[Investing] Why I Am Not a Great Investor Yet: ZOOM

Today, I am starting a new series called “Why I am not a great investor yet…”

I will cover all my investment mistakes so we can learn together and not make the same mistakes again.

My first and recent mistake involves not investing in ZOOOOMMMMM-

Before the pandemic, I saw zoom class in action. There was a professor who was teaching from abroad.

And I thought cool-

Then the pandemic hit and we were all forced to use Zoom in m

So I thought hmmm may be I should invest in Zoom.

At that time Zoom’s P/E was already triple digits. So definitely expensive and as a value oriented investor, I was wary.

But I saw every school and tons of organizations use zoom.

Despite my gut telling me to buy a position, I decided to not dip my toes.

From: QuickFs

One of the main reasons that I did not invest in Zoom was because despite the high growth, costs were also growing fast.

And knowing that there were lot of disruptions and issues as everyone used Zoom, I knew that the cost will eat up the profits.

However, the revenues and profits were better than expected- (ooops) Revenues almost tripled and net income was almost 10X!

From: Zoom’s 10-Q

There were two more reasons why I didn’t invest in Zoom. First, there was a lot of news about security breaches and its data centers being routed to China. I expected some pullback- But that didn’t do much either.

Then the biggest reason, why I didn’t pull the trigger was because Google and Facebook were coming after Zoom. And we know that Google and Facebook are not joking- They can easily crush the competition.

Thus, my investment process went as follows.

  1. High growth can’t continue and cost control will become more difficult
  2. Security breaches/ China issues means higher cost and political risk
  3. Google/Facebook’s competing with zoom is very serious

Given the three strikes, I did not invest in zoom and I missed a 300% return opportunity.

ZM Zoom Video Communications, Inc. daily Stock Chart
From: Finviz

So the lesson?

Sometimes listen to your gut.

Open a small position and see how it goes.

Paying a some premium can reward you quite well!

Now, what’s my outlook for zoom?

I think it can go higher but this stock is priced to perfection. Any earnings miss or slow down in growth will crush the stock. I can see the stock easily dropping 20% with small bad news.

What would be the growth scenario? If zoom can increase its subscription price and provide other services, then zoom will go zooommm-

Thank You Jesus for another blessed day. Let us always be thankful and share Your love and blessings with other. Amen!

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