Long-Term Investing Ideas in a Volatile Market
Simon recently spoke with a $35 billion global asset manager about how they're navigating the market volatility. The key takeaways are to think long term, tune out the noise...
7investing advisor Matt Cochrane interviews growth-style investor Puru Saxena about his favorite stock market opportunities in cloud computing, fintech, e-commerce, and more.
July 14, 2020 – By Simon Erickson
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Beating the S&P 500 is no easy feat. Investors need to get so much right to do so over the long-term. Investors need to 1) Identify the best trends and sectors, where innovation will drive disruptive technologies that can achieve explosive growth; 2) Buy the best companies from those sectors, the ones that will take market share as the total addressable market (TAM) grows too; 3) Buy companies at the right valuation. Even the best companies, the ones growing revenue the fastest, can get over-extended.
Yet even when investors get all of the above things right, the world will still throw curve balls that keep all of the investors on their toes and off their A-game.
Puru Saxena, one of today’s great growth investors, has developed a strategy to not only identify the factors above, but also offset whatever violent volatility the market can throw at his portfolio.
In a past life, Puru was an accomplished money manager out of Hong Kong. He sold out of his asset management business a few years ago, and now just manages his own portfolio, tweeting about it every step of the way. He is one of the most followed, most prolific, and most transparent investors on Twitter, where he can be found @saxena_puru.
In an exclusive interview with 7investing, Puru describes what it was like to manage money through both the 2000 tech bubble and great financial crisis, what trends he finds most promising, how valuations fit into his growth strategy, and why he uses hedges to reduce portfolio volatility during market downturns. He dives into some of his favorite stocks, including why he holds positions in Sea Ltd (NYSE:SE), Adyen NV ADR (OTC:ADYEY) and Alteryx (NYSE:AYX).
0:00 – Introduction
2:00 – What was it like to manage money and invest through the 2000 tech bubble. What lessons did Puru learn by going through that bear market as such a young investor?
5:05 – What lessons did a young Puru take away from the 2000 tech bubble? How did surviving that experience shape his investing today?
8:15 – What lessons did Puru learn by investing through the financial crisis in 2008-09? Why did Puru still lose money during the crisis, even though he warned his investors that the U.S. housing market was acting like it was in a bubble?
11:45 – Are cloud and software names today in a bubble? Shopify and some other tech companies are selling for as much as 50-times sales. Have these stocks gone too high?
15:30 – How does valuation fit into a growth investor’s buying process?
19:10 – When do you sell a company?
21:40 – Why Puru believes e-commerce is a great investment trend that will continue to grow and take retail market share.
23:40 – Why Sea Ltd is Puru’s favorite e-commerce investment right now.
27:50 – Fintech enables e-commerce, making it another one of Puru’s favorite investment trends today.
30:20– Adyen is a pure payments play with many advantages over legacy payment gateway companies, making it Puru’s favorite fintech investment right now.
35:35 – Software is a broad category, but the inherent advantages of the SaaS business model make it another one of Puru’s favorite investment trends looking ahead.
45:55 – There are many great software companies, but Puru explains why Alteryx is one of his favorite investments in the space today.
48:15 – Puru explains his hedging strategy and how he uses it to smooth volatility in his portfolio and sleep better at night!
1:00:15 – Puru explains why financial education is so important and what he’s doing to teach his kids about personal finance and investing.
Publicly-traded companies mentioned in this interview include Adyen, Alibaba, Alphabet, Alteryx, AT&T, CrowdStrike, DataDog, Facebook, Ferrari, Ford, GE, Livongo Health, MercadoLibre, Okta, PayPal, Pinterest, Salesforce, Sea Limited, ServiceNow, Shopify, Square, Tesla, and Twitter. 7investing’s advisors and/or guests may have positions in the companies that are mentioned.
Matt Cochrane 00:00
Greetings, fellow investors. I’m Matthew Cochrane, a lead advisor at 7investing where it is our mission to empower you to invest in your future. We do that by providing monthly stock recommendations to our premium members and educational content that is freely available to everyone.
Listeners, today you are in for a special treat. If you’re interested in what it means to be a growth investor, how to spot investment trends that will provide some of the market’s best returns in the coming years, if there are parallels between today’s post COVID-19 environment and economic crises of the recent past, and how fast growing tech stocks that at first glance appear to be overly valued, but might in reality be undervalued, then you will want to pay special attention today.
Joining us for what I believe will be an enlightening conversation is Puru Saxena. In a past life, Puru was an accomplished money manager out of Hong Kong. He sold out of his asset management business a few years ago and now just manages his own portfolio, tweeting about it every step of the way. He is now one of the most followed, most prolific, and most transparent investors on Twitter, where he can be found @saxena_puru. That’s at S-A-X-E-N-A underscore P-U-R-U. He is a great investor, and I am honored to call him a friend.
Puru, welcome to the show.
Puru Saxena 01:22
Thank you very much, Matt. Thank you for the kind introduction.
Matt Cochrane 01:25
Of course. Puru, you got your start in investing in the late 1990s, making you far more experienced and most of us currently in the financial world, myself included. So I’d like to start by like tapping that experience. Since you got to live and invest through both the tech bubble in 2000 and the great financial crisis in ’08 and ’09. Let’s just start our conversation there by looking back at the 2000 bubble. What was young Puru doing at that time? And how did you fare and what did you learn investing through that?
Puru Saxena 02:04
Well, I just started my career in 1998, Matt. I started working as a futures trader for commodity futures and Hang Seng Index futures in Hong Kong. And a year later, I switched over to asset management. So I started managing money for investors. And I still remember vividly you know, those days, anything related to technology was just going higher and higher. Some of the stocks had gone up four or five, six-fold in a year. Companies were changing their names to .com. So they will just add the word .com after the name and then they will say, well, we are entering the technology business. And lo and behold investors all over the world would just pile into those companies. So it was sheer insanity.
And there was a lot of exuberance and euphoria back then and, you know, people were convinced that the internet was going change the world. Well, the internet did change the world, the problem is that the valuations had gone up so far ahead of the business fundamentals and so many companies didn’t even have any business plans or revenues. Companies used to go higher and be valued based on eyeballs in those days. And it was just the wild, wild west. And stocks had gone parabolic, you know, the charts were very obvious if you looked at, you know, the weekly charts at that time, and I remember looking at a few in those days, they had gone up like that at a 90, almost 85, 90 degree angle, and they’d just gone higher and higher.
