Romance + Revelry = Mobile hotel bookings?

E-commerce used to be a desktop only activity however the rise of the smart phone has given consumers the ability to make last minute and/or spontaneous purchases. One industry that is benefiting from this trend is the online travel agencies. They are benefiting as bookings not advertising drive their revenues. A typical problem for most companies is that while mobile drives extra traffic it tends to be at lower average sales levels due to the smaller advertising and screen. This is a problem these agencies tend not to have as their money is made when a room is booked and because they are last minute purchases the revenue tends to be incremental and does not cannibalise desktop revenues.

This is backed up by the CEO of Expedia (EXPE) Dara Khosrowshahi, "most of our sites are seeing 20 percent or more of their transactions coming from mobile, it’s by far our fastest-growing channel.” Note mobile includes tablets. "Approximately 70% of our mobile hotel bookings occur within 24 hours of stay furthering our belief that mobile represents an incremental opportunity," said Expedia spokeswoman Mallory Seubert.  This is great news for the online travel agencies as last minute bookings tend to go direct to the hotels, now users can use apps on their phone to compare prices based on their current location at the last minute.

The major beneficiaries are EXPE the owner of Expedia, hotel.com and Hotwire and Priceline (PCLN) the owner of Booking.com and Agoda. The main difference between the two is that EXPE is a more US centric business while PCLN is more dominant in Europe. The trend to mobile has pushed PCLN into action acquiring Kayak for $1.8 billion due to Kayak's expertise and growth in mobile downloads and the ability to grow Kayak internationally.

Source: Priceline

EXPE has released the most interesting study teaming up with Harris to commission a study into the trend.Their findings suggested that mobile usage tends to spike around holidays late at night such as New Years.

The most common reasons to book a room was necessity, they had too many drinks and could not find a way home.

“The next most common reason was personal, they had found love (or believed they had) and choose to explore those emotions immediately, in a nearby hotel room. “(Wording straight from the Harris study.)

The study went further onto say that their busiest periods were Valentine’s day, St. Patricks Day and the weekend after New Years Eve suggesting that romance and revelry were the key ingredient to mobile bookings. Here’s to hoping a mobile booking for all on New Years Eve!

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long PCLN

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.

Investor christmas wishlist

It’s now December and Christmas present wish lists are front and centre for households. It's a dangerous time for parents if the deadline is not fulfilled with the potential for anxious and upset family members, this is sounding just like the fiscal cliff!

Our household wishlist consists of some of the products from the table below. These companies are better known for their brands. It’s a handy table for parents to know where their money is going. It also begs the question can I make some money back from these companies?

Hasbro	Mattel	Lego
My little Pony	Barbie	Lego
NERF	Thomas the tank engine	Lego
Transformers	Fisher Price	Lego
GI Joe	Hot Wheels	Lego

Source: Company websites

What about me?

As an investor where is my Christmas wishlist? Looking at the reports from the three rivals above by revenue Lego is the clear standout with revenues growing much faster than peers with a base 3x larger than that of rival Mattel which is slightly larger by revenue than Hasbro. Profits have also grown from 1,028 million Danish Kroner to 4,160 million over the past four years. Not too shabby for such a well known toy brand.

Source: Annual reports/Factset

Lego fan, join the club

On average every person on Earth owns 80 pieces of Lego with all bricks being fully compatible from 1958 to now! (source Lego). Apparently new launches account for 60% of their sales such as new lines like Star Wars and other franchisee or movie tie-ins. The company did not skip a beat during the global financial crisis as Lego was able to grow in the world's largest toy market the US with Lego increasing its market share to 6% by end of 2011 (source Lego Annual Report).

Unfortunately Lego is not listed, its too profitable it doesn't need money from anyone else to grow! While an annual report is available on the website it is still owned by the Kirk Kristianseen family, passed down to a grandchild of the founder.

Who knows how to get to Sesame Street?

Seems like Mattel and Hasbro are left by default. Mattel has added the power brands of Thomas the Tank Engine and Bob the Builder in an acquisition from private equity in the past year. This purchase was motivated by the loss of the Seasame Street license to rival Hasbro 3 years ago. Hasbro starting from 2011 has the right to make Sesame Street merchandise for 10 years after a 15 year agreement with Mattel lapsed. Sesame Street is a nonprofit organisation.

