After an investment committee meeting early Monday morning, our team has decided to initiate positions in shares of ServiceNow (NOW) and Target (TGT) for clients in our Flagship strategy. Our team also elected to trim our position in Apple (AAPL).
The table below summarizes these moves:
As the sell-off in software names took hold in late 2021, even high-quality SaaS names like ServiceNow came under significant selling pressure. Amid this market rotation, we elected to exit our position in NOW for clients in the Flagship portfolio, eventually selling out of the name on December 8th, 2021 when the stock was trading at ~$660.
This week, our team was able to initiate a new position in NOW for Flagship clients at an average price of ~$511/share across Titan client accounts.
ServiceNow is a quasi-monopoly and is the only SaaS platform that offers the full suite of back-to-front office workflow tools. In plain English, NOW is a one-stop shop for an IT department’s needs. In our view, platform is often an overused term when talking about technology businesses, but we think it’s an appropriate way to describe NOW’s offering.
Enterprise software contracts are long-term in nature and notoriously hairy to get out of, and we believe that even during a potentially slower IT budget environment, NOW contracts will be last to go given their deep integration across their customers’ business.
Clients can read our NOW thesis in the app within the Flagship portfolio, and we’re excited to get involved in SaaS again in Flagship.
Our team has initiated a position in Target (TGT) for clients in Titan’s Flagship strategy as a starter position. In the months ahead, we’ll be tracking for a series of signposts that will indicate if and when our team sizes up this position within the strategy.
In a crowded U.S. retail landscape, TGT may seem like another big box retailer. But in the last several years, the company has been successful in leveraging its unique omni-channel model to facilitate a digital transformation with full integration of its physical stores and distribution network, effectively repositioning its brand amidst a brutally competitive landscape.
After outsourcing its e-commerce operations to Amazon for nearly a decade in the early 2000s, TGT prioritized investing heavily in its own online and omni-channel infrastructure as evidenced by online sales now comprising over 20% of total sales at TGT, up from just 6% in 2018. TGT has become an industry leader in initiatives like same-day fulfillment and what’s known as BOPIS, or buy online, pick up in store.
Signposts we’ll be tracking for the TGT position include i) Same-store-sales (SSS) and market share gains, ii) digital/e-commerce growth, iii) omni-channel leadership / same-day services and, iv) margins. Should we see improving data points across these four areas, it’s likely we will be adding to this position for Flagship clients.
As we were initiating positions in NOW and TGT, we also trimmed our position in Apple (AAPL) for Flagship clients. Apple has held up remarkably well throughout this correction, and the valuation is rich in our eyes. Our research out of China indicates that demand is slowing, and we believe this dynamic could extend further into the U.S. With these factors in mind, we felt it was prudent to roll back our position slightly.
Onward, Titan Team
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