| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 11.6% | 6.9% | -23.3% |
Hayden Capital returned 6.9% net in Q2 2026 versus 15.2% for the S&P 500, bringing YTD performance to -23.3%. The fund's core thesis centers on earnings growth through reinvestment cycles at attractive incremental ROICs. Manager Fred Liu argues AI disruption is happening slower than markets initially feared, with software incumbents remaining resilient. He expresses concern about hyperscaler capex sustainability, noting the big tech companies will spend close to $800 billion in 2026 with capex now exceeding internal cash flow for the first time. Liu questions whether incremental ROICs will remain attractive as speculative bid in chip markets potentially evaporates. The portfolio remains concentrated in what Liu views as highest-quality franchises, with particular conviction around e-commerce reinvestment cycles at Shopee and Mercado Libre showing early signs of 18-38% ROICs. The fund exited Pinduoduo after a successful 3.5 year hold generating 24% annualized returns as the original thesis played out. Portfolio allocation is 34% Asia, 43% North America, 17% Latin America. Liu believes current setup of companies growing 40%+ yet trading at market multiples plants seeds for future outperformance.
Hayden Capital focuses on earnings growth as the primary driver of long-term returns, investing in high-quality franchises undergoing attractive reinvestment cycles where incremental returns on invested capital can be calculated with reasonable confidence, while the market prices in pessimistic scenarios.
Manager expects current portfolio companies to continue performing well operationally despite near-term market volatility. Largest investments are growing revenues over 40% year-over-year, beginning to exit reinvestment cycles, yet trade at same valuation as broader market. Manager believes this setup typically plants seeds for meaningful outperformance in future years and remains confident ownership stakes will be valued appropriately over long term in line with growing earnings streams.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Aug 28 2026 | 2026 Q2 | 0700.HK, COST, CRM, DASH, GOOGL, MELI, NVDA, PDD, SE, TSM | AI, Asia, Capex, China, E-Commerce, Reinvestment, ROIC, semiconductors | - | Hayden Capital underperformed in Q2 as markets favored momentum over quality. Manager Liu focuses on reinvestment cycles with calculable ROICs, expressing conviction in e-commerce plays Shopee and Mercado Libre while questioning AI capex sustainability at hyperscalers. Exited Pinduoduo profitably after thesis played out. Portfolio companies growing 40%+ at market multiples sets up for future outperformance as reinvestment programs mature. |
| May 28 2026 | 2026 Q1 | SE, U | AI, Asia, drawdowns, E-Commerce, gaming, Internet, technology, Valuations | - | Portfolio down 28% as AI fears pressure internet stocks while semiconductors soar. Manager sees speculative AI infrastructure bubble, prefers application layer opportunities. Sea Ltd's Shopee VIP scaling like Amazon Prime with strong unit economics. Unity's gaming engine dominance plus Vector ad platform creates compelling value at current prices. Tech valuations most attractive since 2022. |
| Feb 24 2026 | 2025 Q4 | 1519.HK, 7974.T, ABNB, APP, BKNG, CPNG, DASH, EDU, EXPE, GTLB, MELI, NFLX, NOW, RBLX, SE, SPOT, TEAM, TTWO, U, UBER | AI, competition, E-Commerce, gaming, international, software, technology, valuation |
EDU SE |
Hayden delivered +22.3% in 2025 despite Q4 weakness. The AI cycle shift from infrastructure to applications is creating indiscriminate selling in software and digital sectors, presenting opportunities for stock-pickers. The manager focuses on companies with proprietary data and network effects that AI cannot replicate, while maintaining international exposure given US market instability and valuation disparities. |
| Nov 26 2025 | 2025 Q3 | 215A.T | AI, Bubble, Japan, Labor, Marketplace, Staffing, technology | 215A JP | Hayden Capital outperformed in Q3 with focus on AI deployment phase opportunities rather than current infrastructure build-out. Major investment in Timee, Japan's dominant on-demand staffing marketplace, capitalizes on severe labor shortages worsening to 11M missing workers by 2040. Company shows strong network effects, 78% revenue growth, and expanding margins in winner-take-most market. |
| Aug 25 2025 | 2025 Q2 | SMRT | Asia, emerging markets, Long Term, market structure, risk management, volatility |
SMRT SMRT |
