Greenhaven Road Capital, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. The Fund returned about -33% in the second quarter, bringing its total decline to approximately -51% in the first half of the year. This has been the U.S. market’s worst start to a year in over a half-century and, unfortunately, the fund’s losses were quite outsized during the period, largely due to its concentrated, long-term bets in growth areas. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, Greeenhaven Road Capital mentioned Digital Turbine, Inc. (NASDAQ:APPS) and explained its insights for the company. Founded in 1998, Digital Turbine, Inc. (NASDAQ:APPS) is an Austin, Texas-based advertising agency company with a $2.0 billion market capitalization. Digital Turbine, Inc. (NASDAQ:APPS) delivered a -70.29% return since the beginning of the year, while its 12-month returns are down by -70.50%. The stock closed at $18.12 per share on September 13, 2022.
Here is what Greeenhaven Road Capital has to say about Digital Turbine, Inc. (NASDAQ:APPS) in its Q2 2022 investor letter:
“The Fund’s largest detractor year-to-date is a business where the purchases are more discretionary (fewer forced buyers): Digital Turbine (NASDAQ:APPS). The entire ad tech sector has seen similar YTD declines of ~70%, driven by a decline in advertising spend and concerns of a recession. The mobile advertising space has also been impacted by Apple’s institution of new privacy policies that make targeted advertisements more difficult. Digital Turbine is well insulated from these privacy changes as the large majority of their revenue is not derived from the Apple ecosystem, but rather the Android ecosystem, and they have on-device software that allows them to identify users. Instead, Digital Turbine’s troubles have been customerand product-specific. The most generous description of the current situation is that they have hit an air pocket, but growth should resume. This was hard to anticipate for a few reasons highlighted below – all we know for sure is that growth has come to a screeching halt.
There are two important growth drivers that, at a minimum, have been delayed. The first is the rollout of their Mobile Posse product with AT&T and Verizon, both of whom are moving slower than previously forecasted. Given their sheer size and market power, Digital Turbine does not have a lot of leverage with these customers. The second delay is in generating revenue from partners using the company’s SingleTap technology, which makes mobile advertising more effective by improving app download and open rates. Management has said publicly that companies like Twitter and SNAP are testing the technology, and also that they should start recognizing a small amount of licensing revenue in the third quarter, growing from there. One of the challenges of owning APPS right now is that it is hard to get transparency into the timing of the adoption of their technology by large partners. We cannot look at competitors and infer progress, and any disclosure from an executive at a large partner would be material non-public information, so we do not seek it…” (Click here to see the full text)
Our calculations show that Digital Turbine, Inc. (NASDAQ:APPS) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Digital Turbine, Inc. (NASDAQ:APPS) was in 27 hedge fund portfolios at the end of the second quarter of 2022, compared to 32 funds in the previous quarter. Digital Turbine, Inc. (NASDAQ:APPS) delivered a 17.89% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on Digital Turbine, Inc. (NASDAQ:APPS) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.
Disclosure: None. This article is originally published at Insider Monkey.
