Why I lightened my UBNT position

Ubiquiti’s share price has recovered nicely from the news of the disclosure of the SEC inquiry, which seemed to be wholly related to the Citron short report that has been rather thoroughly de-bunked. Ubiquiti has a nice healthy buyback authorization, which they seemed to use at prices up to about $70/share prior to the latest earnings report and up to about $80/share subsequent to the earnings report, with nothing good for me to go on since the price has been above $80/share. Having recently begun trying to look more closely at some stock price charts and developing the start of a theory of rational pricing, price appreciation, and price ranges, Ubiquiti seems to me to be priced within the reasonable range for how their business has performed over the past 3-ish years. The price has risen rather steadily outside of FUD events and an earnings miss or two.

With the price in the upper part of what I view to be the fair value range, with Ubiquiti as primarily a hardware-based company and with revenue growth probably not likely to be 25% going forward, I decided to lighten my position. Upon the next unwarranted FUD attack or price drop due to an earnings hiccup, I will be on the lookout to reload (which is a primary reason that I kept half of my position of shares to keep UBNT well on my radar). Ubiquiti has been one of my favorite stocks to follow over the past 15 or 16 months since I started my initial position. Robert Pera is an interesting CEO, and certainly not conventional (also an NBA franchise majority owner).

still long UBNT, but less so; shares sold today at $86.80 and last of UBNT Jan 2020 $70 call position was sold Monday for $22.20/contract (purchased for $6.30 on Feb. 20, 2018)

Here are some prior posts on Ubiquiti from here on Saul’s board (mostly in chronological order from the time of the first post in each thread, I think):


With Ubiquiti having closed today at $160.67 after having closed at $86.66 on July 6th, 2018 when the first post in this thread was made, I am declaring this to have been quite possibly my worst investment decision to-date.

My conviction on Ubiquiti was strong. I may have quite legitimately had a better overall handle on the FUD situation with the Citron Research attack(s) and subsequent SEC inquiry news (which came out on February 20th, 2018) than any other retail investor on the planet, due to my family ties to Memphis (brother, who is a Grizzlies fan) and recognition of the possibly conspiracy theory-ish connection to the Grizzlies ownership situation.

BUT, I out-smarted myself by thinking the buybacks would slow down with the share price appreciation. On the contrary, Robert Pera has continued to massively increased his own ownership stake in UBNT by decreasing the number of shares outstanding via ongoing buybacks. Pera now owns ~78.8% of UBNT’s outstanding shares, up from about 63.7% as of June 30, 2015 when he had presumably ~57.3M shares and UBNT had 90M shares outstanding, prior to his beginning the voracious buybacks with Ubiquiti’s ample cash flows. That analysis is based on a link to Pera’s last insider sale of 1,000,000 shares - [ http://otp.investis.com/clients/us/ubiquiti_networks_inc/SEC… ]. He still owned 56,278,181 shares after that sale.
As of the most recent quarterly report for the period ending on 12/31/2018, diluted weighted average shares for UBNT was down to 71,406,000.

Making this post reminds me of another post from July 2018, when I was contemplating whether Ubiquiti still “fit in” as a “Saul Board Stock”. Here is a link to that post.

still long UBNT, but not to the extent that I should have remained


volfan84 -

I really appreciate your willingness to share your investment analysis on this name (UBNT). A great learning opportunity.

I do remember many on this board (including Saul) having also been in this name. Most sold for their own justifiable personal reasons. Some sold however more due to FUD including reasons like Pera being questioned as a leader for not having/retaining a true CFO, no marketing spend and other FUD.

I always have viewed Pera much like Elon Musk which I realize is unappealing to many but certainly not to me. I feel they are innovative, transcendent leaders who care little about Wall Street’s established approach but more about driving sustainable competitive advantages and long term value. And they are both MIGHTILY aligned with shareholders given their massive personal stakes in their businesses.

Candidly it has taken some immense courage for me to have retained every single share I acquired of UBNT and TSLA 6-7 years ago, but this ‘Foolish’ approach has certainly paid off from purchase prices for both that were around $30 (UBNT now $161/sh @ 10% of my portfolio; TSLA $292/sh @ 8% of my portfolio). I realize some will say that the money invested was ‘dead money’ for a number of years within the past 6-7 years, but trying to time the market is a fool’s errand as most of us understand well. When the payoff comes, it comes quickly as it has here for UBNT the past year as you note.

I do think these names can expand much more moving forward (especially TSLA) given 5G adoption (UBNT) and the explosion of EV/Solar/autonomous/battery (TSLA).

Continued good luck to all. Fool on!