Cloud Investing Glossary
Asset Light
Asset light companies often require less capital investment to operate, as they typically own fewer physical assets. This offers many advantages, particularly in terms of higher returns on capital, scalability, and flexibility.
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BVP Nasdaq Emerging Cloud Index (EMCLOUD)
An index consisting of cloud computing and Software as a Service (SaaS) growth companies. Some of these companies are already tech dominators and others will emerge as the dominant tech companies of tomorrow.
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Cloud Computing
The delivery of services over the internet. These may include storage, processing power, and applications, among others, and are delivered on-demand to users and businesses.
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Enterprise Value to Revenue
Enterprise Value (EV) to Revenue is a valuation metric that helps assess the value of a company relative to its revenue. Unlike Price to Sales, it accounts for both debt and equity financing, which is why it's our preferred valuation metric.
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Free Cash Flow
Free Cash Flow (FCF) represents the cash a company generates from its operations after accounting for capital expenditures (CAPEX). FCF is preferred by many investors (over net income) because it provides a clearer picture of cash availability and operational health.
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Free Cash Flow Margin
A measure of profitability that reveals how much cash a company generates from its revenues. As a general rule, we prefer an FCF Margin of at least 20%.
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Horizontal Market Software
Horizontal Market Software (HMS) is designed to serve a wide range of industries or markets. These solutions offer more generalized capabilities that can be applied across different companies and users. Companies and products in this space may be attractive due to the potential for achieving scale.
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Indxx Global Cloud Computing Index
An index that tracks the performance of companies that are in the Cloud Computing Industry. This index includes a lot of established, mature tech companies.
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Infrastructure as a Service (IaaS)
IaaS provides virtualized computing resources where the cloud provider hosts the infrastructure components traditionally present in an on-premises data center.
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Insider Ownership
Insiders include a company's officers, directors, and other insiders that own shares in the company. We generally like to see insider ownership of 10% or more.
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ISE Cloud Computing Index
The ISE CTA Cloud Computing Index is designed to track the performance of companies involved in the cloud computing industry.
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Margin of Safety
Margin of Safety is a key concept introduced by Benjamin Graham in The Intelligent Investor that emphasizes the importance of buying securities at prices significantly below their intrinsic value to minimize risk.
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Moat
Often referred to as a "sustainable competitive advantage", a moat is a company's ability to maintain competitive advantages over its rivals in order to protect its long-term profits and market share.
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Modified Altman Z' Score
The Modified Altman Z' Score is a financial stability metric that combines several ratios to predict the likelihood of a company going bankrupt. Originally created for manufacturing companies, we've created a revised version for modern tech companies.
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Mr. Market
Think of "Mr. Market" as an imaginary investor that resembles the market. Being a manic-depressive, his mood swings almost guarantee erratic swings in stock prices.
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Platform as a Service (PaaS)
PaaS provides customers a cloud environment in which they can develop, manage, and deliver applications. Companies in this space generally provide a suite of prebuilt tools for application development and deployment.
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Rule of 40
Rule of 40 is a benchmark that values company performance based on growth and profitability. This can be calculated by adding Free Cash Flow Margin to Revenue Growth.
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Rule of X
Rule of X is a metric used to evaluate a company based on growth and profitability with more weight being placed on growth. Growth and margin can be used together to give an indication of a firm's performance.
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Serial Acquirer
Serial acquirers are companies that primarily grow by acquisitions rather than organic growth.
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Software as a Service (SaaS)
SaaS delivers software applications on a subscription basis. SaaS eliminates the need for organizations to install and run applications on their own computers or in their own data centers.
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Superinvestor
These are what we refer to as the world's most prolific professional money managers. Every superinvestor that manages over $100 million in assets must report their holdings to the SEC every quarter.
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Vertical Market Software
Vertical Market Software (VMS) is software that applies to a specific sector, industry or niche. VMS products are highly customized and generally require extensive domain knowledge. Companies and products in this space may be attractive due to the potential for high margins and pricing power.
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