Building a portfolio can be complicated, but mimicking successful investors is a great place to start. Fortunately, every quarter, institutional money managers are required to disclose their equity holdings in a Form 13F filed with the Securities and Exchange Commission. That gives retail investors a chance to see how so-called "smart money" is moving in the market.
In the fourth quarter of 2021, billionaire James Simons of Renaissance Technologies added over 303,000 shares of Fiverr International (FVRR -3.10%) to his hedge fund. Similarly, billionaire Andreas Halvorsen of Viking Global Investors started a position in Twilio (TWLO -2.12%), buying nearly 3 million shares for his hedge fund. Clearly, these professionals find something appealing about Fiverr and Twilio, so let's take a closer look at both businesses.
Here's what you should know.
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1. Fiverr International
Fiverr is a cornerstone of the gig economy. It connects buyers and sellers of digital services, and its ever-growing gig catalog now spans 550 categories across nine verticals, including trendy jobs like web development, data analytics, and digital marketing.
On the seller side, Fiverr helps freelancers build a portfolio and market their skills, and it provides value-added solutions like task management platform Fiverr Workspace and training content through Fiverr Learn. On the buyer side, Fiverr connects businesses with a global talent pool, leaning on artificial intelligence to make relevant suggestions and accelerate the search process.
Fueled by changing workforce dynamics -- gig economy transaction volume rose 70% between 2018 and 2021 -- Fiverr has grown its business rapidly. Over the past year, active buyers jumped 23% to 4.2 million, and spend per active buyer climbed 18% to $242. As a result, revenue rose 57% to $297.7 million, and Fiverr generated positive free cash flow of $35.5 million, up from $13.1 million in 2020.
Turning to the future, management is executing on a robust growth strategy. That includes the recent acquisition of Stoke Talent, a freelancer management platform for larger businesses. Historically, Fiverr has served small and medium-sized businesses, but the acquisition should help the company move upmarket. It will also allow Fiverr to tap into the offline freelancer market, which is still orders of magnitude larger than the online market.
On that note, management puts its market opportunity at $115 billion. And given the tailwinds behind its business, I'm not surprised to see Renaissance Technologies investing more money in Fiverr. In fact, with the stock down 78% from its high and shares trading at 8.5 times sales -- well below their historical average of 20.4 times sales -- now looks like a good time to add this growth stock to your own portfolio.
2. Twilio
Twilio specializes in customer engagement. Its cloud platform is composed of a suite of communications software and services, allowing developers to embed features like voice, chat, video, and email into their applications. Common use cases include contact centers, delivery notifications, and consumer loyalty alerts. Additionally, Twilio offers pre-built solutions, such as Twilio Frontline for sales productivity and Twilio Engage for targeted marketing campaigns.
In 2021, International Data Corp. (IDC) once again recognized Twilio as the industry leader, citing its broader product portfolio and stronger growth strategy as differentiating qualities. In the report, IDC also noted that Twilio has earned a reputation for reliability, and its recent acquisition of Segment -- a customer data platform that helps clients personalize interactions -- further separates Twilio from its rivals.
That praise has not gone unnoticed. Twilio grew its customer base 16% to 256,000 active accounts over the past year, and the average customer spent 31% more. As a result, revenue surged 61% to $2.8 billion. On a less optimistic note, the company generated negative free cash flow of $148.2 million. But with $5.4 billion in cash and short-term investments on its balance sheet versus $986 million in long-term debt, Twilio can afford to invest aggressively in scaling its business.
Looking ahead, management puts its addressable market at over $100 billion by 2023, and digital transformation should be a tailwind for the company. As enterprises work to engage consumers better and improve loyalty, Twilio should see increased demand. From that perspective, Viking Global's conviction makes a lot of sense. And with the stock down 66% from its high and shares trading at 9.1 times sales -- much cheaper than their five-year average of 16.3 times sales -- now looks like a good time to add Twilio to your own portfolio.