And I still remember talking to my boss at that time, at Richmond Asset Management, my Managing Director saying “Look, this doesn’t seem right to me, you know. How come these charts have done this for years and then suddenly they’ve gone like that? And history shows that this doesn’t end well.” And he said, “Oh, what do you know? You’re just a kid in your early 20s. You know, this is the new era. This is the TMT. This is a revolution. And you just have to buy.” And fortunately for me, I did not listen to him, I realized that something was amiss.
So I basically bailed out of all technology stocks more because of good luck rather than anything else, because I was fortunate enough at that time to actually read some of the writings from the more experienced and sensible players in the industry. And they were convinced that this was going to implode. And I thought, you know, if something has gone up four-, five-, six-fold, in a year, 18 months, obviously, a lot of the good news is already baked into the price. So I bailed out all my clients cash from the tech sector from equities in general. I went short, the S&P, I bought gold, precious metals, and a few market neutral hedge funds which did reasonably well over the next two or three years. So that was my start in this business. And I recall investors basically coming over to see me in my office at that time, saying, you know, “We are getting killed, our account is down 50, 60, 70% and heavy while you are making money in this period.” And that’s how I kind of built my reputation in the business.
Matt Cochrane 05:06
That’s great. And what would be like, so, like, you’re still a young investor at the time, but obviously that was like a, you know, a huge, like experience to go through, like, what was your like takeaway lesson from all that? Like? No, how does that still affect your investing today?
Puru Saxena 05:27
I mean, when I see rich valuations, I mean, super rich valuations. It makes me very nervous and uneasy because I’ve seen this movie before. You know, when things are good Matt, you know, things can stay inflated and/or extended for a long period of time. And I’ve seen that now, you know, in the late 90s. And so for example, in 1999, nobody would ever imagine that tech stocks will go up four- or five-, six-fold in four to 18 months, but they did. So the key takeaway for me is that you know, bubbles can get bigger, and they can get way bigger. And they can stay inflated for as long as the bartender keeps providing the drug, i.e. the Fed, providing newly created dollars.
If you see what is happening in the world today, because of COVID, a lot of the central banks are just printing money like there is no tomorrow. They’ve dropped rates to zero. So you have a zero interest rate policy throughout the developed world. And on top of that, you’ve got central banks, basically printing cash to try and stave off a big credit crunch over credit default or bust. So they are doing what they perceive is the right thing. And inadvertently this cash is being channeled into financial assets, namely, those companies which are beneficiaries of this problem, i.e. COVID. So a very few select number of companies are actually benefiting somewhat from what is going on in the world today. And most of the companies and industries are actually struggling.
So a lot of the investor’s cash is basically piling into these strong names. Because if you’re a fund manager, if you’re a mutual fund manager, pension fund manager, hedge fund manager, and if your mandate says that you must remain invested in equities at all times, and if you want to preserve your capital, and if you want to show some returns to investors, you’re not going to want to own banks, you’re not going to want to own restaurants, hotels, and all the beaten down cyclicals which are really struggling in this environment. You’re going to want to own some of the strong companies which are still exhibiting strong revenue growth and providing strong guidance. And that’s what we’re seeing, you know, it’s a very narrow door and we have a lot of liquidity being funneled through our door into these select companies. And as long as the Fed and the other central banks continue to, you know, keep the foot press to the metal, if you will, I suspect that these technology companies are going to stay strong, and the next big problem will arise either when we get a vaccine which proves to be both, you know, good and efficacious and also safe. Until then I think these tech stocks are going to keep being sort of lifted or bid up because of the, you know, safe haven, its newly found safe haven status and there’s demand.
Matt Cochrane 08:18
That’s, that’s interesting. I want to revisit that in one second. But before we do talk us through your experience in ’08 and ’09 also because like, you know, the tech bubble was 20 years ago, but ’08 and ’09 is now over a decade in the past, and many investors weren’t investing then either. Tell us your experience going through that?
Puru Saxena 08:42
Well, that was a very different experience, because I was one of the unlucky ones who got everything right from a macro perspective, but then lost a lot of money because I bet wrong. So I knew that housing in the US was in a big bubble. I had written about it for a couple of years. I knew that the western world was, you know, in a very precarious situation because of a huge buildup of debt at the household level. So I was warning my investors, and anybody else who came to listen to what I had to say that housing was a bubble, and this was going to end very badly. Where I got it wrong, I thought that commodities would somehow remain insulated from the calamity which I basically foresaw on the horizon. So I was basically heavily invested in commodities, gold, and stuff. And I was also long the emerging markets because I was under the false sort of belief, or I was mistaken, in thinking that, you know, these sectors and pockets of strength would remain insulated and isolated from what was about to happen in the western world.
And as we know, you know, once you had a couple of bankruptcies on Wall Street, everything imploded because there was a massive margin call on risk assets all over the world. And everything regardless of fundamentals was basically sold, which is what happened in March this year to some extent. But that collapse was actually worse because the S&P fell off 50% and banks went down 80 or 90%. So that was a systemic crisis. And that was a big lesson for me because it is very easy in this business, Matt, to put on like, blinders, you know, blinders like a horse does, and you have a tunnel vision. And you think, you know, whatever I’m thinking is right. But it is very important now, for me at least, to basically keep an open mind and try and, you know, see where I could go wrong, what I’m missing.
So now, even though I have done my homework, or I do my homework extensively, I’m always on the lookout for factors which could basically prove me totally wrong. And because now my portfolio is very concentrated in software, fintech, and e-commerce and stuff. And, you know, although I’m pretty sanguine about the long term prospects, I am getting a bit nervous about the froth that we are beginning to see in these areas, especially in companies like Shopify, which are now trading at ridiculous valuations. And I know it’s a great business, and it’s got a great management team and so forth.
But when I invested into Shopify, for example, in early April after the crash, I never imagined in a million years that this stock would more than triple in three months. You know, this is not normal. And that’s the key takeaway I would like your listeners and subscribers to basically get from today’s, you know, chat is that trees don’t grow to the heavens. And when they do that, you know, you do get an abrupt reversal. I’m not smart enough to tell you when it’s gonna happen. But I do know that if investing was so easy that anybody could just buy any stock at any inflated price, everybody would be rich, but obviously reality is very different.
Matt Cochrane 11:48
Yeah, absolutely. You know, there’s absolute. So, getting ready for the show, I was doing a little homework. And let me let me read to you something you wrote over a decade ago, and it’s so true, and and this was before the housing crisis, you said, “The eternal truth in the investment world is that every asset class goes through boom and bust cycles, which typically lasts for several years. However, it is ironic that toward the end of any bull market, when the risk is extreme optimism toward the booming asset class is usually at a record high. On the other hand, during the final phase of a bear market, when the downside risk is limited, the asset that is selling at a huge discount is always neglected and hated by the public. The reason for this irrational behavior is that most people find it hard to foresee and accept change. The conditions that have been prevailing for a long time are considered to be permanent, and investment decisions are made accordingly.” You know, you were writing about U.S. housing at that time. But, you know, you could make an argument, like you were just saying about Shopify and probably some other cloud and software names like, kind of fit that description of a booming asset class today with optimism at a quote-unquote “record high.”
