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 Elastic N.V. (NYSE:ESTC) and explained its insights for the company. Founded in 2012, Elastic N.V. (NYSE:ESTC) is a Mountain View, California-based software company with a $7.9 billion market capitalization. Elastic N.V. (NYSE:ESTC) delivered a -32.42% return since the beginning of the year, while its 12-month returns are down by -48.04%. The stock closed at $83.19 per share on September 13, 2022.
Here is what Greeenhaven Road Capital has to say about Elastic N.V. (NYSE:ESTC) in its Q2 2022 investor letter:
“Shares of Elastic Software, which powers the search for customers such as Uber and provides other security software, ended the quarter down approximately 40% for the year. From the share price, you would think that demand is falling off a cliff, but that is not the case. Revenue is growing at 35%, the balance sheet is rock solid, and net revenue retention continues to hover around 130% as current customers increase their purchases with increased usage. While companies not generating positive cash flow have been obliterated in this downturn, this is a very healthy business that will very likely be cash flow positive this fiscal year. When addressing demand on the most recent call, the CEO did not use the term “forced buyer” but he could have:
“We have not seen any indication of slowdown in the demand and the consumption…. these things are mission-critical to them. So from their perspective (customers), as data grows, they need to use Elastic, and they continue to use Elastic and that’s not a place where we see customers trying to make any optimization. So that is an inherent strength for us, and it’s continuing.”
Given Elastic’s growth rates and operating leverage, if the multiple ceases to compress, we see a clear path to 30%+ returns from here, and still higher returns if / when there is any multiple expansion. Their stock may not have forced buyers, but their products do.”
Our calculations show that Elastic N.V. (NYSE:ESTC) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Elastic N.V. (NYSE:ESTC) was in 57 hedge fund portfolios at the end of the second quarter of 2022, compared to 55 funds in the previous quarter. Elastic N.V. (NYSE:ESTC) delivered a 32.19% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on Elastic N.V. (NYSE:ESTC) 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.
