It’s a busy time of year for us at Spaceship, as we head towards the end of the financial year and prepare for some exciting new features. It’s also the time of year where we tell you about the latest changes to our Spaceship Voyager portfolios, so strap in...
Spaceship Universe Portfolio
Bought: Airbnb
Airbnb bills itself as an online marketplace creating “connection and belonging” thanks to millions of hosts — which could be you or me — offering homes and experiences around the world. The company burst onto the scene in 2007 in San Francisco, and in its early days, was partially funded thanks to the sales of political cereal boxes!
These days, though, the company makes its money by charging its hosts a service fee.
Interestingly, Airbnb — inherently a travel company — has thrived during the COVID-19 pandemic. Airbnb reported sales of US$859 million in the final three months of 2020. Though these sales were down 22% from a year earlier, that’s not too bad by pandemic standards.
This is in part thanks to its business model, which is just as much about local travel as it is about global travel — and we all know local travel is where it’s at right now.
With that said, Airbnb is not just a travel company but a lifestyle company. “People are not just traveling on Airbnb, they’re now living on Airbnb,” CEO Brian Chesky has said. The share of bookings longer than 28 days has jumped to 24%, up from 14% two years ago. During Q1 2021, 50% of room nights booked were from stays of at least seven nights.
We like Airbnb because it has a strong brand — we like companies that become nouns or verbs — and a strong network effect. For example, around 90% of its website traffic is unpaid or direct, even as recently as Q1 2021. And whenever Airbnb adds a host to its network, it benefits Airbnb’s local and global network.
We also like the optionality Airbnb has in revenue, such as from advertising and payments. Airbnb has the opportunity to launch sponsored listings, an advertising tool for hosts to promote their listings, similar to marketplaces such as Amazon or Ebay.
Additionally Airbnb does not charge for payment processing unlike other travel sites. Both payments and advertising are high margin opportunities.
This, combined with the trends we’ve seen during COVID-19 — including working from home — makes Airbnb a strong pick for us. And we still believe it’ll benefit as borders open again.
P.S. The world’s last standing Blockbuster store is now listed on Airbnb!
Bought: CrowdStrike
CrowdStrike is a leading cybersecurity company founded in 2011 with a plan to revolutionise security in the cloud era. Within two years of launch, it was being named on ‘Most Disruptive’ lists, and it has only flourished from there.
For example, CrowdStrike’s Threat Graph now processes 6 trillion events per week across 176 countries and stops more than 75,000 breaches a year. Moreover, it utilises crowdsourced data and cloud analytics to detect and prevent cyber threats, unlike legacy solutions which are more reactionary in nature.
We like CrowdStrike partly because of its network effect. The company uses its artificial intelligence algorithms to inform its product offering. The company uses data from its customers to better its product; the more companies that use the platform, the better it performs. That, in turn, keeps customers ‘sticky,’ with the proof in CrowdStrike’s 98% retention rate.
IDC — a market intelligence firm — estimated that cloud security spend in 2020 was only 1.1% of cloud IT spend on infrastructure and platform as a service. It predicted 5% to 10% of IT budgets would be spent on security. Crowdstrike has 11,420 subscription customers, a low number considering most of the enterprise software companies we own have more than 100,000 customers, which suggests there is more growth to come.
We also appreciate the fact that demand for CrowdStrike (and similar companies) is strong, as the threat landscape of ransomware is growing in intensity. There is software as a service, and now there is ransomware as a service, meaning it’s become much easier for hackers to target businesses. (Fun fact: The average cyber ransom payment paid by Australian companies is A$1.25 million.)
Again, there are risks. For instance, if CrowdStrike failed to stop a cyberattack, there is the potential for reputational damage to its brand. But we believe that if CrowdStrike continues to execute on its mission, they could have a huge business.
Sold: Mastercard and Yum China
We have sold Mastercard and Yum China out of the Spaceship Universe Portfolio. We’ll be talking about that in the next few weeks.
Spaceship Earth Portfolio
Bought: Alibaba
We’re only making one change to the Spaceship Earth Portfolio this quarter: we’ve bought into Alibaba, which is often called the ‘Amazon’ of China.
We believe Alibaba contributes to Goal 1 (No Poverty) and Goal 12 (Sustainable Consumption and Production) of the UN Sustainable Development Goals agenda.
Alibaba has helped diminish poverty in China with the creation of Taobao villages, rural e-commerce hubs where farmers can use Alibaba’s logistics, service and training to become merchants. On top of that, Cainiao Network, the logistics affiliate of Alibaba, has promoted sustainability with green initiatives such as a package recycling program.
We like Alibaba because it is well positioned to benefit from growing consumer spending in China. Furthermore, the company’s dominant position in high growth industries such as electronics payments and cloud computing will likely ensure Alibaba generates strong growth over time.
We decided to buy Alibaba this quarter as we think negative sentiment around Alibaba, other Chinese tech stocks, and the risk of antitrust intervention has created a buying opportunity. However, the risk is definitely real, with Alibaba forced to indefinitely postpone its spinoff of Ant Financial. The regulator also forced Alibaba to pay a US$2.8 billion fine and make several operational changes at Ant Financial. Despite that, we think Alibaba’s valuation compared to its peers (with Alibaba stock still down more than 30% from highs) creates a margin of safety for us as investors.
Overall, we are cautiously optimistic that Alibaba still has tremendous growth ahead, but it’s important for them to regain the confidence of the regulator.
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.
The Spaceship Universe Portfolio invests in Airbnb, Crowdstrike and Alibaba at the time of writing.
The Spaceship Origin Portfolio invests in Alibaba at the time of writing.
The Spaceship Earth Portfolio invests in Alibaba at the time of writing.
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.
