After some heated discussions with some friends of mine we made the following bet.
If you were to put a fix amount of $ and you can spread it as you want buing amazon, apple, google and facebook, knowing that your stock will be illiquid til 4 yrs from now at which point all shares would be sold at the the then price... how exactly would you spread your money?
Here are the choices:
ot
AMZN - 64%
GOOG - 27%
FB - 9%
AAPL - 0%
sk (amzn:aapl 6:1)
AMZN : 85%
AAPL : 15%
ia
AAPL: 50%
FB: 20%
GOOG: 20%
AMZN: 10%
pp
GOOG :50%
AMZN : 50%
Since this is my blog let me add my own explanations for my choices:
I think amzn at about $150B is still has lots of room to grow within the retail segment. walmarts and targets etc.. hold comparable valuations and in my view amzn has a more efficient model which means that it can produce more profits (in spite of its profitless history) when it it will end up devouring these companies. So I can easily see amzn being > $500B within 4yrs and being the worlds mega retailer (as opposed to the worlds biggest etailer). I think that its profitless history is related to its 10+ yr bets (see its efforts into content, into infrastructiure (aws), content delivery and such. I think these efforts while aspirational they are mired with tremendous competition so it may very well be the case that another company would be the leader in (content delivery infrastructure enablement (aws) etc.. , ie I wouldn't bet on these. Nobody comes even close to challenge amzn status as the worlds best retailer.
Google is a much less clear story. (Unfortunately I don't seem to have captured somewhere my thoughts of what is the achilles tendon of each one of these 4 companies... should do so shortly..)
I see its ads dominance having reached a plateau and I see it being challenges in two very different ways from platforms that own the transcaction (amzn) and social platforms that know the user (facebook). The reason that I believe however that google is with us to stay in the long term (as a $300-$500B company) - is because it has attracted 10s of thousands of great engineers and has created a an extremely efficient software generating machine - probably one of the most efficient such "machines". The only comparable company is Microsoft.... so I think that Google is with us to stay for the same reason that I would (should) have said the same for microsoft. 10yrs ago when Bill Gates was about to leave.
The reason I put Apple at the bottom, is because I think that Apple at $650B is currently the most overvalued company in spite of its rock bottom p/e. My primary concern with Apple is that they have trained the market to expect a high profit margin company - which ties their hands. All it takes is one market timing miscalculation and their still great-selling products can become low margin ones.
I-watch is an example. In smartphones, Apple has 40% of the market and 90% if the profits (I am not being accurate). In smartwatches, msft's Band and LG's G may very well tilt the market and force apple to sell its watch at a price point that is consumer success but not a wall street one. And for manufacturing companies the value diff between DELL and APPLE (or GM v TESLA etc etc) can be orders of magnitude..
FB is where it is because I don't really understand it. While it seems that FB eventually should be able to become a consumer decision influenter comparable to Google.. so a comparable valuation is meaningful, On the other hand the internal culture of FB is in from my few interactions with them less healthy than google. And looking at its consumers, it appears to be losing the youth audience (and the early adopter one) (and gets it back with increasingly expensive acquisitions...). So I really can't tell what is the future for FB..
If you were to put a fix amount of $ and you can spread it as you want buing amazon, apple, google and facebook, knowing that your stock will be illiquid til 4 yrs from now at which point all shares would be sold at the the then price... how exactly would you spread your money?
Here are the choices:
ot
AMZN - 64%
GOOG - 27%
FB - 9%
AAPL - 0%
sk (amzn:aapl 6:1)
AMZN : 85%
AAPL : 15%
ia
AAPL: 50%
FB: 20%
GOOG: 20%
AMZN: 10%
pp
GOOG :50%
AMZN : 50%
Since this is my blog let me add my own explanations for my choices:
I think amzn at about $150B is still has lots of room to grow within the retail segment. walmarts and targets etc.. hold comparable valuations and in my view amzn has a more efficient model which means that it can produce more profits (in spite of its profitless history) when it it will end up devouring these companies. So I can easily see amzn being > $500B within 4yrs and being the worlds mega retailer (as opposed to the worlds biggest etailer). I think that its profitless history is related to its 10+ yr bets (see its efforts into content, into infrastructiure (aws), content delivery and such. I think these efforts while aspirational they are mired with tremendous competition so it may very well be the case that another company would be the leader in (content delivery infrastructure enablement (aws) etc.. , ie I wouldn't bet on these. Nobody comes even close to challenge amzn status as the worlds best retailer.
Google is a much less clear story. (Unfortunately I don't seem to have captured somewhere my thoughts of what is the achilles tendon of each one of these 4 companies... should do so shortly..)
I see its ads dominance having reached a plateau and I see it being challenges in two very different ways from platforms that own the transcaction (amzn) and social platforms that know the user (facebook). The reason that I believe however that google is with us to stay in the long term (as a $300-$500B company) - is because it has attracted 10s of thousands of great engineers and has created a an extremely efficient software generating machine - probably one of the most efficient such "machines". The only comparable company is Microsoft.... so I think that Google is with us to stay for the same reason that I would (should) have said the same for microsoft. 10yrs ago when Bill Gates was about to leave.
The reason I put Apple at the bottom, is because I think that Apple at $650B is currently the most overvalued company in spite of its rock bottom p/e. My primary concern with Apple is that they have trained the market to expect a high profit margin company - which ties their hands. All it takes is one market timing miscalculation and their still great-selling products can become low margin ones.
I-watch is an example. In smartphones, Apple has 40% of the market and 90% if the profits (I am not being accurate). In smartwatches, msft's Band and LG's G may very well tilt the market and force apple to sell its watch at a price point that is consumer success but not a wall street one. And for manufacturing companies the value diff between DELL and APPLE (or GM v TESLA etc etc) can be orders of magnitude..
FB is where it is because I don't really understand it. While it seems that FB eventually should be able to become a consumer decision influenter comparable to Google.. so a comparable valuation is meaningful, On the other hand the internal culture of FB is in from my few interactions with them less healthy than google. And looking at its consumers, it appears to be losing the youth audience (and the early adopter one) (and gets it back with increasingly expensive acquisitions...). So I really can't tell what is the future for FB..
