Twilio priced nicely for long-term investors
Abraham George Market Musings
One of the biggest surprises of this year was the Fed changing its tune on inflation and interest rates. I knew all along this will happen and I have been writing about it throughout the year that Fed especially the Chairman is playing cat and mouse with the markets.
What is most surprising is that the Fed Chairman made this announcement making a U-turn from being an inflation-denier to an inflation-fighter, all in one Congressional testimony. He did not waste any time after his reappointment when the world woke up to a new COVID variant called Omicron. It clearly indicates that we are likely to see a very different Fed Chairman in his new term.
We are already talking about a March rate hike. Anyway, we will hear about this more from the Fed next week, where they will most likely layout a new timeline for that possibility.
As I have stated many times before, this new interest rate tightening cycle is bad news for the high valuation growth stocks, with debt and no cash flows. Basically the ‘no EPS’ stocks.
Most of these stocks have been valued by analysts on a multiple of sales and not earnings. They have already taken a beating ever since Powell made the flip-flop. The percentage of growth stocks that have negative earnings is still at record highs. It may be time for money to flow out from debt-ridden growth stocks to value stocks. The force behind that is an inflation-fighting and tightening Fed. Twilio is a victim of this phenomenon. It has fallen already 43% from its top.
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Many incorrectly assume that I am negative/bearish on Twilio based on my recent essay series on Tanla and CPaaS. Nothing could be farther away from the truth. Let me emphatically tell you that Twilio is a GREAT company. Period. Jeff Lawson, like Stripe’s visionary Collison brothers, thinks at a civilizational level which is a rare quality even among tech giants’ boldest executives. If you are a long-term investor, the current levels and lower are interesting levels. Twilio will even give a run for their money with Google and Facebook.
I like to develop on this in the coming days through a two or three-part series which will also indirectly highlight the opportunities that exist for Tanla Platforms in the international markets.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is setting up a hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.