vegaseller
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Posts posted by vegaseller
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Honestly I think it will be down to Austin and Northern Virginia
Austin: HQ to wholefoods, Blue Origin
DC/NoVA: AWS HQ, Washington Post and Bezos bought a mansion next to Obama and Ivanka.
philly and raleigh are possible but don't have the airports. denver and west coast is redundant at this point.
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Most people's consideration of valuations, and including professionals simply boils down to
- Market comps EV/EBITDA are 7 and this company is 9, therefore it is expensive.
- The more prudent does some sort of growth CAGR normalization
But fundamentally aren't companies suppose to be unequal and subject to the 80/20 rule? Wouldn't the best company be significantly better run and better compounders than the #2/#3, etc. Then why do comps matter?
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"In the case of consumer packaged goods, most are manufactured by CPG behemoths who rely chiefly on two aging mechanisms for building consumer awareness: broadcast marketing and physical retail shelf-space. Dollar Shave Club, and similar modern lifestyle brands like Warby Parker and Bonobos, view these dependencies as a disadvantage and have turned the model on its head. Broadcast marketing, in the age of social media, looks as out of touch to digital natives as President George H. W. Bush looked to us when he was surprised by a supermarket price scanner. Now, brands are built by having direct conversations with your customers, not shouting at them, engaging them to provide real time feedback on your products and services and enlisting them to vouch for their satisfaction with your brand. Brands are now built by your customers, not announced to them. And because of this, product discovery is shifting away from physical shelves into the social streams we all follow. If your brand does not occupy meaningful share in the minds of your customers, it won’t move through the streams and allow influencers to introduce you to new customers."
http://www.pakman.com/2014/09/29/dollar-shave-club-and-the-modern-brands/
Actually the interest thing about DSC is that their razors are manufactured by a company called Dorco and sold directly through Amazon. I wonder if the future of CPG shifts away from Brands and back into the OEMs.
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Okay, that was a thoughtful piece. I would observe a few things:
1) For KO, there is already some degree of market segmentation enabling the KO supply chain to engage in some degree of price discrimination and capture a portion of the consumer surplus. They do this by selling coke through different retail outlets. I can go to WalMart or a well known Canadian pharmacy chain and buy about 4.2 litres of Coke for roughly US$2. Or, while inside Walmart or the pharmacy, I can buy a 500ml bottle of Coke for about US$2. Or, I can go to the Coke machine outside the store and pay roughly the same US$2 for a 355ml can of Coke. Or I can go to a restaurant and pay US2.50 for a glass of Coke. Don't even get me started on the near-criminal price of Coke at the hockey arena! In each circumstance, it's the same product that I am buying, but with drastically different pricing depending in which market that I am electing to make the purchase. The supply chain captures more of my consumer surplus on the basis of the location where I buy the product.
2) The subject line of your post includes references to both KO and PG. Interestingly, the Amazon distribution model makes a great deal more sense to me for PG than it does for KO, in large part due to the varied markets in which I buy KO's products (see above; I will not be ordering a Coke through an Amazon-type supplier when I am at the hockey arena, nor when I am at a restaurant). However, most of PG's products that I buy are from either WalMart, CostCo or a large grocery store. Rarely is there much urgency to my PG purchases because I don't wait until I am down to my last square of toilet paper before buying more, nor do I wait until I am completely out of Tide before I buy more. If the pricing were right and the delivery was rapid, I could imagine myself no longer buying PG's products at WalMart. I might even buy some of my bulk Coke purchases through an Amazon type of arrangement, but it would be the minority of my Coke purchases because I don't consume all of it at home.
I would say that KO's distribution model is tenable for the specific type of product that it markets, which is to say, a product with place-based consumption (ie, restaurants, or convenience purchases). But, I say that you are right about the consumer staples that are consumed almost entirely at home. That's a supply chain that is ripe for disruption if somebody can figure out a cheap way to ship 12 rolls of toilet paper or a 3 kg box of Tide.
SJ
I agree, I think KO has some ability to price segregate. Although I was more comparing it to say mobile games, where you have the ability to offer the product to most customer for free but also have the ability to capture people who will spend thousands. The model where you are trying to find the 1 person who would spend the $1000 rather than the 1,000 people who would spend a $1 seems to be the winner in the new world.
