Alec Hogg: How we hit Cloudflare home run
In late March, I agonised over a decision to offload our BizNews Share portfolio's holding in Berkshire Hathaway, creation of the investing and business genius Warren Buffett. At the time, panic selling because of the projected impact of Covid-19 dropped many high quality stocks to bargain prices. Locally we were able to acquire, at unbelievable prices, holdings in Sasol (at R28) and Discovery (at R67).
Mr Market's reaction to the pandemic also brought two stocks I'd been watching for some time onto the buying radar. Music and podcast streaming group Spotify had tanked, enabling purchases at $129 (now $253). Even more appealing, however, was Cloudflare, the global cloud security software leader, whose price had virtually halved, dropping this always highly rated stock to just about its lowest point since listing in September 2019.
Cloudflare was added to the BizNews portfolio in late March at $22 a share. It closed on Friday at $64 – a near trebling in just eight months. The market cap has rocketed from around $7bn to almost $20bn. That's a rich valuation for a company whose annual revenue will break $400m for the first time this year. In other words, the stock now trades at an astonishing 47 times sales (it was 16 times when we bought).
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