Friday, Dec 10th 2021

A confident bet on the crypto economy

Investor Update

We’ve purchased shares of Coinbase (COIN) for clients in Titan’s Flagship strategy, while exiting positions in Charter Communications (CHTR), Shopify (SHOP), and ServiceNow (NOW).

We believe these trades offer our clients:

  • Gained exposure to a market leader in the growing crypto economy;
  • Reduced exposure to high-growth software names;
  • Reduced exposure to a low-conviction holding; and
  • Raised capital, or “dry powder,” which we believe can be deployed in better opportunities.

Going crypto

We’ve initiated a position for Flagship clients in shares of Coinbase Global (COIN).

We believe Coinbase—a leading cryptocurrency exchange platform—is well-positioned to help build and grow with the crypto economy. By adding COIN to our Flagship strategy, we’re investing the majority of our clients in this “picks and shovels” crypto bet.

With an easy-to-use interface, best-in-class security, expanding range of tokens, and value-added services (e.g., staking, Coinbase NFT), we believe COIN has a superior value proposition against its peers.

We believe these competitive advantages may help the company continue its growth trajectory, alleviating any meaningful fee compression in the medium term.

Our work suggests that, even using what we believe to be conservative estimates, COIN may be able to realize annual returns, net of fees, in excess of 20% over the next three years.

In our view, COIN is now one of the best risk/reward opportunities within Titan’s Flagship portfolio.

Selling NOW, SHOP, CHTR

NOW and SHOP are high-growth leaders in their respective markets, but we believe the valuation for both stocks has become less attractive in recent months. As a result, we believe it is prudent to exit both holdings at this time.

NOW is one of the highest quality software names in the market, in our view. Though we believe the company may be able to compound value at an attractive rate over time, we’re selling NOW to reduce our exposure to high-growth software names in this environment. Given the company’s consistent 30%+ organic revenue growth at scale and impressive free cash flow conversion, we will follow this name closely and may look to add NOW back into the portfolio in the future.

SHOP is the de facto “operating system” for modern retailers. However, given the stock’s rich valuation and the current market environment, we’ve decided to exit our position in the stock. We believe SHOP may be able to grow at 20%+ as it gains share in a growing e-commerce market, and may look to add the name back to the portfolio in the future.

CHTR is a cable and telecom giant that generates a huge amount of free cash flow. But with competitors like AT&T and Verizon taking share in the broadband market and our current view on CHTR’s valuation, we believe it is prudent to exit this position.

Adding strategic cash

To better protect our portfolios through what we believe will be a volatile period for markets, we’ve added a strategic cash position in Titan Flagship.

We believe that in the near future, we may be able to deploy this “dry powder” across our strategies into what we consider to be high-quality businesses, potentially trading at deep discounts.

Our investment team also remains prepared to activate market hedges if conditions get worse.

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