Puru Saxena 13:03
I agree with you, I think this is an incipient bubble. It is not gonna end well, you know, I don’t know the timing of it all. It could be a vaccine. It could be the Central Bank aburptly, you know stopping quantitive easing. It could be the Fed saying, you know, “Enough is enough, inflation is creeping up. We’re going to raise rates.” You are not going to get a tripling of these stocks over the next three months, I can assure you that. You’re not even going to get a tripling of these stocks over the next two or three years. I’m pretty confident of that. You know, what has happened in the past is not necessarily, you know, a guarantee or guidance of what’s likely to happen in the future. You know, you remember the old adage in the investment world, ‘Past performance is no guarantee of future returns.’ And you know, when you pull forward, all the returns in, you know, in today’s market cap from these companies, you can only get so big. You know, for example, now Shopify is trading at about 60 times revenue, 50-60 times revenue?
Matt Cochrane 14:02
Yeah, 60-times sales.
Puru Saxena 14:03
I mean, a company, which is basically generating almost $2 billion in revenue, which basically is a loss making enterprise. And its market cap has been built up to $120 billion dollars with a B. You know, so at some point, you have to recognize that this is not rational. This is not normal. How long is it going to take for Shopify to actually you know, grow into its valuation. I could argue and make a very good case that investors who, you know, own Shopify stock today, may be even flat for five years from now, you know. Sure, you could go higher in the near term, but eventually you will get a big pullback on a sell off.
So I don’t think you’re gonna make much money on this. So the risk reward at least from my point of view, and I could be totally wrong, is not very favorable for a company which is trading at such a rich valuation. Some of the other cloud stocks also are fairly richly valued or very richly valued. But their revenue growth rates are a lot higher. You know, if you look at CrowdStrike, you look at Datadog, these companies are growing at 80, 90% a year, their gross margins are higher, you know, the unit economics are better than Shopify, and also they deal with mainly, you know, enterprise grade customers. And I would say that they are less risky to a sort of slowdown in the economy. And I think that Shopify is probably more cyclical, and more vulnerable, because it has such a large exposure to the SME space.
Matt Cochrane 15:30
Right, right. So how does valuation fit into your process? Because obviously, I think you and I, we have similar investing processes. You know, even Warren Buffett, you know, probably the greatest investor ever, but known more as a value investor, has said, “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” So, obviously, growth and quality is integral to even Buffett’s process. But you can’t ignore valuations either. So how important is valuation to your process? And how do you weigh a company’s valuation to its growth and economic moat when studying it?
Puru Saxena 16:12
Well, my objective, or the minimum that I try to target for a new investment, Matt, is a compounded annual return of about 15%. So that is my sort of hurdle rate. So when I look at a business and I see, or I’d make projections of its growth over the next four or five years, and that’s about as far as I go, because I think anything above that is kind of, you just making guesses. So I think I look at what the business will generate in terms of revenue and margins and so forth for five years out, based on what all the analysts are saying, and what the company has done in the past, based on management’s commentary. I look at what the margins are going to be. What the cash flows are going to be. And then I try and slap what I consider a reasonable multiple on that figure five years out. And then I look at the current market cap, make a bit of adjustments for share dilution, obviously based on stock based compensation, and then figure out whether I can achieve 15% annualized. So if it’s a 15% annualized return, which I think I can achieve with fairly rational assumptions, then that kind of gets my interest. If I can, sort of think that I can make closer to 20% annualized, then I got pretty excited. And if anything is sort of in single digits, no matter how great a business, I just don’t pull the trigger.
Matt Cochrane 17:31
Alright. So as long as you believe you can get 15% returns every year, you’ll stay with the investment. Correct? Yeah.
Puru Saxena 17:41
I mean, if I’m in a business, for example, and if I see that, if a business has run up too much, and if I still think that I can generate, you know, and … Say for example, if I bought a company like The Trade Desk in early April, which I did, and it’s almostgone up two-and-a-half fold since then, so I made 150% return, which is absurd. But I still think that I can generate double-digit returns annualized over the next few years. So I’m happy to own that. But you know, in the case of Shopify, I can make a pretty good case that you know, the returns over the next four or five years might be flat from Shopify. No matter how optimistic I get about the company and how bullish I become, I just fail to see how Shopify’s market cap, in a sane world, is going to be greater than $140, $150 billion, five years out. So we are already at $120 now. So it’s a case of me whether, you know, it’s a case of me, either staying with the business, and accepting that this chunk of my portfolio is gonna pretty much do nothing for the next four, five years. Or if I can support a better opportunity. I say, thank you very much Shopify. I’ve made my money. I’ve tripled my cash and I’ll go and look elsewhere to try and compound my cash. My goal, Matt, is not to generate multi baggers on individual stocks. But my goal is to basically generate the highest possible CAGR on my total portfolio.
Matt Cochrane 19:08
Right. Right. That makes that makes a lot of sense. Let’s talk about selling then, since we’re kind of already on that subject. Like, I know, that you, like me, we buy stocks with the intentions of holding them for a long term, decades. But, you know, a lot of times it doesn’t work out like that. It’s a brutally competitive world out there and sometimes selling is the right thing to do. Like, how do you know, when you’re looking at your portfolio, how do you know when to sell a holding, or when to hold and be patient with it?
Puru Saxena 19:45
Well, I look at each company sort of almost on an ongoing basis. And I’m always on the lookout for new ideas. Because one thing I’ve realized over the years that a lot of investors get married to their companies. They feel great joy and pride in being a loyal shareholder of company x or company y. “Oh, I’ve owned this stock for 10 years,” or “I’ve owned this for 20 years.” Who cares? You know, what matters at the end of the day is what you have achieved in terms of your annual compounded return from any given investment, or, more importantly, on your total portfolio. So, although I try and stay loyal to the companies, if something has really shot up, and again, this comes down to experience — living through the TMT bubble, and also, you know, going through the housing bust where I basically had a big drawdown in 2008-2009 — that I look at my existing companies and I compare them with what I might be able to achieve from companies which I don’t own. And I keep a specific set of interests, or keep a close eye, on the new IPOs which are coming, because my experience says that the new IPOs are disruptive groundbreaking companies, which are growing rapidly. They produce the best returns for investors during the first sort of seven or eight years of their lifecycle as a listed company. So I’m always looking out for new opportunities. And if I feel that a business is sound, and you know, I can still generate a double-digit return going forward, no matter how much a stock has gone up, I try and stay with it. But if I feel that a company has become weak, or I made a mistake with the business or its future doesn’t look as good as its past, and the market hasn’t really caught on to that, then I’m very quickly to dump companies. I don’t really care, you know, what my turnover is. My only interest is to make sure that I’m positioned in the best companies going forward.
