New email from 5minwrapup@equitymaster.com
From: 5minwrapup@equitymaster.com
Subject: BEWARE: 'The Uber Syndrome'
Date: February 09, 2016 at 09:33PM
5min Responsive Mailer Not able to view this mailer properly? See here: Desktop | Mobile BEWARE: 'The Uber Syndrome' Tue, 9 Feb 2016 In this issue: » GDP growth numbers - The real challenge » Government mulls share buybacks in state run companies » ...and more! Technology is changing fast. And the companies leading the change are in the spotlight. A new term - 'The Uber Syndrome' - refers to a scenario where a company with a distinct business model changes the dynamics of an industry. Taxi-aggregator Uber is changing the face of commuting. By offering the convenience of comfort and price, its popularity has surged in recent times. So much so that global car manufacturers like General Motors and Ford are beginning to feel the heat. Similarly, other ecommerce companies are challenging traditional business models. No doubt these new-age tech companies are simplifying people's lives. But unfortunately, they are often perceived as invincible. Consider the FANG (Facebook, Amazon, Netflix, and Google) stocks that are presently riding high on the digital wave. These stocks are touted as the most resilient on Wall Street. Back home, the Flipkarts and the Snapdeals are grabbing a lot of investor interest. But herein lies the honey trap: Many of these 'disruptive' companies are yet to turn profitable. The allure of rich returns has stretched these stocks too far. When valuations aren't in line with the underlying fundamentals, the result is the destruction of shareholder wealth. History proves that the herd mentality leads investors astray. Millions of investors were crushed in the 1920 auto bubble, the 1960 semiconductor bubble, and the 2000 dot-com bubble. So how can one profit from game-changers without falling into the value trap? The key is not to get carried away by the frenzy. Instead, take a hard look at fundamentals and viability before putting in your money in these companies. Since FY15, a number of companies with niche business models have tapped the capital markets with IPOs. Many of them are pioneers in their respective segments with virtually no competition from existing players. Quite a few of them also have an impressive profit track record. Naturally, investors are keen to invest in these companies to benefit from their future growth. But we at Equitymaster have been very conservative in evaluating companies with distinct business models. Instead of banking on past financials, we focus on future potential, performance consistency, and management quality. We usually advise investors to avoid the issue if the company is inadequate in one or more of these parameters. We agree with Warren Buffett when he says IPOs are not a good investment as they favour the seller. Do you think that technological disruptions provide huge investment opportunities? Let us know your comments or share your views in the Equitymaster Club. Advertisement Missed The Conference? Let The Conference Come To You... The Equitymaster Conference 2016 was a grand success! This year, we had some of most valued members join us from more than 20 cities across India and from international destinations like United Kingdom, UAE, Singapore, and Saudi Arabia too. However, if due to any reason you missed out on joining us at The Taj... Allow us to bring The Complete Equitymaster Conference 2016 to you! Yes, here's your opportunity to get online-access to the complete Equitymaster Conference 2016 - The Modi-fied India Story. Right from the welcome address to the concluding remarks...and everything in between. Watch Ajit Dayal and Bill Bonner deliver their keynote addresses...Vivek Kaul reveal the true Modi-fied India Story...Asad & Apurva reveal the future of trading...Rahul Shah & Tanushree decode the Indian Consumption Story... and more. All from the comfort of your home! Click here to reserve your online access... Chart of the day We are approaching that time of the year when one takes stock of one's performance and sets the targets ahead - the end of financial year 2016, and the beginning of FY17. The year began with a lot of hopes. However, reality struck, though with a lag. Be it markets, investment data, order books, trade data, different surveys indicating the mood and economic atmosphere, all suggest pessimism, but for one data - the new GDP. One seriously needs to think how the whole can be better when the parts are deteriorating. As per the revised formula, India is expected to grow by 7.6%. This is better than the initial estimate of 7% to 7.5% growth, and implies that the growth in the quarter ended March 2016 should be 7.8% YoY. One must also note that this is much higher than the growth of 7.3% in the third quarter, which happens to be the festive season. What makes the target significant is that at this rate, India will be the fastest growing economy in the world, surpassing even China. While we have our reservations about this new GDP, even if we take it at the face value, there are reasons to be concerned. As an article in