Saltlight Capital, an asset management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. The SaltLight SNN Worldwide Flexible Fund A1 class returned +4.96% during the fourth quarter of 2021 and since inception, the A1 class has returned 18.69%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Saltlight Capital, in its Q4 2021 investor letter, mentioned Sea Limited (NYSE:SE) and discussed its stance on the firm. Founded in 2006, Sea Limited (NYSE:SE) is a Tempe, Arizona-based global consumer internet company with a $68.3 billion market capitalization, and is currently spearheaded by its CEO, Forrest Li. Sea Limited (NYSE:SE) delivered a -45.22% return since the beginning of the year, while its 12-month returns are down by -42.98%. The stock closed at $122.54 per share on March 18, 2022.
Here is what Saltlight Capital has to say about Sea Limited (NYSE:SE) in its Q4 2021 investor letter:
“Marketplaces must overcome the two-sided problem from Cold Start (zero buyers and sellers) to the Allee Threshold by generating liquidity. There is strong inertia in the early stages that requires offsetting momentum. Energy and capital are the only controllable tools and then luck and timing play a role too.
There are countless ways to generate liquidity on platforms but in marketplaces, the first goal is to get a buyer to try the app/website. The succeeding goals are to buy…and then buy again and again.
Retention loops (product reviews, next purchase discounts etc) take the buyer on a journey from ‘trier’ to ‘habitual buyer’. At all stages, friction should be culled to lessen churn and preserve the lifetime value of the user.
Buyer acquisition
Buyer acquisition relies on a funnel. The predominant (and most expensive) method is to advertise on typical platforms. Alternatively, there are more capital-efficient methods used by some platforms where they leverage their existing user bases or make a deal to use another platform.
Use existing user base: But what if the platform had another business where they had millions of customers (say playing games)? If the marketplace could nudge a percentage of these gamers to try the app, they would not need to raise so much venture capital nor would they have to pay it all to Facebook or Google.
SEA Ltd (portfolio company) leveraged its large gaming platform by offering a ‘virtual good’ (i.e., zero marginal cost) to a gamer if they try their marketplace app (Shopee).”
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Our calculations show that Sea Limited (NYSE:SE) ranks 16th on our list of the 30 Most Popular Stocks Among Hedge Funds. Sea Limited (NYSE:SE) was in 108 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 117 funds in the previous quarter. Sea Limited (NYSE:SE) delivered a -42.42% return in the past 3 months.
In February 2022, we published an article that includes Sea Limited (NYSE:SE) in the 10 Technology Stocks Hedge Funds Are Talking About. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
