Twitter (TWTR) - Get Report has vastly outperformed the S&P 500 in its year to date performance, rising 39%, while the S&P 500 is up just 16%. 

Twitter today is more relevant and more focused than ever, having carved out a niche for itself in a super crowded social media space. Furthermore, Twitter has a very rare combination of oozing free cash flow while being cheaply valued. Readers should seriously reconsider Twitter. Here is why:

Where Does Value Come From?

Being a great investor largely boils down to having ideas that are contrary to popular opinion. And it is not good enough to simply be a contrarian, one needs to be contrary and correct. And most importantly, one needs to be proven right in a timely fashion. Thus, boiled down: contrary, correct and quickly.

If the market as whole thinks one way, and the investor can see things differently, this can lead to significant outperformance against the market. This only way this can be accomplished consistently is through extreme selectivity.

Having said that, looking at the graph below, it becomes immediately obvious why investors are not valuing Twitter as high as its peers.

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Including Twitter's Q3 2019 guidance, and over the past several quarters Twitter's revenues have shown evidence of a consistent deceleration on its revenue growth rates. And while this is undeniable, I contend that not only is Twitter here to stay, but that its revenue is very likely to stabilize and continue growing in the range of 10%-15%.

In fact, it can be said that advertisers who do not seriously consider Twitter's ability to segment its audience and to reach their customers in real-time are missing out on a critical weapon in their toolbox. 

A Surprisingly Cash Flow Generative Enterprise

This year has seen many IPOs from companies that have no realistic near-term prospects of generating strong cash flows. Furthermore, if we account for stock-based compensation as a "real" cash cost, many recent IPOs are not even close to breaking even. One noteworthy peer is Pinterest (PINS) - Get Report , which despite being valued at roughly $15 billion is not likely to have "clean" GAAP profits for some time.

Meanwhile, Twitter not only generates a clean GAAP profit -- even if investors back out its income tax benefit. But also, Twitter has very strong cash conversion as its cash flows from operations -- even backing out its stock-based compensation as a "real" cash cost cost -- is on target to finish 2019 with its cash flows from operations at close to $1 billion.

Valuation - Always Critical To Investing

For as long as the stock market is ticking along steadily upwards, investors are not asking difficult questions from their companies. In actuality, many investors have become intoxicated with revenue growth and little else. But once the market starts to become slightly wobbly as we saw the past few days, and investors only then start to question what sort of assets are they invested in?

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The table above is a reminder that not only is Twitter among the cheapest social media platforms, but that investors are evidently not overpaying to participate in the company's profitability.

Readers should also keep in mind that unlike Facebook (FB) - Get Report , Twitter has no overhanging risk of investigations into its practices which have become huge headwinds for Facebook.

The Bottom Line

The legendary investor Charlie Munger teaches us that investing is not complex but complicated. For great investing is about being extremely selective when deploying one's savings, and choosing opportunities that if the thesis does not work out positively, the downside is largely limited.

I believe that Twitter is cheap enough, to largely protect investors' downside, while at the same time having huge staying power, by remaining relevant in a very crowded social media world.

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