2016 most searched for trends

Search is a great way to look back on the year. It was a year for politics the US election and Brexit topped nightly TV news. Everyone probably needed a break from politics as surprisingly the most searched word on Google was Pokemon Go which peaked in July. Thankfully Australia seemed to have proper interests searching for the US election instead. The most searched for item in the US was the powerball lottery which had a record breaking $1.6 billion pool that was split three ways. China had their own interests including the usual house price concerns and the news that couples could have two kids.

                        Google  (Global)      Google (Australia)    Baidu (China)

https://www.google.com.au/trends/yis/2016/GLOBAL

https://www.chinainternetwatch.com/19352/baidu-keywords-2016/?awt_l=GkCVg&awt_m=3hJlxhZJo2RcP7G

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

The selfie trend

Macro investing is hard not many investors were well positioned for Brexit or for Trump. A more consistent method is investing in trends. One of the more unusual trends I follow is the selfie trend.

We have all witnessed this effect. Everyone is a paparazzi carrying a phone with a camera in their pocket. Millennials expect their photo to be taken everyday. The rise of the selfie has led to growth in fast fashion like Zara, heaven forbid you are seen in the same dress in a week. Deloitte Global predicts that in 2016 2.5 trillion photos will be shared online a 15% increase on last year.

Beauty stores like Sephora are benefiting from this trend unfortunately we can't invest directly as its a division of LVMH. But another make up/beauty retailer Ulta Salon (ULTA) has been one of the strongest share performers year to date. It has 21.7 million members in its loyalty program. You can't get your hair cut or colored on Amazon.

The craziest trend has been Botox. 6% of their customers are aged between 20-30 up significantly see above. The pressure is greatest in Silicon Valley where the bias towards young people and startups is extreme. Older engineers are pressured to look younger its illegal but most Silicon Valley engineers presume that older workers are outdated in their skillset. Thankfully finance is the opposite. Experience and grey hair is looked at as a good thing.

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Startcon 2016

We attended the Startcon tech conference this weekend in Sydney. It had a global presence with presenters such as Uber, Zillow, Bloomberg and Twilio.

The bad news is that we are in a startup bubble on average Venture capitalists paid 46x revenue for their investments a record high which has since come off. The good news is that startups are tackling bigger problems than ever. Interestingly each region in Asia has a different set of problems to solve.

Japan
Has one of the highest rates of suicide in the world. Its a major issue so a lot of start ups are working on mental wellness apps able to pre-empt and sense your emotions.

Australia
Australia as you might have guessed is focused on fin tech. The dominance of the big 4 banks and their profitability is attracting many startups. Apparently banks make $1,000 per person in Australia the second is Belgium at $400. We are also early adopters of technology with the 2nd highest iPhones per capita after Singapore. Given we are such early adopters there is no reason why fintech shouldn't be more successful in Australia.

Indonesia
Traffic in Indonesia is bad so start ups are focused on on-demand services.

There was also great advice on pitching creating your Wow moment. The inside joke on elevator pitches is that there are no elevators in Silicon Valley!


The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Trumptastic returns

Trump isn't the only surprise winner. The best performing stock since he was elected president is not a financial or healthcare stock but a commodity shipper.  Dryships (operates drybulk carriers iron ore, coal) is up over 16 times increasing from $4.56 to $73 in less than a week. Its an extraordinary return given concerns over Trump's trade policies. Though Dryships is still way down from its peak in 2007 of $171,000.

The chart above is measured over 4 days note there are only 1.1 million shares outstanding over 10 million shares traded the last two nights. Who would have thought Trump would be good for shipping then again it's been a crazy week.


Decisive has no position in Dryships. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Disruption in two charts

Traditional industries are being disrupted faster than ever. Google disrupted newspaper ads now Facebook is adding to their pain. Valuations of newspapers are cheap for a reason at the time of IPO both Google and Facebook looked expensive but valuations aren't as important when there is a paradigm shift of a better mouse trap.

Not only have Google and Facebook disrupted hundreds of newspapers they have also taken all the growth leaving advertisers with little digital choice. Digital Content Next have calculated that the two companies accounted for all the growth in US digital advertising in the first half of this year. The rest including Yahoo are shrinking. If you're worried about their dominance it might be an idea to go long their shares.

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Decisive has a long position in Facebook and Google. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Computer gaming a legitimate career?

