1/n
This is a thread for long term investors.
I've said this before but perhaps it bears repeating.
I'll use $TWLO as an example but there are many others like $AMZN, $SHOP, etc.
Focus less on TWLO and more on perspective (your edge = alpha).
...
This is a thread for long term investors.
I've said this before but perhaps it bears repeating.
I'll use $TWLO as an example but there are many others like $AMZN, $SHOP, etc.
Focus less on TWLO and more on perspective (your edge = alpha).
...
2/n
$AMZN $SHOP $TWLO are some of our greatest examples of the underappreciated importance of a user base on a platform that in its early stages isn’t necessarily very impressive and doesn’t necessarily have an obviously profitable direction.
...
$AMZN $SHOP $TWLO are some of our greatest examples of the underappreciated importance of a user base on a platform that in its early stages isn’t necessarily very impressive and doesn’t necessarily have an obviously profitable direction.
...
3/n
But the alpha comes from recognizing that, and then extrapolating not the current business, but rather the ‘what could be’ business, which is no small task because, when something doesn’t exist yet, imagining it is… difficult and risky.
...
But the alpha comes from recognizing that, and then extrapolating not the current business, but rather the ‘what could be’ business, which is no small task because, when something doesn’t exist yet, imagining it is… difficult and risky.
...
4/n
Twilio, for example, at first, was just a (i) very clean and (ii) easy API to send text messages (SMS).
SMS messages were on their way to being outdated and commoditized and that was Twilio’s business.
...
Twilio, for example, at first, was just a (i) very clean and (ii) easy API to send text messages (SMS).
SMS messages were on their way to being outdated and commoditized and that was Twilio’s business.
...
5/n
It filled a need and it did so easily and well, but it wasn’t a business in and of itself that was obviously profitable.
Like being an intermediary selling books ( $AMZN) wasn't obviously a good business.
...
It filled a need and it did so easily and well, but it wasn’t a business in and of itself that was obviously profitable.
Like being an intermediary selling books ( $AMZN) wasn't obviously a good business.
...
6/n
But what was obvious, in time, was how many enterprises were using it.
The numbers were growing very quickly and the product itself touched those enterprises customers very often.
...
But what was obvious, in time, was how many enterprises were using it.
The numbers were growing very quickly and the product itself touched those enterprises customers very often.
...
7/n
So, we had this thing; this Twilio, which in and of itself solved a problem very well but it wasn’t so terribly clear that the solution was a good long-term business.
But Wall Street underappreciated the most important part of the story ...
So, we had this thing; this Twilio, which in and of itself solved a problem very well but it wasn’t so terribly clear that the solution was a good long-term business.
But Wall Street underappreciated the most important part of the story ...
8/n
... and analysts couldn’t assign a value to it using the standard methods of a discounted cash flow (DCF) flow because, again, the alpha was in seeing a business which didn’t actually exist yet.
...
... and analysts couldn’t assign a value to it using the standard methods of a discounted cash flow (DCF) flow because, again, the alpha was in seeing a business which didn’t actually exist yet.
...
9/n
The under appreciation by Wall Street gave retail investors an edge to appreciate (i) the users base, and (ii) the frequency of usage.
When a company has this thing that catches fire, it has done the hard part.
...
The under appreciation by Wall Street gave retail investors an edge to appreciate (i) the users base, and (ii) the frequency of usage.
When a company has this thing that catches fire, it has done the hard part.
...
10/n
Good CEOs and teams turn that into a neighboring business — a related business — by harnessing the power of a user base.
Great CEOs turn it into a giant.
...
Good CEOs and teams turn that into a neighboring business — a related business — by harnessing the power of a user base.
Great CEOs turn it into a giant.
...
11/n
Like Jeff Bezos ( $AMZN) and Tobi Lutke ( $SHOP).
This is what we have with a precious few young companies.
Today they seem like a joke
...
Like Jeff Bezos ( $AMZN) and Tobi Lutke ( $SHOP).
This is what we have with a precious few young companies.
Today they seem like a joke
...
12/n
... and in the future they will be shining examples of how the power of a platform, even it started with great analyst consternation, proved that its 'first thing' wasn't the thing.
It's thing was the userbase / usage / etc.
...
... and in the future they will be shining examples of how the power of a platform, even it started with great analyst consternation, proved that its 'first thing' wasn't the thing.
It's thing was the userbase / usage / etc.
...
13/n
$AMZN's 'first thing' (acting as an intermediary for selling books) wasn't it's thing.
Its thing was the mall of the Internet.
Its thing was the platform.
And its thing started from users.
...
$AMZN's 'first thing' (acting as an intermediary for selling books) wasn't it's thing.
Its thing was the mall of the Internet.
Its thing was the platform.
And its thing started from users.
...
14/n
Some companies are on this path.
And that thing, their thing, turns into alpha under the right leadership.
It also takes a really long time to prove itself.
And that means stock down, sideways, 😲 earnings drops, short sellers, and doubt by investors.
But...
Some companies are on this path.
And that thing, their thing, turns into alpha under the right leadership.
It also takes a really long time to prove itself.
And that means stock down, sideways, 😲 earnings drops, short sellers, and doubt by investors.
But...
15/n
All that stuff doesn't mean anything with respect to the business (good or bad).
So, I watch businesses (not stock prices) with a healthy dose of skepticism, not just of them, but of my own analysis.
...
All that stuff doesn't mean anything with respect to the business (good or bad).
So, I watch businesses (not stock prices) with a healthy dose of skepticism, not just of them, but of my own analysis.
...
16/n
But, if the business is doing what it should be doing such that it is moving from its 'first thing' to its 'thing thing,' I'm in, and I'm in big.
With the understanding that...
But, if the business is doing what it should be doing such that it is moving from its 'first thing' to its 'thing thing,' I'm in, and I'm in big.
With the understanding that...
17/n
... I just don't give a s**t about the stock drops.
But don't get me wrong:
* It's not a hobby.
* It's not a relationship.
* I'm in it for the money.
And for that money, my price is time in the market.
You can learn more how I do it here:
CMLPro.com
... I just don't give a s**t about the stock drops.
But don't get me wrong:
* It's not a hobby.
* It's not a relationship.
* I'm in it for the money.
And for that money, my price is time in the market.
You can learn more how I do it here:
CMLPro.com
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