• Introduction: A Quick & Imperfect Review of Akamai
  • Kailash’s view on Carvana: How to Make Money by Losing Money
  • Conclusions & Exhibit

Introduction: A Quick & Imperfect Review of Akamai

Perusing newspapers from the late 1990s, one of the most interesting stories that caught our attention was that of Akamai. As the internet came of age, one of the major roadblocks to adoption was capacity. One article noted “Many users can almost recite the words from memory…unable to make a connection….the server may be busy….please try again later.”1 Dubbed the “World Wide Wait,” the internet had become so popular that making basic connections had become tedious and difficult.

After coming in second place at MIT’s 1998 Entrepreneurship Competition, MIT’s professor of applied mathematics, F. Thomson Leighton, and graduate student Daniel Lewin’s solution to this problem found early backers from Battery Ventures. By June of 1999, the news reported that Akamai’s breakthrough was real. Akamai improved website performance for the likes of Time Warner, CNN, Walt-Disney, and other major firms delivering content over the internet.2 Akamai had truly solved a major problem for adoption of the internet.

Figure 1 shows an imperfect record of Akamai’s private funding values through its closing on the Nasdaq in 1999. Battery Ventures’ first investment at a nominal value in late 19983 was rapidly followed by Apple’s purchase at $250m, Cisco’s purchase at $1.2bn, and Microsoft’s purchase at a “whopping $1.4bn.”4 While the rapid escalation in private valuations stunned people, the public market validated the private market’s view: on the first day of listing in 1999, Akamai was valued at over $13bn. By December of 1999 Akamai had soared to a staggering $30 billion market cap.

While the chart below is fairly boring Kailash encourages readers to note that in the span of just over a year, Akamai’s complex mathematical solution to a global problem went from nothing to $30 billion. Readers interested in the lessons of history – particularly those concerned about increasing risks from bear market indicators and the mania in fast growing stocks should read on!

  1. As a reminder for our Financial Advisors: our models are available on a continuous basis, and most have been in production for over a decade.  If you are looking for simple, concentrated, low turnover, and tax efficient model portfolios we would like to talk with you.  KCR also offers a wide range of easy-to-use but sophisticated tools.  Our toolkits can help identify mispriced stocks with the best and worst risk/reward characteristics, estimate a stock’s duration and warn you when a company is engaging in low-quality accounting. Over the last 12 years, KCR has built and offers time-tested and class-leading products built by experienced and proven money managers for fixed to low prices.
  2. Kailash Capital’s sister company, L2 Asset Management, runs market neutral, long/short, large-cap, and mid-cap long-only portfolios with a value and quality bias.  L2 employs a highly disciplined investment process characterized by moderate concentration, low turnover, high tax efficiency, and low fees. While nobody can predict the future, we believe the recent resurgence in risk-adjusted returns seen across all products is the beginning of what may be a long period where speculation is punished, and prudence and patience rewarded.
The topics discussed in this article are aimed at seasoned professionals, as such, we have included some extra reading for anyone seeking out more information related to the topics above.

  1. Click the following to read more about Fast Growing Stocks, Asset Allocation Definition, Lucid Car, Mean Reversion Process, Is Day Trading Profitable, Carvana Bad Credit, How Frequent Are Bear Markets

Disclaimer

The information, data, analyses, and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital. In preparing the information, data, analyses, and opinions presented herein, Kailash Capital has obtained data, statistics, and information from sources it believes to be reliable. Kailash Capital, however, does not perform an audit or seeks independent verification of any of the data, statistics, and information it receives. Kailash Capital and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors before engaging in any transaction. © 2021 Kailash Capital, LLC – All rights reserved.

Nothing herein shall limit or restrict the right of affiliates of Kailash Capital, LLC to perform investment management or advisory services for any other persons or entities. Furthermore, nothing herein shall limit or restrict affiliates of Kailash Capital, LLC from buying, selling or trading securities or other investments for their own accounts or for the accounts of their clients. Affiliates of Kailash Capital, LLC may at any time have, acquire, increase, decrease or dispose of the securities or other investments referenced in this publication. Kailash Capital, LLC shall have no obligation to recommend securities or investments in this publication as result of its affiliates’ investment activities for their own accounts or for the accounts of their clients.

August 8, 2020 |

Categories: White Papers

August 8, 2020

Categories: White Papers

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