Oct 31, 2023Liked by Moritz Drews

Hi Moritz,

Will miss your monthly updates for sure, but hopefully you will continue sharing your thought between the quarters.

Reading your X tread thread about Arista Network and their Q3 earnings, which just were announced, I started wondering why Arsita's stock is performing YTD better, than ZScaller or have the same YTD performance with Crowdstrike?! Arista is hardware/cyclical business, lower gross margins and slower growth compared to the other two.

Interested in your opinion on that.



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Hey Martin, I can't tell why stock prices move how they move in the short term (which is < 3 years), but Arista Networks has proven for years to generate profits, has low SBC, and is likely to grow double-digit revenue growth for years to come. I expect similar growth durability for Crowdstrike and Zscaler as well but that said, Arista Networks is in a much "healthier" state due to its strong profitability which the market seems to reward - especially in this environment.

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It took you a long time, but slowly you seem to have realized that valuation does matter and that moon prices will not generate excess returns for years despite growth. Until now you were a momentum trader. In and out. A lot of money was gambled away.

That you buy EVO shows that you have become more valuation conscious. I'm sure EVO will give you a great return as long as there are no regulatory headwinds. Whether or not you have to play along with that remains to be seen. In crises like these, EVO will benefit even more. Desperate people hoping for their luck to save their house and yard. But in the end, they gamble everything away. Well.

You mention how expensive SNOW and CRWD are, but are not willing to adjust anything. So you just hope that the high valuation will disappear into thin air?

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