Matt Cochrane 21:42
Gotcha, gotcha. Let’s shift gears a little bit. You’ve been tweeting a lot lately, a lot lately about three trends: e-commerce, fintech, and software. Let’s maybe just quickly move through these trends and why don’t you tell us what you’d like about the three things?
Puru Saxena 22:03
Well, these three things are making lives simpler and easier for both consumers and companies. I mean, that’s the bottom line. If you can find a product or service, which helps people live their lives in a more sort of time efficient and cost efficient manner, you’ve got a wonderful business. If you look at e-commerce, e-commerce is fantastic when you compare that with traditional retail, because as a consumer, you got, you know, a huge choice. So if you go on to an Amazon or any other email, or platform, not email, sorry, e-commerce platform, rather, if you go to Alibaba, you go to Amazon, you go to MercadoLibre, or any of those massive platforms, you realize that you have a massive sort of choice or variety, or range of goods at your disposal. All you have to do is just scroll through and the right pages and stuff. So you have a massive inventory to select from and usually ecommerce is cheaper than traditional retail because they don’t have to worry about the store costs and staffing costs and so forth. And also, it is convenient. So you can actually sit at home or you can be on a bus or a train or a car or whatever and you can just ordering through your mobile phone, through the app, or the website. And the stuff comes through to your home or your office wherever you want it delivered within a day or two or three or four days depending on where you’re getting delivered from. So as a consumer, you have what? Choice. You’ve got convenience. And it is cheaper. What’s not to like?
Matt Cochrane 23:40
Absolutely, I’m with you 100%. What’s your … If you had to pick one e-commerce company today what would it be? What’s your favorite e commerce company right now?
Puru Saxena 23:50
I would probably go with Sea Limited based out of Singapore simply because, you know, it is tackling a part of the world which is very, very under-penetrated. You know the e-commerce penetration in Southeast Asia is tiny. And the company is actually led by Forrest Li, who is a founder and a major shareholder in the business. And the company is based out of Singapore, which is not China. And Singapore is very strict in terms of, you know, law and order and everything else. So I have less reservations about Sea Limited because it’s based out of Singapore. And if you look at what they’ve achieved over the last few years, it has been pretty phenomenal, because they’re actually beating Lazada, which is owned by Alibaba, at its own game. They are actually the most popular platform – e-commerce platform – in several countries where they operate. So Sea is pretty exciting. I also like MercadoLibre, but that’s more because of its new payments division rather than e-commerce. E-commerce has slowed down for that company. But Sea would be my e-commerce pick. Also, if you look at the U.S., for example, I quite like Etsy. Etsy’s carved a little sort of niche for itself. The business growth has been fantastic. For the last few years it is a great compounding machine. The revenue growth has been north of 30% consistently, quarter after quarter, and is actually accelerating. Etsy in its Q1 earnings call basically guided for more than 70% year over year revenue growth. So I think these are the sorts of businesses which excite me, where I can invest in a company and pretty much know that these businesses are going to compound at a very high rate for the foreseeable future. I feel pretty safe owning those companies. I don’t like to own cheap companies which are kind of struggling and people are not sure what the company’s going to do from quarter to quarter. That’s not my cup of tea.
Matt Cochrane 25:52
Sea Limited just checks so many of those boxes, right? I mean, it has a hit video game. It’s in emerging markets that are up and coming. It has the digital wallet and payment side and it has e-commerce. You know, it really, it really checks all those boxes, you know? Talking about stocks like getting meteoric though. I think I just bought that earlier this year and I think, I think I’m almost tripled in it right now. You know, like, where I’m not used to buying stocks and having them go up like this. What do you think of the valuation of Sea?
Puru Saxena 26:31
I think the valuation after the huge run up is fully valued. I wouldn’t say it’s a bubble yet, but it’s richly valued. It’s gonna still probably do well because the business growth is very, very strong still. So investors I think, are still gonna make decent money from it for the next three or four or five years. But would I go and rush in today and put a chunk of money in Sea at this level? Probably not, because it’s had a parabolic move higher. If anything, you know, I’m looking at either a consolidation in these overvalued, sort of richly valued, names which have run up a lot. Or perhaps a sideways consolidation for a few months. Or, more realistically, a pullback to shake out the new longs. Nothing goes up in a straight line. If you can look at the charts of any of these growth stocks going back, you know, 5, 10 years you will realize they have big run ups and then they pull back and they have big run ups and then they pull back. Usually they normally pull back towards the moving averages. You know, the 30 week, the 40 week moving averages? That’s where the pull backs normally end. And a lot of these names are currently significantly over-extended relative to the moving average and some of them are hopping, you know, 50%, 60%, 70% above those levels. So we are pretty overstretched and due for either consolidation or pullback.
Matt Cochrane 27:50
Sure, sure. So what about FinTech? What? What do you like about FinTech right now, so much?
Puru Saxena 27:55
Well, fintech enables e-commerce. It’s as simple as that. You know, if people shop more online, which seems to be the case. You know, who doesn’t like cheap stuff, convenience and a wide variety that you can only get online? The only way to make that happen is by fintech. I mean, you cannot buy this stuff — if you are in America you cannot buy stuff in China by issuing checks or sending cash. No, you’re not gonna get very far. So fintech is kind of the modern day, sort of, pull rich for the global economy. If you want to buy stuff online, you need to have a PayPal or you need to have an account or gateway, which is offered by either Stripe, or Adyen, or somebody like that, or, you know, one of the other payment processors and so forth. So, I just think that these companies have become more like utilities. Because we need these companies, whether it’s a recession or not, they’re not very cyclical. They are pretty robust in terms of their secular growth. And unlike utilities, Matt, these companies offer the prospects of very high growth for a very long period of time. Utilities are good because they have pretty reasonable and steady cash flows, and they’re pretty immune to what’s happening in the economy. But they don’t have much growth because, you know, people don’t need two electricity connections and five telephones at home. But, you know, you have a lot of growth in e-commerce. You have a lot of growth in fintech. You have a lot of growth in software. And they are pretty robust businesses with reasonably steady cash flows. And that’s why they’ve been built up. And, you know, this crisis which we are passing through now, the COVID crisis, is a clear example of why these businesses are so robust. You look at the hotel industry, the aviation industry, the banking industry, the industrials and so forth. All these companies are basically screaming murder because they are in so much pain. Whereas, if you look at these companies, which you and I own and some others own, they’re announcing 30%, 40%, 50%, 60%, 70%, 80% revenue growth and guiding for very, very high numbers for the next few quarters. So, you know, the market that has basically separated the wheat from the chaff.
