A lot has been happening in the markets over the last couple of months but unfortunately I haven’t found much to take advantage of. Partly I have been too busy to look for investments but also most of the carnage seems to be hitting oil companies and mining, neither of which I think are particularly attractive on aggregate at the moment. I have made some changes to my portfolio in the last week however, but these are not a reaction to macro events these are specific adjustments I have made.
Ubiquiti ($UBNT) is a fast growing network hardware producer. Normally when it comes to hardware and technology, margins and returns on investment are low, but Ubiquiti has managed to dominate its market with a unique approach to the business, one that is not easily replicated. It earns margins over 25% by having no marketing and advertising costs, relying entirely on its products to distinguish themselves from competitors.
The company is growing revenues at 40% per annum, is highly cash generative, yet is selling at a P/E of just 13, excluding cash (yes it has net cash, not debt!). Here is my investment thesis.