Frank Sands (Trades, Portfolio) bought 324,774 shares of Splunk Inc. (SPLK, Financial) at an average price of $45.09 per share in the first quarter.
Splunk provides software products that enable organizations to gain real-time operational intelligence by harnessing the value of their data. The company's flagship product is Splunk Enterprise and at its core is a proprietary machine data engine, comprised of collection, indexing, search, reporting analysis and data management capabilities. Its Splunk Cloud service delivers the functionalities of Splunk Enterprise as a scalable, reliable cloud service.
Splunk has a market cap of $7.31 billion, an enterprise value of $6.28 billion, a P/B ratio of 8.83 and a quick ratio of 2.48.
Sands founded Sands Capital, an investment firm that uses a bottom-up independent, research-driven, value-based investment approach when investing in securities, in 1992. He may have decided to add to his stake for the following reasons:
- Splunk has been growing exponentially since 2006. The company had 150 customers in 2006, and since then it has expanded to over 11,000 customers in more than 110 countries including over 80 of the Fortune 100 companies.
- Splunk currently has an 8/10 financial strength rating according to GuruFocus with zero debt. One of Sands' mental models is to purchase securities that have little or no debt.
- Splunk has reported growth in multiple sectors of its financial statements over the previous five years. The company has reported EBITDA growth (77%), operating income growth (66.6%), EPS without NRI Growth (57.10%) and free cash flow growth of 21% over the previous five years.
- Splunk has been increasing its revenue at an exponential rate. In January 2010 Splunk reported $35 million in revenue. Over the previous trailing 12 months the company reported $728.7 million in revenue, an average annual increase of 65% over the previous six years.
Below is a chart of Splunk revenue as of April.
Conclusion
Splunk has been expanding exponentially since 2006. It is conducting its business operations with zero debt, and it has reported strong financial results while expanding its customer base at an exponential level over the previous six years. All of these reasons may have influenced Sands to increase his stake. Since Sands increased his stake, the company's price has risen 21%.
It is also noteworthy that Joel Greenblatt, Ray Dalio, Ken Fisher, Paul Tudor Jones, RS Investment Management and Jim Simons either added to their current holdings or purchased new stakes in Splunk during the first quarter.
Cheers to your investment success.
Disclosure: Author does not currently own any shares of this company.
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