a. Portfolio Changes

I trimmed 10% of my stake in Uber to lock in some triple-digit profits. This was a tough decision for me, as I remain confident in this name. I remain equally confident in its positioning today and as the autonomous revolution unfolds. The utilization gains it’s delivering to Waymo are highly important proof points; its budding partner network packed with deployments planned for 2025 is promising too. I also think their fleet management talents aren’t yet fully appreciated by investors.

So why am I trimming? This is simply to respect the inherent uncertainty that exists as this sector rapidly transforms. I’ve said over and over again that Uber will win unless there is a budding hardware monopoly. That’s how its lucrative network effect becomes less special. I do not think that will happen, but I do think Tesla has the best (still very small) chance of making it happen. Whether or not they can will become a lot more clear in the next two weeks.

While I think Uber’s autonomous positioning is highly compelling and that this transition should accelerate its supply and business, the world has never seen a driverless revolution unfold. I don’t have a crystal ball and we are all making educated guesses. This is me balancing my optimism for Uber and its great team with the fact that things are going to rapidly change this year. I want to lock in some gains while Mr. Market is already more convinced that Uber will be a clear winner amid all of this change. That market-wide optimism creates a recipe for more downside surprise than upside surprise.

All of this is rapidly playing out while Uber’s multiple has expanded from just over 20x to just under 30x. The name is certainly still not expensive, but it has gotten more expensive over a period of time and I want to take advantage.

I used some of these proceeds to boost my DraftKings stake by about 9%. I continue to be deeply impressed with the company and its financial trajectory. They keep slashing marketing intensity while enjoying excellent new customer growth. They are separating from the pack in terms of product quality (especially in live betting) and taking incremental market share. Potential prediction market legality is a net tailwind for them in my mind, as it would unlock many more states at lower tax rates. I think perceived taxation risks are waning, as it shows how capable it is of recouping those added costs elsewhere. It also helps that the progressive tax rate policy in Illinois is looking more and more like an anomaly. Awful outcome luck (which directly hurts quarterly results) will not be permanent and the dry spell for iGaming legalization won’t be either. iGaming is arguably more compelling than sports betting. For context, just 11% of the country has legal access to it vs. 50% for sports betting. And furthermore, New Jersey (over a decade into legalization) is still delivering 20% growth. This is a market leader in a structural growth industry trading for 19x forward FCF and an expected two-year FCF CAGR of 80%. It’s fundamentally healthy and one of the cheapest names I talk about. My full review of the quarter can be found in section 2 of this article.