Greenhaven Road Capital, an investment management company, released its first quarter 2023 investor letter. A copy of the same can be downloaded here. The fund returned 17% in the first quarter. Even though fears of runaway inflation waned in the quarter, investors’ concerns relating to the macroeconomic factors weren’t fully eliminated. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Greenhaven Road Capital highlighted stocks like Cellebrite DI Ltd. (NASDAQ:CLBT) in the first quarter 2023 investor letter. Headquartered in Petah Tikva, Israel, Cellebrite DI Ltd. (NASDAQ:CLBT) is a software company that develops solutions for legally sanctioned investigations. On May 19, 2023, Cellebrite DI Ltd. (NASDAQ:CLBT) stock closed at $5.58 per share. One-month return of Cellebrite DI Ltd. (NASDAQ:CLBT) was -1.06%, and its shares gained 24.28% of their value over the last 52 weeks. Cellebrite DI Ltd. (NASDAQ:CLBT) has a market capitalization of $1.086 billion.
Greenhaven Road Capital made the following comment about Cellebrite DI Ltd. (NASDAQ:CLBT) in its Q1 2023 investor letter:
“Cellebrite DI Ltd. (NASDAQ:CLBT) – Cellebrite is an Israel-based company that came public via a SPAC and is half-owned by a Japanese company. In other words, it has three strikes against it before we even get started. However, Cellebrite has also been a self-funding, rapidly growing technology company since before it was fashionable. They have almost $200M in cash and investments, single-digit churn, gross margins north of 80%, and net revenue retention that has consistently been 125% or greater. Their GAAP reported growth has been depressed due to accounting rules for on-premise licenses and their transition from selling perpetual licenses (large up-front payment) to Software as a Service (SaaS).
As the market leader in “collect and review,” Cellebrite provides the tools law enforcement needs to gather digital evidence from cellphones. Their products help manage the data, track who has accessed it, document compliance with the terms of a search warrant, and make sense of the mountains of data, which generally include geolocation, contacts, texts, phone calls, voicemails, image metadata, and other social media data. The unit economics are excellent and, as the scaled player, Cellebrite can invest more in R&D than smaller competitors. The competitive landscape is limited, most agencies multi-source (using two or more providers), and there is product lock-in as use requires training. A trained/certified technician carries more weight when testifying in court, so many labs put their users through training.
Crime is not going away, digital devices are not going away, and law enforcement’s need for tools to help connect data and criminals will only grow. Cellebrite’s customers are government agencies not subject to the same whims as a consumer and Cellebrite sells products that are mission critical. Can you picture a day where police departments will not have to document compliance with a search warrant of a phone, or one where law enforcement conducts investigations without looking at a subject’s phone? In the first quarter, Thoma Bravo completed their acquisition of Magnet Forensics, a Canadian company also in the digital investigation space. While this isn’t a direct competitor to Cellebrite, I find it notable that they paid multiples of where Cellebrite currently trades. Cellebrite is not going away anytime soon unless private equity or Axon (which already owns 5%) acquires it. Strong balance sheet, strong end markets, strong product line-up, limited competition, scaled player – maybe not Taj Mahal strong, but this is nowhere near a typical soapstone SPAC.”
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Cellebrite DI Ltd. (NASDAQ:CLBT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held Cellebrite DI Ltd. (NASDAQ:CLBT) at the end of the fourth quarter which was 14 in the previous quarter.
We discussed Cellebrite DI Ltd. (NASDAQ:CLBT) in another article and shared Greenhaven Road Capital’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q1 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.