It is a simple analysis but as a growth manager we are going with the faster grower. While not growing anywhere near as fast as Lego Mattel at 9.4% it has a superior growth rate compared to Hasbro 8.2%. Our Santa wishlist has to go with Barbie (Mattel) over Seasame Street as while it is one of the best known brands it is a license and not owned content (Hasbro). Mattel is faster growing and has a better range of more famous and relevant brands for kids.

Santa if I can't buy Lego shares can you please just send a Lego car?

Source http://www.hongkiat.com/blog/35-lego-mega-constructions-you-probably-havent-seen-before/

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive has no position in any of the companies 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.

 

Mobiles, mobiles and mobiles

Kleiner Perkins Caufield & Buyers (KPCB) released their most recent internet trends presentation. Its an 88 slide blockbuster condensed here to 6 key slides. It's more of a chartathon than a blog but a KPCB picture slide is worth a thousand words. Well summed up in four words its mobile, mobiles and mobiles.

 

The great thing about emerging markets is that they can leapfrog developed markets in that they do not have to upgrade exisiting infrastructure, they can start from scratch. No need to buy a desktop computer if you can search through your phone. India mobile usage is already leading desktop and the world. 

 

 

 

 

 Kids Christmas wishlist, out of the top 5 products four are from Apple

 

Those kids that want Apple products above need them so they shop smarter during Black Friday

 



We all know print is structurally challenged as readers but advertisers still have a ways to go

Wintel (combination of Microsoft's software and Intel's hardware) have really been left behind by the move to mobile. By the look of this chart any response might be too late.

 

Smartphones still only 17% penetrated worldwide, stay long the mobile theme!



 

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long AAPL

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.

Ask.com top questions for 2012

Ask.com has just released the most common questions for 2012. The celebrity questions were the best as shown below. Ask.com is owned by Interactive Corp (IACI).

Source http://iac.mediaroom.com/index.php?s=43&item=2084

Some good questions there. I was worried I might have missed out on some wedding invitations but what were the answers? I ended up going to Google (GOOG) instead, that got me thinking....

How does ask.com answer the question of what search engine is the best, ask.com is of course!

Ask.com is far and away the no. 4 player in search at just 3.5% market share behind GOOG, Microsoft's Bing and Yahoo. Ask.com does have a better chance since they acquired about.com, there are a lot of synergies between the two companies with search accounting for more than 50% of IACI's revenues. Its a nice niche focusing on answering questions, interestingly most of IACIs search revenue comes from an agreement with GOOG showing their adwords results to users.

I am just waiting for IACI to focus more on mobile. Mobile has been a major issue for most technology companies, IACI seem to be too focused on desktop toolbars and other PC centric services. The other major part of their business is online dating (they own match.com) another service that is not very mobile centric.

This lack of a mobile strategy is causing the company to trade near the bottom end of their historical multiple range at 12x. IACI's major shareholder Barry Diller is best known as the spin king (in a good way) famous for spinning off Expedia and then Trip Advisor, two companies which are now larger than IACI. Maybe its time for IACI to spin off some of their assets to reduce the conglomerate discount, that might help ease investors concerns over a lack of mobile strategy. 

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long GOOG

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.

A solid gold investment?

We’ve come a long way since the first credit cards were issued in Fresno, California. (Source Visa). We now have online payment systems such as Paypal and the rise of mobile money which surprisingly made their debut in Zambia, Africa ten years ago. Now we have the next innovation, gold credit cards. That’s right a card made of solid gold.

 

Visa and a bank headquartered in Russia (Sberbank) have teamed up to offer their Kazakhstan branch a solid gold credit card. The card will be offered only to the bank's 100 most valuable customers and will cost $100,000 upfront with an annual fee of $2,000. Now I have to go massively into debt just to have a card! Though the card does contain 26 diamonds equal to 0.17 carats and a mother of pearl.

How do you swipe you ask? You can’t the card can only be used for chip transactions. No magnetic strip, guess I won’t be ordering one for Christmas after all!

 

www.decisiveassetmanagement.com

Disclosure: Decisive has no positiion in the bank

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.

Michael Kors fashion is like dating

According to Michael Kors fashion is like dating, there’s great fling material and then there’s husband material. Actual Q&A below.

In conversation with CBS watch magazine the reporter asked.

Q. "Fashion is changing so quickly now. What advice would you give to a young woman who is trying to keep up with trends?"

A. His response was utterly priceless: "She should take the same approach she takes to guys: There’s great fling material, and then there’s great husband material! Apply that to your wardrobe and it means invest in the key pieces you’ll want to spend time with season after season, the pieces that will help define your style. Don’t invest major money in the trendy pieces that will feel old by this time next year. Like dating that guy just for fun--it’s not to say you shouldn’t do it, just don’t sink a lot into it!"

