Updated: Nov 24, 2020
Psalm 100 verse 5 states, “For the Lord is good and his love endures forever; his faithfulness continues through all generations.” What I know from the Bible is that God’s love for me is most clearly expressed through freedom. I have the free will to decide whether or not I will accept God, and God is always right there waiting for me to seek Him. My past actions are never a hinderance for a relationship with God, whether personally from what I have done, nor from my previous generations.
I performed an analysis this past summer during what I called then the Summer IPO Wave. I like to often reflect on my analysis efforts and investment decisions. It is always good to be thankful for wisdom and discernment, especially as blessings from God occur. I have been blessed as I have navigated through the Summer IPO Wave. During this time, the following companies were going public:
Palantir Technologies (PLTR)
Snowflake, Inc. (SNOW)
Asana, Inc. (ASAN)
American Well Corporation (AMWL)
Unity Software Inc. (U)
Of these five companies, I was most focused on investing in Palantir and Snowflake, with mixed feelings on Unity. Asana and Amwell were not considerations based on my analysis. Here’s their performance from their closing IPO day and as of November 23rd:
Palantir – 121%
Snowflake – 8%
Asana – (24%)
Amwell – (1%)
Unity – 89%
As I always say, it's extremely helpful to have strong tools available to gauge investments, especially during times of high-profile and eagerly anticipated IPOs. All five of these IPOs presented challenges for me, as despite strong revenue growth, none were producing positive cash flows at the time of their prospectus filings.
This required me to consider cash flows in a couple ways. First, I had to deconstruct both adjusted reconciliations of net income and working capital in a more detailed fashion. Second, I had to think longer term from my typical two-year projections. Concurrently, I needed to consider the competitive landscape and scale for these new entrants.
Upon my review, I was sure that positions in Palantir and Snowflake would be merited for long-term investment consideration, so much so, that I loaded up on Palantir aggressively below $10 per share, and begrudgingly initiated on Snowflake in the $240s. Snowflake was extremely challenging as I knew the potential was strong, yet it shot out of the gate with one of the highest valuations I’ve seen recently.
Unity may seem like a mistake, but I don't see it that way. The gains would have been nice, but I would not have loaded up on this one so it would still be a smaller holding. Additionally, a better opportunity may be forthcoming as the Roblox IPO could end up being the better play. Cash flow is the underlying name of the game with revenue growth, and I am not entirely confident in Unity's potential there, despite recent improvement. Conversely, near-term improving cash flow expectations is exactly why I was so bullish on Palantir and initiated on Snowflake, despite the insane valuation.
What I am most thankful for were my calls on Asana and Amwell. While Unity has displayed strong improvement on cash flows, Amwell has displayed the opposite and I suspect that Asana will follow Amwell's path.
Moving forward, I am confident that the trends will stay positive for Palantir, Snowflake and Unity being stronger long-term investments. Asana is definitely the weakest of the group, and Amwell may be able to improve over time as its business scales, but it still has a way to go.
I have a very strong position in Palantir with sizeable unrealized gains. I am looking for a better opportunity (if it every comes) to add to the Snowflake position, but with earnings just over a week a way, this is becoming a risky proposition. I will likely consider the Roblox IPO as an alternative to Unity as mentioned. I have other technology investments that I am more optimistic about versus Asana, and I am strongly invested in Teledoc Health (TDOC) for my telemedicine exposure.