– Andrew Macken
For value investors like us who seek to own the world’s long-term winning businesses in attractive markets, there is an ongoing philosophical imperative to ensure the quality we identify is not already fully reflected in the current stock price of the business. After all, if the true quality and growth prospects of any business are accurately reflected in the stock today, then your chance of generating outsized returns is zero, by definition.
In practice, we have come to observe time and time again, that the world’s best businesses (that is: those with advantaged business models, economics and leadership) tend to continually surprise on the upside with the generation of new business revenue streams over time. As these new businesses are developed and grown, so too does the total addressable market and long-term growth potential of the aggregate business. Amazon is arguably the most successful (and widely understood) illustration of this phenomena over the last two decades.
Good things happen to great businesses. This is a mantra ingrained in the Montaka investment team. And as we look through our global portfolio today, we see extraordinary businesses – many of which have valuable non-core assets, often overlooked, and which could well grow to become truly large new business revenues over the long-term.
Let’s start with Alphabet (NASDAQ: GOOGL). Of course, everyone knows about its core digital advertising business Google, but what about Verily, its life sciences research business seeking to use data and technology to help solve some of our most pressing health problems. Or Waymo, its autonomous driving business.
Then there is Facebook (NASDAQ: FB). We all know about Instagram, WhatsApp and Messenger. But Facebook’s virtual reality (VR) platform Oculus is often overlooked. As gaming explodes with popularity, owning one of the largest VR platforms in the world – and integrating it with its 3-billion-member strong social network, is potentially quite compelling over time.
Jio Platforms is a digital services business valued at more than US$60 billion and growing rapidly. It is a wildly popular collection of apps providing services from TV streaming to messaging to music streaming and gaming. Facebook is its second-largest shareholder. Alphabet its third-largest.
Alibaba (HKEx: 9988) has a meaningful economic interest in a side-business you will hear more about over the coming weeks: Ant Group. It is planning an IPO and is expected to be valued at more than US$200 billion. Among other businesses, Ant is the owner of Alipay – the world’s largest mobile payments platform.
Epic Games has been in the news lately. Anyone with children will know Epic as the owner of Fortnite. Well, Tencent (HKEx: 700) owns 40% of this business.
Finally, we’ve even got the African continent represented. Through our holding in Vivendi (Euronext: VIV), owner of Universal Music Group, we also own the leading international pay-TV business in French-speaking Africa – part of the Canal+ business. With more than 200 channels, radio stations and services, this business has approximately 5 million subscribers, growing at +17% per annum.
And these are just to name a few.
Great businesses have a culture of establishing and nurturing new business opportunities such as those described above. This is one of the reasons why good things happen to great businesses.
Andrew Macken is the Chief Investment Officer of Montaka Global Investments. To learn more about Montaka, please call +612 7202 0100.
