– Andrew Macken & Chris Demasi
US equities rallied in November on the surprise clean sweep by Republicans in the general election. The now-likely prospects of lower regulation and corporate tax, and a more favorable posture towards M&A, resulted in stock prices moving higher.
Of course, not all stocks were moving higher because of US politics. Spotify, for example, increased substantially during the month because of its terrific Q3 results.
As a reminder, one year ago sell-side analysts forecast Spotify’s Q3 earnings this year to be €50M. At the time, we thought earnings would at least 5x this forecast – one of the reasons we believed the stock was materially undervalued. Well, Spotify’s Q3 earnings came in at €454M, more than 9x the original broker forecasts.
Spotify has successfully demonstrated an ability to invest in new verticals (think music, podcasts, audiobooks, with others still to come), and new features (think personalised playlists, and AI DJ, for example). These add greater value to subscribers, which the company can monetize through higher subscription fees – while still retaining its very high benefit-to-cost ratio in the eyes of customers.
In this month’s Spotlight Series podcast ‘Why Spotify keeps smashing expectations’, Andy sits down with Lachlan to discuss Spotify, after his excellent case study published last month.
This month, in ‘Ignore the gloomy news, Google’s advantages are growing’, Andy examines Alphabet’s Google Search business. While there had been some risk around ChatGPT and other AI tools disrupting Google’s crown jewel, it appears that Google has successfully moved quickly enough to reinvent its search experiences to unlock even great scale and profitability going forward. And here’s the kicker: because costs to deliver Search at scale have now structurally increased (thanks to AI), so too have the industry’s barriers to entries. So Google’s advantages in Search have grown even stronger.
Finally, to round out a very busy year of investment research, we share a video presentation on KKR that Andy delivered to the MOI Global – Wide Moat Investing Summit of 2023. Andy shared our insights on KKR at the time and why we believed (and still do) that KKR is an extraordinary business, well-positioned in several structural transformations, with more upside in its stock price to come.
We wish you and your family a very happy and safe Christmas and holiday period. Get some rest and some sunshine. And we’ll be back to do it all again in 2025!
Sincerely,
Andrew Macken & Chris Demasi
Podcast: Join the Montaka Global Investments team on Spotify as we share real-time examples and investing tips that govern our stockpicks. Click below to listen. Alternatively, click on this link: https://podcasters.spotify.com/pod/show/montaka
Note: Montaka is invested in Spotify, Alphabet and KKR.
Andrew Macken is the Chief Investment Officer & Chris Demasi is the Portfolio Manager at Montaka Global Investments.
Letter from the PMs – December 2024
– Andrew Macken & Chris Demasi
US equities rallied in November on the surprise clean sweep by Republicans in the general election. The now-likely prospects of lower regulation and corporate tax, and a more favorable posture towards M&A, resulted in stock prices moving higher.
Of course, not all stocks were moving higher because of US politics. Spotify, for example, increased substantially during the month because of its terrific Q3 results.
As a reminder, one year ago sell-side analysts forecast Spotify’s Q3 earnings this year to be €50M. At the time, we thought earnings would at least 5x this forecast – one of the reasons we believed the stock was materially undervalued. Well, Spotify’s Q3 earnings came in at €454M, more than 9x the original broker forecasts.
Spotify has successfully demonstrated an ability to invest in new verticals (think music, podcasts, audiobooks, with others still to come), and new features (think personalised playlists, and AI DJ, for example). These add greater value to subscribers, which the company can monetize through higher subscription fees – while still retaining its very high benefit-to-cost ratio in the eyes of customers.
In this month’s Spotlight Series podcast ‘Why Spotify keeps smashing expectations’, Andy sits down with Lachlan to discuss Spotify, after his excellent case study published last month.
This month, in ‘Ignore the gloomy news, Google’s advantages are growing’, Andy examines Alphabet’s Google Search business. While there had been some risk around ChatGPT and other AI tools disrupting Google’s crown jewel, it appears that Google has successfully moved quickly enough to reinvent its search experiences to unlock even great scale and profitability going forward. And here’s the kicker: because costs to deliver Search at scale have now structurally increased (thanks to AI), so too have the industry’s barriers to entries. So Google’s advantages in Search have grown even stronger.
Finally, to round out a very busy year of investment research, we share a video presentation on KKR that Andy delivered to the MOI Global – Wide Moat Investing Summit of 2023. Andy shared our insights on KKR at the time and why we believed (and still do) that KKR is an extraordinary business, well-positioned in several structural transformations, with more upside in its stock price to come.
We wish you and your family a very happy and safe Christmas and holiday period. Get some rest and some sunshine. And we’ll be back to do it all again in 2025!
Sincerely,
Andrew Macken & Chris Demasi
Podcast: Join the Montaka Global Investments team on Spotify as we share real-time examples and investing tips that govern our stockpicks. Click below to listen. Alternatively, click on this link: https://podcasters.spotify.com/pod/show/montaka
Note: Montaka is invested in Spotify, Alphabet and KKR.
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