Millennials follow computer games and their teams just as passionately as sports. Even Australian banks are getting on board with news that St George is sponsoring a local gaming league. The biggest event the League of Legends world championship was held this weekend at the Staples Arena Los Angeles. Esports as they are known is massive in Korea and it's reflected in their sponsorship the top team SK Telecom T1 defeated Samsung Galaxy for the championship. The debate about whether gaming is a sport can be settled they earn just as much. The wining team took home $2m. Interestingly over 50% of the $5million pool was contributed by fans the final number will continue to increase as fans can contribute till November 6th.

 Viewership is already ahead of hockey and is on track to overtake every American sport except NFL by 2020. It was the first worlds final to go to five games but for the rest of us it's hard to follow. The commentary is interesting with each gamer having their own call signs such as Blank and Wolf. Most millennials relate more to these gamers than to professional sports stars. 

It's a great business model change for gaming companies. Gaming in general is predicted to increase significantly (see chart below) so far they earn money from games but if you begin to add in ticket sales, sponsorships and licensing revenue its financially looking much more attractive than the traditional sports model.

These slides were sourced from http://www.wsj.com/articles/activates-michael-wolf-predicts-whats-next-for-tech-and-media-in-2017-1477436031?tesla=y

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Australian phone use is one of the lowest globally.

Charging your phone is a daily habit for all of us you have to do it everyday. In Australia we all seem obsessed with our phones but globally we are one of the most power efficient with 26.7 hours of phone power compared to the global average of 21.7 hours. Apps are the biggest drain on our phones. The biggest power hogs are games the least are messaging apps suggesting we are big on messaging, all fun but no games.

Baidu in conjunction with DU Global Battery Lab have ranked apps according to the drain on your battery life. The worst battery offenders tend to be games.

The best energy wise are 

You can find the entire report here 

Decisive has no position in any of the stocks mentioned. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

The Big Mac disrupted from above

I was astounded to read this week that just one in five millennials have eaten a Big Mac. You can see this trend below millennials are flocking to more expensive but better quality burgers the type that Shake Shack sells. McDonald's focus on speed (nearly 70% of sales in the US are drive through) makes it difficult to offer more natural, better tasting burgers.

Big Mac disrupted from above
Disruption usually occurs from cheaper products but in this case it seems McDonalds is being disrupted from above. Customers are focusing on quality rather than speed. McDonalds is fast while Shake Shack is slow long lines mean long order times but it is better quality. Shack's focus on 100% all natural angus beer (beef), no hormones and antibiotics, wine and even snacks for dogs makes it the brand for Millennials. McDonald's image is that of a soft drink and Big Mac.

Shake Shack the millennial brand
McDonald's strength is in breakfast. The introduction of all day breaky has been a success there is a reason why they have 36,500 stores globally. To put this in context Shake Shack has only 50 stores in the US and another 50 globally with plans for 450 restaurants domestically. Only a handful of Shack's restaurants offer breakfast. Shake Shack is a big brand in a small company. Disruption doesn't just occur in technology. McDonald's is the brand for baby boomers, Shake Shack is the relevant brand for millennials.

Decisive has no position in any of the stocks mentioned. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Snapchat/Uber opening up the IPO market

The IPO market is coming back to life with news that Snapchat is planning an IPO next year at a rumoured $25 billion valuation. Snapchat generated $60 million in revenue in 2015 with expectations for as much as $1 billion in 2017 the majority from video ads. It's valuation would be twice that of Twitter and as a multiple of sales more expensive than Facebook at time of IPO. Since selling their loss making China business Uber is likely to follow. At this early stage with limited information all we can look at is revenue growth potential.

Price x Volume
Revenue growth is a function of price and volume. Snapchat likely has the ability to increase ad prices and increase user/ad volumes. Uber has volume growth but at its current commission rate it's hard to see this increasing. The attractiveness of the last big IPO Alibaba was that it could increase its pricing alongside increased customer growth. For example at the time of IPO Alibaba's mobile commission rate was 1.87% its now 2.8% of all products sold, to put this into context Ebay's is 8.4% so both price and volume could grow. One issue for Uber is their high take rate. A rate of 30% (see below) seems too high especially compared to other marketplaces. It would be unlikely that Uber could raise price though the majority of their rates are discounted and reimbursed to drivers so it's effective rate is lower. That leaves Uber relying mainly on user growth. Based on this I'm leaning towards Snapchat as an IPO. One thing we know for sure the IPO market is getting interesting.

https://www.bloomberg.com/gadfly/articles/2016-10-05/uber-s-outsize-commissions-leave-it-vulnerable-to-competition

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Peak App?

