I decided to trim another 1/3 of my Uber stake. The reasoning is identical to the previous trim. Uber currently enjoys monopolistic-type power and network effects across North America and its other large markets. That network power has been secured against somewhat underwhelming competition. Alphabet, Amazon, Tesla and others are far more legitimate and far more numerous than Lyft in North America, for example.
Uber is working hard to partner with autonomous vehicle (AV) players and I think it will successfully do so. Waymo, Cruise, BYD and many more are already partners.
But? Many of these companies will have their own separate apps and volume too; Waymo is also already racking up several points of market share in the cities where it operates. And while Uber can absolutely help AV fleets maximize occupancy, which matters dearly… it will likely have to share this finite pie with several more players than before. Google, Amazon and Tesla are superior at building their own network effects compared to anyone Uber has had to compete with (outside of Asia).
How this evolution precisely unfolds is difficult to predict, as new technological trends always are. Uber can absolutely be the Expedia-like aggregator in this situation. I actually find that to be the most likely outcome, and is why this remains a decent-sized position in the portfolio.
However, it’s possible that its dominant hold over the market could fizzle a bit as Waymo and others expand in the coming years. It’s possible that I’m wrong. I’m sitting on great gains from holding it since February 2023, and wanted to harvest more of those profits. I think the risk/reward will continue to erode just a bit as we move from a guaranteed category lead, to a more uncertain category position in a highly fluid market. This is my hedge against being wrong about Uber surviving and thriving through these changes.
I’ve re-allocated the funds accordingly:
25% boost to my newer Alphabet stake. Search trends remained very strong as of last quarter. I think GenAI is significantly growing the interest in and use cases for search. I think others like Perplexity will take a piece of that mainly incremental demand, and I also think that won’t materially impact this historically consistent growth engine. I also love the idea of owning more Waymo, more of the best streaming platform in the world (sorry Netflix) and more of its cloud business. I think the anti-trust case represents continued headline risk for the time being. I’d continue to take advantage of this noise if we see the multiple compress by another turn or 2.
30% boost to my newer Zscaler stake. Link to my investment case.
Here’s how things currently look. I’ve included an updated view of performance vs. benchmarks:
