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jerryking : investment_thesis   16

Opinion: Canadian companies must prepare for disruptors to come knocking
July 26, 2019 | The Globe and Mail | by JOHN RUFFOLO.

In August, 2011, technology legend Marc Andreessen wrote his seminal article titled Why Software Is Eating the World, which became the central investment thesis behind his venture capital firm Andreessen Horowitz. Andreessen’s prognostication has since followed Amara’s Law on the effect of technology, which aptly states: “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” [JCK: See also Andy Kessler's definition of S-Curves "Technology develops in S curves: Things start slow, go into hyperbolic growth, and then roll over. "] The feast has really just begun.

We are in the midst of the Fourth Industrial Revolution – or as some call it, the Information Revolution.....the Information Revolution really began to take shape in 2008, catalyzed by three incredibly powerful and converging forces – mobility-first, cloud computing and social media. All three forces collided together with full impact in 2008, spawning a wave of new technology companies.......The next phase of the Fourth Industrial Revolution will see the rise of a new species of company – the “disruptors.” While technology companies will continue to grow, we are witnessing the enablement of those technologies across all economic sectors as the leading weapon used by new entrants to disrupt the traditional incumbents in their respective industries. The massive influx of venture capital to support the building and growth of technology companies over the past 10 years has produced these tools, such as artificial intelligence, machine learning, and the internet of things, which are now being leveraged across all industries......Those companies that can harness these new technologies to operate better and faster, and to gain unmatched insights into their customers, will prosper. Although these disruptors are not technology companies in the conventional sense, their tight focus on value creation through innovation further blurs the lines between a technology company and a traditional company.

The incumbents, however, are not asleep at the wheel. To ward off the disruptors, they know they must embrace technology. It is this battleground that I believe will generate the greatest wealth creation and transfer opportunities over the next decade. The disruptors, naturally, are particularly active in those industries where they perceive the incumbents to be burdened by outdated technological infrastructure or business models, and hard-pressed to counterattack.

Yesterday, the disruptors focused primarily on consumer sectors such as the music industry, travel booking, newspapers, magazines and book publishing. Today, it’s groceries, entertainment and personal transportation, thanks to Amazon, Netflix and Uber, respectively.

But consumer-focused sectors were just the start for the disruptors. Before long, I believe we will see them try to disrupt varied industries such as banking, insurance, health care, real estate and even agriculture and mining; no industry will be immune. These sectors all represent emblematic Canadian brands, and yes, each will in turn will go through the same jarring disruption as so many others.
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See [Why It’s Not Enough Just to Be Disruptive - The New York Times
By JEREMY G. PHILIPS AUG. 10, 2016] Creating enormous value over the long term requires turning a tactical edge into some form of durable advantage....Superior tactical execution can still create real value, particularly where it provides ammunition for a bigger war (like Walmart’s battle with Amazon). And in the long term, value is created not by disruption, but by weaving together advantages (as both Amazon and Walmart have done in different ways) that together create a barrier that is hard to storm.
Amara's_Law  artificial_intelligence  cloud_computing  digital_savvy  disruption  incumbents  insurgents  investment_thesis  John_Ruffolo  legacy_tech  Marc_Andreessen  mobility_first  overestimation  S-curves  social_media  software_is_eating_the_world  start_ups  technology  underestimation  venture_capital 
july 2019 by jerryking
Store wars: short sellers expect more pain in US retail
February 26, 2019 | Financial Times | by Alistair Gray in New York.

Short sellers who made big bets against US retailers a couple of years ago had hoped for carnage across the board. No one could compete with the rise and rise of Amazon...which would make life hard for every mall tenant across America.

But after a period in which internet shopping seemed to hit almost every brick-and-mortar retailer, the industry seems to be dividing into winners and losers. Casualties are still piling up: bankruptcies since the turn of the year....Payless Shoes ....Sears, the once dominant department store chain, narrowly avoided outright liquidation.

However, some of the biggest companies e.g. Walmart & Best Buy are reporting their healthiest metrics in years......For short sellers trying to profit from falling share prices, it makes for a perilous environment.

“It’s a slow death by a thousand paper cuts, and not the kind of ‘mall-mageddon’ originally anticipated by that trade,”.....“Retail has been much more volatile than many would have expected. It hasn’t been decidedly one way down.”....an over-reaction in 2017 and that led to pretty nice opportunities [for longs] in 2018,”.....Investors who put money on the demise of retail that summer have lost out in many cases......It was almost as if they [shorts] were acting like no retail real estate space can work,” ....overcapacity doesn’t mean retail real estate is dead.”...Shares in the sector have been volatile in part because investors have had to consider a series of seemingly contradictory data points about the health of both the US consumer and the retail business.....Traditional chains are also trying to take on Amazon by improving their online offerings and making their stores more enticing. Both require hefty investment, although successful examples include Lululemon, which offers yoga lessons in its stores. Shares in the company have tripled since a 2017 low.

“Those who are innovating and investing in ecommerce, marketing and social media tend to be doing well...“The US is still over-stored,” ...Ecommerce meant “more of the store base is not economic. That’s going be a secular pressure for years to come. For those retailers that don’t have a digital strategy, it’s just a matter of time before they fall.”
Amazon  apocalypses  bankruptcies  barbell_effect  bear_markets  bricks-and-mortar  commercial_real_estate  death_by_a_thousand_cuts  department_stores  digital_strategies  e-commerce  innovation  investors  investment_thesis  Lululemon  pain_points  overcapacity  retailers  shopping_malls  short_selling  structural_decline  Wal-Mart 
february 2019 by jerryking
'Big Mick' returns to mining - and he's hungry for acquisitions
October 1, 2013 | Globe & Mail | ERIC REGULY.

