I’ve been spending a lot of time on the phone with old hedge fund manager and other money manager kinds of friends. Inevitably, the talk turns to some of our current stock holdings. Yesterday I was on the phone with an old friend who’s one of the most successful hedge fund managers that you haven’t heard of. Let’s call him “Aries”. One of the first times I’d ever talked to Aries was back in 2003 when he had invested a large amount of money in Nextel at like $2 a share which he, just a handful of years later, let Sprint buy from him above $30 per share.
I asked Aries if he had a favorite tech stock right now and he said — “Hmm, probably Fitbit $FIT.” He told me how he’d just not thought much about the stock other than how it might be “just another GoPro which went public way too early in their life” despite his daughter and wife using the device until one day a couple months ago.
Aries was checking out of Best Buy and asked the sales guy what the best seller in the store was and was “of course expecting to hear about some Apple product” but the answer was “Fitbit.” The stock was around $15 at the time and my hedge fund buddy started buying some. With the continued domination that the Fitbit devices have on Amazon’s best seller boards and the platform Fitbit seems to be creating for itself and its users, he thinks it could be a good investment. I told him I hope it’s another Nextel!
Anyway….I later mentioned in passing that I had started shorting Hubspot, that very morning in fact. He said, “Oh, I know Hubspot.” But we never got back to the Hubspot topic so I emailed him this morning asking him what his thoughts on Hubspot were. Here’s what Aries wrote back:
“HUBS is one of those businesses that the first time they miss, it’s dead. That may not be this quarter, but the whole model is a crock, as you know. It doesn’t scale. I suspect they will ‘make’ this quarter because they want to bury the bad vibes from Dan Lyons’ book, but it’s just not sustainable to sell stuff they way they do.”
I don’t think he’s got any positions in Hubspot, but he clearly sees the potential for the stock to head much lower in quarters ahead. It’s always possible that we’re “early” on this short, and we haven’t seen the stock crack yet, so let’s not get all courageous and call a top for the near-term, as my buddy is right that the company could use some of the flexibility that corporate accounting enables to make sure they report a strong quarter.
Gotta love coincidences that help give you insights into your existing positions. Don’t forget this week’s Live Q&A Chat at 2pm ET today.