I am hedging my Rubrik exposure heading into earnings. A few things I need to immediately say about this:
I remain very confident in this investment.
An impressive beat & raise is my expectation.
I expect this hedge to expire worthless & hope it does.
Their business model is perfectly positioned for this new age. It's a consumption-based data infrastructure niche with entrenched incumbents that are smaller legacy players rather than giant mega-caps. They are the market share taker, their future is compelling and their team is highly capable. So... why am I doing this?
Rubrik is newer to public markets. We don't have a several-year track record to work with like we do for other names and so my familiarity with the team hasn't had as long to build. Furthermore, they're just now turning profitable and up 80% in the blink of an eye. I think these factors make this one of my most speculative investments and create a difficult setup.
With that in mind, an 8.5% investment in this type of name is very large for me. It's bigger than Mercado Libre, Google and ServiceNow for a company that I think is much higher risk than those three. I have zero interest in selling any shares right now. Making that decision while practicing proper risk management (I believe) requires a small hedge today. I am structuring this to remove some of the potential upside if the stock performs well, and to guard against the risk of surprisingly disappointing results. Again... not my expectation. But it's always possible.
I opened a position in the $70 strike puts expiring this Friday with a $2.50 average cost. The stake is worth 2.2% of my Rubrik position. If the stock closes above $70 on Friday, these will be worthless. If it closes between $67.50 and $70, the hedge will lose money but not expire worthless. If the price action gets more negative than that, this will begin to more meaningfully buffer declines from the much larger equity position.
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