Thanks! A very timely article for me. I’m a late comer to Fastly. This week I was reviewing my portfolio to see what improvements I could make. This year’s top performer by a large margin is Zoom (ZM) and also my largest position. Next is Teladoc (TDOC) which is outpacing most SaaS stocks. Third in my portfolio is Everbridge (EVBG) which is doing nicely but well below Teladoc, it just does not seem to be as mission critical as other services.
One has to be very careful not to chase performance which typically leads to buy high and sell low, the reason most mutual fund investors underperform these funds! I’m looking for a better performer than Everbridge but there has to be a business reason for the change, not just a difference in recent performance. After an initial preselection of ten candidates I reduced the list to four:
BILL - cloud based back-office financial operations
DOCU - cloud e-signature
FSLY - edge computing platform
LVGO - healthcare realtime data capture
BILL reminds me of an excellent Peter Lynch pick from way back when, ADP which was a back office favorite. DOCU is one I really like but I bought it and sold it a while back because it did not seem mission critical and differentiated enough from the competition. LVGO reminded me of an old position of mine, BEAT which is not performing as I thought it should. In healthcare I’m sticking with Teladoc. That left Fastly which seemed mission critical to an old IT guy but I really did not understand why it should be a big winner. The linked article is a huge help. Thanks!
An important takeaway is this cautionary note:
Investor Take-aways
While Fastly is benefiting from investor excitement and possibly some hype, there are no guarantees around the success of Fastly’s Compute@Edge solution and the eventual size of the market for it. Cutting edge technology innovation doesn’t always translate into market penetration and competitive advantage. My purpose here is to explain why I think Fastly’s fundamental approach to addressing long-standing challenges in CDN and distributed serverless infrastructure is unique. The investment thesis is that like Zoom, Fastly’s intense focus on a limited set of difficult problems with the goal to create noticeably better outcomes for developers and DevOps teams, will ultimately drive investment returns over the long term. Personally, I think Fastly is fundamentally bringing a better architecture design to distributed, serverless compute outside of the data center. While nascent, similar to Shopify’s planned usage, I can think of many applications for this technology.
The parable of the better mousetrap attributed to Ralph Waldo Emerson is not true in the high tech world, the market seems to pick the winner at random. How then does one decide which competitor to buy. When there is a clear market leader like Zoom, the choice has already been made and the problem solved. When there is no clear leader one has to depend on subtle clues. The article notes Fastly’s most prominent clients which read like a list of the top Who is Who! Microsoft, Google, Amazon, Shopify… These people know who is who!
The other very telling clue comes from a website that rates CDNs, CDNPlanet.com. They track 26 CDNs but in the “Compare CDNs side-by-side” panel they have preselected the two top contenders, Cloudflare (NET) and Fastly (FLSY).
https://www.cdnplanet.com
Denny Schlesinger
Build a better mousetrap, and the world will beat a path to your door
https://en.wikipedia.org/wiki/Build_a_better_mousetrap,and…