There are so many apps to choose from. App stores are crowded along with our phone screens. We are even seeing apps advertising on TV my favourite is seeing Schwarzenger promoting the game app Mobile strike. Comscore recently released their 2016 mobile app report it confirms what we are all probably experiencing peak app downloads.

The only apps left to download seem to be mobile games 18-44 year old males tend to download 5 apps a month. Most users limit their apps to 4 screens on their phone with thumb reach the key reasons for app positioning. Generally app usage is becoming more concentrated users spend 9 out of 10 minutes with their top 5. The following are some of my favourite slides.

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Cash isn't king for Mastercard

It's hard predicting what a company might earn in the future. There's a lot that could change. However there are a few companies out there that should do well no matter what happens to the economy. Mastercard and Visa are some of these companies. They both benefit from the declining use of cash. As users buy more online and payments become electronic both these companies will benefit. We are still at the early stages of this growth 83.7% of transactions globally are still cash.

Source: Mastercard investor day

Source: Mastercard investor day

With an outlook like that it's no surprise that these companies have outperformed the market.

Source: Mastercard investor day

Decisive has a long position in Visa and has no position in Mastercard. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Data is Alibaba's core business

Alibaba talked about their many businesses on a recent investor day. The common trend among them all is data. They actually describe their core business as the generation of user data which can be used to fuel their retail ecosystem. Their apps are used much more frequently than you would expect of a shopping app. Their Taobao app has 40% of their active users coming back daily. On average these users are launching their app 7 times a day or 25 minutes a day, I can't imagine users opening Amazon that much.

Social selling works in China

Facebook and other social networks have tried social selling based on recommendations by friends. BABA has been successful by not connecting friends but by starting with strangers and using data to find common interests to create communities. 75% of users on the Taobao app are under 35 years old sharing information with special interest groups is a more natural way for them to talk and recommend products.

Investor questions answered

One of the major IPO questions/concerns was mobile monetisation. This is no longer an issue. Mobile take rates exceeded PC for the first time 2.8%. To put this in context Ebay's latest transaction rate was 8.4%. 75% of sales are from mobile devices.

Cloud opportunity
Also similar to Amazon BABA is growing in the cloud. Their cloud business was nearly breakeven this quarter with revenue increasing 156% year on year. Like Amazon growth is just beginning. The entire IT spend in China is $200 billion assuming 20% will be on the cloud which saves customers 25% it will be a $30 billion market BABA generated $187 million in the last quarter.

Decisive has a long position in Alibaba (BABA). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

12 years since the Google IPO

It's been 12 years since Google went public at a valuation of $23 billion. There was a lot of skepticism 2004 was only a few years after the dot.com bust. Bankers were hoping to price Google at $135 a share but the final price was $85 which resulted in a modest first day pop of 18%. To celebrate the occasion CNBC have put together the best and worst performing stocks since the Google IPO. Only ten stocks have beat it.

Decisive has a long position in Google. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Facebook thumbs up

It has been a historic turnaround for Facebook since their IPO. Barron's sums up the sentiment perfectly with a thumbs down in 2012 in contrast to a thumbs up released this weekend (August 2016). Technology is an easy area to get wrong and Facebook traded on the perception that mobile was a risk to the business but now four years later 84% of advertising revenue is from a mobile device. Mobile generated $5.24 billion in the last quarter alone and its driving the business as users spend more time on Facebook. At the time of the 2012 article Facebook was expected to earn nearly $1.36 a share in 2016 instead analysts are expecting nearly $4 a share. Perception vs reality is the key to the market where different views can lead to large rewards if proven correct. We attempt to find these differences but like everyone else we get things wrong and can be influenced by the media. Facts and opinions are very different things. Barron's price target has increased from $15 to $149 let's hope that Barron's has it right this time.


