December 11, 2007
GP Bullhound have released a research note (pdf) on Virtual Worlds.
The key findings are:
- Experts predicting that 80% of internet users will become members of virtual worlds by 2011.
- Virtual Worlds increasingly segmented by demographics and hobbies.
- In 2007, 24% of US child and teen internet users will visit virtual worlds. By 2011, an estimated 53% will do so.
- Multiple revenue streams are emerging in the virtual world space. The main business models identified are:
- The sale of virtual goods.
- It is key for virtual worlds to have multiple payment methods ranging from credit cards, to Paypal or SMS in order to be able to process micro payments efficiently and to allow users to pay conveniently.
- Subscription and premium subscription.
- In-world advertising and product licensing.
- In June 2007, Parks Associates estimated that US$15m was spent on virtual world advertising in the US in 2006 and projected that it would rise tenfold to US$150m in 2012.
- Given the competitive environment the virtual worlds operate in, they forecast that subscriptions and premium subscriptions for virtual worlds will decrease in prominence by 2010.
- Virtual worlds will instead benefit from the growth of advertising and the purchase of virtual goods.
You can download the full research note (pdf) from their website.
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Posted by bertfresno
September 27, 2007
Just came across www.istockresarch.com they have a online DCF valuation model. And use it to value a number of companies in the S&P 500, NASDAQ etc.
You can plug in your own numbers to their model to get your own valuation.
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Posted by bertfresno
September 12, 2007
Value Investing News highlighted this presentation (pdf) from Centaur Capital Partners about how concentrated an investment portfolio should be.
A few quotes from the presentation:
Not every idea has to be worthy of a very large position allocation to be included in our portfolio so long as each idea adds an unique element that contributes something to the favourable asymmetric payoff profile for the portfolio as a whole.
Value comes in many forms, including:
- Out-of-favor blue chips
- Stubs
- Out-of-favor cyclicals
- Net-nets
- Distressed industries
- Discounts to cash
- Turnarounds
- Declining cash cows
- Overlooked small caps
- Oddball companies
- Fallen growth angels
- Sum-of-the-parts
- GARP (growth at reasonable price)
- Activist opportunities
- Spin-offs
- Post-bankruptcies
There are several common “portfolio models” used by successful value investors that we have come across:
- Ultra-concentrated portfolio model
- Fewer than 10 stocks with large position sizes routinely comprising 20-25% of portfolio assets and larger.
- Practitioners: Chieftain, Eddie Lampert, Tom Brown.
- The 10 stock model
- Standard position size of around 10%, though there may be one or two larger positions, and a handful of smaller positions for a total of 12-20 ideas.
- Practitioners: Mohnish Pabrai, Clipper.
- Standard 20-stock model
- Standard position size for a good idea is about 5%, though best 2-3 ideas may be modestly larger and many ideas are somewhat smaller. Total portfolio of 25-40 ideas.
- Practitioners: Many of the value mutual fund managers on the previous slide: Robert Hagstrom, Bill Miller, Wally Weitz, Longleaf Partner, Tweedy Brown Value, etc.
- 20-stock model (super-sized)
- Essentially the same as standard 20-stock model, but two or three best ideas are “super-sized” to 10-15% of the portfolio, and there are fewer sub-5% positions. Total of 20-30 ideas.
- Practitioners: Tilson Focus, Fairholme, Sequoia, Oakmark Select.
“Confronted with the challenge to distil the secret of sound investment into three words, we venture the motto, MARGIN OF SAFETY.” Benjamin Graham, Intelligent Investor.
Why is having a margin of safety important?
- Valuation is an imprecise art.
- The future is inherently unpredictable.
- Having a margin of safety provides protection against bad luck, bad timing, or error in judgment.
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Posted by bertfresno
September 11, 2007
Just came across this article (free registration required or use bugmenot’s login) from McKinsey Quarterly about delivering software as a service. Thought it is relavent to the high profile Xero, who provide accounting software as a service.
Main points in the article:
- An IDC report projects that 10% of the market for enterprise software will migrate to a pure software as a service model by 2009.
- Software as a service vendors are less profitable than some traditional software vendors today, this gap is primarily caused by a lack of scale.
