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.