Hi there
It's been another volatile few months for the stock market.
While the market was trending upwards again, stocks have reversed course in recent weeks, partly driven by fears over how the US Federal Reserve plans to deal with inflation.
In fact, when Jerome Powell, chair of the US Federal Reserve, mentioned he intends to "act with resolve" and continue raising interest rates until inflation has been quashed, the S&P 500 nosedived by 3.4%, while the tech-heavy Nasdaq index fell 3.9%.
On top of all that, we're heading into September, a historically bumpy month for stocks.
With all that said, we believe in the value of long-term investing at Spaceship; we don’t make changes to our portfolios based on short term events. However, we always maintain a "watch list" and when it comes time for our quarterly investment meeting, we will make changes to our portfolios if we feel there are important changes to be made.
This quarter, we did make some changes.
For the Spaceship Universe Portfolio, we bought Snowflake.
For the Spaceship Earth Portfolio, we bought Tesla and Airbnb, sold Siemens Gamesa Renewable Energy and Crown Castle International, upped the weighting of American Tower, and lowered the weighting of Mercari.
So, let's get into the reasons why…
Spaceship Universe Portfolio
Bought: Snowflake
Snowflake is a cloud-based data warehouse service that went public in 2020. There are infrastructure clouds, application clouds, and now there is the data cloud, where Snowflake is the leading provider.
The IPO received a lot of attention at the time, because it was the first IPO that Berkshire Hathaway, the firm of celebrated investor Warren Buffett, had ever participated in.
(Fun fact: The last time Warren Buffett had participated in an IPO as a solo investor, Dwight Eisenhower was president of the USA!)
Moving on… Snowflake provides a data software 'layer' so that data stored in public clouds — such as Amazon Web Services, Microsoft Azure, and Google Cloud Platform — is separated from the computer-intensive actions performed over it. Instead of data silos, customers can integrate and analyse data sets, store all data in one location, and get access to and share external data with scale and speed (according to Snowflake).
We like Snowflake because we believe it's at the forefront of the 'data cloud' trend. Workloads are moving to the cloud, and data-driven decision making is becoming more prevalent.
We feel Snowflake has an opportunity to become core infrastructure to the digital economy.
While it has a revenue model that makes it slightly more volatile than its peers (being consumption based), it also means new customers can easily test services rather than making long term commitments.
And, customers are impressed!
Snowflake’s dollar-based revenue retention rate is best in class, at 171%. Dollar-based net revenue retention is a metric that shows how much revenue growth comes from existing customers. So, even if Snowflake didn’t acquire any new customers, revenue would grow by $71 from existing customers expanding spend on top of last year's $100 base. It’s also an indicator of whether customers are finding new use cases and seeing value from Snowflake’s services.
All things considered, we decided to buy Snowflake for the Spaceship Universe Portfolio.
Spaceship Earth Portfolio
Bought: Tesla
Tesla likely needs no intro; we've no doubt you've heard of the electric car company, founded by Elon Musk and on a mission to accelerate the world's transition to sustainable energy.
We believe Tesla contributes to several of the UN Sustainable Development Goals, including Goal 7 (Affordable and Clean Energy), Goal 13 (Climate Action), and Goal 12 (Responsible Consumption and Production), as outlined in its impact report.
We like Tesla because we believe it's well positioned to be a leader in the electric vehicle market for years to come. The US government is targeting 50% of new car sales in the US be all-electric by 2030, but for that to happen, Tesla CEO Elon Musk has said that electricity generating capacity will have to double. Tesla's Gigafactory and Powerwall are important parts of Tesla's ecosystem that will help make that happen.
There are risks with Tesla, such as its ambitious production targets, but we've owned Tesla in the Spaceship Universe Portfolio since that portfolio's inception, and since then we've seen better than expected execution, so we decided to add it to the Spaceship Earth Portfolio too.
Bought: Airbnb
Another company that many of you will have likely used is Airbnb.
Airbnb is the world's largest online marketplace for "alternative accommodation" with more than 300 million nights and experiences booked in 2021 alone.
Airbnb is a part of the sharing economy, and it’s asset-light, meaning it doesn't own assets the way other companies might. Instead it relies on its more than four million hosts who offer up more than seven million listings, and connects hosts with guests.
We believe Airbnb contributes to several of the UN Sustainable Development Goals, including Goal 7 (Affordable and Clean Energy), Goal 12 (Responsible Consumption and Production), and Goal 5 (Gender Equality), as outlined in its latest ESG update.
One of the reasons we like Airbnb is because its business model is more resilient than peers with local and global offerings that cater to short term and long term needs. It has increased its market share and its relevance (among consumers) during the Covid-19 pandemic and has benefited from increased job flexibility. Guests are staying longer on Airbnb, with long term stays of 28 days or more up by almost 90% from pre-covid levels in 2019.
Airbnb has an incredibly strong brand (Airbnb is a noun and a verb), evidenced by the fact that nearly 90% of its traffic is direct. Additionally Airbnb benefits from a strong network effect; every additional host’s listing adds value to both local and global guests.
We also believe there is potential for Airbnb to increase host pricing. Hosts are currently charged 3% of the room’s revenue. By adding extra features such as advertising to its marketplace, we believe Airbnb can capture more of the value they generate.
There are risks with Airbnb, such as struggles to increase host supply, but we believe in its growth.
Sold: Siemens Gamesa Renewable Energy
Siemens Gamesa is a pioneer in the development of wind turbines. They operate in more than 90 countries, offering an extensive range of technologies to cover all wind classes.
The company recently received a takeover offer from its parent company, which already owns 67% of the company. This was in order to take the company private, which means we essentially had no choice but to sell out of Siemens.
Sold: Crown Castle International
Crown Castle International (CCI) is one of the largest providers of shared communications infrastructure in America. While we still feel strongly about that sector, we believe we should consolidate our position in wireless infrastructure.
We prefer exposure to American Tower, which we believe has stronger economic moats (aka competitive advantages) such as increased exposure to towers, so we decided to sell CCI.
Weight increase: American Tower
Which leads us to American Tower!
We are increasing our weighting in American Tower (from 2.5% to 3.5% target position) as we believe American Tower's exposure to wireless tower infrastructure is a more valuable investment proposition for us than Crown Castle's mix of small cells and wireless towers.
Weight decrease: Mercari
We're also decreasing our position in Mercari at this time (from 3.5% to 1.5% target position).
We'd rather reduce our exposure to the ecommerce sectors and reallocate to Airbnb's travel and longer term experiences trend.
This also helps us increase our trend diversification in the portfolio.
Spaceship Origin Portfolio
For customers in the Spaceship Origin Portfolio, things are a little different.
The Spaceship Origin Portfolio is made up of around 100 of some of the largest ASX listed companies by market capitalisation, and around 100 of some of the largest global companies by market capitalisation.
If a company moves in or out of the Spaceship Origin Portfolio, it will be because its market capitalisation has changed, not because we have made the decision to buy or sell it.
One or more of the Spaceship Voyager portfolios invest in Snowflake, Tesla, Airbnb, American Tower, and Mercari at the time of writing. Please refer to the Spaceship app or our website for more information on what each portfolio invests in.
Important! We’re sharing with you our thoughts on the companies in which Spaceship Voyager invests for your informational purposes only. We think it’s important (and interesting!) to let you know what’s happening with Spaceship Voyager’s investments. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator or guarantee of future performance.
