3. Slack Technologies, Inc. (NYSE: WORK)
Number of Hedge Fund Holders: 60
Slack Technologies, Inc. (NYSE: WORK) stock has returned 29% to investors in the past year. The company owns and operates a business technology software platform. It is placed third on our list of 10 stocks Cathie Wood is selling. Wood has significantly trimmed the stake of ARK Investment Management in the firm in the first quarter. At the end of March, ARK Investment owned just 4,735 shares in the firm worth close to $200,000.
On June 3, Slack Technologies, Inc. (NYSE: WORK) posted earnings results for the first quarter of 2021, reporting earnings per share of $0.08, beating market expectations by $0.09. The revenue over the period was more than $270 million, up 35% year-on-year.
At the end of the first quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $4.2 billion in Slack Technologies, Inc. (NYSE: WORK), down from 66 in the preceding quarter worth $3.9 billion.
In its Q4 2020 investor letter, RV Capital, an asset management firm, highlighted a few stocks and Slack Technologies, Inc. (NYSE: WORK) was one of them. Here is what the fund said:
“We became co-owners in Slack, a channels-based communication service for businesses. In an unexpected twist, a few months later it was acquired by Salesforce.com at roughly a 50% premium to what we had paid.
In accordance with my usual practice, I was planning on writing about our investment in Slack. By laying out my investment hypothesis at the onset of an investment, I hope to enable investors to assess in hindsight whether it worked (or not) because of a plausible investment philosophy consistently applied. Given that Slack has effectively already played out as an investment, this rationale has gone. After all, anyone can make a successful investment decision look smart after the fact.
There is one element of my Slack investment thesis that I would like to lay out as it neatly illustrates an idea in my first-half letter and has not yet played out. I wrote then that I wanted to invest more in “early-stage, listed companies”. What I meant by this are companies whose moat is not yet fully developed, but not so undeveloped that it is difficult to say if they will ever have one. I described early-stage companies as possessing:
The kernel of an idea (however unformed), which – if you squint – you can imagine creating a new paradigm in decades to come.
Slack was the type of company I had in mind when I wrote this. Its moat in its core business of providing channels-based communication within companies is well developed. It benefits from a network effect (the more employees on Slack, the higher the value they derive from it), a broad developer ecosystem (thousands of integrations have been built for Slack) and switching costs (Slack becomes tightly interwoven into a company’s workflow through said integrations).
What really got me excited – the new paradigm – is “Slack Connect”. Connect is a feature that allows companies to extend Slack beyond their own organisation to external partners. Connect has not yet achieved viral growth – the moat is not yet developed.”