Hayden Capital posted 17.6% Q2 returns as emerging markets outperformed US assets. The fund leverages minimax theory and patient capital to exploit forced selling by short-duration competitors. With 57% allocation to Asia and focus on emerging growth companies, Hayden positions for long-term value creation while competitors chase short-term inefficiencies. |
| Mar 31 2025 | 2025 Q1 | APP, COIN, CVNA, LK, SE, SPOT, UBER | Asia, E-Commerce, growth, profitability, Recovery, technology, Trade Policy, volatility | SE | Hayden outperformed in Q1 with -0.6% vs S&P 500's -4.3%, maintaining 63% Asia exposure. The manager focuses on identifying best-of-breed companies that emerge stronger from downturns, citing examples generating 4x-82x returns from troughs. Trump's unpredictable trade policies create volatility, but this benefits patient investors who can spot sustainable competitive advantages before profitability becomes obvious. |
| Feb 27 2025 | 2024 Q4 | APP, SE | Asia, Concentration, E-Commerce, emerging growth, Logistics, Power Law, Southeast Asia | SE | Hayden Capital returned 64.3% in 2024, outperforming the S&P 500 by nearly 40 percentage points through concentrated bets on emerging growth companies in Asia and Latin America. Sea Ltd's logistics dominance and Applovin's advertising algorithm drove returns. The firm's power law strategy targets businesses with mature divisions funding expansion, providing downside protection with significant upside potential in inefficient markets. |
| Nov 27 2024 | 2024 Q3 | 1211.HK, APP, CACC, COIN, CVNA, SE, TM, TSLA | AI, Asia, gaming, growth, Hedge Funds, market structure, Multi-Manager, technology | APP | Hayden Capital posted 13.9% Q3 returns led by Applovin's 240% gain from AI advertising platform recognition. The fund adapts to structural hedge fund industry changes by expanding focus to $1-10B market cap companies and investing closer to business inflection points. Global portfolio positioned for crypto regulatory clarity and US-China competition benefits. |
| Aug 27 2024 | 2024 Q2 | AMZN, APP, META, PDD, SE, U | Advertising, AI, Asia, E-Commerce, gaming, Reacceleration, technology | - | Hayden Capital's reacceleration strategy delivered strong Q2 performance as portfolio companies demonstrate earnings recovery after temporary growth slowdowns. Core holdings Applovin and Pinduoduo showcase the thesis with AI-driven advertising growth and profitable e-commerce execution. Manager actively deploying capital during volatility while positioned for Fed rate cuts benefiting international and growth assets. |
| Jun 11 2024 | 2024 Q1 | APP, COIN, SE | Asia, competition, crypto, E-Commerce, gaming, growth, value | SE | Portfolio companies are accelerating growth and gaining market share while competitors struggle with operational challenges and balance sheet issues. Sea Ltd, Applovin, and Coinbase are cementing dominant positions in their respective markets at attractive valuations of 8-13x forward free cash flow, positioning for continued outperformance as industry leaders emerge stronger from the competitive shakeout. |
| Jan 7 2024 | 2023 Q3 | AAPL, ADBE, ATVI, EDU, KO, NESTLEIND.NS, PDD, PG, SMRT | cash flow, China, Predictability, real estate, technology, value | SMRT | Hayden delivered strong Q3 returns driven by Chinese investments like Pinduoduo and New Oriental, which show resilient growth despite macro headwinds. Manager identifies opportunities exploiting the market's predictability premium while SmartRent approaches profitability. With Chinese positions nearing fair value, actively seeking new deployment opportunities in beaten-down sectors, expecting portfolio cash fluctuations during reallocation. |
| Feb 24 2023 | 2022 Q4 | PDD | - | - | |
| Nov 25 2022 | 2022 Q3 | SE, SMRT | - | - | |
| Aug 19 2022 | 2022 Q2 | COIN | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIManager views AI as transformational but believes disruption is happening slower than markets initially feared. Software incumbents remain resilient despite SaaS-pocalypse narrative. Manager notes AI adoption has meaningful inertia and will take longer to permeate society than early expectations suggested. |
Software Disruption Adoption LLM |
Data CentersHyperscalers are spending close to $800 billion on capex in 2026, up over 80% year-over-year. Manager questions sustainability of returns as capex now exceeds internal cash flow for the first time, requiring external capital. Concerns about whether incremental ROICs will remain attractive or drift lower as compute prices potentially compress. |
Capex Hyperscalers ROI Infrastructure | |
SemiconductorsManager expresses concern about speculative bid inflating chip prices, with companies like Tencent able to flip chips at 30% markup. Questions what happens when supply increases and speculative bid evaporates. Notes commoditized component manufacturers in Asia have seen stocks rocket but lack pricing power of scaled players like Nvidia and TSMC. |
