It's been a minute since we wrote about the latest movements in the Spaceship Voyager portfolios. Here's the latest changes:
Spaceship Universe Portfolio
Bought: Duolingo (#DUOL)
Duolingo is a fantastic app for anyone looking to learn a language, complete with a green owl mascot called Duo who serves as a sort of motivational coach.
The app is incredibly popular, as it uses games and fun social features to engage its more than 100 million monthly active users. With 42 languages to choose from, users have plenty of options, and the app is now expanding into maths and music education.
We find Duolingo to be a compelling investment due to its strong brand reputation, efficient user acquisition (with around 90% joining organically) and potential for growth.
On the potential for growth, we believe that AI and education make for a great duo (pun intended). Duolingo is adding a new tier called Max, which leverages AI to enhance the platform’s effectiveness by providing diverse simulated scenarios, clarifying answers, and unique responses for every interaction.
The company has a free version, which not only acts as a funnel for monetisation opportunities, but it provides Duolingo with user data. This data helps Duolingo train its algorithms and run A/B tests to continually improve its product. As the company invests further into generative AI and large language models (LLMs), we anticipate further products and enhancements will follow, leading to more paid users.
There are risks here, of course, with OpenAI (the company behind ChatGPT) and Google also increasing competition within the language learning space, but we feel Duolingo's unique approach and loyal user base give it a strong position in the market (and it's worth noting Duolingo has a working partnership with OpenAI).
Bought: ServiceNow (#NOW)
ServiceNow is a tech company that provides a cloud-based service to help companies manage digital workflows, covering everything from app development and automation to customer service to finance and supply chains. Nvidia CEO Jensen Huang referred to ServiceNow as the AI operating system for the enterprise.
We feel they're well positioned to benefit from two major trends: the ongoing shift to cloud computing and the ever increasing use of artificial intelligence (AI). Management believes the key is their domain-specific language models, rather than large models; these smaller models are quick, secure, and inexpensive to run on customer data.
With the cloud market expected to grow, ServiceNow should benefit from increased demand. It has formed strategic partnerships with both Nvidia and Microsoft to enhance intelligent workflow automation, and is utilising LLMs in its tech.
The company is also increasing its prices, placing a bet that the added value from AI will justify the higher cost. While there's some risk, we're betting on the company navigating its transition to AI and capitalising on cloud growth.
Bought: Nuix (#NXL)
Nuix is an Aussie tech company that specialises in investigative analytics and intelligence software, particularly for law enforcement, legal firms, and corporations.
Nuix has a new product, Nuix Neo, which is integrating AI into their existing services. What's interesting for us is that Nuix's AI is proprietary, which is crucial for the company's suite of security-conscious users who can't risk using public platforms.
We also like the fact that Nuix is shifting to a new business model. The company is moving from selling individual components to offering its platform on a subscription basis, where customers pay based on how much data they process. This could lead to higher prices for existing customers and open up new markets.
While there are of course challenges, including their sales approach and the ever present threat of cybersecurity breaches, the potential rewards are significant, which is why we decided to add Nuix to the Spaceship Universe Portfolio.
Sold: Match Group (#MTCH)
You might not know Match Group but I bet you've heard of a couple of the dating apps it owns: Tinder and Hinge. Unfortunately, we'll be swiping left on Match Group.
The online dating market is challenging. While we feel there's still room for growth in the market, users seem reluctant to pay for online dating services — hopefully because they've found what they're looking for, but maybe because they're tired of participating.
When we compared Match Group with a company such as Duolingo, which is converting free users into paying customers, and seems to be engaging users for longer periods, the natural next step for us was to sell Match Group and switch into Duolingo.
Sold: Fisher & Paykel Healthcare (#FPH)
Fisher & Paykel Healthcare specialises in respiratory care and sleep apnea treatment.
While Fisher & Paykel Healthcare is a solid company, it isn't the market leader in sleep apnea products — that spot belongs to Resmed.
While they are still a leader in respiratory care, at the current share price we believe there are better opportunities elsewhere and thus we sold the stock.
Sold: PayPal (#PYPL)
PayPal doesn't really need an introduction. It has been a long-standing investment in the Spaceship Universe Portfolio, valued for its large user base of more than 400 million.
The concern for us is that the competitive landscape has changed.
While we once felt PayPal's user base was a strong defence against other fintechs, tech giants such as Apple, Amazon and Shopify have all created payment systems and checkout buttons. We no longer see the company as a unique tech leader in its own right, so we've decided to sell.
Spaceship Earth Portfolio
Bought: Duolingo
You can read more about why we like Duolingo above, because we also bought it for the Spaceship Universe Portfolio.
As for why we bought it for the Spaceship Earth Portfolio, we believe Duolingo contributes to Goal 4 (Quality Education) of the UN Sustainable Development Goals agenda, as its mission is to develop the best education in the world and make it universally available.
Bought: Service Now
You can read more about why we like ServiceNow above, because we also bought it for the Spaceship Universe Portfolio.
As for why we bought it for the Spaceship Earth Portfolio, we believe ServiceNow contributes to several of the UN Sustainable Development Goals agenda, including Goal 4 (Quality Education), Goal 5 (Gender Equality), and Goal 7 (Affordable and Clean Energy).
Sold: Atlassian (#TEAM)
Aussie software company Atlassian has been one of the bigger players in the IT service management market over the years. We originally picked Atlassian over ServiceNow because it offered similar tools at lower prices.
Unfortunately, Atlassian's approach of letting customers set up and use its products on their own works well if you have a team of tech-savvy developers, but it's not as effective for selling to bigger companies outside of IT departments. Additionally, ServiceNow has gained an advantage by using AI and LLMs.
Given these changes, we decided to sell out of Atlassian and into ServiceNow instead.
Spaceship Origin Portfolio
For customers in the Spaceship Origin Portfolio, things are a little different.
The Spaceship Origin Portfolio is made up of around 100 of some of the largest ASX listed companies by market capitalisation, and around 100 of some of the largest global companies by market capitalisation.
If a company moves in or out of the Spaceship Origin Portfolio, it will generally be because its market capitalisation has changed, not because we have made a decision to buy or sell it.
Spaceship Galaxy Portfolio
You can read more about why the additions to the Spaceship Galaxy Portfolio above, because everything we bought and sold for the Spaceship Universe Portfolio was also bought and sold for the Spaceship Galaxy Portfolio.
This is because the Spaceship Galaxy Portfolio balances lower-risk investments such as bonds and cash with the same growth investments that meet our "Where the World is Going" criteria and are included in the Spaceship Universe Portfolio.
For last quarter, nothing changed in the 'bonds and cash' allocation.
Spaceship Explorer Portfolio
There were no changes made to the Spaceship Explorer Portfolio last quarter.
Until next time.
One or more of the Spaceship Voyager portfolios invests in Alphabet (Google), Duolingo, Fisher & Paykel Healthcare, Microsoft, Nuix, Nvidia, and ServiceNow at the time of writing. Please refer to the Spaceship app or our website for more information on what each portfolio invests in.
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.
