Stocks

Interesting, and often contrarian, Snippets on individual companies and the stock market.

Stocks

The Coming Semiconductor Revolution

  • “The future of semis will be designing ever more specific chips for ever more specific uses. This change will take many years to play out, but the transition has already begun. This is going to upend the semis industry to the same degree that consolidation over the past 20 years has.“
  • A must read here.
Stocks

Aladdin

  • Intriguing transcript call from a former director suggesting Aladdin could be spun-off from Blackrock [To read follow this link and get a free two week trial of Stream].
  • Alladin is big (2021 the Technology Services Business at BLK, which is mostly Aladdin, delivered $1.3bn of revenue) and appears to be a winner takes all business (more data means it is better at doing its job).
  • This was a brilliant (paywalled) history of Alladin for those interested.
Stocks

Challenger Banking

  • “I couldn’t help reflecting that there was a fine balance between the stringent requirements of the regulator and what our potential investors would like to see. For the PRA [Prudential Regulation Authority] we needed to be people who had done it all before, who knew how the committees and governance processes worked, and who were fully aware of our responsibilities to look after our customers’ money. On the other hand, for the private equity (PE) world we needed to appear as hard-headed business people who were going to sweat the assets and run a traditional high-return banking business. Meanwhile, any potential venture-capital investors would be on the lookout for a bunch of smart people who wanted to change the world. We just needed to fulfil each and every role somehow! Or rather, some people on the team would have to be all three people on the same day, while others picked a side and stuck with it.“
  • Brilliant condensation of the tensions of a startup bank by Boden, the founder of Starling (h/t Net Interest)
Stocks

Shorting Startups

  • Derivatives and shorting have made their way into the private market.
  • Selling interest increased to 80% of open order interest at Caplight, while the buy side has dropped to 20%, according to Javier Avalos, CEO of the private-market derivatives marketplace. It was previously fairly even or a 60/40 split, he said. “We basically saw the demand side of the Caplight marketplace go away for the past few months,” he said.
  • One interesting aspect of tech is how circular it is, making it prone to downside leverage – “Tech, unlike other sectors, disproportionately sells to itself.”
  • “The circularity goes beyond VC investments,” he added. “Today major tech companies incubate their own customers at a pace and scale not seen in any other industry.”
Stocks

Jumia

  • Nice profile of the African Amazon – Jumia.
  • Despite the odds (54% of African startups shut down between 2010-2018) Jumia has made it to its ten year birthday.
  • It has been listed since 2019 – the shares hit a peak of $63, but are languishing now at $8.
  • It trades on 1.2x EV/Sales now and is forecast to grow sales 30%.
  • Africa is very unique and it is worth reading a few expert calls on Jumia (two weeks free sign up here).
Stocks

Litigation Financing

  • A large alternative asset class you probably haven’t heard of is litigation financing – “transactions in which a third party provides capital (debt, equity, or a hybrid) to one of the parties to a legal claim (a plaintiff or law firm) in exchange for a financial interest derived in part from the outcome of the claim.“
  • This is an excellent comprehensive up to date paper on this sector. The full paper is here and a great summary is here.
  • The asset class is estimated to boast 20%+ returns and has grown to a dedicated AuM of $12bn.
Stocks

How Monzo Grew

  • Interesting first hand account of how Monzo grew from nothing to 1 million users in three short years.
  • Tom credits – a great product (compared to competition) that was a delight to use, a brightly coloured card, and network effects – “if you had 3+ friends on Monzo when you joined, you had a 70% chance of being a WAU [weekly active user] by day 90, versus only a 50% chance if you didn’t have any friends on the platform.“
Stocks

Open Access Research

  • Strikes me as a very important move by the US towards “open access” academic research.
  • By 2026 all US federal agency funded research must be free to read immediately on publication.
  • This has been talked about for a very long time.
  • In a recent transcript from Stream by AlphaSense (sign up for two free weeks here), a former Elsevier Director, argued the effect on RELX business will be a “small negative” as they will find ways to charge for ancillary parts of research (reviews, data etc). The hit to smaller publishers will be worse.
  • h/t Ben Evans.
Stocks

Biotech VC

  • The venture landscape has changed in general, and this is also true in Biotech.
  • A new crop of VC investors in the sector have been taking share from more established players in Series A funding markets.
  • These comprise techbio, crossover and corporate VCs.
  • What is interesting is the downturn has actually seen them stand their ground.
Stocks

China Property Developers

  • The Chinese property market is the biggest asset market on earth (worth $60 trillion).
  • Its potential crash has been one of the key narratives in financial market for the past two decades.
  • There are now signs of things cracking, as written up so brilliantly in this Net Interest piece.
  • This chart, for example, looks at property developer cash flow – where the picture has turned decidedly negative.
Stocks

Index Inclusion

  • According to Morningstar data, inclusion into an index no longer attracts the usual rise (on announcement) and then fall in stock price.
  • “Indeed, the up-and-down trajectory that was once the fingerprint of the index inclusion effect now resembles a flat line that runs from announcement date through the weeks following inclusion in the S&P 500.“
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