Chips Pricing Supply Speculation | |
E-commerceManager is bullish on e-commerce reinvestment cycles at Shopee and Mercado Libre. Shopee's VIP program showing strong results with incremental ROIC moving from 26% to 38%. Mercado Libre's logistics investment attracting 8 million incremental customers with potential for 18-37% ROICs as cohorts mature and ad take-rates rise. |
Logistics Reinvestment Customer Growth Unit Economics | |
ChinaManager exited Pinduoduo position after successful 3.5 year hold generating 24% annualized returns. Original thesis around Duoduo Grocery profitability played out. Cites sluggish macro environment and lack of visibility on new Pinmu initiative as reasons for exit, though acknowledges company's strong track record. |
Ecommerce Consumption Macro | |
Capital MarketsManager discusses how markets rarely give credit for reinvestment programs until payoff shows up in financials. Notes markets have grown increasingly momentum and short-term driven over the past decade. Emphasizes importance of earnings growth as primary driver of long-term returns versus multiple expansion or dividends. |
Reinvestment Earnings Growth Valuation | |
| 2026 Q1 |
AIManager sees AI infrastructure as overvalued with speculative behavior emerging, but believes the real value will be captured by AI application companies rather than infrastructure providers. Cites historical precedent that technological value typically accrues to users of technology rather than equipment makers. |
Infrastructure Applications Valuations Speculation Technology |
E-commerceManager is bullish on internet/e-commerce platforms trading at attractive valuations after being sold off. Sees Sea Ltd's Shopee VIP program as similar to Amazon Prime's early success, with strong unit economics and growing market share despite TikTok Shop competition. |
Platforms Valuations Growth Competition Asia | |
SemiconductorsManager acknowledges tremendous earnings growth in memory and semiconductor companies but questions sustainability of the cycle. Expresses concern about speculative behavior and vertical price moves, choosing to avoid the sector despite strong performance. |
Memory Cycle Speculation Valuations Equipment | |
GamingManager invested in Unity as a dominant 3D content creation engine with new leadership and Vector ad platform showing promise. Sees Unity's first-party data advantage from being embedded in 70% of mobile games as a structural competitive moat. |
Engines Advertising Data Mobile Platforms | |
| 2025 Q4 |
Biopharma M&AM&A activity accelerated in the second half with notable acquisitions including Merck's $10 billion purchase of Verona Pharmaceuticals and Sanofi's $9.5 billion acquisition of Blueprint Medicines. Manager believes acquisitions will play a key role in filling the void created by patent expirations as big pharma faces the largest patent cliff in industry history, potentially losing $400 billion by 2030. |
M&A Acquisitions Patent Cliff Big Pharma Biotech |
BiotechnologyFund's allocation to pharmaceutical and biotechnology stocks increased significantly to over 40% by year end. Manager believes small-cap biotech and pharma stocks are on the front end of a multi-year innovation cycle with recent drug launches having blockbuster revenue potential of $1 billion plus. |
Small-cap Innovation Drug Launches Blockbuster Revenue | |
PharmaceuticalsHealthcare sector faced significant pressure in first half due to regulatory uncertainty and government drug pricing proposals, but recovered strongly in second half. Manager focuses on identifying businesses more insulated from macro and regulatory factors positioned to compound value through various environments. |
Drug Pricing Regulatory Healthcare Value Compounding | |
| 2025 Q3 |
AIManager discusses AI infrastructure investment surge and debates whether current environment represents a bubble. Views AI technology as permanent despite market volatility, with focus on identifying deployment phase opportunities rather than installation phase winners. |
Infrastructure Bubble Deployment Technology |
JapanSignificant focus on Japan's chronic labor shortage crisis, with declining birth rates creating 3.4M missing workers by 2030. Government work-style reform initiatives and structural inflation creating new market opportunities for labor marketplace solutions. |
Labor Demographics Shortage Reform | |
StaffingDeep analysis of Timee's on-demand staffing marketplace model in Japan. Platform connects businesses needing immediate staff with workers seeking short-term employment, addressing critical labor shortages through instant matching and payment systems. |