                                       2012                                                2016

Decisive has a long position in Facebook. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Top 20 R&D spenders

Innovation and disruption are words associated with the big technology giants. But looking at the actual top 20 research and development spenders might surprise you. Topping the list is Volkswagen (this was a surprise to me) with 5 automotive companies making the top 20 in terms of spend. Healthcare companies dominated the list with 8 participants. Apple also made the list for the first time. Personally I am glad to see so much spending go into auto and healthcare and not just making the latest consumer electronic.

Source: http://www.strategyand.pwc.com/global/home/what-we-think/innovation1000/top-20-rd-spenders-2015

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

For Apple a billion is the new million

Late July Apple announced they had sold 1 billion iPhones. It's an amazing milestone not many products have sold that amount let alone a product that was released in 2007 taking less than a decade to achieve. To put it in context the total number of computers sold since 1981 is likely to pass 5 billion this year.

That's the problem with Apple the sharemarket is always asking what is next. Coming up with a successful product after the iPhone is tough. The Apple Watch would have been a success for any other company but for Apple it was a relative disappointment. We expectations reset we do think investors have become too pessimistic on Apple products. Software can scale to a billion users but to actually manufacture a billion products is a massive achievement. Apple's spending on Research and Development is now 6% of sales up significantly from the 2-3% average over the last couple of years. The spending is likely on the much rumoured car and TV but also the tenth anniversary of the iPhone will likely result in major product updates for the phone. Having just one success will likely positively impact the share price given expectations are low.

Apple Free cash yield vs the market

Source: Bloomberg

Is the phone a consumer staple?
While Apple is not a consumer staple most people would notice their phone missing ahead of losing their wallet. Smartphones are a must have product but because of their volatility (time to upgrade has increased) Apple hasn't participated in the large cap consumer brand rally. We think the Apple system is very sticky (think iTunes, iCloud) while it might not be a "consumer staple" users are highly likely to continue buying their products once they become a part of their system. Most people would regard Apple as an above average company yet the market prices Apple below the average. Apple's free cash yield is significantly higher than the market. In other words we are paying 11x for Apples cash flow versus 19x for the S&P500.

Great "problems" to have
In addition to 1 billion iPhones sold Apple has $231.5 billion in cash. The market always looks ahead but its current "problems" highly successful products and high levels of cash are the right "problems" to have.

Decisive has a long position in Apple. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

How does your netflix catalog compare?

Reporting season has been kind for most technology names. Facebook, Amazon and Google all showed accelerating revenue growth as these companies expand their domination overseas. An exception short term has been Netflix. Comparing Netflix catalogs across the world helps us to understand why. In Australia it costs $8.99 a month in America its $9.99 but the difference in the number of titles is staggering. In Australia for example we only have 2,418 titles available just 47% of what US subscribers receive though we are a lot better off than Sudan with only 908 titles. Netflix is a fantastic service it dominates online TV with users viewing 1.8 hours of content a day. The global opportunity is there for Netflix but it will take time as NFLX needs to obtain licenses for each region as some are tied up with other providers. Creating more successful original programming (House of Cards, Orange is the new black) has been a smart way for Netflix to get around this problem. Having exclusive content available globally should help them get back on track. (Picture can be hard to see the link is below).

http://cordcutting.com/how-many-titles-are-available-on-netflix-in-your-country/

Decisive has no position in Netflix. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

What do you do after making 44% per annum for 18 years?

There are many great venture capital investors out there but I haven't seen anyone who was come close to Masayoshi Son's returns of 44% per annum over 18 years. Masa is the CEO and founder of Softbank in Japan. His biggest win was investing $20m in Alibaba when it was a startup. At the time of Alibaba's IPO this investment was worth $58 billion.

http://www.softbank.jp/corp/d/sbg_press_en/list/pdf/pressconference_01/material_en.pdf

Masa's investment style can be described as getting ahead of trends. He has benefited from the shift to mobile. His next bet is on the internet of things buying Arm Holdings a UK based developer and licencor of semi conductor technology.

http://www.softbank.jp/corp/d/sbg_press_en/list/pdf/pressconference_01/material_en.pdf

On the Arm acquisition conference call he explained how he made his returns.

"So, people ask me how, Masa, did you do that? And people tell me it was lucky incident. But to me, if I can answer only one key factor, one thing in common that I always make investment is that I always make investment at the beginning of the paradigm shift. I never chase from the backward. I always go at the front of the edge of the paradigm shift. So in my last 40 years, okay, the PC started, PC internet started, PC broadband started, mobile internet started, okay. So, to me everything was internet. It was all getting connected and I invest at the every beginning of paradigm shift.

