Great discussion on Fastly. Here is my only post. Back in August, I had pointed out Fastly’s anemic enterprise growth over several posts here:
https://discussion.fool.com/so-8-years-from-now-with-a-10-churn-…
I was really surprised that the CEO quoted that they will get to 30,000 to 100,000 enterprise customers. He said that in the EC and repeated that in at least one other investor call. I had felt that after the temporary usage spike due to covid wore off its usage would drop to 40% like in 2019.
But since then after reading a large number of posts here and elsewhere, I became convinced of Fsly’s superiority in its edge computing technology which I still believe by the way. With that and its Signal Science acquisition, I felt its revenue could grow to 55%+. As a result, I increased my conviction level in the stock to make it one of my highest by weightage. By early last week before the drop, it had grown to nearly 15%. The drop brought it down to around 10% and over the last few days I have sold it down to around 4%.
Lesson learned - Given that there was no revenue coming from edge-computing yet Fastly should always have been a medium conviction position. My error was to make it a high conviction position. I did not lose a lot of money but lost in opportunity cost.
Another interesting thought - the MF mantra is to ride these things out and hold for 3+ years since ups and downs are always likely even with great companies. This approach works fine if you held 20 stocks with position sizes of around 5%. In fact, DG preaches that and has been quite successful with a CAGR of 21% since 2004 despite having to pick 2 stocks every month.