Matt Cochrane 30:14
Right. Look, we could talk about fintech the rest of the show, and I would be happy.
Puru Saxena 30:19
I know this is the area of your expertise, yeah.
Matt Cochrane 30:24
Give me an example though of one company that you really like from fintech.
Puru Saxena 30:30
Well, I really like Adyen because I think it is almost a pure play, online fintech business and it is predominantly geared towards enterprises so it is as safe as they come. I love the management. I think Pieter van der Does is actually one of the smartest guys. He’s very honest. You know, and that is the reason why the business is very richly valued. But if you look at the cash flow that this business generates, it’s pretty phenomenal. And they’ve got it for 30% top line growth for the next four or five years and very robust sort of earnings and cash flow growth. And this is the business of the future. As more and more people shop online and buy stuff online, and as the cross border e-commerce picks up over the following years and decades, this business, along with Stripe, is going to do very well in my view. And I really like … I also used to own PayPal. And I really like that business too. And I know you’re a big fan of PayPal.
Matt Cochrane 31:35
Puru Saxena 31:36
But if you look at the revenue growth of PayPal, the revenue growth is not as impressive as say, like Adyen. Adyen is growing at 30% year over year. PayPal’s growth is sort of high teens, 16%, 17%, 18%. So I like PayPal too, but I prefer Adyen and I’m also curiously waiting for the IPO for Stripe to see at what valuation it comes public.
Matt Cochrane 32:00
Yeah, you know, there’s really … I mean, there’s so many payment gateways, and these payment processors, and most of the giants today, the legacy players, they’ve just cobbled together a bunch of disparate systems and kind of cobbled them together. And Adyen is one of those companies, they just built it from the ground up. And it’s one comprehensive, holistic system designed exactly for scale and an online world. And, in my mind, Adyen, Stripe, and Square, and probably Braintree from PayPal, are the four processors that are really built for the modern day world. That’s not that the legacy players still have … I’m not saying they’re necessarily bad investments, but they weren’t built for the world we have today.
Puru Saxena 32:58
Yeah, I agree with you 100%. I mean, whilst we’re discussing fintech, I’ve got to give you credit for basically putting Adyen on my radar. I doubled my cash fairly quickly.
Matt Cochrane 33:16
The problem is, I remember discussing this with you, we went back and forth on the research. And the problem was I didn’t pull the trigger on it and you did. So you get the credit for it not me.
Puru Saxena 33:28
I mean, Adyen was actually on my radar and then when you sent me that research report several months ago, and I fully understood the technology behind Adyen and what made it so special and what made the system so cohesive and the stack so cohesive and interesting and compelling for the enterprise grade customers. I pulled the trigger and you know, credit goes to you for sending that report. Otherwise …
Matt Cochrane 33:53
It’s an impressive company, no doubt. Ah, like, I couldn’t get over the valuation at the time but so far I’ve been very, very wrong about that.
Puru Saxena 34:03
Yeah, I mean, the valuations have been pretty crazy. But if you look at what’s happening on the monetary front, Matt, if you look at the interest rates all over the world and the amount of cash the central banks are pumping into the system, and you do a discounted cash flow analysis when your risk free rate is 1%. I mean, crazy things happen. And that’s what we’re seeing, because I think the market correctly is now of the view that interest rates in the US are not going to go higher for the foreseeable future.
And I think interest rates are not going to go higher for at least three or four years. I’d be very surprised if the Fed actually raises rates before 2023 or 2024 at the earliest. And even when it does raise rates, I think the system would be so sort of leveraged by then, that the next monetary tightening cycle is going to be shallower than the previous one. Because if you see what’s happened since the early ’80s, if you pull up the long term chart of the Fed funds rate, you will note that each peak of the Fed tightening cycle has been lower than the previous one. So, you know, it’s been like that, lower highs and lower lows. So I suspect that in the next round of monetary tightening whenever we get past COVID, and the economy is kind of picking up steam, the Fed funds rate is not going to reach the level it reached in the previous cycle. I think 100 or 200 basis points will basically kill the golden goose and then we’re going to be back to QE and up again for a very long time.
Matt Cochrane 35:35
Now, it makes sense I understand what you’re saying. And for the record, you have been very right about Adyen, and I really wish I pulled the trigger when we were researching that several months ago. And, so one more though: software. So that’s your last trend that you’ve been talking about lately, it’s obviously a broad category, but tell us why you like software.
Puru Saxena 36:00
Well, software again, is making life simpler for both consumers and companies. And basically software saves both time and cash for companies. You know, in this day and age, where everything is going digital and most business and commercial transactions are done via the email or by the computer, it is a no brainer to me that some of the software vendors have become almost like necessities again, modern day utilities for these companies.
You try and run a Fortune 500 or, you know, one of those big companies without cybersecurity and without some of the offerings from like an Okta, Datadog, or CrowdStrike or ServiceNow or Salesforce, you can’t do it. So if I’m a CFO of a big business, or if I’m the senior management of a big business, and a software company comes along and says “Hey, you know, you can try out our product and offering. and you basically will save both time and money and improve your company’s productivity. Your employees are going to become more productive. You’re going to streamline your processes. And you’re going to do well as a business. And if you add everything together, what you pay us and how much you’re going to save him time and cost and everything else, especially with the cloud now, you don’t even have to build your own data centers and spend money on hardware. We’ll do everything for you. We will look after the software for you, we will upgrade it for you. You don’t have to spend a copious amount of cash on upfront legacy licenses and then pay us a lot of money every few years for upgrades and then call us and pay us a lot of cash for maintenance. We will take care of all of that for you. And all you have to do is just pay us a monthly recurring fee and be looked after for the next, you know, four or five or 10 years.” It’s a no brainer for me. You know if I cannot run my business in today’s day and age, and say, You know what, I don’t like the internet. I don’t like the computer. I’m just going to do my business the way it was done 20 years ago. You know, I’ll be out of business within five years, right?
Matt Cochrane 38:11
You can’t do business the way your father or grandfather did or …
Puru Saxena 38:14
Can’t be done. Can’t be done. You look at how people view content these days. It’s YouTube, it’s Netflix. How do people converse with each other these days? It’s through WhatsApp. How do people bank these days? It’s through the online banking portal. Everything is going online, everything.
