FSLY is Peter’s largest position to date at 24%.
Correct. Thank you.
FSLY is Peter’s largest position to date at 24%.
Correct. Thank you.
He linked to his portfolio where he listed his positions. Fastly was 24% of his portfolio while his next largest were 17%, 16%, and 12%. Based on that, I’d say that in spite of his cautions, Fastly is by far his highest conviction position.
Clearly. When I read the article and last checked the link his portfolio showed FSLY as his largest position but only at 10%. That would have been on July 2 evidently a lifetime ago. Cheers draj
Hi Draj, I just looked at his Software Stack Investing website again and Fastly IS definitely currently listed as 24% of his portfolio. Perhaps when you looked at it, he hadn’t gotten around to updating his portfolio on the web site in a month or two. As you say, in this market that’s a lifetime.
I have spent the last 31 years of my life studying leadership. What I know is that companies grow or shrink to the size of their leadership, almost regardless of products and markets. If a leader of a $1 billion company has the vision breadth, depth, executive skill and passion to lead a $100 billion, he will find where the TAM is and bring his company along.
I don’t have the investing acumen of many on this board. I do agree that a great management team is crucial, but I don’t agree that identifying them is as easy as you make it sound.
I work in real estate, and had a tenant who was a former fund manager, and now works managing the finances of a few very rich families.
I asked him how to you spot great management, and he said that it is almost impossible. He told me a story of someone who was a great salesman, and convinced fund managers his company was great, and it turned out he was committing fraud.
You look at Enron, and Bernie Madoff and you can see how hard it is.
Now they are saying that Jack Welch did a bad job, by turning GE into a huge bank.
If you scroll down to the bottom of the following SSI web page, you will find FSLY is Peter’s largest position to date at 24%.
Replying to the above - FWIW I checked his holdings within the last 10 days and he had 38% FSLY at the time (unless he or I made a typo). So, he may have trimmed a little after the big run.
I personally did not sell any FSLY outright, but I did sell some August 21 $140 covered calls for $6.35 each when the stock was over $100. My thinking was I wanted to lock in a little gain after the big run, and if it does actually get to $140 by August 21 I’m pretty sure I would be selling some anyway at that point. I saw it as a can’t lose opportunity. My cost basis is $41, so I was able to get about 15% of my cost basis out and still leave myself the potential for 40% upside in 6 weeks time. I only did this on 2/3 of my shares so that I still have some if it somehow blasts past $140 after earnings.
Just a few thoughts.
FSLY does not have an earth breaking technology invention. What FSLY has are a bunch of significant, smart incremental CDN improvements. Most of the time, this is how invention works. Even Einstein put together pieces he discovered from others.
I just bought FSLY last week and yes I know it is a little late, but better late than never. I needed the technical understanding. I have a problem sometimes as an investor when I think I know the technology so well and poo poo some brazen whippersnapper up and comer. I helped develop one of the first CDNs back in 2001 at Cacheflow. I held off purchasing CRWD as well. I worked cyber security the last 10 years at FireEye before I retired this year. So I have a solid knowledge of malware detection. And I helped develop the Qualys cloud 15 years ago before the term ‘cloud’ was created. Again I did not buy CRWD until recently. sigh…(no worries I have killed it with others. You can’t buy them all you know)
So what I have learned is to deeply understand the technology and the business model. But most importantly recognize the market movers (oomph factor) and do a second deeper dive when I overlook.
Let’s be real, FSLY will hit some significant competition at some point. Akamai, AMZN, and others will not just sit by for long and watch customers go to FSLY. But FSLY has a moat for some time, maybe 1-2 years, enough time to get established and realize some significant growth. (This is what we did at FireEye in 2012-15). The FSLY BGP BIRD with Silverton distributed routing agent running on the low cost Arista Networks switch is not something easily or quickly replicated. And the API user controls are a very sticky and a desirable feature for customers. FSLY is smart with their fewer but heavy POPs and SSD based hosts, but this can be replicated pretty easily I think by competitors. (probably already has been)
I think folks need to realize that not all web hosting companies or applications need accelerated content delivery. The TAM may not be as big as we think. Many times customers simply need what is ‘fast enough’ and this is where pricing pressures come into play. CRWD will see this same effect. Mid tier, low security maturity customers have limited security budgets and many times they do not buy best in breed. They buy what is good enough for what they can afford.
long a little FSLY and CRWD
Let’s be real, FSLY will hit some significant competition at some point. Akamai, AMZN, and others will not just sit by for long and watch customers go to FSLY. But FSLY has a moat for some time, maybe 1-2 years, enough time to get established and realize some significant growth
One of the features described in recently published explanations of FSLY operations was that they did not use off the shelf equipment for their CDN system but created new software and operation logic,.As well they have lowered latency time to microseconds. My impression is that this gives FSLY a headstart with accelerating velocity vs competition. A recent SSI article says for example,
This software-driven design has paid dividends many times over, giving the team the flexibility to evolve their network design as content delivery use cases change.
