Mr Market likes the earnings of this ex-Saul stock. Currently up over $45 (35%) to $175.17 for a new ATH.
6 Likes
A big, big part of this particular rise is the Ubiquiti buybacks and how that has limited the public float.
I commented on their buybacks a number of times in the past here on the board, and made a lengthy post on a Premium board about it as of the latest numbers.
(Past post/thread here mentioning buybacks: https://discussion.fool.com/ubnt-anyone-still-following-33158993… )
The abbreviated version is that with the buybacks, Robert Pera’s ownership stake in $UI (formerly $UBNT, but they changed ticker symbols when they switched from being listed on the NASDAQ to being listed on the NYSE) is now up to about 86% (56.8M shares owned by Pera out of about 64.8 or 64.9M that remain outstanding). Since Ubiquiti instituted a dividend several quarters ago (maybe even a full year ago), which is currently at $0.30 per quarter, Mr. Pera should get pre-tax dividend income of $67.5M annually.
This board is not about dividends and share buybacks, however, so I will throw out that their revenue growth for the latest quarter was up 14.3% year over year. Their net income was up about 14.5% year over year. These clearly aren’t “2017/2018/2019 Saul company-like” growth numbers, but generating profits and cash flows is something that the market still has a degree of appreciation for.
volfan84
long $UI (previously $UBNT)
13 Likes
A big, big part of this particular rise is the Ubiquiti buybacks and how that has limited the public float.
I agree wholeheartedly with this. Robert Pera is one of the best capital allocating CEOs in recent history. When the stock goes down, he uses excess cash to buy shares back cheap. This is much better than want many CEOs do which is typically use funds to buy other companies and give management a lot of stock comp. Pera did not give himself any stock comp in recent history and only gave out very limited stock to a few key employees. His ownership percentage in the company increased due to the company buying back shares and not giving out a ton of stock comp.
Another takeaway is that when high profile shorts like Citron come out with a short report, it is often a great time to buy in cheap if you really know the company. In September 2017, Ubiquiti’s stock steadily went down and on 9/18/17, Citron came out with their short report calling the company a big fraud bringing the stock even lower to close at 50.04. To me this was a great time to buy more as I felt I knew the company well and understood the financials well enough to see that the risk of material fraud was low. I posted about this here:
https://discussion.fool.com/why-i-bought-more-ubnt-32844489.aspx…
and here:
https://discussion.fool.com/ubnt-citron39s-focus-on-cash-3284976…
The stock eventually recovered back to the 70s in February 2018 when on 2/20/18, the SEC said they would investigate UBNT. The stock plummeted from 73 to below 50 and closed at 54.64. This was a rare opportunity to cash in twice on the same fraud concerns. I posted about it here:
https://discussion.fool.com/ubnt-buying-more-32991327.aspx?sort=…
Unfortunately, I did not ride UBNT all the way back up, but I made a good amount on buying UBNT both times. From the low on 2/20/28, UBNT went from 49.40 to 184 today for a nice 272% gain in less than 2 years.
A similar thing happened to Shopify in October 2017 when Citron called them a fraud and the stock came down from the low 100s to as low as 89.35. Again if you read the report and understood the company, this was a great time to buy. I remember, Tobi posted on Twitter on 10/10/17 to focus on earnings and not the short report:
https://discussion.fool.com/tobi-tweets-shop-32858883.aspx?sort=…
We all know that SHOP did really well subsequently hitting 409 earlier this year for a 358% gain within 2 years.
The key is to know the company really well so that if a short report comes out, you feel comfortable buying. With SHOP, I did not know it as well as UBNT but given all the errors Citron made in the UBNT short report, it was easy to see the flaws in the SHOP short report.
17 Likes
Citron has made me lots of money… just do the opposite of what Andrew Left says you should do (because he’s betting against you anyway). SHOP and UI and NVDA and others I’ve now relegated to the “don’t care” list, because he’s a horrible person. I think Citron did a hit piece on ROKU back in 2017, too, which is more amusing now.
Knowing your companies well, as you called out, is absolutely essential. It is the absolute fortress against fear, uncertainty and doubt that a well- (or even poorly-) written attack might trigger even in the best investors. And the best way to do that is to do your own research – then you KNOW what you know instead of “knowing” what someone else told you was true.
3 Likes