- A few service vendors already have much higher margins (WebEx, at 26%, and Digital Insight, at 19%) because they’ve been able to achieve scale and a leading position in their niches.
- Other leaders, such as salesforce.com (which provides on-demand CRM and sales force automation tools) and ADP (the world’s largest automated check processor) have also gained mainstream uptake among midsize and large companies.
- Software as a service offers several advantages to IT buyers:
- More frequent (and potentially less painful) upgrades.
- Lower cost of ownership.
- Higher level of service from vendors that must become more responsive to customer needs or risk losing subscription revenues.
- Countering these benefits are the acknowledged risks of reliability and security.
- The article has a great graph showing the migration of software applications, broken down software catergory, large enterprises, SMEs, if the speed of migration is different for each customer segment).
- The conclusion was for core financial applications that SMEs are already migrating (pace depends on customer segment) while it may be unlikey for for large enterprises to migrate at all.
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Posted by bertfresno
August 20, 2007
Quick list of resources I use when doing any research.
General
Industry / Company
- SEC: Annual (10-K) and quarterly reports (10-Q) which contain information, including industry estimates. IPO and M&A documents are another source of information.
- Yahoo finance: company financial data (mostly US listed).
- ADVFN: company financial data.
- New Zealand companies office: documents filed by NZ companies, as required by law.
- Google: search by filetype, filetype:pdf works well for finding presentations of industry research.
- NZTE: free research paid for by the Government.
- Big four accounting firms: tend to publish lots of research on specific industries.
- Reuters: good industry profiles.
- PwC cost of capital report: beta and discount rates from NZ listed companies.
News / In depth Articles
Private Equity and Venture Capital Industry Information
Information About Other Investors
Other
- Damodaran On-line: website of the Professor of Stern School of Business at New York University. It contains lots of valuation related data, plus lectures about valuation and corporate finance.
- Mygateway.info: website from the Wellington Public Library, with a library card and a login you can access a number of databases, including:
- Business Source Elite, full text from top management and marketing journals including Harvard Business Review, Business Week, Forbes, MIT Sloan Management Review, California Management Review. And detailed company profiles for the world’s 5,000 largest companies.
- MasterFILE Premier, a database with full text for nearly 1,950 general periodicals covering current affairs, business, entertainment, education, health, general science, multi-cultural issues and much more.
- ProQuest ANZ Newsstand offers full-text access to Fairfax New Zealand newspapers including The Dominion Post, Sunday Star-Times etc and The Australian and ABC news sources.
- ProQuest Newspapers offers full-text access to 14 of the world’s best newspapers including the New York Times, Washington Post and the Observer.
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Posted by bertfresno
August 20, 2007
A list of my favourite free / open-source software:
Office
Drawing
- GIMP: replacement for Photoshop.
- Paint.NET: replacement for Photoshop.
- Dia: good for creating diagrams.
- Inkscape: drawing tool.
Utilities
Internet
- Firefox: internet browser.
- CCleaner: gets rid of cookies etc.
- Ad-Aware: gets rid of cookies etc.
- AVG: free anti virus.
- Clamwin: free anti virus.
- Filezilla: FTP application
- AI Roboform: automatically inserts your saved user name and password into websites that require you to login.
Communication
- Pidgin: instant messaging client that works with the MSN and Gtalk networks.
- Skype: free VoIP to other Skype users.
Media
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Posted by bertfresno
August 9, 2007
My top six email newsletters:
- Dealbook, NY Times daily newsletter that covers financial news including M&A, IPOs, private equity and venture capital news.
- FT, daily newsletter from the Financial Times that has a list of their top news stories.
- Morningstar’s Ultimate Stock Pickers Portfolio, email updates from Justin Fuller whose portfolio tracks the performance of selected shares from Morningstar’s five star companies (those that trade at a significant discount to their intrinsic value).
- AltAssets, weekly newsletter from AltAssets that gives a summary of the weeks private equity and venture capital transactions.
- RBNZ, email updates from the Reserve Bank of New Zealand.
- NZVCA, updates from the New Zealand Venture Capital Association. These don’t seem to come out very often, but do keep track of venture capital and private equity activity in NZ.
I do subscribe to a number of blogs and news sources via RSS with Bloglines. But I still find these email newsletters helpful.
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Posted by bertfresno
