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StoneCo: Challenges Surface In Q1

Jun. 06, 2020 11:48 AM ETStoneCo Ltd. (STNE)12 Comments
Marathon Investing profile picture
Marathon Investing


  • StoneCo reduced its team by 20%.
  • So why have you decided to lay off 20% of the company in mid-May when you have the numbers already recovering?
  • In today’s world, I strongly believe that looking into the future, people make a difference.
  • When I assess the recent decision made by StoneCo management I’m quite concerned about the long-term case for the company.

I’m a big fan and follower of Warren Buffett and Jorge Paulo Lehmann, therefore I closely watch how they allocate capital. When Berkshire Hathaway (BRK.A) (BRK.B) bought shares in StoneCo. (NASDAQ:STNE), I said it's outside of my circle of competence and I will not analyze the company. But as time has passed, I started to monitor the company. I was further attracted by the company seeing several other value investors talked or invested in the company.

About The Company

StoneCo. is a leading provider of financial technology solutions that empower merchants and integrated partners to conduct electronic commerce seamlessly across in-store, online, and mobile channels in Brazil. A customer-centric culture, no bureaucracy, and a deep entrepreneurial spirit are the company’s values. The primary mission is to remain focused on empowering clients to grow their businesses and help them conduct commerce and run their operations more effectively.

If you are value investors it's music for your ears. You want to find a company with a strong culture with a long run away. When you dive into StoneCo's case it has many elements of that narrative. For most investors, it's difficult to assess what company will “walk the talk” and who would rather “talk the talk.” The only way to make a reasonable assessment is to rigorously follow management actions.

Staff Reduction

I was quite surprised when I read a letter from CEO Thiago Piau and the announcement that StoneCo reduced its team by 20%, and 1,300 people left the company. Here's what he said: “This was an extremely hard decision, and we did not make it lightly. At the beginning of the crisis, we did not contemplate having to take this route. Having exhaustively considered all alternatives, we have concluded that it is a necessary step to maintain our purpose towards our clients and support them in such

This article was written by

Marathon Investing profile picture
Long-term Investor

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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