Confluent Inc: A Bet on "Sticky" Software - 2025-02-14

Confluent is a significant part of my portfolio, and notably, it's the only one currently in the red in terms of profitability. I invested because I understand the power of their software: it's incredibly "sticky." Once integrated, it's a real headache to switch to something else. Think of it like the glue that holds complex systems together.

However, if you asked me when Confluent will turn a profit, I'd have to shrug. They're heavily investing in new features and capabilities, which, understandably, is eating into their bottom line. Frankly, I'm still evaluating the management team. Are they brilliant strategists, or are they overspending? Time will tell.

Here's my thesis: if Confluent can continue to attract users and grow revenue faster than costs, they will become profitable. And if no disruptive technology emerges to replace their offering, that profitable period could be very long indeed.

This investment is a long game. It's likely to be a bumpy ride, a real roller coaster, but the potential payoff is significant.

There are still some unknowns that keep me up at night:

  • Will management avoid any boneheaded decisions?

  • While the business model seems solid, I need more confidence in their capital structure. Are they burning cash on unproductive ventures?

  • Can they fend off competitors like Red Panda?

  • Will some unforeseen technological leap render their offering obsolete?

Despite these uncertainties, I believe Confluent has the potential for explosive growth. As more and more software relies on their platform (or a similar one), the demand for their services should skyrocket.

So, I'm documenting my thoughts here, a marker in time. I'll revisit this analysis in a few years to see if my understanding of the company, and my investment thesis, were correct. Only time will tell.

Comments

Post a Comment

Popular posts from this blog

The Perils of Blind Trust: Navigating the Complexities of Estate Planning - 2025-02-27

The headlines grabbed my attention: a wealthy individual, with an eccentric vision, drafted a will that would delay the distribution of his fortune for a century. Intriguing, right? But the devil, as always, was in the details. The news casually mentioned that the lawyer entrusted with this bizarre mandate had sold off the properties and deposited the proceeds into a bank account. That, to me, was a glaring red flag. Imagine the lost potential. Real estate, especially in prime locations, tends to appreciate significantly over time. By liquidating these assets and placing the money in a bank, the descendants were robbed of substantial long-term gains. Inflation alone would erode the value of that cash over a century. This case serves as a stark reminder: even with the best intentions, poorly executed estate plans can lead to devastating financial losses. Contrast this with the story of an Arab trader whose opulent Orchard Road residence was transformed into a rental property. The asset ...
Read more

The Simple Yet Powerful Rule of Input and Output - 2025-03-09

There's a fundamental rule that applies to many areas of life: if you want to gain more, your input must be greater than your output. If you want to reduce something, your output should exceed your input. This principle is easy to understand and can be applied to a wide range of situations: 1. Weight Management If you want to lose weight, you need to burn more calories (output) than you consume (input). This means eating less, exercising more, or both. However, be mindful of health conditions like low blood sugar—always consult a doctor before making drastic changes. 2. Wealth Accumulation If you want to grow your wealth, you must earn more than you spend. Even if you make millions, spending billions will leave you broke. Smart financial management follows the input-output rule—save and invest wisely! The Classic Water Tank Problem - from your Primary 5 math olympia This rule even applies to math! Consider a water tank being filled by a pipe that takes 18 hours to fill it complete...
Read more

The Unexpected Rise of a Chicken Rice Champion - 2021-12-12

Remember that tale I shared with my boy about the Hainanese Chicken Rice? It wasn't just a food story; it was a lesson in ambition and relentless improvement. A reporter had interviewed a stall owner, a non-Hainanese, who served up incredible Hainan chicken rice. How did he learn the craft? Simple: he observed. His shop sat right beside an Hainanese Chicken Rice vendor. Day in and day out, he watched, absorbed, and learned.  The original stall, sadly, struggled, eventually leading the owner to throw in the towel. But our protagonist? He seized the opportunity. He took over the stall, and here's the kicker: he didn't just replicate the recipe. He perfected it. His chicken rice became a sensation, eclipsing the original and drawing crowds.  This story is a powerful reflection of life. How often do we possess potential, yet fail to fully realize it? We settle, we stagnate, while others, perhaps less experienced, surpass us through sheer dedication and a drive for constant imp...
Read more