Marketplace On-demand Gig Platform | |
| 2025 Q2 |
Emerging MarketsEmerging market assets are finally catching a bid as the US has become an erratic and unreliable partner to global peers. The MSCI Emerging Markets index is outperforming the S&P 500 by approximately 9% year-to-date, potentially marking the first time emerging markets have outperformed the US since 2017. |
Emerging Markets Outperformance Valuations US Premium |
Risk ManagementThe manager applies minimax theory to investing, emphasizing maximizing survival over total risk elimination. The optimal strategy focuses on maintaining a high survival threshold and wide margin of safety to stay in the game until favorable opportunities arise, rather than avoiding all risk. |
Minimax Survival Margin of Safety Volatility Tolerance Risk Limits | |
Market StructureThe rise of pod shops, short-duration strategies, and algorithmic trading has fundamentally changed market dynamics. These firms have tight risk limits that create cascading margin calls and forced liquidations, generating opportunities for investors with higher volatility tolerance and longer time horizons. |
Pod Shops Risk Limits Forced Liquidation Market Volatility Short Duration | |
| 2025 Q1 |
E-commerceShopee's expansion into Latin America, particularly Brazil, is generating strong returns with ~$150M EBITDA projected this year. The company has built leading logistics infrastructure and is positioned to re-enter other Latin American markets. Sea Ltd emerged as essentially a monopoly in SE Asian ecommerce after competitors like Lazada and Tokopedia struggled. |
Shopee Brazil Logistics Market Share Profitability |
ResilienceThe letter extensively discusses how best-of-breed companies emerge stronger from market downturns. Companies that transition from unprofitable to profitable during bear markets can generate exceptional returns, with examples showing 4.5x to 82x recoveries from trough levels. The key is identifying companies with sustainable competitive advantages. |
Bear Markets Profitability Recovery Competitive Advantages Volatility | |
Trade PolicyTrump 2.0 administration implemented unprecedented tariffs on global trading partners, with rates on China fluctuating from 54% to 145% and then negotiated down to 30% within six weeks. The unpredictable policy environment is creating market volatility and uncertainty about future trade relationships. |
Tariffs China Volatility Policy Uncertainty | |
AIMarkets started the year excited about AI potential, but anxiety emerged about AI over-capacity even before tariff announcements. The AI theme contributed to early market exuberance but concerns about overinvestment became apparent. |
Over-capacity Market Sentiment Technology Investment Concerns | |
| 2024 Q4 |
E-commerceShopee has built a dominant logistics network (Shopee Express) that is now 89% the size of J&T Express, the largest logistics company in Southeast Asia. This infrastructure investment allows Shopee to expand its profitable total addressable market by serving rural customers with lower shipping costs. The company has invested approximately $2.1 billion to build this logistics capability, generating at least a 14% return on investment with potential to reach 24% as volumes grow. |
Logistics Southeast Asia Market Share Infrastructure Unit Economics |
Emerging GrowthHayden has evolved its strategy to focus on emerging growth companies that exhibit wide ranges of potential outcomes but with predominantly positive expected returns. These businesses often have mature profitable divisions funding startup divisions, providing downside protection while offering significant upside potential. The strategy has generated higher returns since 2019 compared to the earlier compounder-focused approach, with a hit rate of 50% but a slugging ratio of 5.7x. |
Business Risk Range of Outcomes Power Law Hit Rate Volatility | |
| 2024 Q3 |
GamingApplovin's mobile gaming advertising platform demonstrates 20-30% long-term growth potential through AI-driven algorithm improvements and expansion into ecommerce. The company controls approximately 30% of the total gaming market and is instrumental in mobile gaming ecosystem monetization. |
Mobile Gaming Advertising AI Algorithms Ecommerce |
AIMachine learning models naturally improve through data ingestion, creating predictable growth drivers. Applovin's AI algorithms generate 12-17% annual growth simply from processing more data, with additional step-function improvements from manual engineering enhancements. |
Machine Learning Algorithms Data Automation Predictive | |