Mick Davis is back in the mining game....Mr. Davis, older, leaner but still hungry, along with a few former Xstrata executives, has launched X2 Resources, a private company that has raised $1-billion (U.S.) and plans to raise more. The goal is to give it the firepower to pounce on mining assets that the X2 executives consider undervalued in a market that has lost its love for commodities....Mr. Davis is bullish on commodities and thinks the selloff that sent mining company values plummeting is overdone, although he does not see a return to the "explosive" demand that turned mining companies such as Xstrata into some of the biggest wealth generators of the pre-2008 era. "We still have a lot of conviction about the resources industry," he said. "We're seeing ongoing demand in the developing world and the rise of consumer markets there."

Mr. Davis built his career on this "stronger-for-longer" theory that was centred on he belief that urbanization in China, India and some parts of sub-Saharan African would send the prices soaring for the copper used in everything from plumbing to the coal burned in electricity plants....In a statement, Jim Coulter, TPG's founding partner, said it invested because "the X2 team has an impressive track record of building metals and mining platforms around the world."
Eric_Reguly  Mick_Davis  Second_Acts  Glencore  staying_hungry  mining  commodities  private_equity  mergers_&_acquisitions  TPG  natural_resources  X2  Xstrata  entrepreneur  privately_held_companies  urbanization  China  India  sub-Saharan_Africa  investment_thesis  undervalued  developing_countries 
october 2013 by jerryking
When markets collide : investment strategies for the age of global economic change
When markets collide : investment strategies for the age of global economic change
by El-Erian, Mohamed A., 1958-
books  PIMCO  CEOs  libraries  Mohamed_El-Erian  investment_thesis 
november 2012 by jerryking
Lessons from Private-Equity Masters
June 2002 | Harvard Business Review| by Paul Rogers, Tom Holland, and Dan Haas.

The Four Disciplines of Top Private-Equity Firms

Define an Investment Thesis

Have a three- to five-year plan

Stress two or three key success levers

Focus on growth, not just cost reductions

Don’t Measure Too Much

Prune to essential metrics

Focus on cash and value, not earnings

Use the right performance measures for each business

Link incentives to unit performance

Work the Balance Sheet

Redeploy or eliminate unproductive capital—both fixed assets and working capital

Treat equity capital as scarce

Use debt to gain leverage and focus, but match risk with return

Make the Center the Shareholder

Focus on optimizing each business

Don’t hesitate to sell when the price is right

Act as unsentimental owners

Get involved in the hiring and firing decisions in portfolio companies

Appoint a senior person to be the contact between the corporate center and a business
HBR  Bain  lessons_learned  private_equity  metrics  investment_thesis  measurements  dispassion  incentives  constraints  leverage  focus  sweating_the_assets  unsentimental  debt  owners 
november 2011 by jerryking
The new masters of the universe - Bain & Company - Publications
July 27, 2005 | The Wall Street Journal | By Hugh MacArthur and Dan Haas.

Blueprint the path to value:
Hire hungry managers:
Measure what matters:
Make equity sweat:
private_equity  KKR  Bain  metrics  investment_thesis  measurements  value_creation  blueprints  what_really_matters 
november 2011 by jerryking
Invest With A Thesis
Posted: Aug 27, 2007 | investopedia | Ryan Barnes.

Tough truths, on the other hand, are things like when and where you invest and under what circumstances.
investment_thesis  value_creation  goal-setting  investing 
november 2011 by jerryking
Invest With A Thesis
??? | Investopedia | by Ryan Barnes.

Example - Investing Thesis for XYZ Industries

May 31, 2007 - XYZ Industries is currently No.2 in market share in its
core business of selling designer widgets. Market share is currently at
27%, and it has improved that from 23% a year ago. An industry trade
group predicts that the total market for widgets will grow by 10% during
2007 and 2008.

Goals:

1. 35% market share within two years
2. Total widget growth to remain at at least 8%
3. Maintain current P/E of 21 by growing earnings by at least 20%
annually
4. Maintain or grow operating margins from the current 22% level
5. Keep a healthy balance sheet; keep debt/equity below 40%

Exit Strategy - Sell position if XYZ loses market share during a full
12-month period, or if industry growth turns negative for more than two
quarters.
thesis  themes  investing  investment_thesis 
december 2010 by jerryking
Writing a Credible Investment Thesis
11/15/2004 | HBS Working Knowledge | by David Harding and
Sam Rovit
Many companies are "terrifyingly unclear" to themselves and investors about why they are making an acquisition, according to the authors of a new book, Mastering the Merger. Support comes when you spell it out.

Tough truths, on the other hand, are things like when and where you invest and under what circumstances.
HBS  HBR  mergers_&_acquisitions  M&A  private_equity  investment_research  writing  themes  thesis  value_creation  value_propositions  investment_thesis  Bain  tough-mindedness 
december 2010 by jerryking
Another View: Peering Clearly at the Future - DealBook Blog - NYTimes.com
April 20, 2010 | New York Times | by Mike Kwatinetz and
Cameron Lester of Azure Capital Partners who explain how they examine
the the market dynamics of successful start-ups. "Here are our five
principles:

1. Lower component costs and improvements in component technology
enable new platforms to emerge.

2. New platforms breed new application winners.

3. Creating a new ecosystem creates substantial competitive
advantage.

4. Economics always matter, such as a cost advantage for the
start-up or strong return on investment for customers.

5. A leap in user experience can drive substantial adoption.
competitive_advantage  cost_advantages  customer_adoption  customer_experience  ecosystems  forecasting  investment_thesis  investors  platforms  ROI  rules_of_the_game  start_ups  step_change  UX  venture_capital 
april 2010 by jerryking

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