At Spaceship we’re long-term investors. But we still keep an eye on what’s happening in the market day-to-day.
These were the companies in our Spaceship Voyager portfolios that made some big moves last week (29 August - 2 September 2022).
Want more? You can see daily price moves and company news when you log into the Spaceship app.
CrowdStrike
(CrowdStrike is in the Spaceship Universe Portfolio)
Picture this: you’re on a plane.
You’re a guy who works at an anti-virus company. You see another guy open his laptop and run the software he purchased from you. Fifteen minutes later he’s still waiting for it to finish scanning and you think, “A-ha! There must be a better way!”
So you decide to go it alone…
…and you set up a competing business, which happens to become one of the fastest growing tech companies in history.
That’s what happened to CrowdStrike CEO George Kurtz.
He co-founded CrowdStrike, which sells cloud native software that predicts and prevents modern cyber threats for companies and organisations all around the world. CrowdStrike became famous for uncovering the Russian hacking of the US Democratic National Committee in 2016.
Last week CrowdStrike announced quarterly results
They included a 59% increase in ending annual year-over-year recurring revenue to reach $2.14 billion, and added 1,741 new subscribers in the quarter alone, for the quarter ending 31 July 2022.
The Spaceship Voyager Investment Team added CrowdStrike to the Spaceship Universe portfolio mid-last year.
What makes CrowdStrike a high flier?
“CrowdStrike‘s mission is simple: to stop breaches," said the Spaceship Voyager Investment Team.
"CrowdStrike is ranked number one at securing endpoints (devices connected to networks like computers) and with 22 software modules is increasingly protecting cloud workloads, identity, and data against hacks.
Cybersecurity has become an essential spend, a priority for CIOs, CEOs, CFOs and bBoards of dDirectors, helping CrowdStrike become the second fastest company to reach US$2 billion in annual recurring revenue.
Endpoint cybersecurity is a strong trend yet cloud security is still predicted to be only 1% of 2023 Cloud IT spend. This spend could increase significantly as according to Deloitte the average business spends nearly 11% of their IT budget on security.
We believe CrowdStrike’s moat is strengthening, as customers embed more of their workflows with CrowdStrike adopting more modules. In the last quarter 59% of customers adopted 5 or more modules, 36% of customers 6 or more and 20% 7 or more modules, a 70%, 84% and 105% year-over-year increase respectively which bodes well for increased revenue and customer retention.”
Lululemon
(Lululemon is in the Spaceship Universe and Spaceship Earth portfolios)
Back to you. Suddenly you’re wearing $120 yoga pants.
They could only be by Lululemon - one of the biggest names in the athleisure world.
Lululemon was founded as a women’s yogawear company in Canada in 1998. They now design for ‘most other sweaty pursuits’ for women and men, and sell their clothing in 600 stores globally.
They have signature fabrics
Lululemon is big on exclusivity: they innovate and create new fabrics. These include their signature four-way-stretch fabric ‘Luon’ which they’ve previously sourced from just one factory in Taiwan.
Lululemon was a winner during lockdown…
…When we all ditched our business casual clothes for activewear.
Business of Fashion reports that Lululemon customers benefit from their strong technical focus on their fabrics, as well as a “sticky sense of community that still endures.” They rarely wholesale or discount, which means they maintain a sense of premium exclusivity.
And they’re still a winner after it.
Last week they announced their latest quarterly report which showed a 29% increase in net sales with an increased, adjusted earnings per share of +33% versus the year before, for the quarter ending 31 July 2022.
Why do we keep Lululemon in the Spaceship Earth and Spaceship Universe portfolio?
“You may think of Lululemon as a mature brand, however it is clear to us that Lululemon is still in the early stages of their growth journey," said our Spaceship Voyager Investment Team.
"Earlier this year at their 2022 investor day, the company laid out their strategy of aiming to double its men’s revenue, double digital sales, and quadruple international revenue in the next five years to 2026.
These are bold but attainable targets backed by consistent, strong execution. For example, at Lululemon’s 2019 investor day, the company aimed to double the men’s business by 2023. Instead, this goal was achieved two years ahead of schedule and they also tripled digital revenue from 2018-2021.
When we think of our “Where the World is Going” investment philosophy, Lululemon is riding the secular trend towards living an active and healthy lifestyle and currently only represents 1% of their total addressable market of $650 billion.
Lululemon has also gained more market share than any brand in the industry since 2019, highlighting their strong brand moat backed by a NPS score of 83, far above the average retail score of 44. Lululemon has strong operating leverage, a unique direct-to-consumer operating model that is vertically integrated, high employee engagement (they are a top retailer on Glassdoor in the US) and a strong culture of innovation across all facets of their business.
Therefore, Lululemon ticks several boxes when we are assessing companies that can create and capture value.”
Starbucks
(Starbucks is in the Spaceship Universe and Spaceship Earth portfolios)
Feel like a pumpkin spice latte?
Fun fact about Starbucks: their digital wallet puts the bucks in Starbucks.
In the U.S., Starbucks has a digital wallet that doubles as a loyalty program. As reported in its latest quarterly report, the company has 27.4 million active U.S. customers who use this program to pre-pay their coffees - and help drive 53% of Starbucks U.S. revenue in the process.
Starbucks ended their last quarter (to 3 July 2022) with $1.7 billion of ‘stored value card liability’ which means money that its customers have loaded onto their digital wallets. This is money that becomes immediately available for Starbucks to spend even if its customers don’t redeem their coffees for months. Not bhed.
Starbucks announced a new CEO
Last week, Starbucks announced its long-time and beloved CEO Howard Schultz’s replacement. He’ll be replaced by Laxman Narasimhan.
Schultz has come and gone a few times, most recently stepping in as interim CEO when its former CEO retired in April after 5 years at the top. He’ll remain in the role of interim CEO while Narasimhan transitions in, and will remain a member of Starbuck’s board.
When Narasimhan announced his departure from his current company Reckitt, its shares slumped 4%. Narasimhan has previously been a bigwig at PepsiCo.
A new CEO is a pretty big deal because CEOs can make or break companies. In fact, leadership is a key factor we look for when we choose the companies that make it to our Spaceship Universe and Earth portfolios.
Why do we care about CEOs at Spaceship?
“A key investment principle that is built into our investment process is looking for companies run with an ‘owner mentality’," said our Spaceship Voyager Investment Team.
"This is because companies where the founder still plays a significant role as CEO, chairman, board member, or owner tend to outperform the stock market over time.
In fact, a study by Bain & Company found that an index of Fortune 500 companies where the founder was still involved, performed ~3 times better than the rest over 15 years.
This outperformance is attributed to the mindset of an owner who generally has a clear sense of purpose and responsibility, is customer obsessed, has increased speed of action and takes personal responsibility for risk and costs.
This translates into a high return on invested capital, high sustainable (organic) growth, little debt, low executive turnover and aligned executive compensation plans.”
The Spaceship Universe portfolio invests in CrowdStrike, Lululemon and Starbucks at the time of writing. The Spaceship Earth portfolio invests in Lululemon and Starbucks at the time of writing.
Important! We’re sharing with you our thoughts on the companies in which Spaceship Voyager invests for your informational purposes only. We think it’s important (and interesting!) to let you know what’s happening with Spaceship Voyager’s investments. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator or guarantee of future performance.