CryptoAnticipates US crypto regulatory framework will benefit long-held Coinbase investment as animal spirits return to certain market pockets following election results. |
Regulation Framework Coinbase Policy | |
Electric VehiclesChinese EV companies like BYD may follow Toyota's 1980s playbook by establishing domestic US manufacturing to navigate protectionist restrictions. Trump administration has expressed willingness to allow Chinese EV sales with domestic factory requirements. |
BYD Manufacturing China Protectionism Domestic | |
| 2024 Q2 |
AIApplovin's Axon machine learning algorithm represents practical AI application that significantly expanded revenues and created industry value. The algorithm improved accuracy by 500% from 2020-2022, with each 20% accuracy improvement generating $500M additional revenue at zero incremental cost. Axon 2 launched in early 2022 drove step-function growth in the ads business from $674M in 2021 to expected $3B in 2024. |
Machine Learning Algorithm Predictive Technology Data Advantage Revenue Growth |
AdvertisingMobile advertising market experienced reacceleration after 2022 slowdown when companies cut marketing budgets during recession fears. Meta's revenue declined -1% in 2022 but recovered as digital advertising rebounded. Applovin dominates mobile ad networks as third largest after Google and Meta, facilitating over $10 billion annually with 1 billion daily active users across gaming ecosystem. |
Mobile Ads Digital Marketing Ad Networks Gaming Monetization User Acquisition | |
GamingMobile gaming represents 60% of all app spend with high-churn business model requiring effective monetization within first few days. Free-to-play games depend on ad networks for survival, with only 7% of gamers returning after a week. Applovin's gaming studios provide first-party data advantage, though management plans to eventually sell this lower-margin business to focus on higher-margin ads platform. |
Mobile Gaming Free-to-Play User Retention Monetization Gaming Studios | |
E-commerceE-commerce showing early reacceleration signs after 2022-2023 slowdown. Sea Ltd's GMV growth decelerated from 101% in 2020 to 7% in 2023, but reaccelerated to 33% in first half 2024 as company achieved profitability. Pinduoduo's Duoduo Grocery achieved 5-15% net margins while Temu expansion shows promise with US business approaching profitability. |
GMV Growth Southeast Asia Online Grocery Cross-border Marketplace | |
Data PrivacyApple's App Tracking Transparency rollout in April 2021 required user permission for IDFA access, with 51% of users opting out. This created challenges for mobile advertising but benefited companies with first-party data advantages. Applovin circumvented ATT limitations by acquiring gaming studios and MoPub, providing exclusive user data outside Apple's restrictions. |
ATT IDFA First-party Data User Privacy Competitive Advantage | |
| 2024 Q1 |
E-commerceSea Ltd's Shopee is gaining market share in Southeast Asia as TikTok Shop faces regulatory challenges and competitive pressures. Shopee invested in logistics infrastructure and livestreaming capabilities while competitors were distracted, positioning it well for reacceleration as competitive intensity decreases. |
Southeast Asia Market Share Logistics Livestreaming Competition |
GamingSea Ltd's Garena division is showing recovery with Free Fire returning to growth and active players back to Fall 2021 levels. The game remains banned in India but may relaunch later this year, potentially driving player base above prior peaks. |
Free Fire Player Growth India Recovery Mobile Gaming | |
CryptoCoinbase has emerged as the most trusted crypto exchange left standing after competitors faced operational challenges. The company reported 116% year-over-year growth while maintaining its market-leading position in a consolidating industry. |
Exchange Trust Growth Market Leader Consolidation | |
| 2023 Q3 |
ChinaChinese investments drove positive Q3 performance with companies like Pinduoduo and New Oriental trading near multi-year highs. Manager sees divergence between resilient business models and broader economic weakness, with valuations approaching two-thirds of fair value estimates. |
China Pinduoduo New Oriental Divergence Resilience |
ValueManager discusses the predictability premium where investors overpay for stable cash flows versus volatile but potentially higher-returning investments. Identifies opportunities in companies transitioning from volatile to predictable earnings profiles. |
Predictability Premium Stability Volatility Valuation | |
Real EstateExtensive analysis of SmartRent's smart home technology platform for multifamily properties. Company approaching profitability with rising software ARPU and partnerships with major real estate owners, expected to generate significant free cash flow. |
