A new year is upon us, but we still have some unfinished business from 2020: we wanted to tell you about the latest changes to the Spaceship Universe Portfolio.

We bought one stock — Twilio — and sold four stocks: Constellation Software, Elmo Software, Pinnacle Investment Management, and Sonic Healthcare.

Bought: Twilio

Twilio is a cloud-based business communications platform that helps companies engage with their customers through phones, VoIP, email, and messaging.

In September 2020, Twilio reported it had helped its 200 million-strong customer base power nearly one trillion human interactions over the previous year.

This customer base includes well-known companies such as Amazon, Nike, PayPal, Airbnb, the American Red Cross, and Atlassian.

We like Twilio because it's helping to solve the problems of customer engagement through communications and data, giving companies a better understanding of their consumer while building a serious competitive advantage.

In fact, the company is becoming a bit of a one-stop shop for communications, thanks to its acquisitions of email delivery service Sendgrid in 2019 and customer data platform Segment in 2020.

At Spaceship, we actually use both Sendgrid and Segment.

Twilio has lower gross margins than most technology companies due to messaging costs, but we believe this is offset by the increasing potential of customer data improving the quality of customer interactions. Twilio is building out new business opportunities in healthcare and in two-way communication between customers and companies, rather than just message notifications.

Sold: Constellation Software

Constellation Software is a software provider with a track record of acquiring, managing and building industry-specific software businesses.

While we have long liked Constellation Software, we believe its competitive advantage isn’t as strong as Twilio’s, so we essentially decided to switch their positions.

Sold: Elmo Software

Elmo is a cloud-based human resources software company.

While the business continues to grow, we no longer believed that it could compete the way we’d like it to. At Spaceship, we’ve used three different human resources software services in recent years, showing just how competitive the space is.

As such, we decided to remove Elmo Software from the portfolio.

Sold: Pinnacle Investment Management

Pinnacle Investment Management is an investment management business that owns stakes in fund managers.

The company is dealing with fee pressure and competition, thanks in part to a growing trend in passive investment and super funds internalising investment.

Sold: Sonic Healthcare

Sonic Healthcare is a healthcare provider working primarily in laboratory medicine/pathology, radiology/diagnostic imaging, and primary care medical services.

Although Sonic Healthcare has benefited from increased COVID-19 testing, its continued focus on the US, a highly competitive market where it is the third largest player, is concerning. Pathology is a capital intensive area, and therefore economies of scale are vital.

We didn’t feel its moat was as strong in the US as it is here in Australia, so we decided to sell.

Spaceship Origin Portfolio

For customers in the Spaceship Origin Portfolio, things are a little different.

The Spaceship Origin Portfolio portfolio is made up of around 100 of some of the largest ASX listed companies by market capitalisation, and around 100 of some of the largest global companies by market capitalisation.

If a company moves in or out of the Spaceship Origin Portfolio, it will be because its market capitalisation has changed, not because we have made the decision to buy or sell it.

Spaceship Earth Portfolio

We didn’t make any changes to the Spaceship Earth Portfolio.

The Spaceship Universe Portfolio invests in Twilio at the time of writing.

The Spaceship Origin Portfolio invests in Sonic Healthcare at the time of writing.

Important! We’re sharing with you our thoughts on the companies in which Spaceship Voyager invests for your informational purposes only. We think it’s important (and interesting!) to let you know what’s happening with Spaceship Voyager’s investments. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator or guarantee of future performance.

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