Every quarter, institutional investors with more than $100 million in assets under management must disclose their stock holdings in a Form 13F filed with the SEC. This not only creates an element of transparency in the market, but also allows retail investors to keep tabs on what Wall Street’s top stock pickers are buying and selling.
For example, in the fourth quarter, billionaire James Crichton of Hitchwood Capital Management opened a position in MongoDB ( MDB 6.89% ), buying 95,000 shares for his hedge fund. And billionaire John Overdeck of Two Sigma Investments added more than 173,000 shares of HubSpot ( HUBS 5.22% ) to his hedge fund.
Clearly, these professional asset managers are seeing something they like, so let’s take a closer look at both companies.
Traditional databases are based on a relational model, which means that information is stored in structured rows and columns. This model worked well for decades because it kept storage costs low by minimizing data duplication.
But storage costs are no longer the limiting factor in software development. The most expensive part of the equation now is a developer’s time. And relational models require complex formatting changes that slow down workflow.
To solve this problem, MongoDB designed a database that uses a more flexible document model. Simply put, document databases store information in a way that looks like code, which is more intuitive for developers. Best of all, because the data doesn’t need to be split into rows and columns, developers can work faster and more cost-effectively.
Fueled by its pioneering status, MongoDB has become the most popular document database on the market and the fifth most popular database of any kind, according to DB-Engines. This competitive advantage has been a powerful driver of growth. MongoDB’s customer base has grown 33% to 33,000 over the past year, fueled by the massive adoption of MongoDB Atlas, a fully managed database as a service offering. In turn, revenue jumped 48% to $873.8 million, and the company generated $7 million in cash from operations. It’s a small number, but it’s the first time MongoDB has generated positive cash flow over a full year.
Looking ahead, the bullish case for this stock is simple: the vast majority of modern applications generate unstructured data, which means that information doesn’t fit neatly into rows and columns – think images, videos and text files. And these types of applications will become more and more common in the future. To that end, MongoDB pegs its addressable market at $106 billion by 2024, leaving plenty of room to grow. And given its strong competitive position, I’m not surprised to see Hitchwood Capital buying this growth stock.
HubSpot specializes in customer relationship management (CRM). Its platform includes productivity software (or hubs) for marketing, sales, service, and operations, which collectively help customers attract and engage leads, convert leads to customers, and build relationships. sustainable with customers.
HubSpot’s core innovation is inbound marketing. Traditionally, marketers have used outbound tactics, meaning they constantly bombard consumers with unsolicited digital advertisements. But inbound marketing turns this pattern on its head. The goal is to create engaging content that is easily discovered by interested consumers. To that end, HubSpot’s marketing software helps clients post blogs, videos, and social media content, and it incorporates search engine optimization tools to ensure consumers can find what they’re looking for. content when it is relevant to them.
While HubSpot is far from the biggest player in the CRM industry, it has over 33% market share in marketing automation software, according to Datanyze. In other words, the company holds more market share than the next five competitors combined, and this strong foundation has helped HubSpot successfully execute its land-based and broad-based growth strategy. Today, 60% of customers use more than one hub, up from 34% in 2017.
This increase in adoption has fueled strong growth. The company ended 2021 with over 135,000 customers, up 30% from 2020, and the average customer spent 15% more over the past year. In turn, revenue soared 47% to $1.3 billion, and the company posted free cash flow of $176.9 million, up from $30 million a year earlier.
Looking ahead, investors have good reason to believe that HubSpot can maintain this momentum. BofA securities Analyst Brad Sills puts HubSpot’s addressable market at $87 billion, which leaves plenty of room for growth. And given the essential nature of its CRM tools and strong competitive position, Two Sigma Investments’ decision to buy more of this tech stock makes perfect sense.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.