BBuilding a portfolio can be complicated, but emulating successful investors is a great place to start. Fortunately, every quarter, institutional fund managers are required to disclose their stock holdings in a Form 13F filed with the Securities and Exchange Commission. This gives retail investors a chance to see how so-called “smart money” performs in the market.
In the fourth quarter of 2021, billionaire James Simons of Renaissance Technologies added more than 303,000 shares of Fiver International (NYSE: FVRR) to his hedge fund. Similarly, billionaire Andreas Halvorsen of Viking Global Investors opened a position in Twilio (NYSE: TWLO), buying nearly 3 million shares for his hedge fund. Obviously, these professionals find something appealing about Fiverr and Twilio, so let’s take a closer look at the two companies.
Here’s what you need to know.
1. Fiverr International
Fiverr is a cornerstone of the gig economy. It connects buyers and sellers of digital services, and its ever-growing gig catalog now spans 550 categories across nine verticals, including hot jobs like web development, data analytics and digital marketing.
On the vendor side, Fiverr helps freelancers build a portfolio and market their skills, and provides value-added solutions such as the Fiverr Workspace job management platform and training content through Fiverr Learn. On the buyer side, Fiverr connects businesses to a global talent pool, leveraging artificial intelligence to make relevant suggestions and speed up the search process.
Fueled by changing workforce dynamics – gig economy transaction volume grew 70% between 2018 and 2021 – Fiverr has rapidly grown its business. Over the past year, active buyers have jumped 23% to 4.2 million, and spend per active buyer has climbed 18% to $242. As a result, revenue increased 57% to $297.7 million, and Fiverr generated positive free cash flow of $35.5 million, compared to $13.1 million in 2020.
Looking to the future, management is executing a solid growth strategy. This includes the recent acquisition of Stoke Talent, a freelance management platform for large companies. Historically, Fiverr has served small and medium-sized businesses, but the acquisition should help the company move upmarket. This will also allow Fiverr to tap into the offline freelancer market, which is even bigger than the online market.
On that note, management values its market opportunity at $115 billion. And given the tailwinds behind its business, I’m not surprised to see Renaissance Technologies pouring more money into Fiverr. In fact, with the stock down 78% from its peak and stocks trading at 8.5 times the sell – well below their historical average of 20.4 times the sell – now seems like the right time. to add this growth stock to your own portfolio.
Twilio specializes in customer engagement. Its cloud platform is made up of a suite of communications software and services, allowing developers to integrate features such as voice, chat, video and email into their applications. Common use cases include contact centers, delivery notifications, and consumer loyalty alerts. Additionally, Twilio offers pre-built solutions, such as Twilio Frontline for sales productivity and Twilio Engage for targeted marketing campaigns.
In 2021, International Data Corp. (IDC) once again recognized Twilio as the industry leader, citing its broader product portfolio and stronger growth strategy as differentiating qualities. In the report, IDC also noted that Twilio has earned a reputation for reliability, and its recent acquisition of Segment — a customer data platform that helps customers personalize interactions — further separates Twilio from its rivals.
This praise did not go unnoticed. Twilio grew its customer base by 16% to 256,000 active accounts over the past year, and the average customer spent 31% more. As a result, revenue jumped 61% to $2.8 billion. On a less optimistic note, the company generated negative free cash flow of $148.2 million. But with $5.4 billion in cash and short-term investments on its balance sheet versus $986 million in long-term debt, Twilio can afford to invest aggressively to grow its business.
Looking ahead, management estimates its potential market to be over $100 billion by 2023, and digital transformation is expected to be a tailwind for the business. As companies strive to better engage consumers and improve loyalty, Twilio should see increased demand. From this perspective, Viking Global’s belief makes a lot of sense. And with the stock down 66% from its peak and the shares trading at 9.1 times sales – much cheaper than their five-year average of 16.3 times sales – now seems like the right time. to add Twilio to your own portfolio.
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Trevor Jennewine owns Fiverr International and Twilio. The Motley Fool owns and recommends Fiverr International and Twilio. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.