Business Standard suggests, in nominal terms, the revised GDP growth is much lower than 11.5% estimated in the Budget. To achieve the Budget target, the Government will need to reduce its expenses. This could be a daunting task, keeping in mind the burden due to implementation of One Rank One Pension for retired Army personnel and the Seventh Pay Commission recommendations. All in all, just looking at the GDP numbers to assess India's economic health and prospects does not seem like a good idea. Should You Take GDP Data at Face Value? Despite the poor market sentiments, it is raining IPOs. Most of these, even the ones yet to turn profitable, have been oversubscribed. An interesting parallel development that is happening is Government mulling over share buybacks in state run companies. Despite the poor governance, a lot of these companies are cash rich. As per an article in Business Standard, around 50 listed state run companies have cash and liquid investments worth Rs 2 trillion. In times when the global economic environment and concerns of the same have led to massive correction in stock prices, it could be a good opportunity for these firms to use cash to consolidate ownership. While it is hard to predict when things will turn around for these firms earning them investors' favour, effective use of cash is likely to improve valuations and per share earnings for them. Indian stock markets opened the day in the red and continued to trade on a negative note. At the time of writing, the BSE-Sensex was trading lower by about 290 points (down 1.2%), while the NSE-Nifty was trading down by 85 points ( down 1.2%). Barring oil & gas, major sectoral indices are trading in the red with stocks from the information technology and metal space facing the maximum brunt. Today's Investing mantra "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years." - Warren Buffett Comments on this edition of The 5 Minute WrapUp: Post a comment | Read comments This edition of The 5 Minute WrapUp is authored by Madhu Gupta (Research Analyst) and Richa Agarwal (Research Analyst). The Premium edition is authored by Bhavita Nagrani (Research Analyst) Today's Premium Edition. What Makes Divis the Most Successful CRAMS Player? This company has demonstrated strong financial growth over last many years in the Contract Research and Manufacturing Services space. Get Instant Access to this and all future editions of The 5 Minute Premium. Click here for details... Recent Articles The Three-Step Guide to Be as Successful as Buffett... February 08, 2016 Warren Buffett has amassed wealth in his lifetime on account of these three reasons... Risks That Do Not Yield Higher Returns February 06, 2016 Avoid the biggest risk in investing. Are You on The Highway to Wealth Creation? Be Careful... February 05, 2016 The mantra to safely get to your destination of wealth creation. How Making Money Can Lead to Losing Money February 04, 2016 This is how the stock market's deceptive ways can lead unsuspecting investors to lose their hard earned money. DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014 INTRODUCTION: Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537. BUSINESS ACTIVITY: An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes. DISCIPLINARY HISTORY: There are no outstanding litigations against the Company, it subsidiaries and its Directors. GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT: For the terms and conditions for research reports click here. DETAILS OF ASSOCIATES: Details of Associates are available here. DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST: 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report. DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION: Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report. GENERAL DISCLOSURES: The Research Analyst has not served as an officer, director or employee of the subject company. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company. Definitions of Terms Used: Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service. Feedback: If you have any feedback or query or wish to report a matter, please do not hesitate to write to us. All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Use of the information herein is at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Before acting on any recommendation, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an "As Is" basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services. Please read our detailed Share Trading Guidelines here. You're receiving this email at RH@ignition.bz. If you have any questions about your subscription, or would like to change your email settings, please contact Equitymaster at +91 22 61434055, Mon-Fri 10.00 AM to 6.00 PM (IST) and Sat 10.00 AM to 3.00 PM (IST). If you wish to contact us, please click here. To unsubscribe from The 5 Minute WrapUp, click here. If you would like to report any mail delivery problems, click here. SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537. Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. | Telephone: +91-22-6143 4055. Fax: +91-22-2202 8550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
