Argosy Investors, an investment management company, released its second-quarter investor letter. A copy of the same can be downloaded here. The S&P 500 returned 8.7% during the second quarter. The fund ended the quarter with 52% of the portfolio in cash and equivalents. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Argosy Investors highlighted stocks like Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) in the Q2 2023 investor letter. Headquartered in San Ramon, California, Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) is an enterprise-level digital transformation services provider. On August 15, 2023, Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) stock closed at $11.14 per share. One-month return of Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) was 1.36%, and its shares lost 44.27% of their value over the last 52 weeks. Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) has a market capitalization of $ 834.35 million.
Argosy Investors made the following comment about Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) in its second quarter 2023 investor letter:
“In other news, I essentially swapped the positions in Thoughtworks and Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) for a position in Endava. As a result, the entire sector has fallen rather significantly. Given the indiscriminate selling of quality companies in the space, I decided to sell Thoughtworks, a slower-growing outsourcer with some suspicious foreign ties I wasn’t previously aware of, and Grid Dynamics (GDYN), a much smaller company that I bought during the COVID pandemic after it went public via SPAC.
One of the challenges with former SPAC companies is that their incentives were poorly aligned when they went public, so there is the possibility that they won’t behave any better once public. When Grid Dynamics went public, it went public as a $100MM revenue company with significant growth opportunities ahead of it. Because of this, I looked past the significant stock-based compensation when I initially bought because oftentimes newly-public companies will issue a large amount of stock-based compensation (SBC) as a reward for a successful IPO and to incentivize the management team. We’re now 3 years past their IPO via SPAC, and the SBC issue remains.
In 2022, SBC is nearly 20% of revenue, the same % the year the company went public, and the company remains unprofitable on a GAAP basis but is conveniently profitable on a non-GAAP (I.e. adjusted for outrageous SBC) basis. At >$300MM of revenue, Grid Dynamics has no excuse for not achieving GAAP profitability. EPAM at a similar revenue level was significantly profitable with 15% operating margins and >20% annual growth. I grew tired waiting for GDYN to scale and generate real profits and instead will entrust Endava (DAVA) to treat my hard-earned money with more respect.”
Photo by mahdis mousavi on Unsplash
Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 11 hedge fund portfolios held Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) at the end of first quarter which was 16 in the previous quarter.
We discussed Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) in another article and shared Renaissance Small Cap Growth Strategy’s views on the company. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