Now going forward what will happen in the next decade? Every 10 years, the big paradigm shift comes then what is the next 10 years, okay, next 20 years and so on. I say biggest paradigm shift that's coming is that internet is going to get connected, not just PC, not just mobile, but everything else. Everything else will be interconnected, so that is Internet of Things in today's terminology. So that paradigm shift is really happening from here on next 10 years, big-time. It's going to explode and in 20 years, 30 years, it's even going to more-and-more accelerate. Today 10 device per population are having Internet Of Things that is smartphone and tablets or PCs. But in 40 years from now, 1,000 devices per population is going to get all connected, that's my view. That's the view I kept on saying the last few years."

Masa believes Arm Holdings chips will be the biggest beneficiary of the internet of things with a track record like his it's a view worth listening to.

Note Decisive has no position in Softbank. The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Pokemon catch 'em all but not the stock

You can't escape Pokemon Go its everywhere. Since its release on July the 6th (Australia and US were the first) it has already become the most successful mobile game of all time. Nintendo shares are up 93% since then with a market value of $37 billion. To put this in context Activision Blizzard the maker of Warcraft and Call of Duty is worth $31 billion. Pokemon Go is attracting traders to Nintendo according to Bloomberg on Friday $4.5 billion shares traded the biggest daily turnover for any company in Japan's Topix index this century. 

 

Some of the increase is justified as investors extrapolate Pokemon success to other franchisees like Mario and Zelda. The only problem is its hard to live up to these expectations. Nintendo has a historically volatile share price great expectations led to slight disappointments and the realisation they have to bring out a hit product all over again. As a reminder they only own 32% of Pokemon Co and the game was released by Niantic (Nintendo owns a stake) whose augmented reality technology helped the game become a hit. It's good to see a game where users are active similar to Wii Fit which led to a similar rise below but expectations again brought Nintendo back. There is a reason traders are trading the stock long term returns in Nintendo have been average. Surprisingly Pokemon hasn't been released yet in Japan I suspect once Pokemon Go does comes out in Japan trading and the stock will settle down. 

Note Decisive has no position in Nintendo (7974). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Best social media marketing

Social media is great for marketers. If successful news goes viral. Cards against humanity have run some very successful Black Friday events. The card game is a popular "party game for horrible people" its very inappropriate and offensive on purpose. Its the most popular selling game on Amazon. Their marketing lives up to their hype offering inappropriate Black Friday experiences. Instead of receiving a discount on Black Friday they charged you $5 for nothing. Amazingly they made $71,145 and split it among employees! One person gave $100 and if you click this link you can find out what employees did with the money (some of it went to charity). Previously they sold $6 boxes of dog poo (called bullsh*t) and the year before that they raised prices from $25-$30. The price rise was great marketing for the company and widely shared on social media. The promotion was successful they kept their position as the best selling toy/game on Amazon. As a bonus the day after Black Friday they saw a lift in sales as people waited for the price to go back down to $25!

Pizza is a very shareable item so it's no surprise that pizza does well on social media. Domino's has been very savvy with technology. With just one pizza icon tweet you can order your favourite pizza. It's probably too easy. Domino's also made news with an autonomous delivery vehicle named DRU. Though it can only reach speeds of 20km an hour limiting it to neighborhood deliveries. Thoughtfully each unit will have cameras so any theft will be recorded.

I'm looking forward to the promotions cards against humanity (slightly cringing) and Domino's come up with next.

Note Decisive has a long position in Domino's (DPZ). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Founder led companies outperforming the rest

We believe that investing with founders gives you an edge in the stockmarket. Behind every stock there is a company and behind every company are people. Why not invest with the best like Jeff Bezos and Mark Zuckerberg? Amazon and Facebook have outperformed for years they seem to be able to take risks and make investments most companies wouldn't be able to. We believe a main reason is the founders long term vision. Thankfully Bain & Company have quantified the out performance of founder led firms, you can see below that they beat the index by 3.1x.

https://hbr.org/2016/03/founder-led-companies-outperform-the-rest-heres-why

The founder mentality=owner mindset
Bain's study found that when the founder was still CEO the company generated 31% more patents, were more likely to make investments and had a willingness to take risks to better position the company for the future. These companies had a strong sense of purpose for servicing customers this purpose helped employees feel more engaged at work. The founders treated everything like their own money because it was with large stakes in the business and hated bureaucracy. It's hard to have a successful business but it's even harder to keep growing into the future. The long term view of founder led companies meant that overtime they were positioned for change compared to management with shorter time horizons (average S&P500 CEO 9.9 years in 2014) and little equity in the business.