SmartRent Multifamily PropTech ARPU Profitability |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Feb 24, 2026 | Fund Letters | Fred Liu | EDU | New Oriental Education & Technology Group Inc. | Consumer Discretionary | Education Services | Bear | New York Stock Exchange | capital return, Demographics, Free Cash Flow, Regulatory risk, Share Buybacks, turnaround | Login |
| Feb 24, 2026 | Fund Letters | Fred Liu | SE | Sea Limited | Consumer Discretionary | Broadline Retail | Bull | New York Stock Exchange | Competition, e-commerce, EV/EBITDA, Logistics, margin compression, market share | Login |
| Nov 26, 2025 | Fund Letters | Fred Liu | 215A JP | Timee Inc | Industrials | Human Resource & Employment Services | Bull | NYSE | Demographics, Employment, Fintech, inflation, Japan, Labor, Margins, marketplace, Staffing, valuation | Login |
| Aug 27, 2025 | Fund Letters | Hayden Capital | SMRT | SmartRent | Real Estate | Real Estate Management & Development | Bear | NYSE | interest rate sensitivity, IoT, Management Change, Multifamily, proptech, REITs, SaaS, Smart home, turnaround | Login |
| Aug 25, 2025 | Fund Letters | Fred Liu | SMRT | SmartRent, Inc. | Information Technology | Application Software | Bear | New York Stock Exchange | Governance, Interest, Multifamily, profitability, proptech, SaaS | Login |
| May 29, 2025 | Fund Letters | Hayden Capital | SE | Sea Ltd | Communication Services | Interactive Media & Services | Bull | NYSE | Brazil, competitive moat, e-commerce, EBITDA margins, Gmv Growth, international expansion, Latin America, Logistics, market share, operating leverage | Login |
| Feb 27, 2025 | Fund Letters | Hayden Capital | SE | Sea Ltd | Communication Services | Interactive Media & Services | Bull | NYSE | Cost advantage, e-commerce, economies of scale, Emerging markets, growth, infrastructure investment, Logistics, market share, Southeast Asia | Login |
| Nov 27, 2024 | Fund Letters | Hayden Capital | APP | AppLovin Corporation | Communication Services | Interactive Media & Services | Bull | NASDAQ | advertising technology, Algorithm, e-commerce, growth, machine learning, Mobile Gaming, Performance Marketing, SaaS | Login |
| May 27, 2024 | Fund Letters | Hayden Capital | SE | Sea Ltd | Communication Services | Interactive Media & Services | Bull | NYSE | competitive moat, Digital Entertainment, e-commerce, Emerging markets, Gaming, Gmv Growth, livestreaming, Logistics, market share, Southeast Asia | Login |
| Nov 25, 2023 | Fund Letters | Hayden Capital | SMRT | SmartRent | Real Estate | Real Estate Management & Development | Bull | NYSE | ARPU growth, asset-light model, Free Cash Flow, IoT, proptech, real estate technology, recurring revenue, SaaS, Smart home, turnaround | Login |
| TICKER | COMMENTARY |
|---|---|
| GOOGL | Alphabet is guiding to as much as $205 billion of capex this year. In Q2, Alphabet posted negative free cash flow of ~$6 billion – its first negative quarter since the 2004 IPO – as quarterly capex doubled to ~$45 billion. Alphabet priced an $85 billion equity raise in June – the largest ever by a listed corporate, from a business that didn't know how to spend its cash for two decades. |
| NVDA | Nvidia is undoubtedly one of the most important companies in the middle of this AI buildout boom. And yet despite expecting to grow earnings ~+89% y/y this year, its P/E multiple is below consumer staples companies barely growing above GDP. I suspect the market is wrong one way or the other – either multiples need to rise as earnings prove durable, or earnings growth estimates need to come down. |
| 0700.HK | Tencent said this month, 'For the prepayment and for some of the compute orders that we have made just a couple of months ago, today, we can actually sell it at more than 30% profit compared to the price that we paid just a few months ago'. |
| DASH | We're still ordering pad that the old fashioned way, and DoorDash stock has recovered to where it traded before the 'SaaS-pocalypse' narrative took hold. |
| CRM | Instead of replacing software companies, the LLM firms are partnering with them (for example, see Salesforce and Anthropic's 'Claudeforce'). |
| COST | Nvidia trades at ~21x P/E, while Costco trades at ~43x. Costco is projected to grow at just +7% y/y the next few years. |
