The Razor's Edge

Last week's Fed meeting played to expectations - slightly tougher talk, limited changes in policy.  The market's reaction was to pile back into the Covid winners, which meant SaaS stocks among others.

So for today's episode, we follow up on our Fed discussion from last week, talking their decision and the market and media reaction. We then move over to the SaaS sector, our regular field. We break down three companies in detail – Zoom, PagerDuty, and Workday. We finish off with thoughts about the growth hangover that might plague COVID winners generally.

• 2:30 minute mark – Our Reaction to the Fed meeting

(Note: Daniel is long DBX as well as PD/THO, that disclosure was accidentally omitted from the recorded disclosure).

We've seen this movie before, but it still doesn't really make sense: a group of traders has taken up the cause of inflating the stock price of a motley bunch of stocks, including AMC as the most prominent company this time around. There are hints of financial populism as there were with GameStop in January, but this time it feels more like pure financial nihilism.

On today's episode of The Razor's Edge, we talk about the difference between round one and round two, how AMC should have something of a future even if it's more than priced in, and how given the trading volumes it would be rash to assume retail traders are truly driving this movement. We also talk about the body lurking in the background who could, if they so chose, take action to stop or slow this mania. Jerome Powell, you're our only hope? We break it down.

• 3:15 minute mark – Meme stocks part deux, and the bleeding from trading into investing

Also, check out another Shortman Studios podcast, the Big Tech Ticket, featuring conversations on the biggest issues in tech. https://podcasts.apple.com/us/podcast/the-big-tech-ticket/id1565981471

A couple weeks ago, Akram released a short thesis on Yalla, calling out an odd business model and then some major issues with the platform - duplicative accounts, low engagement, glitches with the gifting model, etc.

On this week's episode we recap that short thesis for those who haven't heard it yet, but then we also go into the aftermath. What's it like to have another short report come out in the same week? Where are the bulls? What about that buyback announcement? And where can this go? 

• 4:00 minute mark – Background on the Yala case

• Akram's Razor's presentation on Yalla - https://www.dropbox.com/s/wntrsycechmyxj9/YallaPrez.pdf?dl=0 and update - https://www.dropbox.com/s/y4wihdy3f7zjz6a/Yalla%20FollowUp.pdf?dl=0

Inflation realities and fears struck the market last week, sending indices lower and helping drive the Nasdaq's 3rd consecutive losing week. At least that's the straightforward read, but as with so much of the market, there could be other things going on. While many are talking about the CPI report, the CDC's updated mask guidance is a reminder that a post-COVID world is coming. So is that what's moving stocks, or how are investors thinking about all this?

On this edition of The Razor's Edge, we talk about the nature of this inflation and the nature of this market, how it compares to past environments, and what sorts of changes we are or are not making in our positioning.

• 3:00 minute mark - Interpreting the regime change – inflation or end of covid?

We're sharing the debut episode of a new Shortman Studios podcast, The Big Tech Ticket. The show, hosted by veteran journalist James Rogers, will cover many of the topics you hear on The Razor's Edge, but from a different angle. AI, semiconductor supply chain, antitrust, all the big issues facing tech and our society today, from the perspective of people with a front-row seat to the stories.

The initial episode features James speaking with Jason Mollica, professor of communications at American University, about Facebook’s oversight board and its awaited decision on whether or not to let Donald Trump back onto the platform. The show was recorded a few weeks ago, and with the decision expected to come out today, the discussion is timely. So, without further ado, check out this episode of the Big Tech Ticket, and sign up for the show wherever you get podcasts, including:

Apple: https://podcasts.apple.com/us/podcast/the-big-tech-ticket/id1565981471

Spotify: https://open.spotify.com/show/3Aj3Za0kZRMpAGwzgLybPw?si=3c855142bde04233

• 2:30 minute mark - The background on the Facebook Oversight Board’s pending decision

On this week’s The Razor’s Edge, we’re talking Stitch Fix. The e-commerce apparel retailer has had quite a six months – a strong earnings report in December sent shares higher, propelled perhaps by high short interest in the name. That high short interest took on rocket fuel in January amidst the Gamestop frenzy. The air came out of the shares, and then the company reported a weaker earnings in March. And then co-founder and CEO Katrina Lake announced she would step down as CEO in August. So a lot going on.

The stock has passionate bulls and bears, and we try to sort out the bull case and whether it's a keeper.

• 2:45 minute mark – Daniel’s SFIX elevator pitch

Semiconductor shortages have been one of the big economic themes emerging in 2021, in our ‘light at the end of the tunnel’ pandemic stage. We have to mention the pandemic because that’s a proximate cause of many of the shortages and supply chain issues that have beset the semiconductor industry and many others. The Auto industry has been a headliner for having to shut production due to lack of semis. And with some grumbling between China and the US over Taiwan, the key role that island plays in the supply chain also looks like a vulnerability.

On today’s episode, we attempt to navigate the economic, geopolitical, and investing implications of all this talk, while zeroing in on the supply chain and its oligopolistic, specialized nature.

• 2:30 minute mark – The shortage and Covid dynamics in semis

The Archegos Capital blow-up at the end of Q1 marked the second huge non-fundamental market event, mirroring the GameStop/Melvin Capital/vintage investing short squeeze dynamics of January. While these can feel like localized events, making or spoiling GSX or VIAC investors' quarters, they at the very least offer important reminders of risk management and understanding your underlying investments. We break down how something like this might happen and what it means for bystanders and active investors.

• 2:30 minute mark - The Archegos and GameStop echoes

Bonus: Article from Michigan Radio on sewer issues

This week’s the Razor’s Edge takes a March Madness theme, as we break down a bracket of ideas. 

 We start off with PagerDuty, breaking down their very solid Q4 report and FY 2022 guidance, as well as the swagger management had on the call. Then we each pitch a new idea. Daniel talks up the favorable economics of Just Eat Takeaway (in the process of buying out GrubHub), and Akram pitches GoPro as a growing subscription business positioned perfectly for a reopening tailwind. We quiz each other on the theses and try to boil down what truly matters for each pitch.

• 3:00 minute mark – PagerDuty Earnings review – confidence, use case expansion, bundling, valuation, the point product vs. platform elements, and when is it worth talking to management

• 20:00 – The basic bull argument

• 54:30 – The GoPro case

Some related items to read:

• Not Boring on the beginning of the end.

One of our regular areas of focus on the Razor’s Edge is the streaming space, and there are few people who are following that space as closely as Andrew Freedman of Hedgeye. To the point where his name has come up on our episodes more than once. So it was long overdue to have him join the Razor’s Edge to share what he’s seeing.

We focus on what’s going on in streaming and whether all the new entrants will have the endurance to make it in the long-term. We then drill into the story around FuBo, a company that Andrew has been vocally bearish about. We wrap up streaming with a look at Netflix’s next act, and then look into the new emergence of live audio as a competitive opportunity, and wrap up with a few questions sourced from Twitter followers.

• 3:00 minute mark – What’s interesting about streaming right now, and the rise of the laggards

Andrew's work at Hedgeye: https://accounts.hedgeye.com/products/communications_pro/558!559

Hedgeye’s Terms of Service: https://www.hedgeye.com/terms_of_service

Definition of some terms:

• SVOD – Subscription Video on Demand