One of the famous technology and media-oriented hedge funds, Glen Kacher’s Light Street Capital Management, discussed some of its most recent favorite investments in the interview for Barron’s. Before we reveal the most interesting details from the interview, let’s take a brief look at Glen Kacher’s background and the fund’s track record.
Prior to launching his own hedge fund in 2010, Glen Kacher honed his investment acumen at Integral Capital Partners and Tiger Management. At Integral Capital Partners, he was a managing director overseeing all the investments in the technology-related sectors, while at Tiger Management he first worked as an analyst and then as a consultant. This is where he mostly sharpened his investing skills and accumulated a vast knowledge of hardware, software, and networking industries. He has been running Light Street Capital quite good so far, with its Light Street Mercury Master fund returning 19.1% since its inception (July 2010) outperforming the Nasdaq, which delivered 17.5% in the same period. Since the begging of 2019 through April 30, Light Street Mercury Master Fund brought back 15.9% this time lagging behind the Nasdaq which delivered 22.4%. Nevertheless, the year isn’t over yet. So, what kind of bets Glen Kacher has at the moment, trying to boost its already amazing returns?
According to the interview, Light Street’s secret to beating the market lies in a successful identifying of the technology stocks that offer some kind of shift from an old way of doing things to the improved way. Throughout the years, Glen Kacher together with Jay Kahn, a partner at the firm, managed to recognize and invest in some of the best technology shifts, such as the launch of cloud computing for example. And now, they see big opportunities in Slack Technologies (already filed for an IPO), Just Eat (JE.UK), Farfetch Limited (NYSE:FTCH), and Uber Technologies, Inc. (NYSE:UBER)
Slack Technologies caught Light Street’s attention because it is a small company that offers a new way for corporate communication – pushing a shift from email to instant messaging that runs in the cloud. Glen Kacher sees real potential in this idea, more precisely a market of more than 200 million users, which means that the company is currently only 5% penetrated. He explained that this potential lies in the fact that people are eager for a real-time communication at work just like they have it in social communication using Facebook, Snapchat, and similar platforms.
“ Slack is one of the few enterprise tools we have seen in the past 10 years that crosses the chasm between enterprise software and social networking ” – said Kahn.
They further said they believe in Slack‘s business model being exceptional and its ability to achieve favorable margins.
Another shift this modern world has brought upon us is in the domain of food. More precisely, the word is about online food ordering which is becoming more popular each day. And, in the world of online food ordering one company can take a notable place according to Light Street Capital, and that is Just Eat, which trades at around half the price of its two peer companies – Delivery Hero SE, and Takeaway.com NV. Mr. Kahn further emphasized that the company is “trading three times forward sales for a business that should grow somewhere around 20% to 30% a year globally.” Just Eat has some of the highest take rates among internet businesses (reaching 18-20% of the ordered food cost), which also speaks a lot about the company. Light Street Capital concluded that it expects Just Eat’s stock price to double in a year or two.
As for the luxury good online retailer Farfecth, Light Street Capital already talked about it, presenting it as its best idea at the Sohn Conference at the end of October in 2018. (More details, including video you can find here.) It turns out the fund still believes in the company’s success, explaining that it provides a better option for smaller businesses – those that don’t want to sell its products via Amazon.com as they wish to stay in control over the price and the look of its products. The company that was launched with the aim to raise luxury-goods penetration online by catering to the needs of luxury brands, earns from a high take rate (around 30%).
The fund praised Uber for reaching a market cap of $70 billion (started from a zero) over a decade, by wisely taking market share from the rental-car industry and other industry players.
Disclosure: None.
This article was originally published at Insider Monkey.
