Annual Letters

A recent WSJ article pointed out that General Electric's annual report was downloaded only 800 times in 2013. No one has the time or patience to read annual reports anymore with all the jargon and legal disclosures involved its no wonder. But there are some great company letters out there. Buffet with Berkshire always tops the list. My personal favourite is Amazon's Jeff Bezos. He talks about their strategy and culture. He believes that Amazon is the "best place in the world to fail" a key reason for their success.

"We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments." Free shipping with Prime membership has been a major beneficiary. He adds that "we want Prime to be such a good value, you’d be irresponsible not to be a member."

Activision Blizzard is my next favourite. "If you had invested $100 in our company 20 years ago, it would have returned over $4,400 today — almost nine times more than the $520 the S&P 500 would have returned in that same period of time and almost five times more than Berkshire Hathaway, which we generally regard as the gold standard to measure just about everything against." Any company that measures themselves against Berkshire is setting an incredibly high standard.

My final pick is Under Armour. They are known as an aggressive upcoming brand in 2015 Under Armour athletes secured MVP titles in the four major US sports.

"We feel Under Armour's brand promise is to create products you don't know you need yet, but once you have them, you don't know how you lived without them." The best companies tend to explain their strategy simply. The CEO goes on to talk about the opportunity in connected fitness but he reminds us that he's not forgetting to sell shirts and shoes!

Decisive has a position in Amazon (AMZN). 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 and Softbank where long term is really long term

Facebook had their annual conference last week. They impressed with their ten year plan/outlook for communication revolving around messaging and virtual reality. Their Facebook Messenger app is the fastest growing in the US. Including Whatsapp their users are sending 60 billion messages a day versus 20 billion globally through SMS 3x the size.

The crowd went wild when they demoed a selfie taken in virtual reality (personally not looking to forward to that). But in the short term Facebook view chat bots in Messenger as the new way to communicate. No need to download any more apps if you need to do anything just open up messenger and you can chat with companies to find out information and buy things. Initial partners include Bank of America, Burger King and 1800-Flowers. 1800-Flowers might have to change their name. It was a conference to be at as everyone received a free Gear VR and Samsung Galaxy phone.

Facebook's 10 year plan is very impressive in a quarterly world. Ten years ago they only had 24 million users compared to 1.6 billion today. Their ten year plan reminded me of Softbank's long term vision. The Japanese telco has a 300 year vision though it is broken down into 30 year slots. Their goal is to provide so much value that they will be one of the top companies in the world by market cap in 2040. It's an impressive goal apparently only 0.02% of companies survive after 30 years yet alone grow (see vision below) my hat goes off to both of these companies for their long term view.

Decisive has no position in Softbank (9984) but has a 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.

Breweries at all time highs

If you're a beer drinker there's great news. The number of breweries in the US is at all time highs. It's surpassed even the late 1800's when your local beer was really local. Without fridges a horse and cart limited the distance for a cold beer. Prohibition was the cause of the large dip in the 1920's.

The range of beers has increased significantly but as an investor its hard to get exposure as the majority of craft beer are local private companies. One listed craft brewer is Samuel Adams (SAM) they also sell Angry Orchard Cider and Twisted Tea. SAM has grown so tremendously that the Brewers Association of Craft Beer has had to change its barrel production limit from 2 million to 6 million to accommodate their growth. SAM is a great company but the competition in craft beer and their 'size' has led to slower growth with sales for SAM's declining last year. The major beer companies have bought into a number of smaller craft brewers.

While growth for SAM has slowed it's hard to count them out Angry Orchard is the no.1 cider brand they are also introducing nitro beers. Apparently nitrogen gas gives beer a creamier, smoother texture. If that doesn't work they are also introducing alcoholic sparkling water. SAM is continuing its innovation alongside the 4,300 other brewers. The investment outlook is cloudy but it sure is a great time to have a drink.

Decisive has no position in Samuel Adams (SAM). 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.

Google and Facebook the online duopoly

Traditional media is dominated by the big 6 movie studios (Warner Bros, Fox etc) and 4 broadcast channels (ABC, Fox etc) however as we move online it reduces to two. Google and Facebook are new media and dominate the time we spend online. Top online activities are not just media viewing but also social networking and messaging. Google has 5 of the top ten apps while Facebook has 3.

