FSLY from 97% gain to 0.02% loss

Well, this is what happens when I don’t listen to people like Saul who know far more about this stuff than I will ever know.

As of this morning, my FSLY holding has gone from a 97% gain to a 0.02% loss.

I guess I’ve bought too deeply into TMF’s “never sell unless we tell you to” mantra.

Eric [“It isn’t a loss unless you sell”, right?]

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Eric, why did you own the company in the first place?

What you’re doing here is a form of “resulting” which Annie Duke talks about in her book “Thinking in bets”.

You now know the outcome of Fastly’s stock performance since you bought, so you are upset with your decision to hold.

But a more important question is why did you buy shares in the first place? Did you believe in management, the business, its products, and the industry?

If so, then have those things changed?

I would say, the long-term thesis of his company has not changed. Have the last 4 weeks been terrible for the share price? YES!

But some of this is the nature of being a business and specifically a relatively young technology company. They managed to land the business of one of the fastest-growing applications in the world (TikTok) which gave the company VERY strong performance and the stock price shot way way way up.

That caused more people to buy shares and chase it higher and now the share price has come crumbling down based on some geopolitics outside of management’s control with their largest customer.

I’m not advocating for you to hold your shares… you have to make your own decision. I’m just saying the learning point could be why did you buy in the first place and has that thesis changed?

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That caused more people to buy shares and chase it higher and now the share price has come crumbling down based on some geopolitics outside of management’s control with their largest customer.

Austin, TikTok didn’t leave because of geopolitics! You are still kidding yourself. They moved to Akami, another US company headquartered in Massachusetts. And they probably moved because Akami has portals (or whatever they are called) in many, many, more countries than Fastly, and many countries now want their data to stay in-country as much as possible.
Saul

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You are speculating Saul – I guess I am too, but I’m choosing to believe management because in my opinion, they’ve given me no reason not to believe them.

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Austin, TikTok didn’t leave because of geopolitics! You are still kidding yourself. They moved to Akami, another US company headquartered in Massachusetts. And they probably moved because Akami has portals (or whatever they are called) in many, many, more countries than Fastly, and many countries now want their data to stay in-country as much as possible.

Not to mention the fact it’s entirely possible Akamai simply beat Fastly on price. FSLY’s average enterprise spend has increased from $642K to $716K to $753K during 2020. Given TikTok’s popularity I can only imagine what those costs must look like for ByteDance.

Regardless, my speculation is no better than anyone else’s. I simply chose to put my money somewhere less speculative.

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Good point SN – and if they lost TikTok because Fastly refused to budge on price, that shows management is confident enough in the platform and long-term business prospects that they don’t feel the need to budge on price.

I respect your decision to own companies you believe are less speculative.

If we see this happen with other customers like Shopify, Etsy, etsy, I’d get concerned. Bottom line is I’m giving the business and management a couple quarters to get through this.

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If we see this happen with other customers like Shopify, Etsy, etsy, I’d get concerned. Bottom line is I’m giving the business and management a couple quarters to get through this

Not trying to spoil your moment, but…

https://www.cdnplanet.com/tools/cdnfinder/#id:1396010195246_…

Count Hostname CDN

30 i.etsystatic.com Akamai
8 www.etsy.com Akamai
1 etsy.com Fastly
1 js.sentry-cdn.com Fastly

Etsy is already using AND Akamai, so maybe there is more to it than “geo political” - I think personally Fastly idea to keep less POPs vs Akamai and CloudFlare is hurting them, the problem with that is that they don’t have as good coverage and there is higher latency for global sites in certain markets, like Africa, the pacific. Fastly has no POPs in China, and both Akamai and CloudFlare have presence there - that is a BIG deal for multi international businesses since there is a lot of red tape and regulation in order to be able to offer hosting abilities for Chinese businesses that want international exposure and international businesses that want to reach China.

Regarding Shopify - they use both Fastly and Cloudflare.

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First, for context, I was very clear in posts over the last week that while I was reducing around 25-30% of my holdings I was waiting for the numbers to come through to form stronger opinions. I posted a results thread that explains why I am now out of Fastly. I held on a little longer and lost a little more and I’m totally ok with that because that was what I needed to do for myself to form a complete picture. This wasn’t a single decision. It was a series of them. I’m not going to be hard on myself for going through a longer process than Saul did. I may learn over time to shorten it or this may be a one-off situation. I don’t know but I WILL remember this the next time something feels similar and use it to learn, as always.

I agree the geopolotics spin doesn’t make sense when you move to another company in the same country. Even ignoring that, consider this…

TikTok has reportedly decided to build their own CDN…so why switch in the mean time? Perhaps cost, perhaps other concerns, but if nothing else it demonstrates how easy it is to switch companies for pure CDN use-cases when a company can do it in the interim while they roll their own. If it was harder they wouldn’t bother with an interim migration.