Source http://cbswatchmagazine.com/blog/2012/11/08/kors-and-effect/

Great advice, I think? What is even more confusing is how fast Michael Kors (KORS) the company is growing in what should be a soft economy for a luxury brand. What are the reasons? They seem to be taking market share from their major competitor Coach (COH), KORS has 1/3 of their market share in the US and its growing. KORS is also underpenetrated overseas so while markets like Europe and China might be soft KORS can still find room to grow. It also helps that KORS bags are generally cheaper than COH and according to KORS made with better quality materials evidenced by lower margins than COH. In my opinion, the major reason is Michael Kors himself.

Michael is the key

There are a lot of fashion brands around the world. The difference is many of these fashion brands have lost their original iconic founder and creative designer, KORS has not. Michael is 53 years old, is a major shareholder with 4% of the company and has a lifetime non-compete agreement. He has fashion credibility from project runway and many celebrities are fans of his designs.

 

Source: Retail Sails

KORS has also made the list of the most productive retail stores in the US. Apple was not a surprise given the dollar amount of goods they sell but Lululemon was, I thought their gear was expensive!

Europe sales up 97%?

Overall revenue was up 74% with same store sales of 45.1%. Sales in Europe were particularly strong up 97% year over year. The CEO John Idol was upbeat about Europe in contrast to many other companies. “I think, by this time next year we anticipate being the number one accessible luxury handbag company in Europe. And to really get there from  four years  ago is quite an extraordinary feat.” No.1 after 4 years, I tip my hat off to that performance.

Management's profit guidance assumes a slow-down in sales to mid-20% same store sales growth, in our opinion a conservative assumption given the strength and underpenetration of the brand. KORS is one company investors should put on their shopping list as the fiscal cliff approaches.

Jason

www.decisiveassetmanagement.com

Disclosure: At the time of this article Decisive has no position in KORS

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

Do you earn more than the boss? $1 CEOs

Executive pay has risen multiples above the average common worker (see chart below). Including realised options CEO’s in 2011 earned on average 231 times more than employees in the same firm. It is an obscene amount of money, at least it is trending down. Executives are now earning only 200x a normal salary down from 400, the GFC has affected everyone! After this little outburst, we will concentrate more on positive executive trends and while it is small we are a seeing a trend of $1 CEO’s. Yes that’s right CEO’s with $1 salaries. You might earn more than the boss.

Source: Economic Policy Institute

According to Forbes there are now at least six executives who take in $1 as their salary. Before you can say you finally earn more than the boss, five out of these six are billionaires. These executives are 

• Oracle‘s Larry Ellison
• Google’s Larry Page and co-founder Sergey Brin
• Hewlett Packard’s Meg Whitman
• Kinder Morgan’s Richard Kinder
• The other executive is Whole Foods’ John Mackey (only worth a couple of hundred million).

Other notable members

The late Steve Jobs was also a member of the $1 club. 

• Mark Zuckerberg is following this Silicon Valley trend, effective 1st January 2013 Mark Zuckerberg will be earning $1 per year.
• Elon Musk of Tesla is a $1 CEO but in annual disclosures he is entitled to $33,280 the minimum wage requirement under California law. Talk about red tape, don’t worry he is billionaire too.
• Investors have got to pay more for Buffet services $100,000 but this is an absolute bargain given average hedge fund managers typically charge 20% of the profits.

Of course the $1 salary is not so simple CEO’s like Larry Ellison receive other benefits like stock options, security services and perks like use of aircraft. Now I don’t mind earning a $1! The point of all this is while these CEO’s are wealthy having all their personal wealth tied directly to the stock provides direct alignment of interests with shareholders. Investing with CEO’s that benefit only when shareholders do sounds like a good starting point for investments.

We like to invest alongside founder led firms. The companies these founders create are their life’s work, they are not like professional managers jumping from job to job every five years. Founder led firms tend to be more focused on the longer term and are more willing to invest in future growth opportunities at the expense of short term margins. They also tend to do more focused acquisitions, no empire builders here. This tends to add up to better long term share performance.

The final question is how do they get paid? A dollar monthly is only 8.3 cents a month! Luckily they have already earned enough money. It typically pays to invest alongside these people, they are working because they enjoy it and they want to see their businesses succeed. The bottom line is it pays to invest alongside management with material shareholdings, its the best kind of shareholder alignment. 

Jason

www.decisiveassetmanagement.com

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