Matt Cochrane 38:33
You know how incredible, how incredible is it too? I mean, we would have never met a generation ago. How many times have we traded investment ideas or just talked and it started on Twitter, but we’ve also talked on WhatsApp and now we’re talking on Zoom. All these technological platforms, how amazing they are and how powerful they are.
Puru Saxena 38:59
They are. I mean, they’ve changed everything. I mean, if you look now, as human beings, we take so many things for granted. I would argue that Google has made everybody more intelligent, because without the Google search, most people didn’t have a clue about anything. You either had to go to a local library or look at the dictionary or some sort of directory to get your answer. Now, you’ve got this amazing computer in your hand, i.e. the smartphone. You go to Google. You ask any question you want, and within a second, you got a pretty reasonable answer. So you know, Google, I mean, I personally can’t imagine life without Google for example. You know, I use its services in so many different ways throughout the day. When I’m driving, I use Google Maps. I watch my content on YouTube. I search Google multiple times a day to find answers to questions that I’m looking for. And there’s so many things you know, like Twitter, Facebook. All the advertising is now moving gradually online, you know, Roku. Even if you look at the car industry, Tesla is basically revolutionizing the car industry. You know, they’re doing sort of over the air software upgrades and everything else. I mean, in the future, I’m convinced, and I’m not so sure about the timing, but at some point in the future, we’re going to get autonomous driving and ride hailing fleets and all of that.
So everything is going to be run by machines and computers. And you have a choice as a business and as an investor, you can either embrace this change, or you can get caught, you know, in the past 50 years prior to 2000 and say, “I am not going to change I will only buy cheap, distressed assets.” And of course your performance is not going to keep up because there is one big difference in the modern day business, Matt, versus the companies of the pre-internet era. And I mentioned this once or twice in my Twitter feed a few months ago. You know, before the internet, the gross margins of the spectacular companies were very low, you know, 20%, 30%, 40%, maximum 50% if they were lucky. And the growth rates were fairly muted. You know, a high growth compounder used to grow at maybe 20%, 25%. And the answer for that is, or the reason for that, rather, is pretty simple. Because in the old economy, companies, businesses had to set up factories. They had to set up distribution centers. They had to, first of all, make the product at scale. So whenever there was demand, they couldn’t just ramp up production overnight and cater to that rising demand. So, growth was pretty slow and steady. And the margins were pretty low.
But if you look at the current crop of these disruptive businesses, whether it’s software, e-commerce, or fintech, especially software, the gross margins are super-high. You know, 70%, 80%, 90% in some cases, so the cost of producing those goods is fairly low. And you have these unheard of growth rates of 50%, 60%, 70%, 80%, 90% revenue growth. Heck, Zoom grew at 160% year over year in Q1. So you have these unbelievable mind boggling growth rates, simply because their businesses are so scalable and they don’t require factories and distribution centers. Once a software is coded, that’s it. You can basically get as many customers as you want, as quickly as you want, without having to incur much apart from sales and marketing costs. Now, if you look at the internet companies, are either ecommerce businesses or fintech and stuff, they already have the infrastructure in place. So when you have a new customer who wants to open, for example, a PayPal wallet. PayPal doesn’t have to rush out and build a new factory, or a new distribution center, or open a new retail store. It happens almost instantly.
So these businesses are very scalable, and they’re growing very rapidly and their margins are a lot higher. So, you know, that’s why the valuations are high. I mean, why should these businesses be cheap, given all the attributes that are described? And also the internet is a place where you know, scale counts a lot. So, you know, it’s a first mover advantage, whoever has the advantage, whoever has the users, and the traffic is pretty much a winner take all scenario for many of these spaces, within the internet space.
Matt Cochrane 43:40
Absolutely. You know, that’s the one thing, I mean, so often, you’ll see people compare or just take like the S&P 500 average or median P/E ratio and compare it to the average or median P/E ratio of the market from 20, 30, 40, 50 years ago. And it’s higher now. But I always say, what were the large companies back then compared to what they are now? Like you have Microsoft, Alphabet, Facebook, Adobe, Salesforce, I mean, those are some of the largest companies in the world right now. What are their margins compared to, in the old days, when you had General Electric, AT&T, metal benders, you know like car makers and things like that. It’s not comparable at all. You know, the margins and the growth rates and, like you said, how easily they can scale. Of course, the P/E ratios should be a lot higher now.
Puru Saxena 44:49
Of course, of course. I mean, comes back to my old analogy, which I mention quite often, if you go to a store or get an auto loan, a Ferrari is going to cost a lot more than a Ford.
Matt Cochrane 45:03
Puru Saxena 45:03
If you have a massive compounding beast, with a very sort of powerful engine, it’s not going to come at the cost or the price tag of our little Ford and Kia Motors. You have to pay up for this long term compounding ability. So if you look at any walk or area of life, you know people accept the fact that quality doesn’t come cheap. When if you go to your local tailor, I’m sure you can get a suit made for very little. But if you go to you know, Xenia, or if you go to an Armani that costs because you have a party, and the same thing applies for businesses. Why should a great compounding machine, a life changing business which is going to perhaps alter your life forever financially, why should that be cheap? I mean, can you give me a good answer? Why should that be cheap?
Matt Cochrane 45:55
Definitely not. Nope. We’re on the same page there. Ah, all right. So one software company.
Puru Saxena 46:03
Matt Cochrane 46:03
Yeah, what’s your favorite software company?
Puru Saxena 46:05
I mean, a favorite software company is very different than me sort of recommending a stock now, because a lot of the companies have grown up a lot already. But if I were to look at everything, you know in totality, look at the long term prospects of the business and also compare that with the current valuation. I will probably go with Alteryx. Alteryx’s valuation is not as nosebleed as some of the other ones. And I think the business slowdown that the company is currently facing is a temporary phenomenon. And they’ve recently come out with a more cloud-based offering. And I think the business has an enviable position in its space. It’s clearly a leader in what it does. You know, if you look at the Gartner’s Magic Quadrant, it’s clearly been a leader for a long time. And the management is pretty switched on. And I think the TAM is massive. So given what the company has achieved and what its future prospects look like, and the current valuation, I would say, Alteryx looks pretty compelling. I do like, you know, Datadog and CrowdStrike, and all of those also. But their valuations are already pretty rich and investors have already caught on to their business prospects and those names. So if I would be looking at investing fresh cash today, I will probably put that in context.