Here is the thing about usage based models in tech: When a company hits a certain level of scale, building in-house becomes very very attractive. Think about how many millions of dollars TikTok could take and spend on a custom solution and still save many more millions of dollars! In a way Fastly is a stepping-stone high-performance CDN for any use-cases which don’t require the best of their tech for companies which spend a LOT. The subtle change in my thinking here is that they already service a niche but only a niche inside the niche would stick around at massive scale. This pokes a big hole in their business model of using the big guys to aggregate traffic for them and greatly increases the risk in their customer concentration for the CDN business (the current one) as they may see more churn at the super-top end of their customers. At least the ones who increase traffic as a direct correlation with their own growth and can see a trajectory where there is a clear business-case for moving that spend internally.

I think Cloudflare side-steps this currently as the costs are known and will not scale with a company quarter-by-quarter, and while the customers are sticking around they get to see the other things they could try out.

In Summery…
If Fastly continues to develop the more interesting and stickier use-cases for their network they may yet become a powerhouse business, but for me the investment became a turn-around play, at worst, or perhaps a bet on the future, at best. This is because the current business’s organic growth is no where near good enough, especially considering they are a relatively small company. They will either have to change their approach to sales or their tech is going to have to sell itself better in the future.

…and again I still love what Fastly is don’t with the tech. Just not as an investment at this time.

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why did you buy shares in the first place? Did you believe
in management, the business, its products, and the industry?

Good afternoon, Austin.

I am about to make a confession that will probably get me burned at the stake as a heretic, or at least kicked off this board.

After an 18-year absence, I got back into active investing and re-activated my TMF membership around the first of March of this year, before much of the March crash. At the time I had two main interests in investing: 5G and medical devices, the latter because I’m a retired consulting software engineer who specialized in medical devices for 30 years. I bought FSLY mostly because its virtues were sung to the rooftops by TMF as a “Buy” and three separate “Best Buys Now” etc., and its business stands to benefit from the 5G rollout. I bought a number of other TMF recommended stocks mostly for the same reason. And they have done OK so far, my portfolio is up a bit north of 60% since the first of March, with three doubles (ROKU, TTD, PINS) and one triple (ZM)… which is nothing compared to what many on this board have done but still, better than a poke in the eye.

So, I did familiarize myself somewhat on the networking sector and where FSLY fits in, but no, I didn’t and couldn’t educate myself on all of the nitty gritty details of its management, its business, its products, or the industry, and then try to keep up with all of that on a continuous basis so I could identify when some part of the “thesis” breaks. If I tried to do that for every stock I own I’d own about three stocks, and anyway my head would explode. Trying to make sense out of a prospectus or a quarterly report or a conference call just makes my brain hurt. I just don’t have the temperament or mind-set to deep-dive to that extent into dozens or even one dozen companies. I’d much rather go engineer some software or consult on an FDA submission for some medical device. I’m really good at that.

That’s where I’m at. I’m out of the closet now, completely exposed as a perpetual noob who has no business investing in stocks at all, should stick with managed mutual funds and ETFs and be done with it. I’ve done OK so far but I know I have no one to blame but myself if and when it all goes south like it seems it might. I also know that this year’s returns to date are a massive outlier, most likely never to be seen again at least in my lifetime.

Eric

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Eric,

I’m in the same boat. Took a position in the twenties beginning of the year. Added up along the way. Much of with the conviction built and learnings with this board and other experts in connection with Saul’s. And now squarely in the red for the position overall.

I have the same conviction. I added more. Might be a mistake. But what I lose in possible gains or further losses from staying in and from lost opportunity cost with other better performing companies in between quarters, the plan (hopefully) is to make up with my increased positioning and extended time horizon.

The quality of companies vetted by everyone here is top notch to the point where even the most bearish arguments with all of their well observed and astute reasoning are reasons that I still like the company.

I think that they’ve proven themselves with the stress test of this pandemic to grow out of the small cap universe. Whether they get to survive and stick around as a midcap, they’ll have to be able to justify their existence.

Grateful for the access to the diversity of backgrounds and experience in this community.

Thanks,
Eddie

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Eric,

The point of my questions was not to put you on blast or embarrass you.

If your portfolio is sizable (in terms of your own worth) AND is hyper-concentrated into only 10 or so companies, then I think YES, you must dive extremely deep into each company you own because each company’s performance will significantly influence your financial situation.

However, if you’re not hyper-concentrated and own 20-25 companies, then I think there’s a middle ground to doing a much lighter level of reading and research on companies you own using whatever resources you find trustworthy.

I’m veering far off-topic for this board… my point is just that we all have to know ourselves, our investing experience, and our financial situations and make our own decisions.

This is the last I’ll post about this because I can tell some people are really getting offended.

