Bristlemoon just published a deep dive on $PDD, the owner of Pinduoduo and Temu. This company is insane. It was founded in 2015 and did c.$72m of revenue in 2016. Seven years later it 490x'd its revenue, doing c.$35bn in 2023. It's the fastest company in history to achieve $100bn in market cap, hitting it in just 5 years (vs. 18 years for Amazon to go from founding to $100bn). We have a look at what makes this company special and what allowed it to achieve such meteoric growth. Pinduoduo and Temu are 3P e-commerce platforms: they act as marketplaces connecting buyers with merchants. Pinduoduo is not like conventional e-commerce companies which rely on intent-driven shopping and a solitary shopping experience. Pinduoduo’s platform uses feed-based shopping that’s personalized to a user’s preferences, allowing them to serendipitously discover items they may not have known they wanted. User demand preferences are then collated by Pinduoduo and fed back to merchants, directing future production quantities for goods.
bristlemoonresearch.com/p/pdd-holdings…

A year ago I left my job at a hedge fund in NY to start my own fund, Bristlemoon Capital. Some thoughts below on the journey of launching a fund (both the good and bad): Unsurprisingly, launching a fund is very hard. It requires execution on multiple fronts: building/managing a portfolio, legal/operations buildout, capital raising and building a brand, and then eventually managing a team as the AUM scales. These roles require v diff skillsets.

Bristlemoon just published a deep dive (>16k words) on Dutch Bros $BROS, a U.S. drive-thru coffee chain that is like a cross between $SBUX and Dairy Queen. BROS has 831 shops and is targeting 4,000 shops over the next 10-15 years (an 11-17% CAGR). We explore issues such as... the portability of the mostly West Coast concept to other (colder) parts of the U.S., given >80% of drinks served are cold, as well as what the shop expansion is doing to shop AUVs.

bristlemoonresearch.com/p/dutch-bros-i…

Bristlemoon just published a deep dive on The Trade Desk. $TTD is a solid business exposed to two high growth digital ad channels (CTV + retail media) but we question the extent to which TTD will benefit, explore the likely take rate pressure, and other risks such as... signal loss from cookie deprecation, risks around the scalability and regulatory scrutiny re $TTD's alt. ID called UID2, as well as supply path optimization risks. We do our best to cut through the complexity and provide a balanced view.

open.substack.com/pub/bristlemoo…

$MTCH now targeting QoQ Tinder payer growth in mid-24' and YoY growth by YE-24' [Wells Fargo TMT conference]. Really need to bank on the product refresh helping the top-of-funnel trends which according to CFO are "slowly bouncing back". Co now talking about a heavy mktg push... CFO reiterated that Tinder is a 50% mgn asset but that mktg spend would only be a 1-2 ppt mgn impact. Co now talking about "always-on" marketing required with periodic mktg spikes around events/product launches.

Bristlemoon just published a report on $CPRT, one of the best businesses we've ever encountered (link below). The problem is that the mkt is seemingly missing the pricing-led, high-incremental mgn growth of the last few years being replaced by relatively lower mgn vol growth... This, along with relatively stronger growth from the much lower mgn international biz, will likely see mgns struggle to hold these elevated levels. The stock is richly valued and falls far short of our return thresholds.
bristlemoonresearch.com/publish/posts/…

$MTCH looked okay on the surface; below the surface it was pretty bad. The Tinder net payers stabilization/inflection keeps getting pushed out and marked a significant degradation vs. prior comments (see below). Some thoughts... In 1Q23 mgt guided to "much stronger" Tinder sequential payer adds by the end of the yr and later that month @ JPM conf. guided to them being back in "positive territory" in Q4. That got walked back in Q2 with MSD % net payer declines guided for the rest of the year.

The value investing maxim of "buy stock X because it's trading at $70 and is worth $100" gives you an incomplete picture. Fundamentals don't move the stock, it's the marginal buyer stepping in and putting capital against a name to zero out any value gap you're saying exists... Einhorn's point is an important one bc it recognises this and how changes to the mkt structure re how capital is being deployed now means that there's less capital that sympathises with a value investing strategy.

Regardless of your thoughts on $META, I'm leaning towards the view that those who shorted the stock into the print got lucky. Opex/capex guide was what caused the leg down and I don't think there was any way to have formed this view going into print. All other KPIs fared well... I'm aware that uptick in capex due to years of underinvestment in servers/GPUs etc to train AI to compete with TT, but I don't see how it would have been possible to form conviction around the view that a significant FY23 step up in spend was required bc current rr insufficient.