As a social network Facebook is on another scale. Its 17.2% of all digital media time spent.

Want to keep up with the hottest new apps? See the fastest growing below.

Maps continue to be the most used mobile app (thank goodness no more map directories)

Note charts are sourced from Comscore's 2016 US Cross Platform Future in Focus report

Decisive has a position in Alphabet/Google (GOOG) and 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.

It's Easter and what's Easter's favourite ingredient? Chocolate. Chocolate sales always increase in Easter but in a sign of the times chocolate sales fell -0.6% over Valentines (4 week period ending Feb 21) versus a year earlier. Let's hope Easter works out better I'll be doing my part with some of the products below.

Cadbury (owned by Mondelez) is the chocolate leader in Australia its products make the chocolate hall of fame you might have heard of Freddo 90 million are eaten every year in Australia, Cadbury Roses, Cherry Ripe and Picnic. During Easter many of these products turn into eggs.

There are certain brands that retailers have to stock to be in business Mondelez has a portfolio of them. They are also dominant in the biscuit category with brands such as Oreo otherwise known as milk's favourite cookie with 35.9% share of the US market in 2015. Over the last two years Mondelez's profitability has increased substantially but at the cost of sales. They used to have 74,000 product varieties its down to 30,000 today. Less choices for you means greater profits for Mondelez.

Chocolate is still a good investment though growth is slowing. Snacking is a $1.2 trillion market with emerging markets just beginning to snack. Branded chocolate typically have good margins, when was the last time you craved private label chocolate? We all want our Cadbury. Let's hope you get it Happy Easter everyone.


Decisive does not have a position in Mondelez (MDLZ). 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 performing stocks since the market bottom

It's been 7 years since the GFC stockmarket bottom. How things have changed. Apple was only the 15th largest company in the world with a market cap of $74 billion on the 9th of March 2009. Today Apple has a market cap of $561 billion (including $216 billion cash) the largest company in the world. Energy has been a notable laggard Exxon Mobile once the largest in 2009 is now the fourth largest in the world.

Source: Bloomberg numbers total return

Hopefully you own some of the best S&P500 performers since the bottom above. Hindsight investing is a lot easier but property and hotels were the top two performers followed by consumer discretionary which dominated the list. Underwear seemed to be a standout with L Brands (owner of Victoria Secret) and Hanesbrand making top appearances. Interestingly a lot of the top performers are fairly well known brands.

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.

Tinder and Buffet not yet a Match

Buffet released his annual letter last week and as usual its a must read. The one surprise I had was Buffet mentioning Tinder saying that he was not ready to use it (see below). I was amazed he had heard about it, you've made it as a service once you're mentioned in his letter. Tinder has entered popular culture becoming a verb for meeting people online.

Tinder is a part of Match group alongside 45 other dating brands. Buffet doesn't use it so it might not pass his investment process but its interesting because Match.com is an established business with great cash flow partnered with the future growth potential of Tinder. All up they have around 59 million monthly active users with 2.5 million confirmed marriages. Match Group was spun out of Interactive Corp late last year whose track record of spin-off's include Expedia, Tripadvisor and Lendingtree.

Online dating is mainstream
If you weren't on a Valentines date last month you're very likely married or looking at online dating sites. The market for singles is expanding people are marrying later and online seems to be the best chance of meeting someone outside of friends and work. In the 70's 28-30% of Americans were single compared to 45% today (2014 US census).

Tinder has become a phenomenon it's how young people meet. It's a first impression swipe right if you like someone app. 3Q data has users swiping 1.4 billion photos a day with 9.6 million daily active users spending on average 35 minutes swiping through photos. If you haven't heard of it you must be over 35, 86% of users are under 35.

Tinder swipe right
Match has grown as online dating has become mainstream. But they do have difficulties Tinder monetises at a lower rate as most services are free, on average Tinder revenue per user is 50% lower than Match. Though Match argues that as people get older they upgrade to paid services to figure out who is serious in finding a long term relationship as compared to a shorter term Tinder crowd. Out of all of the IPOs last year Match Group was one of the more interesting having both good cash flows and future growth through Tinder it's one to swipe right and stay connected to.

Decisive has no position in Match Group (MTCH). 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.