I surmise it takes more than a year or two for a company to redesign the system, backtrack, redeploy , get up to speed, catch up and compete.
You seem to be saying it can be done in that time frame. Could you elaborate.?
FSLY seems to have a head-start in content retrieval speeds and delivery. Having software control over the POP switches as well as the hosts gives FSLY maximum flexibility to adapt. Make no mistake, they are still adapting to their customers needs. FSLY is not done.
From what I read FSLY is using COTS hardware from Arista Networks and customizing. They could be developing their own line interface cards and custom ASICs for this switch but I have not read this. Pass me a link on their hardware if you have it. Also they are using custom configured BGP edge router software. BIRD BGP is an open-source implementation for routing Internet Protocol packets on Unix-like operating systems. So most of the proprietary software seems to be in the switch and the hosts.
On the host since they say they are using their own file system for fast caching, they have customized the OS. (Let’s hope they did not write their own OS like Cacheflow did in 1998. This gets expensive to maintain.)
If I were a major competitor, I would raise my game to offset the FSLY strengths. Add SSD storage resources to my high volume POPs is easy. And assess their routing and storage/retrieval technologies and see if I can do something similar with my architecture.
I am making a lot of guesses here on the FSLY architecture and on how long it will take for a committed competitor to catch up. My 1-2 years is a simple wild ass guess (SWAG). I would be watching Akamai and Limelight. And I would watch the pricing as competition strengthens.
Add SSD storage resources to my high volume POPs is easy. And assess their routing and storage/retrieval technologies and see if I can do something similar with my architecture.
Adding SSD storage is likely easy, but custom storage around it is likely not easy and some head start. From the software stack investing article:
They also wrote a custom storage engine for their POP servers to bypass the file system and squeeze every last drop of performance out of the SSDs, cramming as much data on them as possible. They employ various algorithms to keep commonly used data in the 384 GB of RAM, making it even faster. For some assets, such as “Like” or “Share” buttons that never change and are requested millions of times a second, they go even further by serving them out of the L3 cache directly from the processor.
Fastly advantage seems to be as Jeff Bezos once said: “We don’t have one big advantage, so we have to weave together a rope of small advantages.”
My feeling is in the end engineering talent matters. Fastly likely over time will evolve into enablers of edge technology removing barriers and bottleneck in the adoption of edge paradigm.
I have a problem sometimes as an investor when I think I know the technology so well and poo poo some brazen whippersnapper up and comer.
That statement is why I have some resistance to believing totally what a “expert” says and I make attempts to understand things myself using multiple opinions. Someone who holds themselves out as “experts” that has worked in the industry now or in the past do not necessarily have “correct” opinions on all topics in that industry, all the time.
There are some problems 100% believing industry insiders:
Usually people working for a company “drink the Koolaide” or 100% believe their company line on how the industry is supposed to play out and will pooh-pooh automatically differing ideas that might ultimately work out. Sometimes, a competitor’s vision might play out and not the company vision where the “expert” works, which could take a industry in a totally different direction than where the “expert” believes.
Sometimes, depending on what job a person works at, a persons job might be so in the weeds that the person has little comprehension of the “big picture” view. For instance, there is one person that I have seen that when talking about software companies seems to believe that the only people qualified to talk about the software industry are people that can write code. That person seems to have little comprehension that the ability to write code might not exactly qualify the person to speak on many different aspects of the industry/company.
For example, I am a ship engineer. I might be great at changing a piston in a diesel engine but that might not necessarily make me a expert on building a whole ship or running a shipping company.
This also works in the opposite way too. A CEO of a shipping company might not necessarily understand how to change a piston in a diesel engine or be a expert on building a ship. Generally, people that work in any industry develops specific expertise in a given area and it is extremely rare to find people that know everything from top to bottom and from side to side in a given industry. A person working might not have expertise in the things a person they work next to has expertise in.
Now, industry experts are not always wrong but I have found over time that industry “experts” are not always “right” in their observations or predictions either. I have learned to treat “expert” opinion as only one data point and I base decisions that I make on multiple views rather than only one “guru” view.
You are so right starrob.