This hedge fund just made a bold move into a once-hyped software name that is now trading at a steep discount.
Boston-based Solel Partners has announced a new stake in Braze (FASTER +1.88%)adding 745,900 shares worth about $21.2 million in the third quarter, according to an SEC filing on Friday.
What happened
On Friday, Solel Partners LP reported a new equity position in Braze, acquiring 745,900 shares with an estimated value of $21.2 million. The transaction, disclosed in a filing with the Securities and Exchange Commission (SEC), reflects activity as of the quarter ended September 30. The new holding accounted for 4.1% of the fund’s $519.8 million in reportable U.S. equities.
What else you need to know
Top positions after filing:
- NYSE: UNH: $71.3 million (13.7% of assets under management)
- NYSESE: BRSL: $59 million (11.4% of AOM)
- NYSE: CVS: $53.8 million (10.4% of assets under management)
- NYSE: SYF: $52.5 million (10.1% of assets under management)
- NNL: TNL: $46.8 million (9.0% of assets under management)
At market close on Friday, shares of Braze were at $28.74, down 21.2% over the past year and underperforming the S&P 500, which is up nearly 15% over the same period.
Company overview
| Metric | Value |
|---|---|
| Price (as of market closing Friday) | $28.74 |
| Market capitalization | $3.2 billion |
| Yield (TTM) | $654.6 million |
| Net income (TTM) | ($108.8 million) |
Business snapshot
- Braze offers a customer engagement platform with products such as data ingestion, segmentation, predictive analytics, personalization, orchestration tools and reporting for digital brands.
- The company operates on a subscription-based Software-as-a-Service (SaaS) model, which provides recurring revenue streams.
- It serves enterprise and mid-market clients worldwide, with an emphasis on organizations looking to improve digital marketing and customer engagement.
Braze, Inc. is a technology company specializing in customer engagement solutions for enterprises worldwide. The company uses a comprehensive software platform to help brands deliver personalized, cross-channel messages and optimize user journeys at scale. With a robust suite of analytics and automation tools, Braze is positioning itself as a strategic partner for organizations looking to drive retention and maximize lifetime value in increasingly digital markets.
Take foolishly
For a fund whose largest holdings include stable, cash-rich names, Solel Partners’ decision to open a significant position in Braze is interesting. The mid-sized Boston company added about $21.2 million in stock in the third quarter — a perhaps unusual move given that Braze shares are still trading near their lowest levels in several years after falling more than 20% in the past year and well below the 2021 high of $94.16.
What may have caught Solel’s attention is that Braze’s foundations are seemingly growing stronger beneath the surface. Last quarter revenue rose nearly 24% to $180.1 million, fueled by subscription growth and solid customer expansion (upsells and renewals). The company also posted another quarter of non-GAAP profitability, even as GAAP losses widened to $27.8 million. Free cash flow also weakened, but Braze still operates with more than $360 million in cash and cash equivalents and continues to bring in corporate accounts.
So what’s the biggest takeaway for long-term investors? Braze may still be trying to prove itself: fast growing, but not yet consistently profitable. But if it can translate its growing customer base and AI-driven product investments into sustainable cash flow, its current valuation could provide an attractive entry point rather than a value trap.
Glossary
Stake: The amount of ownership or shares an investor owns in a company.
Assets under management (AUM): The total market value of investments managed by a fund or investment firm.
Assets to be reported: Investments required to be disclosed in official filings as required by the SEC.
13F Assets: U.S. stocks that institutional investment managers must report to the SEC quarterly on Form 13F.
Most important assets: The largest investments in a fund’s portfolio, usually based on market value.
Trailing Twelve Months (TTM): The twelve-month period ending with the most recent quarterly report.
Customer Engagement Platform: Software that helps companies communicate with and retain customers through personalized communications and analytics.
Predictive analytics: The use of data and statistical algorithms to predict future results or trends.
Orchestration tools: Software functions that coordinate and automate marketing or customer communications across multiple channels.
Synchrony Financial is an advertising partner of Motley Fool Money. Jonathan Ponciano has no position in the stocks mentioned. The Motley Fool holds positions in Braze and recommends Braze. The Motley Fool recommends CVS Health and UnitedHealth Group. The Motley Fool has a disclosure policy.
