Thanks for bringing up the idea. I appreciate your blog very much and read all of your posts. Being an investment novice, I look forward very much to learn more from you and admire your work a lot.
Though the stock of Kraken Robotics has too many uncertainties for me, I appreciate your efforts. But my preference of stocks is more like your suggestions of Alibaba and Manolete partners, which are better analysed, on a clear path to grow and reasonably valued. I think it is very difficult to position size if the risks and rewards of niche microcap stocks [eg. tech / pharma] have a great range of variance of outcome.
I have found several interesting stocks / points that I would like to ask your opinion on:
1/ For Airtel Africa,
I have read that the E payment in Africa is very fragmented.
What would be the final total addressable market?
What competitive advantages that the company has in comparison to other competitors?
After several years, would you imagine that this company will become a market leader and be consistently profitable?
Or are there any other formidable competitors that is backed by huge capital and likely leading the market into price war?
2/ For Alibaba thesis,
I notice that the growth of cloud has slowed down last year [arguably due to COVID policy], but I want to check if our assumption of long term growth of cloud market is right in China or not. I fear that the demand for cloud service for China [Economy mostly mostly based on industrial] is very different from US [Economy mostly based on virtual / financial / software] such that we cannot project the same results in China.
Have you found any market research material on the customers of cloud service in China and their usage trend, whether it is reasonable to project that their use will increase in the long term?
I heard that government customers have switched to state owned enterprise cloud service, so who are the customers of private cloud service [game developer / financial institution etc] ?
And if the trend of 5G / IOT / Big data in manufacturing continue its path of development, would those manufacturers use private cloud service in the manufacturing process or install their own local computer network [thereby forfeiting any benefits to private cloud service]? Which is more cost efficient?
3/ Micron:
I heard famous investors like Pabrai and Li Lui invest heavily in Micron. Initially I tend to agree their judgement that the DRAM market is gonna to grow and is currently already consolidated. But I found that Chinese DRAM companies [e. CXMT, YMTC] are already offering similar products albeit slightly lagged performance, but at 20-30% discount to Micron / Samsung / SK hynix products. I am wondering whether Li Lui and Pabrai are underestimating Chinese companies to level up production capacities and pose threat [I think cheaper slower DRAM though can still be a threat if it is cheap enough]. If we read history, the production throne of DRAM has been switched from US to Japan to Korea over decades.
What made China unable to closely follow Western companies?
Is it the lack of top manufacturing equipment [EUV lithography] or the highly likely political forbiddance of usage of Chinese DRAM products by US government?
Or is it that even if they can catch up, it would mostly take up to a decade as their current market share is below 1%? I have read that the LCD and solar equipment markets are already occupied Chinese companies, though once they were occupied by Western companies like DRAM market too.
4/ Kaspi $KSPI
I recently read an interesting stocks - Kaspi, which operates on Kazakhstan and listed on LSE. It is a combination of E-commerce, payment, fintech and bank for the country, which already occupied the market and highly profitable from what I read.
Can watch a video of the stock here: Artem Fokin from Caro-Kann on Kaspi
Do you think that the numbers are too good to be true? Would appreciate if you can write a thesis on it if it is worth for investment, like elaborating more on the valuation, TAM, competitors and risks.
5/ For the blog, would like to kindly make some suggestions, for example,
a/ occasional follow up on the chosen companies, their development and whether the thesis holds, [sometimes if there are not much new ideas, just some revision of old ideas is better, actually only 1-2 good ideas like Alibaba / Manolete every 1-3 years are already enough; inaction may be better than action];
b/ some write up on historical companies that are highly profitable or falls miserably at the end, how to valuate them at that historical juncture and what lessons can we learn from them.
Perfectly fine surface level analysis. You raise important topics. Great job. And based on your inputs, I agree with your conclusions on why this falls in the "too difficult" bucket. But ultimately I think this type of research is the reason most fund managers don't outperform the market.
Whether margins historically have been contracting or growing, one needs to understand the company's market, it's moat, how it scales, and it's competition to guide their thoughts about its future. A business is not a trend line on a graph to simply be extrapolated. Finding companies that look on the surface to have negatives like this but have the capability to turn positive can drive a lot of investor interest and stock price appreciation.
@anonymouse, you state: "I think this type of research is the reason most fund managers don't outperform the market. "
A good fund manager looks at optimizing risk adjusted returns. If there are too many unknowns then one can neither quantify risk nor expected returns so this calculation becomes impossible.
To apply money into the unknown is speculation not investing. The best fund managers outperform the market by avoiding speculation.
What you said makes sense. But IMO you didn't really go through enough DD to warrant an investment even if all of these things which you said were a negative were positives. I appreciate you sharing this overview though!
Dear Emanuel,
Thanks for bringing up the idea. I appreciate your blog very much and read all of your posts. Being an investment novice, I look forward very much to learn more from you and admire your work a lot.
