mardi 20 février 2018

Sequoia fund’s update

For many years now, I like Sequoia fund's guys.

But sometimes I have some difficulties to take them seriously. For instance, the transactions of the last quarter puzzle me.

Last quarter, they almost doubled their investment in Amazon (now 7,5% of the fund) making it the third stake of the fund. Yeah, Amazon is a great company and Jeff Bezos is the richest man on earth. The fact remains that AMZN isn't a traditional investment. You may put some money in that stock, but making it your third biggest stake, is it serious? Is it a billion dollars joke?

They added 29% to their investment in GOOGL and now their stake in Alphabet (GOOGL + GOOG) represents 14,3% of the fund which seems bold to me. Didn’t these guys told after the Valeant fiasco that they would never again have more than 10% of the fund in a single investment excluding Berkshire? Do these guys laugh at us? Did they forgot that I was some kind of fucking asperger who remembers everything that’s been said or written about things that fascinate me? Sequoia guys, my trust level is going down. Can you really afford to lose my trust?

They also reduced their Carmax position by 31%. Don’t forget that it was a recent addition for them. Why did they sell such a big part of it so soon? It reminds me their stupid acquisition of Chipotle Mexican Grill which was dumped soon after. That kind of move seems amateur to me. I’d expect that from Ackman but not from them.

And I don’t want to defend too much Carmax but like I said not so long ago, the stock isn’t pricey at all in an expensive market. And the predictability of it is very high. I surely wouldn’t put 10% of my portfolio on that stock like Giverny Capital but that decision doesn’t make sense to me.

They also reduced their stake in O’Reilly by 8% (now 2,4% of the fund). I have a very high opinion of O’Reilly so I’m becoming slightly mad at this point of that post.

Finally, they added 65% to their investment which now represents 2,3% of the fund.

In retrospect, I dislike what they did for their three biggest transactions. I see no logic or at least, no measure there.

3 commentaires:

  1. Perhaps some people only see Amazon as an online retailer who does not make any money. Amazon is also the most dominant cloud services company in the world. That lucrative division alone is worth at least $250 million. Amazon also competes against Netflix in streaming. Amazon is now competing with Google and Facebook for internet advertising dollars. We thought that internet advertising was a duopoly for Google and Facebook. It turns out that Amazon is going to make billion$ from internet advertising. For starters, those third party sellers on the Amazon site pay Amazon to have a better position when somebody does a search for a product that Amazon does not carry directly. Now, when looking for a product, people do not do a google search...they go straight to the amazon website and do a search for the product on amazon.
    I laughed at the valuation of Amazon for years. I recently became a shareholder because these guys are positioning themselves to take over. Soon people will be handing most of their paycheques over to Amazon. Alexa will order all your supplies for your home with just a voice command from you. People will go into convenience stores and just walk out with their purchases. No cashier. Nothing to slow you down. You will get the bill online. Amazon is a disruptor and investors do not seem to care if they make a profit so long as they keep their revenues growing. Pull up their lifetime chart. Twenty years ago they were at $2 and now they are a bit higher than that ($1,468.35). What other company has been as successful? I don't know which company will be the first with a market cap of $1 Trillion but I bet that Amazon is going to be the first company to $2 Trillion in market cap.

    1. amazon is a great business and it’s valuation has been very high since forever. I’m not tempted to invest money in that stock but I could understand why somebody would put 2-3% of their portfolio in it. However, 8% is too much in my opinion. And don’t forget that Sequoia guys told that they wouldn’t put too much money on a stock after the Valeant fiasco. I’m not saying that Amazon and Valeant are the same but both have no traditional metrics.

  2. This just in:

    The first Go Store, which offers a cashier-free shopping experience, opened in Seattle last month. They are aiming to open six more.