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A distribution built out is based on cost benefit analysis of your product. Low margin high volume vs high margin low volume.
Coca Cola is a very profitable product and will be for a long time. These products might not carry the same share of mind as they used to but still worth something. would love to buy it at 5 times earnings. It is over priced and there is too much competition in those names.
It is harder to create massive focused influence as compared to the past. But I wasn't around during the golden age of tv so I am not sure.
Also share of mind over entire market share changes slowly due to the limitation of the human mind.
I would argue mind share has changed significantly over the past 10 years due to the rise of mobile and the consolidation of the internet by categories
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Going to be stepping on some holy grounds here so please hold the crucifix for now.
One of the things I got to thinking over the past several years was about whether the business model we have seen Buffet and other investors invest in continue to make sense or not. I know this sound crazy but hear me out. We all know the story of Coca Cola, the low price, inelastic, semi-addictive product then converted into large global distribution base and brand portfolio. The story of the company for the past 40 years was about building out this massive global distribution footprint to the point where it was easier to find a bottle of coke in some rural Indian village than a bottle of water. But there are some problems to this model, primarily that A) You can't really find another 1-2 billion consumers now B) It is hard to capture consumer surplus (price segregation is impossible and C) it is hard to capture increasing share of the consumer wallet as living standards improve. (people will cap out on how much product to drink a day).
And I got to think about the problem with mass distribution or infrastructure models, usually the core is highly profitable and end up subsidizing the hinterlands, the last mile country road to a small town is a very unprofitable investment. In my mind, this is also a problems existing CPG companies face, the last customers is hard to reach, expensive to acquire, at some point it is much better to increase wallet share and/or capture the consumer surplus of your core base of customers. This is why targeted ads are changing marketing so much, as it allows companies to price segregate by customers (different tier of a similar product) and big data is so valuable (increasing wallet share).
I wonder if the time for traditional companies that relies on the formula of building out distribution, acquire/develop a bunch of products and push through your channels is over. The rise of third party infrastructure rails like Amazon and facebook for distribution and customer aggregation also has removed the needs for doing that yourself. I feel the economic laws revolving around specialization will push companies to being more product oriented and focused on capturing consumer surpluses through niche products. The obvious play is that the infrastructure rails will capture a large part of the economics, but who knows if big scaled brands even exist 10-20 years down the line?
Just some foods for thoughts, feel free to join in on the conversation.
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No, Amazon is all about orthogonal infrastructure play.
Build first party ecommerce -> build out modular infrastructure -> lease to third parties -> tackle only high IRR first party segments using data
same play for AWS
build own IT systems -> Build out modular IT infrastructure -> Sell to third parties -> tackle high IRR segments (PAAS)
Same play for Wholefoods
Buy wholefoods -> build out intermediate logistics/store backend -> Sell to mom and pops -> tackle high IRR segments (forcing UPS into peak load areas), etc.
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Undervalued relative to yield. Think of the 1950s as high real interest (despite financial repression to burn down WWII debt on the gov bond side), lots of demand for capital, lack of supply of capital. We are now living in inverse world, where there is no demand for capital (companies are buying back shares) and lots of capital everywhere. One just has to look at Japan to see what a low rate world looks like. Now we have slightly better demographics than Japan that keeps the U.S. from full deflation and bond hoarding Japan has seen, but it is not unreasonable to project a Japan-lite scenario where rates are low for a long long time and asset prices just slowly grind up.
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i don't really understand crypto.
It seems like a successful one required widespread adoption, yet being volatile and hoarded by speculators goes counter to merchant adoption. On the other hand one that is stable and non-volatile which merchants may adopt is not one which you can speculate on.
It is basically lose lose.
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Chou' style seems to be to buy really crappy business at a very low price. This does not seem to work out well right now.
to be honest, I don't know why people on here constantly pump his stuff, his long term returns have been miserable.
Car value depreciation or "appreciation"?
in General Discussion
Posted
I bought a 996 (2003) turbo on the basis of it hitting the bottom of the depreciation curve in 2014, with some pricing upsides. It has since then flattened out but I spent on average 2-3k/year on maintenance/expensive one-off parts failing. But it is definitely fun though and rates were low (1.75%). I may refinance the car again now that it is mostly paid off.