Though the stock of Kraken Robotics has too many uncertainties for me, I appreciate your efforts. But my preference of stocks is more like your suggestions of Alibaba and Manolete partners, which are better analysed, on a clear path to grow and reasonably valued. I think it is very difficult to position size if the risks and rewards of niche microcap stocks [eg. tech / pharma] have a great range of variance of outcome.
I have found several interesting stocks / points that I would like to ask your opinion on:
1/ For Airtel Africa,
I have read that the E payment in Africa is very fragmented.
What would be the final total addressable market?
What competitive advantages that the company has in comparison to other competitors?
After several years, would you imagine that this company will become a market leader and be consistently profitable?
Or are there any other formidable competitors that is backed by huge capital and likely leading the market into price war?
2/ For Alibaba thesis,
I notice that the growth of cloud has slowed down last year [arguably due to COVID policy], but I want to check if our assumption of long term growth of cloud market is right in China or not. I fear that the demand for cloud service for China [Economy mostly mostly based on industrial] is very different from US [Economy mostly based on virtual / financial / software] such that we cannot project the same results in China.
Have you found any market research material on the customers of cloud service in China and their usage trend, whether it is reasonable to project that their use will increase in the long term?
I heard that government customers have switched to state owned enterprise cloud service, so who are the customers of private cloud service [game developer / financial institution etc] ?
And if the trend of 5G / IOT / Big data in manufacturing continue its path of development, would those manufacturers use private cloud service in the manufacturing process or install their own local computer network [thereby forfeiting any benefits to private cloud service]? Which is more cost efficient?
3/ Micron:
I heard famous investors like Pabrai and Li Lui invest heavily in Micron. Initially I tend to agree their judgement that the DRAM market is gonna to grow and is currently already consolidated. But I found that Chinese DRAM companies [e. CXMT, YMTC] are already offering similar products albeit slightly lagged performance, but at 20-30% discount to Micron / Samsung / SK hynix products. I am wondering whether Li Lui and Pabrai are underestimating Chinese companies to level up production capacities and pose threat [I think cheaper slower DRAM though can still be a threat if it is cheap enough]. If we read history, the production throne of DRAM has been switched from US to Japan to Korea over decades.
What made China unable to closely follow Western companies?
Is it the lack of top manufacturing equipment [EUV lithography] or the highly likely political forbiddance of usage of Chinese DRAM products by US government?
Or is it that even if they can catch up, it would mostly take up to a decade as their current market share is below 1%? I have read that the LCD and solar equipment markets are already occupied Chinese companies, though once they were occupied by Western companies like DRAM market too.
4/ Kaspi $KSPI
I recently read an interesting stocks - Kaspi, which operates on Kazakhstan and listed on LSE. It is a combination of E-commerce, payment, fintech and bank for the country, which already occupied the market and highly profitable from what I read.
Can watch a video of the stock here: Artem Fokin from Caro-Kann on Kaspi
$KSPI https://www.youtube.com/watch?v=1y1hDtHvM_Q&t=1145s
Do you think that the numbers are too good to be true? Would appreciate if you can write a thesis on it if it is worth for investment, like elaborating more on the valuation, TAM, competitors and risks.
5/ For the blog, would like to kindly make some suggestions, for example,
a/ occasional follow up on the chosen companies, their development and whether the thesis holds, [sometimes if there are not much new ideas, just some revision of old ideas is better, actually only 1-2 good ideas like Alibaba / Manolete every 1-3 years are already enough; inaction may be better than action];
b/ some write up on historical companies that are highly profitable or falls miserably at the end, how to valuate them at that historical juncture and what lessons can we learn from them.
Regards and take care,
YY
Perfectly fine surface level analysis. You raise important topics. Great job. And based on your inputs, I agree with your conclusions on why this falls in the "too difficult" bucket. But ultimately I think this type of research is the reason most fund managers don't outperform the market.
Whether margins historically have been contracting or growing, one needs to understand the company's market, it's moat, how it scales, and it's competition to guide their thoughts about its future. A business is not a trend line on a graph to simply be extrapolated. Finding companies that look on the surface to have negatives like this but have the capability to turn positive can drive a lot of investor interest and stock price appreciation.
@anonymouse, you state: "I think this type of research is the reason most fund managers don't outperform the market. "
A good fund manager looks at optimizing risk adjusted returns. If there are too many unknowns then one can neither quantify risk nor expected returns so this calculation becomes impossible.
To apply money into the unknown is speculation not investing. The best fund managers outperform the market by avoiding speculation.
It's all about Golden Bullets versus Bronze Broncos (see https://rockandturner.substack.com/p/rule-2-strategy-matters)
What you said makes sense. But IMO you didn't really go through enough DD to warrant an investment even if all of these things which you said were a negative were positives. I appreciate you sharing this overview though!