Subject: BEWARE: 'The Uber Syndrome'
Date: February 09, 2016 at 09:33PM
5min Responsive Mailer Not able to view this mailer properly? See here: Desktop | Mobile BEWARE: 'The Uber Syndrome' Tue, 9 Feb 2016 In this issue: » GDP growth numbers - The real challenge » Government mulls share buybacks in state run companies » ...and more! Technology is changing fast. And the companies leading the change are in the spotlight. A new term - 'The Uber Syndrome' - refers to a scenario where a company with a distinct business model changes the dynamics of an industry. Taxi-aggregator Uber is changing the face of commuting. By offering the convenience of comfort and price, its popularity has surged in recent times. So much so that global car manufacturers like General Motors and Ford are beginning to feel the heat. Similarly, other ecommerce companies are challenging traditional business models. No doubt these new-age tech companies are simplifying people's lives. But unfortunately, they are often perceived as invincible. Consider the FANG (Facebook, Amazon, Netflix, and Google) stocks that are presently riding high on the digital wave. These stocks are touted as the most resilient on Wall Street. Back home, the Flipkarts and the Snapdeals are grabbing a lot of investor interest. But herein lies the honey trap: Many of these 'disruptive' companies are yet to turn profitable. The allure of rich returns has stretched these stocks too far. When valuations aren't in line with the underlying fundamentals, the result is the destruction of shareholder wealth. History proves that the herd mentality leads investors astray. Millions of investors were crushed in the 1920 auto bubble, the 1960 semiconductor bubble, and the 2000 dot-com bubble. So how can one profit from game-changers without falling into the value trap? The key is not to get carried away by the frenzy. Instead, take a hard look at fundamentals and viability before putting in your money in these companies. Since FY15, a number of companies with niche business models have tapped the capital markets with IPOs. Many of them are pioneers in their respective segments with virtually no competition from existing players. Quite a few of them also have an impressive profit track record. Naturally, investors are keen to invest in these companies to benefit from their future growth. But we at Equitymaster have been very conservative in evaluating companies with distinct business models. Instead of banking on past financials, we focus on future potential, performance consistency, and management quality. We usually advise investors to avoid the issue if the company is inadequate in one or more of these parameters. We agree with Warren Buffett when he says IPOs are not a good investment as they favour the seller. Do you think that technological disruptions provide huge investment opportunities? Let us know your comments or share your views in the Equitymaster Club. Advertisement Missed The Conference? Let The Conference Come To You... The Equitymaster Conference 2016 was a grand success! This year, we had some of most valued members join us from more than 20 cities across India and from international destinations like United Kingdom, UAE, Singapore, and Saudi Arabia too. However, if due to any reason you missed out on joining us at The Taj... Allow us to bring The Complete Equitymaster Conference 2016 to you! Yes, here's your opportunity to get online-access to the complete Equitymaster Conference 2016 - The Modi-fied India Story. Right from the welcome address to the concluding remarks...and everything in between. Watch Ajit Dayal and Bill Bonner deliver their keynote addresses...Vivek Kaul reveal the true Modi-fied India Story...Asad & Apurva reveal the future of trading...Rahul Shah & Tanushree decode the Indian Consumption Story... and more. All from the comfort of your home! Click here to reserve your online access... Chart of the day We are approaching that time of the year when one takes stock of one's performance and sets the targets ahead - the end of financial year 2016, and the beginning of FY17. The year began with a lot of hopes. However, reality struck, though with a lag. Be it markets, investment data, order books, trade data, different surveys indicating the mood and economic atmosphere, all suggest pessimism, but for one data - the new GDP. One seriously needs to think how the whole can be better when the parts are deteriorating. As per the revised formula, India is expected to grow by 7.6%. This is better than the initial estimate of 7% to 7.5% growth, and implies that the growth in the quarter ended March 2016 should be 7.8% YoY. One must also note that this is much higher than the growth of 7.3% in the third quarter, which happens to be the festive season. What makes the target significant is that at this rate, India will be the fastest growing economy in the world, surpassing even China. While we have our reservations about this new GDP, even if we take it at the face value, there are reasons to be concerned. As an article in Business Standard suggests, in nominal