$MSFT partnering with $META is HUGE. There is a lot we can glean from this. Some thoughts below...

https://twitter.com/GHadjia/status/1579890642502955008

MSFT's move to integrate Office 365 and Teams into Horizon Workrooms takes a page out of its PC-era playbook of being hardware agnostic. MSFT has its own HoloLens product but backing the current VR hardware leader (META) is strategic re maintaining productivity sw dominance.

So $FB managed to grow Q1 rev by 7% YoY off the back of a +48% comp during a period where $AAPL did all it could to screw them with ATT, Reels transition, supply chain/macro hitting SMBs and ad $ more broadly, & Russia/Ukraine headwind. 2yr rev CAGR held steady QoQ @ 25% in Q1... Guide actually implies 2yr CAGR remains flat sequentially @ midpoint which is not bad given deteriorating macro backdrop and worries around consumer rolling over w. higher rates. This is an exceptional biz trading at a multiple that will likely prove laughable over time.

The struggle in this market is figuring out if a stock is actually cheap enough to have baked in worsening near term biz fundamentals, or if the decel of fundamentals is worse than expected and causes the price to leg down. Both can be true and it comes down to time horizons... $FB @ low-$180s incorporates a huge amount of negativity. DCF it and implied expectations at current Px equate to a melting ice cube biz. So it might be a fantastic entry point if you have a multi-year time horizon but it could also stink as an investment over next few qtrs

I recently read "How to Read a Book" and it sparked some surprising thoughts around my own investing process re the allocation of time when trying to uncover great investments... The book explores inspectional reading vs. analytical reading. Insp. reading sets a time limit for reading materials and is a useful concept that should reflect the initial stages of scoping a new business; i.e. where you're trying to see if there is an opp worthy of further work

Tencent's cloud biz option upside could be HUGE. THREAD 🧵👇
(Following from my prior thoughts on why $TCEHY is primed for optionality...) 1/

https://twitter.com/GHadjia/status/1422221370126217217?s=20

Tencent has many opportunities to realise option value, whether it be the metaverse, the creator economy, e-commerce, or healthcare. However, the company is pushing up the cloud stack which could generate enormous value that is currently being ignored by the market. 2/

Tencent's optionality. A THREAD. $TCEHY
Consider the revenue growth of the following company:
What would you guess the revenue growth of this company will be for the next three years? 1/X Your guess probably involved some sort of tapering of the growth rate. In other words, you extrapolated the trend of the past three years to inform your view for the next three years. This is problematic when forecasting, but especially so for companies with optionality. 2/

"$U is so expensive. It trades on 29x revenues". No, not really. $U charges a US$1.8k/yr flat fee and 85% of users actually use a free version of the s/w, which is almost at feature parity with the paid version. There is significant underpricing. 1/ THREAD This is sensible as $U is trying to draw in developers, which learn how to build using their platform tool and are incredibly sticky. They might be undermonetising now, but there are benefits to attracting developers early... 2/

$U IDFA Impact [Part 2] LONG THREAD
See here for [Part 1] 1/

https://twitter.com/GHadjia/status/1376704029796016128?s=20

$U has a lucrative data asset that few understand. If a game is built using the Unity engine, then the game developer is able to opt-in to sharing game data with $U (they benefit as they get a preferential ad revenue share for doing so). The majority of game developers opt-in. 2/

Will $U be affected by the IDFA-deprecation? LONG THREAD [Part 1]
$U’s revenues will be affected both directly and indirectly but they could be a beneficiary. First we must understand $U’s ads biz. 1/
👇👇👇 U has ads inside of game apps. This includes games built using Unity’s engine, and others that are not. Game developers basically rent out space in their game to create ad inventory that provides revenues for them. 2/

I really think $AAPL failed to foresee all the second order unintended consequences. There's a chance this ATT initiative backfires for them, perhaps in a big way. THREAD 1/

ft.com/content/520ccd… The CAID is a state-backed initiative - the Chinese seemingly don't have the same qualms around tracking and ad targeting (maybe they understand that the pros actually outweigh the cons, unlike some of the specious privacy narratives that circulate in the West). 2/