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Best CEO ratings

Glassdoor recently announced the top CEO's as rated by their employees. In what should be a tough crowd to please the top 5 CEO's had an employee approval rating of 97%. Two of the top five were private companies represented by consulting firms Bain and McKinsey. The reason for Bob Bechek's success? He made time to support employees and help them with their professional development. The other top performers were internet companies like Facebook, Linkedin and Ultimate Software (see below).

https://www.glassdoor.com/Award/Highest-Rated-CEOs-LST_KQ0,18.htm

The top ten has changed considerably from last year. Only three of the top ten made it again Tim Cook from Apple, Mark Zuckerberg Facebook and Scott Scherr Ultimate Software. Out of the top 50 four were women. In the S&P500 there are only 20 female CEOs so they are outperforming percentage wise at 8% versus the index of 4%.

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Internet Trends 2016 report

Mary Meeker just released her 2016 internet trend report. There are 213 slides we have included our favourites below. US internet advertising actually accelerated last year growing 20% vs 16% driven by mobile up 66% y/y. Google and Facebook were 76% of internet advertising growth. If you're in the print business you probably wouldn't like to see the slide below.

This chart helps explain some of Apple's (iOS) problems their average selling price has increased while Android prices have halved.

As we all know owning a car is expensive costing $8,558 year in the US, depreciation is 44% of the annual cost. Commuters spend 4.3 hours a week traveling to work time that Google or Facebook could use entertaining you! The rise of Uber has a big impact not just on cars but carparks freeing up extra space should help reduce property costs. Most users like Uber for its convenience but 84% surveyed use it after a few drinks.

China has spent more building roads in the past six years than than previous 30 but now its slowing.

Retail in China is online first. The top 2 Chinese retailers are e-commerce players. Alibaba is around 6.5% of retail sales compared to Amazon's 3% of sales in the US.

Source: http://www.kpcb.com/internet-trends

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

PayPal investor day more than just a button

Paypal recently held an investor day. Their message to investors we are more than just a checkout button! They focused on services centered around mobile including Venmo and Braintree. In our opinion Paypal's acquisition of these two will probably go down in history as one of the best ever. Alongside these services is Paypal one touch. Paypal's goal is simple get users to transact 2-3 times a week versus today's 2-3 a month.

One touch is all you need
22 million users have opted in to one touch where users choose to stay logged in. No more forgetting your password enter it and your login info is saved (shipping, financial) for 6 months all you have to do is one touch check out. This helps retailers convert browsing to purchases on mobile. Half of all searches are on mobile, yet mobile is 10-15% of purchases 30% of Paypal's revenue are mobile.

Venmo is social payments
Venmo has become a verb for splitting payments on college campuses. The most popular transaction shared emjoi is one you can easily guess and that's pizza. It gets shared once every 20 seconds. Venmo users open the app 2-3 times per week inline with Paypal's overall long term engagement goals.

Source: Paypal investor day

While Braintree helps businesses accept payments in app or online. Braintree is made for mobile their main customers are Airbnb and Uber. Transactions have grown 3x in the past year. Braintree now has over a quarter of a billion cards on file. Overall Paypal reviews, assesses and makes decisions on 15 million transactions per day at peak second doing over a 1,000 payments. At a loss of 30 bps of payment value or 30 cents every $100. As money becomes digital and transactions move to mobile Paypal will likely get even busier.

Source: Paypal investor day

At the time of publishing Decisive had a long position in Paypal (PYPL). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Nike king of patents as well as sneakers

Nike is so innovative in shoes that it has more patents than most drug companies. Nike was granted around 500 patents last year. Macquarie research found that patents granted to Nike increased by 14% every year compared to the annual 4% rate of patents granted by the patent office. Recent technology includes self lacing shoes (no traditional laces). They automatically tighten when you place your heel in the shoe. Two buttons on the side let you tighten or loosen it yourself. No more tripped up shoe laces. You can actually hear the self lacing. It took Nike nearly ten years to perfect. We don't know the price yet but they go on sale at the end of the year.

