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.