Light Street Capital filed a 13G on Monday July 22, disclosing a 5.2% stake in cybersecurity firm Carbon Black, Inc. (CBLK).
The Palo Alto-based hedge fund acquired the $69 million CBLK position as cyber attacks become an increasing problem for U.S. corporations, and spending on computer security technology proliferates. Waltham, MA-based Carbon Black has been transitioning from an on-premises cybersecurity company to a cloud-based one over the last couple years. Cloud-based security systems offer multiple advantages over on-premises security technology.
Crowdspike Holdings (CRWD) — another cloud-based cybersecurity company — went public at $34 on June 15, and has since soared to $88.05, a 258% gain. CRWD sports a $17.56 billion valuation. According to Barrons, most analysts expect Crowdspike to reach $400 million in revenue over the next 12 months, implying the stock trades at 35 times next year sales. Meanwhile analysts on average expect about $288 million in revenue for Carbon Black next year. CBLK’s current valuation is $1.35 billion, or about 4.68x next year’s sales.
Light Speed Capital possibly views Carbon Black stock as a relative bargain in the booming cloud-based security sector.
CBLK’s IPO was on April 10, 2018 at $19, valuing the firm at $1.3 billion. With the stock’s June 22 close of $18.81, the stock’s not far from that level.
Cybersecurity spending is forecast to rise 9.7% in 2019 to $132 billion
Hackers continue to steal credit card data and intellectual property. Extortion is on the rise. Hackers are increasingly using ransomware and demanding payments to let companies regain access to their own information. Market researcher Gartner forecasts that 2019 information security spending worldwide will rise 9.7% to $132.6 billion.
Light Street’s new position in Carbon Black shares makes that stock the hedge fund’s 11th largest holding.
13D/G filings must be submitted within 10 days by anyone who acquires ownership of more than 5% of a company’s stock. 13D filings usually indicate ‘activist’ investor activity where the person(s) involved seek to influence management. 13G filings — like the one filed by Light Street on Carbon Black — are typically passive investments.
Light Street Capital is run by Glen Kacher — one of the most successful “Tiger Cubs.”
Light Street Capital has emerged in recent years as one of the top performing tech-focused hedge funds. Glen Kacher is Light Street’s controlling owner and Chief Investment Officer. In the mid-90’s, Kacher worked at Julian Robertson’s Tiger Capital Management as a tech analyst before getting his MBA at Stanford. After graduating, Kacher stayed in Silicon Valley and worked for private equity pioneer Roger McNamee’s firm, Integral Capital Partners. After 13 years at Integral, Kacher started Light Street with McNamee’s backing.
Of all the so called “Tiger Cubs,” Kachner’s Light Street Capital has the best performance over the last three years — a 28.41% return. That’s based on long positions disclosed quarterly in 13Fs.
Here’s how the hedge fund describes its strategies (from the firm’s ADV).
Light Street looks at individual companies in a variety of industries, including technology, eCommerce/retail, Internet media, traditional media, alternative energy and telecom. It also invests in other industries when it believes significant secular change is occurring, often driven by technological innovation… A primary goal of Light Street is to combine expertise in rapidly innovating industries with proprietary research to identify companies with superior management teams, products and strategies. Light Street combines its expertise and research to make investments that seek to create attractive, risk-adjusted long-term returns for the Funds. Light Street intends to identify companies that are well positioned to take advantage of industry opportunities.
Below are Light Street’s top 15 positions from Q2 of 2019, including the recently disclosed CBLK stake.
| Stock | Symbol | Shares Held | Market Value | % of Portfolio | Ranking | Change in shares | Change Type | Qtr first owned | source_type | source date | Avg Price |
| Amazon.com inc. (Call) | AMZN | 146,800 | 261,414,000 | 15.6219% | 1 | 0 | Q2 2017 | 13F | 03/31/2019 | ||
| Sea ltd adr | SE | 4,927,879 | 115,904,000 | 6.9263% | 2 | 4,927,879 | new | Q1 2019 | 13F | 03/31/2019 | 23.52 |
| Netflix inc | NFLX | 308,752 | 110,089,000 | 6.5788% | 3 | 1,352 | addition | Q4 2018 | 13F | 03/31/2019 | 268.05 |
| Pinterest inc | PINS | 4,172,126 | 107,849,457 | 6.445% | 4 | 4,172,126 | new | 13G | 04/23/2019 | ||
| Farfetch ltd | FTCH | 3,586,147 | 96,503,000 | 5.7669% | 5 | 1,336,202 | addition | Q3 2018 | 13F | 03/31/2019 | 25.004 |
| Amazon.com inc. | AMZN | 52,350 | 93,222,000 | 5.5709% | 6 | -4,393 | reduction | Q4 2014 | 13F | 03/31/2019 | 653.6 |
| Yandex n.v. | YNDX | 2,688,900 | 92,337,000 | 5.518% | 7 | 1,070,088 | addition | Q1 2018 | 13F | 03/31/2019 | 36.364 |
| Mongodb inc | MDB | 589,000 | 86,595,000 | 5.1749% | 8 | 75,450 | addition | Q4 2018 | 13F | 03/31/2019 | 91.846 |
| Twilio inc | TWLO | 662,250 | 85,549,000 | 5.1123% | 9 | -8,080 | reduction | Q4 2018 | 13F | 03/31/2019 | 89.3 |
| Iac/interactivecorp | IAC | 333,000 | 69,967,000 | 4.1812% | 10 | -6,000 | reduction | Q1 2018 | 13F | 03/31/2019 | 164.29 |
| Carbon black inc | CBLK | 3,779,963 | 69,248,922 | 4.1383% | 11 | 3,779,963 | new | 13G | 07/11/2019 | ||
| Everbridge inc | EVBG | 869,850 | 65,247,000 | 3.8991% | 12 | -156,974 | reduction | Q2 2018 | 13F | 03/31/2019 | 50.486 |
| Match group inc | MTCH | 939,200 | 53,168,000 | 3.1773% | 13 | -140,597 | reduction | Q2 2017 | 13F | 03/31/2019 | 42.77 |
| World wrestling entertainment inc | WWE | 593,135 | 51,472,000 | 3.0759% | 14 | -51,700 | reduction | Q4 2018 | 13F | 03/31/2019 | 74.72 |
| Palo alto networks inc | PANW | 207,400 | 50,373,000 | 3.0103% | 15 | 125,100 | addition | Q3 2017 | 13F | 03/31/2019 | 219.89 |
Disclaimer:
Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this blog is meant for educational and informational purposes only. Do your own research before investing and don’t risk more than you can afford to lose. This article expresses my own opinions, and I am not receiving compensation for it (other than from WhaleWisdom). I do not have a business relationship with any company whose stock is mentioned in this article. I or my associates may hold positions in the stocks discussed.