Most other patents involve 3D printing and automating manufacturing, around 5% of their patents involve wearables. Automated manufacturing of their Flyknit technology (lightweight shoe that fits like a sock) is estimated to reduce labour costs by up to 60% and cut material usage by up to 20%. Being able to produce products locally will also give Nike quicker inventory turnarounds and less risk of out of fashion stock. It will be exciting to download a shoe design file from Nike and 3D print your own shoe. Nike was also awarded a patent for in built shoe fitness tracking basically a fitbit for your shoe. With a record number of patents Nike's future is looking comfortable.

At the time of publishing Decisive had no position in Nike (NKE). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Netflix saving us from 159 hours of ads

Came across this great article on cordcutting.com where they estimate how Netflix saves us from hours of commercials. They estimate as much as 159 hours saved (calculation below). It's great to see but guessing many of us use it to binge watch even more Netflix!  

"First of all, we know that Netflix recently passed the 75 million subscriber mark. And, at around the same time, Netflix CEO Reed Hastings said that Netflix subscribers stream 125 million hours of content every day. So, with some simple arithmetic, we can calculate that 125 million hours spread across 75 million subscribers is 1 and 2/3 hours per subscriber per day.

From Nielsen, we know that a typical hour of cable TV includes 15 minutes, 38 seconds – or 938 seconds – of commercials. Multiply that figure by 1.67 repeating and you get 1,563.3 (also repeating) seconds of commercials per day. That’s 570,616.7 seconds per year, which works out to 158.5 hours. So each subscriber saves him or herself about 160 hours of commercials per year by streaming their content through Netflix."

http://cordcutting.com/people-spend-more-than-twice-as-much-time-on-netflix-as-with-friends/

Time spent on Netflix trumps most activities. The lack of ads helps create the phenomenon of binge watching (watching two episodes of a series back to back). Deloitte believe that 70% of US consumers now binge watch. It's interesting to compare this time spent on Netflix to other companies. Facebook recently made waves announcing that the average Facebook user including Instagram and Messenger spends 50 minutes a day on their products. They are different business models but Netflix's 1.67 hours is way ahead yet their market value of $38 billion pales in comparison to the $340 billion for Facebook. Investors should stay tuned.

http://cordcutting.com/netflix-saves-its-subscribers-from-160-hours-of-commercials-per-year/

At the time of publishing Decisive had a long position in Facebook (FB). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Fintech now its just finance

Fintech has been one of the hottest investment trends in the past year. Many of these companies were priced as tech companies when in reality they're finance companies. It worked out well for a number of IPO sellers but not so well for public investors as valuations moved from high multiple tech to low multiple finance. Lenders have become more cautious creating liquidity and demand issues alongside future regulatory risk. However the reality is in-between. Now that these companies are being valued as finance businesses their valuations make more sense. The leading player Lending Club last night fell 35% to $4.60 at the time of their IPO shares spiked at $27 (it was marketed as tech). Their board includes Larry Summers former Treasury secretary and John Mack former CEO of Morgan Stanley. Shares fell as the CEO and other executives resigned over faulty loan disclosures.

Their business model makes sense borrowers connect online they get lower rates and lenders receive higher rates than deposits (see below). The problem with all finance companies is that they need trust to operate properly. Management actions last and the fact the industry is lightly regulated likely mean much more scrutiny and problems ahead.  

High risk, high returns? Maybe for banks
With no branches, approvals in days instead of weeks and the matching of borrowers and lending in theory peer to peer should be a much more profitable and less risky business than banking. But with all the economic volatility earlier in the year demand for loans decreased. Without any deposits this mismatch is an issue. Regulatory scrutiny will be sure to increase these companies could end up looking like banks with reserve requirements leading to a more capital intensive model. At these levels we think it would make sense for banks to buy into marketplace lending companies not just their loans. Ownership/support by a bank will give the lenders a backstop. For us Lending Club is tricky the resignation of the CEO and other executives over faulty loan disclosures creates too much uncertainty. If lenders can't believe/trust what they are investing in they will take their money elsewhere. History would say trust will take time to recover and unfortunately there is hardly ever only one cockroach!

At the time of publishing Decisive had no position in Lending Club (LC). The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.