As a value investor I focus on individual stocks and frequently travel overseas to investigate global investment opportunities. I recently visited the US to explore stock specific ideas with a select group of companies in technology, gaming, housing and financial services. The meetings were insightful, with a number of investment ideas being substantiated or falling by the wayside as anticipated. And as sometimes happens, a simple personal experience prompted me to consider a very different investment angle. During my trip I used a number of Uber services and observed the extent to which they were being adopted by consumers in the US. It made me think about the business model and what it means, not just for Uber, but for other businesses in Australia and around the world. Read the full article: (VIEW LINK)
Interesting perspective Anthony. Do you think it's easier to invest in the disruptors, or short the disrupted?
Hi Patrick. The beauty about a typical disruptor company is the fact that being profitable is not a short term goal. They are typically driven by taking market share and then worrying about profitability later. Part of Perpetual’s rigorous process involves only investing in profitable companies. This results in us investing in more established and less speculative companies. Therefore, investing in the disruptor can be difficult. I believe it is important to analyse the potential materiality on earnings of disrupted companies before the rest of the market truly understands it. That way you can sell existing positions in your portfolio or generate alpha shorting stocks which could potentially be disrupted before this trend becomes obvious to the broader market.
Thanks for the explanation. I can certainly see why you avoid investing in unprofitable companies, trying to put a value on them is nearly impossible.
Well Anthony I think the impact on Cabcharge of a variety of negatives may well be baked in already and I would be so quick to diss it. I've driven Uber to see how it works properly from both perspectives (driver/rider) and its fabulous in many amazing ways - young Mum ubering so they can pick up their kids at an appropriate time and still pick up $$ is just one example. However, CAB now trades at sub 2x trailing EV/EBITDA for cab business, pulling out buses, and other investments at a lower value than presented in their balance sheet, and attributing NO value to the taxi plates, which will have some if Uber is legalised in NSW. (how much is a ? given nearly 6k plates which "trade" at $375k each) Would remind you that if you could get over the ethics issue, tobacco stocks have been fantastic investments. CAB is a real cigar-butt stock but the NSW Taxi Council are effectively negotiating its value by working with NSW Government.