Beneficiaries of under-financed US business
“Discussing how the weak US middle-market business outlook is beneficial for the large alternative asset managers
Investment Management
In the Midst of an Historic Reallocation?
Over the last 12 months we have borne witness to one of the most significant portfolio reallocations of modern times. Investors have sold ~US$250bn of global equity funds and bought ~US$780bn of bond funds (inc money market). Looking at the difference between equity and bond flows (i.e. equity flows minus bonds flows), implies over US$1 …
Look for Businesses That Get More Than Their Fair Share
Peter Lynch, the legendary investor, once quipped that it’s best to invest in businesses that any idiot could run, because sooner or later one will. This begs the question of what drives the economic returns of businesses: is it the competitive forces of that industry or the skill of management? It’s likely a combination of …
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When is the Top of the Cycle Really the Top?
Forecasting peaks of cycles is notoriously difficult, and while it often feels like we’re reaching the top of the longest expansion period in history, evidence suggests there is still plenty of room to grow. Equity market tops are often associated with euphoria and overconfidence, when otherwise risk-averse investors finally succumb and buy equities or the …
As the range gets wider, investing gets harder
There are lots of things that could happen; but only one thing that will happen. This is one of the better articulations out there of the concept of risk. Understanding risk is at the core of any investment because substantially all investments could result in a range of possible outcomes. Sometimes that range is narrow …
Re-thinking Growth
Growth comes in different forms, some of which are intuitive and easy for our minds to handle. Unfortunately, simplistic growth models often fail to adequately describe the world around us. Relying on them to make investment decisions can lead to sub-optimal or even dire outcomes. As students of investing this behoves us to explore more …
Netflix’s moment of truth
Last week, Netflix reported that U.S. subscribers in 2Q19 declined for the first time in nearly a decade, erasing over $20 billion in market capitalisation as investors fretted over the looming “streaming wars”. The company’s dominant position in programmed video streaming will soon be tested by the launch of streaming services from Disney, NBCUniversal and …
A New Paradigm in Book Retail or Destined to Repeat History?
Elliott Management, the activist U.S. hedge fund, famous for seizing an Argentinean ship after the country refused to make good on a bond payment, once again acquired a somewhat unusual asset, this time a chain of bookstores called Barnes & Noble. While most would agree, the nostalgia and whimsy of walking the aisles of a …
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Who’s selling you that stock?
“We regard investing as an arrogant act”, Seth Klarman, the brilliant investor at the helm of The Baupost Group, once mused. While people typically eschew arrogance in their everyday demeanour, it is in fact a necessary, albeit incomplete, part of being successful in investing. The explanation for this dynamic lies in the nature of transacting …
Beware of “Network Effects”
The term network effects gets thrown around a lot, particularly when describing tech platforms. However, only a select number of businesses experience genuine network effects, and not all network effects are created equally. A recent video by venture capital firm Andreesen Horowitz sheds some light on this topic, and provides useful information to build out a …
