Hi Multis
Surprise! Here’s a new Potential Multibaggers pick! This is a company I already put on My Stocks On My Radar list two years ago and here we are, picking it.
When a company’s numbers are extremely good, sometimes you see people react with suspicion and I think that was the case here for me for a long time. I’ve studied accounting scandals and very often, you have a somewhat opaque company that posts incredible revenue growth for several years. Well, to be honest, this company fits that mold. That’s why it took me so long to trust it. I’ve spent two years studying the business, but a few changes finally made me pull the trigger and pick this stock as a Potential Multibagger.
The founder-CEO here is one of the most impressive operators I’ve come across in years, and I read about a lot of founders. There are many CEOs I admire: Matthew Prince of Cloudflare, George Kurtz of CrowdStrike, David Vélez of Nubank, and so on.
But only once before did I have what I had with this CEO. I heard him on a podcast and it was like lightning struck. The first time I had that was in February 2017, when I heard Tobi Lütke, the founder and CEO of Shopify, on a podcast. I immediately bought shares, then started thinking I was an idiot because I hadn’t followed my process. I had just bought shares of a founder I had heard for an hour. How light-headed, how naive, how stupid.
But then I realized something. If Tobi Lütke could make me so enthusiastic, he must have the same effect on his executives, his employees, his customers, his investors, and so on. Wasn’t that worth something, or even a lot? That’s what I spent three months researching. I found that all the best founders and CEOs had similar traits and their companies as well. And it made me so enthusiastic that I started Potential Multibaggers on May 1, 2017. The first pick? Shopify, of course.
This was the same. I heard the founder-CEO in a podcast episode and I was blown away by what he said and how he thinks. Like the best CEOs, he thinks totally differently from the crowd.
This is an outsider CEO, like many of the best in their field. He is totally obsessed with his company, like the best in their field. And like many of the best in their field, he was rejected by venture capital companies. But he built the business. All of his competitors were funded by VCs, and (almost?) all of them are gone.
For years, public market investors told him his company was worthless. His reaction: he bought as many shares as possible. Not just through a public-market share buyback. He went to big investors and (ex-) employees and tried to convince them to sell their shares. He often succeeded, as those people started doubting the company or simply wanted liquidity. He even borrowed money to do this. Normally, you wouldn’t want this as an investor, but he was right, and he probably turned that investment into more than 10x in just a few years.
Thinking differently isn’t easy, and it can be, or seem, risky, but if someone is really focused, it can be a huge competitive advantage. As David Gardner said about the competition in e-commerce and about how Amazon won: “How about this as a competitive advantage? We have Jeff Bezos, and you don’t.” I think you should never underestimate how important that is.
As always, I have an advantage over you here. I’ve done a lot of research, listened to hours of interviews with Foroughi and his Chief Technology Officer, listened to and read the earnings calls, and read everything else I could find. There are definitely risks to this investment, so, as always, I wouldn’t make this a big position too fast.
This pick is also different than the most of the Potential Multibaggers. Most of my picks are stocks that have already run up a lot, and most think they have missed it and that I’m too late. Some of my best picks are made like that (Shopify, Cloudflare, CrowdStrike...).
But this one fits in another category, which has been successful as well. It’s down almost 60% from its highs. But the same was true for Nu Holdings and, more recently, Axon. Both have worked out great so far. Let’s hope the same happens to this pick.
Every VC rejected this founder, so he built his company profitably from day one, paying engineers out of his own pocket before there was a product.
I’ve followed this company for two years. Everything I found only convinced me more. Now I’m buying.
Below: the name and the full story. Don’t want to miss my new pick?