terms, the revised GDP growth is much lower than 11.5% estimated in the Budget. To achieve the Budget target, the Government will need to reduce its expenses. This could be a daunting task, keeping in mind the burden due to implementation of One Rank One Pension for retired Army personnel and the Seventh Pay Commission recommendations. All in all, just looking at the GDP numbers to assess India's economic health and prospects does not seem like a good idea. Should You Take GDP Data at Face Value? Despite the poor market sentiments, it is raining IPOs. Most of these, even the ones yet to turn profitable, have been oversubscribed. An interesting parallel development that is happening is Government mulling over share buybacks in state run companies. Despite the poor governance, a lot of these companies are cash rich. As per an article in Business Standard, around 50 listed state run companies have cash and liquid investments worth Rs 2 trillion. In times when the global economic environment and concerns of the same have led to massive correction in stock prices, it could be a good opportunity for these firms to use cash to consolidate ownership. While it is hard to predict when things will turn around for these firms earning them investors' favour, effective use of cash is likely to improve valuations and per share earnings for them. Indian stock markets opened the day in the red and continued to trade on a negative note. At the time of writing, the BSE-Sensex was trading lower by about 290 points (down 1.2%), while the NSE-Nifty was trading down by 85 points ( down 1.2%). Barring oil & gas, major sectoral indices are trading in the red with stocks from the information technology and metal space facing the maximum brunt. Today's Investing mantra "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years." - Warren Buffett Comments on this edition of The 5 Minute WrapUp: Post a comment | Read comments This edition of The 5 Minute WrapUp is authored by Madhu Gupta (Research Analyst) and Richa Agarwal (Research Analyst). The Premium edition is authored by Bhavita Nagrani (Research Analyst) Today's Premium Edition. What Makes Divis the Most Successful CRAMS Player? This company has demonstrated strong financial growth over last many years in the Contract Research and Manufacturing Services space. Get Instant Access to this and all future editions of The 5 Minute Premium. Click here for details... Recent Articles The Three-Step Guide to Be as Successful as Buffett... February 08, 2016 Warren Buffett has amassed wealth in his lifetime on account of these three reasons... Risks That Do Not Yield Higher Returns February 06, 2016 Avoid the biggest risk in investing. Are You on The Highway to Wealth Creation? Be Careful... February 05, 2016 The mantra to safely get to your destination of wealth creation. How Making Money Can Lead to Losing Money February 04, 2016 This is how the stock market's deceptive ways can lead unsuspecting investors to lose their hard earned money. DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014 INTRODUCTION: Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537. BUSINESS ACTIVITY: An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes. DISCIPLINARY HISTORY: There are no outstanding litigations against the Company, it subsidiaries and its Directors. GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT: For the terms and conditions for research reports click here. DETAILS OF ASSOCIATES: Details of Associates are available here. DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST: 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report. DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION: Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report. GENERAL DISCLOSURES: The Research Analyst has not served as an officer, director or employee of the subject company. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company. Definitions of Terms Used: Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service. Feedback: If you have any feedback or query or wish to report a matter, please do not hesitate to write to us. All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Use of the information herein is at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Before acting on any recommendation, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an "As Is" basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services. Please read our detailed Share Trading Guidelines here. You're receiving this email at RH@ignition.bz. If you have any questions about your subscription, or would like to change your email settings, please contact Equitymaster at +91 22 61434055, Mon-Fri 10.00 AM to 6.00 PM (IST) and Sat 10.00 AM to 3.00 PM (IST). If you wish to contact us, please click here. To unsubscribe from The 5 Minute WrapUp, click here. If you would like to report any mail delivery problems, click here. SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537. Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. | Telephone: +91-22-6143 4055. Fax: +91-22-2202 8550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