Matt Cochrane 47:31
It’s a great company. It’s a great company. I have you on and I know you get asked this question constantly, but I have to ask you, because sometimes people ask me about your hedging process. And I’m like, Man, don’t ask me. So investors today, they have to weigh all these things we’ve been talking about. You have economic uncertainty and stretched valuations on one hand, but you also have the Fed, or fiscal stimulus and zero percent interest rates on the other hand. And you have these great businesses that we’ve been discussing, and it’s hard to weigh them. But you have a secret weapon for managing volatility in your portfolio. So why don’t, if you don’t mind, because I know you get asked this constantly, but why don’t you walk us through that process?
Puru Saxena 48:32
So, I mean, first of all, it’s not so secret anymore because I’ve been tweeting to help others, because I know what volatility feels like. And you know, it’s not fun and crashes happen out of the blue. They come out of the blue, you know, they strike and I’m not smart enough to know when the market is going to tank and then when it’s going to go higher. In early February, I had no idea that the market was going to plunge 40% in sort of four weeks, and I don’t think anybody else did either. And then in early April, nobody would have imagined that the market would basically have this huge rally despite the pandemic. And a lot of these growth names would double or triple. I certainly didn’t know. And I’m pretty sure if any of your listeners or viewers or subscribers asked themselves, honestly, whether they knew this was going to happen, most of them are going to say, no, they had no idea.
So when I manage my money, and when I approach the investment business, I base it on the truth that the market can do whatever it wants to do. And it is beyond any human beings sort of intellectual capacity or prediction of forecasting abilities to know what any stock or any market is going to do tomorrow, next week, next month or next year. You know, we are dealing with unknowns, the future is unknowable. Nobody knows what’s going to happen tomorrow. You know, a war could break out tomorrow. You know, we could have a serious natural disaster, we could have a fight between two or three major economies. Anything that can go wrong often or sometimes does go wrong.
So for me, you know, rather than positioning my portfolio for the upside, my key emphasis always is to protect the downside. And again, this comes from having lived through the big 60% drawdown that I endured in 2008-2009, which wasn’t very pleasant for me. It was in terms of my own sort of confidence. And also for my investors who basically had to grit their teeth and basically ride it down with me. And I realized then, that running an equity portfolio or a portfolio of any risk asset without a defense mechanism in place, is basically asking for trouble. Because, if you have a mechanism which either gets you into cash, or if you are able to hedge or mitigate these big sharp plunges in the markets, then that to me at least is is worth its weight in gold. Because if you look at what happened in March, you know, a lot of investors who invested heavily in these growth names, were down 40%, 50%, 60% from the peak to trough drawdown, and market failure was down maybe 15% – 20%.
And then because of the hedges, I booked in some very large profits near the lows, sort of late March, early April. And then I was able to use that cash and invest in these quality companies when they were temporarily beaten down. And that’s why my year-to-date return is pretty insane, because I was able to leverage on these hedging profits. So not only was my drawdown significantly reduced when compared to the broad market, it also put cash in my pocket, which I was able to reinvest at depress prices.
And that’s why if you take care of your downside, and if you use 100% price-pay system with zero input from macro, some pundits, commentary, or wizardry, then price is what it is. The price trend is objective. Everybody can see it on the price chart. All you need is to look at the price and look at a few moving averages to see whether we are in an uptrend or a downtrend. And I sort of work on the premise that the market is pretty efficient most of the time. You know the market is not a totally insane, dumb mode. You have pretty smart people who are betting their life savings on certain outcomes. The market is usually pretty rational. Where it does sort of get unhinged from reality is that emotional extreme.
So after you’ve had a big run up, or you had a big crash, that’s when people become extremely emotional. And human beings are emotional by nature. So that’s when you get irrationality or insanity creep into the markets. But usually, the price is pretty reasonable and rational. So I base my hedging on 100% price-based system. So when the price is trending higher, I want to be 100% long, I want to basically be positioned in a manner which allows me to benefit from this up trend. Because at the end of the day, we all invest for one reason: To make money. You know, we want our portfolio to be bigger a month, two months, three months, six months, five years out from now. That’s why we all take the risk and invest.
So if you are able to actually participate in the upside and then, when the tide reverses – and it does from time to time – then if the trend becomes down, where the price is telling you that you know the price is trending higher and the movers moving averages are telling you that the tide has turned down the path of least resistance is now down. If somehow you can find a way to protect your gains and preserve your capital, and somehow become market neutral or even use your market risk during those periods, over time, you are bound to do better than a simple buy and hold strategy. Simple math.
So the way I do it now, what I have done for the last few years, is I look at the price and I look at the moving averages, the 5-day and the 10-day EMA, and I also look at a trend filter. So, for me, the 100- and 50-day moving average exponential moving average is the trend filter. So when the price is above the 100- and 50-day moving average that, for me, is a primary uptrend. When the price is trading below the 150-day moving average, i.e. the price is below the average price over the last 150 days, That is a primary downtrend. And that’s when I basically put my hedges on. So below the 150 day moving average, that to me is the sort of danger zone. And when the short term trend i.e. the 5-day, 10-day moving average cross, is also in a negative bearish position, i.e. when the five beginning average is below the 10 day, and the price is below the 150 day moving average.
That’s where I’m headed. So I’m totally market neutral, but not totally because it is never a perfect hedge. But I’m pretty much market neutral. So if the market tanks under the 150 day moving average, it doesn’t affect me so much anymore, and I’m able to sleep well and preserve my cash. And if we do get you know, these crazy crashes which do happen once every few years, once every few decades, then you know, even better. Then you can get extra cash, which you can reinvest or you know, spend whatever you want with the profits from the hedges.
Matt Cochrane 56:11
And how long have you been doing this now with the hedging?
Puru Saxena 56:14
I’ve been doing that for a few years now. I mean, I wasn’t able to do this when I was managing money for investors in my firm. We didn’t have the licenses to short sell stuff. Because obviously, if you’re borrowing, you know, on margin, keeping stocks as collateral and shorting ETFs and futures and stuff that introduces the element of leverage, which I did not have the capacity or capability for when I was running my firm, so I used to go into stocks and get out of risky assets and go into treasuries and stuff, you know. But since I’ve been managing my own funds, or portfolios since 2016, I’ve been hedging my portfolio.
Matt Cochrane 56:54
So you’ve been doing it for a few years and knowing you, I bet you back-tested this too. So does it add to your returns? I know it reduces volatility and it just helps you stay invested and stay calm during these economic downturns, which is huge. I mean, that’s, half the battle. But have you found that it adds to your returns or does it take away a little bit or is it return-neutral? Like what have you found about that?