| SE | Last quarter, I wrote about the company's VIP program, and our view that management was reinvesting at attractive incremental returns, with an inflection point likely coming in the near term. This quarter, we got the first confirming data-point, indicating that our calculations are on track. VIP membership reached 14M, and those members now drive 24% of total GMV. Retention held at 80%, and monthly active buyers accelerated to +18% y/y – a sign the logistics spend is paying off: bringing shoppers back to the platform more often, and away from competitors. By our math, incremental ROIC moved from ~26% to ~38%, driven by VIP membership growing ~40% q/q alongside take rate gains. The stock rallied on the earnings report, likely because the market is starting to have enough visibility, to read this spending favorably. As an offensive move rather than a defensive one against TikTok Shop – and with a clearer sense of what today's forgone profit eventually offers. |
| MELI | Another situation I'm following closely is Mercado Libre's reinvestment program in Latin America. The company has been building out same and next-day shipping, and offering free shipping on low-ticket items (those under R$19 in Brazil). By my calculations, Mercado Libre has spent ~$2.2BN in cumulative reinvestment spend since mid-last year. The initiative is still early, but we're starting to see signs of it paying off. New buyers grew ~+18M over the last twelve months (+26% y/y), against a pre-investment run-rate of ~15% y/y. Had the company simply continued along that previous trajectory, it would have only added ~+10M customers – implying roughly ~8M incremental customers were attracted by the new faster and cheaper delivery. Existing users are transacting ~15% more frequently as well, so the value of both the new and the legacy base is rising simultaneously. The stock is down ~-34% from its high last year – set right before the company embarked on this investment cycle. In my experience, the market rarely gives credit for reinvestment programs until the payoff shows up in the financials. But if our math is even directionally correct and the cohorts mature as I expect, I think the shares eventually get re-rated toward prior levels – and likely beyond, given the business emerges with more customers and better unit economics than it had going in. |
| PDD | Four years ago, China was still in the middle of its 'zero-covid' policy, with city-wide lock-downs. US-China tensions were running high with many US institutions dumping their Chinese investments, and China's economic health remained highly uncertain. It was against this background, that we originally invested in Pinduoduo in 2022. I believed the market was misunderstanding the company and the operating leverage inherent in the model. Fast forward three years, and the company's revenue exceeded our own estimates by ~+70%. Today, Pinduoduo does ~$900BN in GMV, having over-took JD during our holding period to become the 2nd largest ecommerce platform in China. The Duoduo Grocery segment won the community group buying war with Meituan, and I believe is solidly profitable now, generating ~$1.5 - 2BN profits per year, off an estimated ~$3.5BN cumulative investment. If our math is correct, that's a ~50% (and growing) annual ROI. While Temu (and it's newer iteration of Pinmu) are still works in progress, that too is showing promise and brought Pinduoduo's direct-from-factory model to consumers outside of China. So why did we sell the position then? Well simplistically, our original thesis played out and we made a good return. Also, I don't have enough visibility in their new investment project – Pinmu. It's not that I'm negative on this new initiative. Afterall, the company deserves the benefit of the doubt, as they have a phenomenal track record of embarking on these initiatives, having gone '3 for 3' (i.e. Pinduoduo China, Duoduo Grocery, Temu), despite always coming from a (deliberate) 'late-mover' position. Rather, I just don't have enough information at this point, to have confidence on the magnitude of investment or payoff from this project. Additionally, our thesis around Duoduo Grocery reaching profitability (i.e. no longer a margin-drag) played out. And the Chinese ecommerce business has slowed due to China's sluggish macro environment – it's hard to know when that will inflect, and increases the business's unpredictable nature. Given these factors, we decided to exit the investment after a successful ~3.5 years of ownership. Our first purchase was at ~$37, and eventually built the initial position at ~$49. We sold the remainder of our shares over the past year at an average ~$105, resulting in a ~+24% annualized return over the investment period. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
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| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
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| No industry data available | |||
