Bert on hyper growth comps and MULE acquisition

Bert on hyper growth companies in light of the MULE acquisition. Here’s a little excerpt:

…And then there is the universe of other hyper-growth businesses. I suspect that all of them will see some kind of further valuation premium based on their potential to be acquired. If Salesforce can pay what it did for Mule, then there is a universe of other hyper-growth businesses that will be similarly considered-certainly by investors and probably by the large companies that already have platforms as well. Lists of such names are already circulating. My own list, for what it might be worth, includes Ansys, Alteryx, Atlassian, Coupa, Guidewire, Hortonworks, HubSpot, MongoDB, New Relic, Nutanix, Splunk, Twilio, Veeva, and Wix. I think companies such as these, will be candidates for consolidation.

In addition, I think that there is a certain “fear” premium, in that short sellers have to consider the consequences of a take-out in their calculus of making a negative bet on what might seem a highly valued name.

I am not suggesting that this particular event is cause in and of itself to recommend buying hyper-growth IT names. I do think that it might explain some of what might look like stretched valuations and perhaps give readers a bit of insight into why institutions, in particular, are willing to pay valuations despite current share price values in the space…

https://www.tickertarget.com/crm-buys-mulesoft/

You probably need to be a subscriber (worthwhile) to read the whole article.

Saul

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Hi Saul,

Do you have a membership to the basic or premium plan, do they happen to offer discount like some of the MF subscriptions

I noticed
basic $280
Premium $520

Thanks
Angelo

Do you have a membership to the basic or premium plan

Basic (I think). Yes, Basic.

Lists of such names are already circulating. My own list, for what it might be worth, includes Ansys, Alteryx, Atlassian, Coupa, Guidewire, Hortonworks, HubSpot, MongoDB, New Relic, Nutanix, Splunk, Twilio, Veeva, and Wix. I think companies such as these, will be candidates for consolidation.

Saul:

Two points form my perspective:

  1. Hoping for a buyout is never a reason to hold a stock

  2. Nothing limits one’s potential wealth like great companies getting bought out before their time.

Hence, for me anyway, this would not be welcome news…and while I benefited from MULE…not something I long for.

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2) Nothing limits one’s potential wealth like great companies getting bought out before their time.

True. But the belief that a buyout is likely should push the stock price higher which can make a buyout less likely.

Chris

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Thanks for the insights, Saul!

I own half of the companies listed and also own MULE. I will always be somewhat value oriented but I have learned that one has to pay up for great growth companies, especially in a market awarding a premium to growth.

I am now wondering whether to sell MULE given its rapid rise on the buyout. And I would think its appreciation may be capped by the buyout price.

dave

https://www.cnbc.com/2018/03/21/salesforce-mulesoft-deal-cou…

this CNBC article on MULE acquisition states similar thoughts, and lists these companies:

“Analysts at KeyBanc and Stifel listed a number of companies that could now be in play, including Zendesk and Talend. Additionally, KeyBanc suggested that Blackline and Five9 are “high-probability targets,” while Stifel added Cloudera, HubSpot, MongoDB, Nutanix, Okta, Paycom, Paylocity and Veeva to its list of companies that may have an improved outlook.”

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and look how well most of these hung in on a terrible market that should generally hurt high growth stocks…

http://stockcharts.com/freecharts/candleglance.html?BERTSHYP…

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