Puru Saxena 57:30
I hedge off the IWO, which is the Russell 2000 Growth ETF, and I hedge now by shorting that. So if you look at the back tested results, going back to the inception of the IWO or the start of the Russell 2000 Growth index, then the annual cost of hedging has been about 0.4% a year. So you will have lost about 0.4% per year for protecting your portfolio. But this does not include the prospect of having the cash after major bear markets, and reinvesting that money in stocks when they are cheap. So had you taken the profits from those hedges after the 2002-2003 bear market and the crash in 2008-9, and then the plunges in 2015-16. And then the recent tank in 2020, you would have actually made money by hedging a portfolio. It would not have been costing you.
Matt Cochrane 58:35
I remember, I don’t think we actually talked about this specifically, this last time, but in late 2018, when you were explaining this to me and you said, Look, Christmas Eve or New Year’s Eve, whenever the market hit the bottom, you said I have this pile of cash right now. And you know,when the trend reversed like a week later you had this pile of cash ready to ready to deploy.
Puru Saxena 59:00
Yeah, and the same thing happened now in March. You know, when I covered my shorts, the hedging positions in March, in late March or so, the cash that I had in my account was equivalent to like 35% – 50% of my entire account value. And then all these companies were smashed down and cheap. I mean, what did I do? I just rented more and more shares, because I knew that over time they would bounce back. And I didn’t know that they would bounce back then. But history has shown that if you invest in great companies, and if they become temporarily cheap, and if the business isn’t broken, only the stock is broken temporarily, that is a fantastic opportunity to buy. If you look at some of the best investors of our times, you know, Phil Fisher, I know you’re a big fan of Phil Fisher’s teaching, so am I. If you look at Peter Lynch, and all those masters and legends, they all said the best time to Invest in a world class business is when it is temporarily cheap in a bear market. And what do investors do? You know, they chase big run ups after big bull markets and they head for the hills when things go south, and that is exactly the opposite of what a person should be doing.
Matt Cochrane 60:19
Right, right. I could talk to you all day, but I want to be respectful of your time. So I have one more question. You know, one thing our seven investing advisors have talked a lot about, both on Twitter and this podcast is teaching our kids about personal finance and investing. From our past conversations, I know you’re a father that cares deeply for your children. What tips would you give fellow parents about educating their children on financial matters?
Puru Saxena 60:47
Well, I think the financial education is pretty bad. I mean, I think investing should be taught as a subject in school and also in university. I think it’s insane that people are actually taught to become, you know, corporate slaves and to be employees. And nobody’s taught how to handle money. Nobody’s taught not to borrow from credit cards. Nobody’s taught how to use credit cards prudently. Nobody’s taught about inflation, how money loses its value over time because of inflation.
So most people in the world, I would say over 90% of the world’s population, is totally clueless about money and investing. And I think it is a travesty. Because everybody, you know, earns money. Everybody needs money for survival. Everybody works super hard. For most people, unless you’re a crook, you work super hard for your money, whether you’re a business owner or you’re an employee at a firm, and most people don’t have a clue on what to do with it.
To make it worse, most people go to experts and give their life savings to experts whose only goal rather is to line their pockets at your expense. And they underperform. They actually do worse than the indices. And they come up with all sorts of excuses of why, you know, they’ve underperformed. So I think teaching kids about investing is very important. I mean, for me, my kids are now 13 and 10. And a few years ago, I basically told my daughter and son saying, look, you know, you have this pyramid in the world. And at the top of the pyramid, you’ve got the small percentage of people who control the businesses, and own the businesses, who set up the plants and factories, who hire people who bring the capital to the table. And then you know, you’ve got the majority at the bottom who actually want to these people. And the people at the very top, the business owners, are the wealthiest people in the world.
So you have a choice of what you want to do. You know, you can either choose to be an employee, and line somebody else’s pockets, or you can, you know, take a bit of risk, especially when you’re young and set-up your business. It doesn’t matter what you invest in, you know, invest in yourself, have a good idea and go for it. You know, I don’t care whether my children become musicians or athletes or business owners or you know, software coders or whatever, it’s up to them, but whatever you do decide, invest in yourself and do it and be smart about your money.
I mean, my son gets pocket money and so does my daughter, I give them a weekly sort of allowance to spend cash. And they obviously get, you know, presents and cash gifts and stuff from relatives and stuff and grandparents and all of that, for birthdays and stuff. And my little boy was, you know, for years he kept his cash in like a home safe. So he had like this plastic piggy bank, and he used to, you know, put his money with a digital one and put cash in the counter and stuff. And I said, you know, look, your money’s been sitting here for the last two or three years and hasn’t really done anything for you. It’s still the same. And I showed him my investment account a few days later, I said, “Look, this is the amount of cash I made when I’m asleep, when the US market is open, you know, on a good day, this is how much I earn. Would you like to do the same?” And his eyes lit up. So he says, “Yeah, of course, you know, I’d like to make money.”
So his first investment was Pinterest, he chose that. I think as long as you want to remain invested in Pinterest or do you want to get onto or jump onto these other horses, which are sort of galloping. So he said, “Yeah, you know, Pinterest is a rubbish investment and hasn’t done anything.” So basically showed him my strength to, which I maintain for stocks, revenue growth, and EPS growth and I said, “You know, which company would you like to select?” And he says, “Duh, obviously, you know, I’d go for the triple digit growers.” So I said, Why? He says, well obviously you know, if they’re growing the fastest, the stocks will go up, you know, quicker. So he basically went with Livongo. He bought Livongo, he put all his money in Livongo. And basically that was $40 a share a few months ago, and now it’s over $130. He reminds me every single day how smart he is.
Matt Cochrane 65:09
He’s a genius. He should be managing your money.
Puru Saxena 65:14
That’s what he says to me every day. He says, Because you own 18 or 19 companies, all my cash is in one company, you should let me manage your money.
Matt Cochrane 65:24
Of course, of course.
Puru Saxena 65:26
Very important, it’s very important to teach your children to invest in companies, if you don’t want to own your own business, you don’t have to. You know, as long as you have savings and if you you know, save more than, you know, you spend less than you actually earn. You have in this wonderful capitalistic system, you have the opportunity to own small pieces of incredible, world-beating companies which can basically provide life altering returns. So I think investing should be taught and, frankly, I’ve also thought about this myself, I’m actually going to teach investing in a local school or university just as some volunteer charity work to share some of my experience and knowledge and help young kids become better decision makers with cash as they grow old.
Matt Cochrane 66:19
That’s great, Puru. Thank you so much for your time today and for sharing with us, Puru Saxena, ladies and gentlemen, thank you again for coming on today. I’m Matthew Cochrane, lead advisor with 7investing and we’re here to empower you to invest in your future. Have a great day, everyone.
Puru Saxena 66:37
Thank you so much.
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