Don’t Give Up on Grab
By: Armchair Banker
Tags: Asia, Stock Market, Investing, Startup, Finance

Grab’s NASDAQ Debut. Image Courtesy: BBC

These few weeks have been a blood bath for growth stocks. While I was strolling on LinkedIn I saw a post from ShawSpring Capital’s Dennis Hong. He posted two screenshots from Bloomberg. One has one day performance of high growth stocks. The other image is the performance of low growth stocks (the post was from 5 days ago).

High Growth Stock Performance (Credit to Dennis Hong at ShawSpring Capital)

Low Growth Stock Performance (Credit to Dennis Hong at ShawSpring Capital)

As you can see from above the high growth/cloud/emerging technology stocks that went astronomically up during the pandemic have been taking a pounding. Names like Carvana, StoneCo (Brazilian FinTech company), Anaplan, and Bill.com have taken some huge hits ever since the sell-off. On the other hand safe stocks like consumer staples names like Kellogg, General Mills and Johnson and Johnson have seen growth in their stock values.

There are so many reasons why this blood bath is happening. Inflation, concerns about the Omicron variant, and US-China tensions have been contributing to this blood bath. As inflation stays with us for a long time and the Fed is turning hawkish and goes for at least one rate hike next year, investors are getting scared and dumping high growth and innovation names and flocking to safe assets. But investors should not be scared of innovation and technology stocks.

Here at Armchair Banker we are extremely bullish on Sea, Square, and PayPal. With the market downfall these stocks are a steal. The FAAMG stocks also are a steal where these stocks are trading on low P/E multiples. This is a growth stock picker’s paradise market.

Grab’s shares debut trading on December 2nd, 2021 after merging with Brad Gerstner’s Altimeter Growth Capital. AGC is currently the world’s largest SPAC merger. Since its debut on the NASDAQ the stock has been plummeting.

It is easy to not like Grab. Grab went public through a SPAC. The stock is plummeting. It is also an unprofitable high growth tech stock. But investors should not give up on Grab.

Grab is plummeting mainly because investors are going away from high growth names and putting their money into less risky assets. This is a great buying opportunity to buy a world class technology company in a booming part of the world.

This current market climate and Grab stock action remind me of two past scenarios. Many after the Facebook IPO had doubts about the company. Many though Facebook will not make money and cannot grow beyond just helping people connect. After its IPO the stock went down by 50%. But 10 years later Facebook (now Meta) is close to being a trillion-dollar company.

Grab is already the largest ride hailer in Southeast Asia. Uber had to exit the area and sell its operations to Grab. Grab’s Q3 numbers look promising. The company’s Gross Merchandise Value went up to $4 billion and up 32% YoY growth. Delivery GMV grew by 63% YoY. Averaging spending per user on Grab grew by 43% YoY. Even with the lockdowns in Vietnam the company’s revenues were $157 million. Grab operates in Singapore, Malaysia, Cambodia, Indonesia, Myanmar, Thailand, and Vietnam. This is an Ant Financial, Square + Uber, and Sea Limited type Super App operating in one of the fastest growing parts of the world. Not only is Grab a sleeping giant but the original SPAC sponsor is Brad Gerstner, one of the best technology investors in Silicon Valley.

The market conditions during the last few weeks are a bit similar to what we saw at the end of 2018. The market was worried about the Fed hiking rates and this led to one of the largest declines of growth stock shares. But after a Christmas and early 2019 growth stock slump these stocks skyrocketed to their highs during the pandemic.

Growth stocks are falling for more than just anticipated Fed actions. Inflation concerns, Omicron, and declining US China relations have played a role in the growth stock decline. But like I have mentioned before now is the time to go bargain hunting on some strong tech names like Grab.

Some stocks I’ve bought during the downturn include Grab, StoneCo., Sea Limited, Square, PayPal, JD.com, Pinduoduo, and Alibaba (and yes, I am buying China).

What I mention here is not investment advice. This is mainly written for educational purposes. Please consult an investment advisor before investing. Investing in anything involves risk. Please be careful and diligent before investing.

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Wish you all a happy holiday season and a happy new year!!!

As always live well and prosper!

Some links to learn more about Grab:

Farrer Wealth Advisors, a Singapore based wealth manager, on Grab. Part 1 and Part 2. (Courtesy: Asian Century Stocks).

Brad Gerstner’s interview with Jason Calacanis where they discuss Grab, the world’s biggest SPAC, and fixing the broke IPO system.

My earlier article on Grab