Having objecting rules to guide your investment process means less decision making. As risk averse investors, we only allocate a fixed amount of funds to any disruptive tech stock and that’s that. It’s kind of like the old saying. “If it’s the next Microsoft, all we need is a little. If it’s not, we only lost a little.” More importantly, it’s about removing the temptation to try and catch falling knives. That brings us to the topic of today’s conversation – Adyen (ADYEN.AS).
It’s been nearly a month since that fatal earnings call which saw the share price halve. Our initial take was that the accounting changes which affected revenues, along with sudden negative cash flows, wreaked havoc on valuation models which caused the precipitous drop. Market consensus is that the drop resulted from difficulties the company is having in the U.S. market where they compete against players like PayPal (PYPL) and Block (SQ). We decided upon a “wait and see” approach for several reasons.
Adyen hasn’t been a volatile stock historically. Waiting for the dust to settle a bit makes sense, but for