Ensemble Capital, an independently-owned investment firm, recently published its first-quarter Ensemble Fund commentary – a copy of which can be downloaded here. During the first quarter of 2020, the Ensemble Fund returned -18.6%, while the benchmark S&P 500 was down 19.6%.
In the said letter, Ensemble Capital highlighted a few stocks and Blackline Inc. (NASDAQ:BL) is one of them. Blackline offers cloud-based software platform. Year-to-date, BL stock gained 16.7% and on May 4th it had a closing price of $57.16. Its market cap is of $3.4 billion. Here is what Ensemble Capital said:
“Blackline, Inc. (2.0% weight in portfolio): Blackline supplies cloud-based software that enables the automation, management, and tracking of manual and repetitive accounting procedures, especially related to a process called accounting closing. This relies on collecting sales and expense transaction data from multiple IT systems within mid-size and large enterprises, matching and reconciling those transactions and posting them into a final ledger that is then used to construct the financial statements of a company.
This process has traditionally been manual with excel spreadsheets sent back and forth between multiple individuals and parties, leading to a process that can be error prone, or worse. By automating the process, not only do enterprises increase the speed, efficiency, and transparency of their accounting close process, but they also have an auditable system of record and tracking for compliance and management purposes.
All this is to describe just how critical Blackline’s software is to customers. Just as an old adage goes that accountants are needed in good times and bad times to tell you which one you’re in, so it goes for Blackline’s software. In fact, its ability to automate processes means that it also reduces costs in those bad times while allowing companies to act faster in a changing economic environment.
With a 97% customer retention rate and about 110% revenue retention rate, the company’s software is clearly very sticky. But this is a young market and Blackline is the leader, so growth is an important value creation goal. As a result, it rationally invests heavily in sales marketing and R&D to both acquire new customers and grow its footprint of products within its customer base.
We expect that with a recently deepened partnership with SAP in its go-to market strategy, when customers are ready again to focus on faster speed, lower cost, and improved efficiency in the virus’ aftermath, Blackline will be ready to help them do just that with its software solution.”
In Q4 2019, the number of bullish hedge fund positions on BL stock remained unchanged from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.