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I’m really offended by this:

…if they lost TikTok because Fastly refused to budge on price, that shows management is confident enough in the platform and long-term business prospects that they don’t feel the need to budge on price.

This tortures logic with such wanton savagery a benefit concert should be held.

You get credit for holding your price WHEN YOU GET YOUR LARGEST CUSTOMER TO PAY IT because your service is so superior they must bow down before Zod.

Good grief.

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This is the last I’ll post about this because I can tell some people are really getting offended.

Not including me, I hope.

I greatly appreciate your input, now and in the past (and future). I just wanted to make the point that I don’t have the talent or the temperament to deep-dive into these companies the way others do.

Eric

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…and its business stands to benefit from the 5G rollout.

TMF is really rolling out the 5G hype wagon these days. Don’t climb on board. It’s so bad I wouldn’t be surprised if they roll out a whole 5G investing service.

Oh wait, duh, they already have: https://www.fool.com/premium/next-gen-supercycle/landing/

When people start saying that “OLED chips” (whatever those are) will benefit from 5G, it’s time to watch out. IMHO.

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If you look at the MF services and their boards you will see constant posting by mainly new members when the service they are paying for recommends a stock and that stock doesn’t work out. Moaning and groaning posts about how the service sucks and they should have never joined.

You never see that on Sauls board. No one posting and blaming anyone for a bad stock pick. If there were people blindly following every Saul call, any call that turned out to be wrong, he’d be hearing the heckling from those type herd investors.

It seems to me that people over there have their big boy and girl pants on and own their own investing decisions. This just recently came up on Sauls board about “herd mentality”. Sure there will always be some that follow what Saul or a few very influential people say and do, but so what. Was the FSLY call by Saul a bad one? Again, I never see any posts from someone complaining that they followed Saul and sold a stock that in time ended up going way up and that they shouldn’t have listened to him.

I sold 1/3 of FSLY just below the high, posted it here on this board, because of valuation and it wasn’t a high conviction stock for me. I sold the remaining at 94 after the guidance was lowered. Why? Well Sauls comment got me thinking, along with comments from Beth Kindig, who I very much rely on for her insight. It’s what a pay for. Isn’t that the point of hanging out in a place like this, to learn, to share, to make investment decisions?

I attempted to bottom fish at 75 cost average but jumped out completely at the open this morning. Why? I think the company has issues to resolve, the CDN space is a commodity business and they aren’t alone in chasing edge technology. No one told me to try to trade the stock, I did that on my own.

Note. I am guilty of relying on Beth Kindig in a big way, that’s why she gets paid. If she continues to make me the profits going forward that she’s made me in the last year then call me a cow, a lamb, a sheep, or whatever you want to call me. I’ll be part of that herd 7 days a week for the next 10 years because I know she knows a lot more then me about technology. Restaurants? No, that’s where she would have to pay me for my knowledge, and she would be smart to do because my restaurants are in the top 1% in the country in net profitability percentage. This is why I know how important it is to find the best that you can in anything you do.

Sauls board has some good information on it, so I skim through it almost daily. Not sure why there’s such controversy on his board right now because Saul made a very good call on FSLY.

TMB

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When people start saying that “OLED chips” (whatever
those are) will benefit from 5G, it’s time to watch out.

OLED (“organic light-emitting diode”) is a kind of display and is used on the new Apple 5G phones, among others.

https://www.fool.com/investing/2020/07/02/is-universal-displ…

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When people start saying that “OLED chips” (whatever those are) will benefit from 5G, it’s time to watch out. IMHO.

OLED
An organic light-emitting diode (OLED or organic LED), also known as organic electroluminescent (organic EL) diode,[1][2] is a light-emitting diode (LED) in which the emissive electroluminescent layer is a film of organic compound that emits light in response to an electric current.
https://en.wikipedia.org/wiki/OLED

HUAWEI DEVELOPING ITS OWN OLED DRIVER CHIPS
https://www.gizchina.com/2020/08/26/huawei-developing-its-ow…

OLED Display Driver IC
https://www.solomon-systech.com/en/product/advanced-display/…

Denny Schlesinger

OLED (“organic light-emitting diode”) is a kind of display and is used on the new Apple 5G phones, among others.

I know what OLED is. TMF got confused over OLED and “OLED chips.”

What does OLED have to do with 5G? Nothing. My old iPhone X doesn’t have 5G and it has an OLED screen.

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Gosh…
It sounds like someone at TMF did not know what he was writing about

Even a non-tech guy like me knows that the two are different…

TMF got confused over OLED and “OLED chips.”

There are devices that drive the OLED screens. I suppose that’s what was meant by “OLED chips”.

What does OLED have to do with 5G?

Apple and others are using OLED screens in their new smartphones. I assume the perception is the 5G rollout will generate a lot of sales for those phones which in turn will generate a lot of business for OLED vendors like Samsung and Universal Display (ticker: OLED).

Eric