years, even owning 1% of Airbnb at today's prices would be enough to pay for literally every other seed investment they have ever made—and more.
📚 Good reads
Robert J. Shiller for Project Syndicate — Making Sense of Sky-High Stock Prices
Not Boring — Another excellent piece of writing from Packy. This Invest Like the Best episode with Eric Vishria is a must-listen for anyone interested in learning more about the future of SaaS and APIs
Beth Kindig for Forbes — Google Cloud Will Not Be Able To Overtake Microsoft Azure. Beth always provides great analysis and her latest includes commentary on the big tech cloud war and future of edge computing and 5G
25iq — The Dot-Com Boom and Bust. A fun read from Tren Griffin, who experienced the dot-com bubble firsthand. Prognostications of a stock market crash are growing by the day. Sure, pockets of froth and foolish speculation exist. But we’re nowhere near 1999 levels in terms of valuations, returns and overall euphoria. Back then, VA Linux was doing ~$18M in annual revenue and jumped a record 733 percent to a $9.5B market cap (a jaw-dropping 528 price-to-sales ratio) in its first day of trading. Airbnb does almost $5B in annual revenue and “only” had a ~2x IPO pop; given the same P/S multiple, it would have a $2.64 trillion market cap! Every bubble is different, but the common thread is that they last a lot longer than most think possible. Have a plan, but don’t forget to enjoy the party while it’s here
Seeking Alpha — Adyen: Get On The Train Before It Leaves For Good. Adyen is the best European business most people have never heard of. The payments company reports EBITDA margin of 60% (!), 25-35% YoY net revenue growth, has been profitable since 2011 and has no long-term debt. Some of the strongest financials I’ve ever seen.
They serve mid-market merchants (<€25M annual volume) and large enterprises including Nike, Farfetch, Microsoft, Uber and McDonald’s. As these companies rapidly grow across the globe, Adyen grows with them, allowing it to expand while also adding new customers. They’ve seen exponential growth in transaction volume:
Adyen also finds a way to make dry ass financial reports visually pleasing. What’s not to like?
🎧 Press play
Chit Chat Money — David Polansky | Par Technology (PAR)
David Polansky from Lowell, Blake & Associates provides his investment thesis for PAR. The company is a leading global provider of cloud-based POS, Payment and Food Safety software, hardware, and service solutions to restaurant chains and food retailers. PAR is a picks and shovels play on the secular trends of digitization and SaaS adoption within the restaurant industry.
$1.27B market cap
Customers: fast-growing restaurant chains such as Mod Pizza and Sweetgreen and established 1,000+ location enterprises like Arby’s and Dairy Queen
5.2x P/S ratio (NTM)
20.7% YoY revenue growth as of Q3’20
Main takeaways: huge TAM, great product and management team, significant growth opportunity via higher ARPU, increasing units and acquisitions. PAR is one of my favorite stock ideas for the next 3 - 5+ years.
If you’re interested in digging into the business, I shared a handful of links in this post. I also thought these podcast episodes with CEO Savneet Singh were great:
The Berkshire of Software with Savneet Singh [Invest Like the Best, EP.79]
Savneet Singh – PAR Technology Corp [PenderFund Capital]
Capital Allocators — Chamath Palihapitiya - The Social Capital Flywheel
Really enjoyed this conversation and thought this quote was a good one: “Companies are all the same. Same variables, different weights. Good investing is about figuring out the weights." (Chamath)
Product-market fit
Integrity of management
Headwinds/tailwinds
Culture/politics: "how dysfunctional is this company?"
📺 Videos of the week
AlphaFold: The making of a scientific breakthrough
Google-owned DeepMind made “a gargantuan leap in solving one of biology’s grandest challenges—determining a protein’s 3D shape from its amino-acid sequence.”
When Munger speaks, we should listen
Great opportunity to hear from an investing GOAT. And it’s free. Sign up here.
Disclosure: None of this is investment advice. I own IAC, AMZN, ADYEY and PAR shares.
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Great update today! Starting the mornings/week off with these posts have been great. Keep up the good work capo