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Which Tech Giant Would You Drop?


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Did you guys read the question in the article?  8)

 

Here's the order I clicked to drop them:

 

1. FB

2. AAPL

3. GOOGL

4. AMZN

5. MSFT

 

First two are easy. Last three are difficult and tomorrow I might have answered completely differently.

So perhaps 3-5: GOOGL/AMZN/MSFT

 

BTW, this is the user/person point of view. It's not investor point of view. From investor point of view I don't own MSFT, own very little FB, AMZN, GOOGL, bunch of AAPL. If these stocks were "equally"  ::) cheap, I'd buy tons of FB and GOOGL.

 

 

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I would drop:

 

1) MSFT

2) FB

3) GOOGL

4) AMZN

5) AAPL

 

I pretty much already live without much MSFT, I have a rarely used windows machine in my office at work, but I use Linux most of the time.  And I have a rarely used windows machine powered off in my basement at home, but I use my iMac most of the time.  My son uses his Xbox, but I never do.  I have no use for this company or its products.

 

I go on FB daily, but I could give it up easier than the bottom 3. 

 

As for GOOGL I don't think it would negatively effect my life very much to start using Duck Duck Go for searching the internet.  I could switch back from chrome to firefox. I already don't use Android. The only thing I'd miss is YouTube.

 

I do a lot of shopping on AMZN and could you really live if you couldn't access any site hosted on AWS?  I'd miss Netflix for sure.

 

My iPhone and my iMac are my primary computing and communicating devices.  I would not want to switch to using only windows/linux/android.

 

Of these stocks the only ones I own are AAPL (since 2013) and AMZN (since late 2016).  I'd like to own FB and GOOGL at the right price. I have no interest in MSFT.

 

 

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1) FB (There will be other social platforms)

2) MSFT (Lower switching costs than in the past?)

3) AMZN (Great leader and business model but retail is tough)

4) AAPL (Higher switching costs than MSFT?)

5) GOOG (Natural monopoly)

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Purely investor point of view:

 

1) AAPL : at its core its  a branded consumer company, which I believe has little moat. Lots of competitors with little ability to stop new entrants. Clunky products since Steve Jobs passed. Consumers are moving from iTunes -> Spotify. Apps are increasingly HTML based, so easily portable to other mobile devices. Points to the stickyness of the ecosystem really isn't that sticky.

 

Large Gap

 

2) MSFT: Cloud growth is mostly coming from Office -> Office 365. Lost out on mobile OS which is much larger than desktop/laptop. Will probably lose out on the next big OS too due to slow bloated culture (AR/VR headset OS? Purely voice driven OS home consumer systems?). Moat: Network Effect

 

3) FB: I think its the new phonebook. Its value to users depends on the size of the network, so weaker for every new generation of kids, but stronger for those who have used the platform for a while. Important that they try to snap up any small competitor that's popular with younger demographics, but should have plenty of cash flow to do so. Moat: Network Effect + Economies of Scale

 

4) GOOG: Best in desktop search engine. Won big in mobile OS, which feeds mobile search engine. I think Android is worth more than Windows. Key will be keeping on-top of new platforms and making sure they own the search (again AR/VR headset OS? Purely voice driven OS home consumer systems?). Used to have a capital allocation problem with moonshots and Fiber, but the new CFO is more disciplined. Moat: Network Effect + Economies of Scale

 

Large Gap

 

5) AMZN: Lowest cost retailer is the strongest moat of all the companies on here. Huge runway backed by the best CEO and capital allocator on the list. Moat: Economies of Scale

 

I own none of these.

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You guys do understand what FB owns? -Whatsapp, messenger, Instagram and Facebook.  These 4 platforms each have almost a billion monthly active users besides Instagram but it's not far behind.  I do not know about you guys but each of these apps are very sticky.   

 

1) FB (There will be other social platforms)

2) MSFT (Lower switching costs than in the past?)

3) AMZN (Great leader and business model but retail is tough)

4) AAPL (Higher switching costs than MSFT?)

5) GOOG (Natural monopoly)

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You guys do understand what FB owns? -Whatsapp, messenger, Instagram and Facebook.  These 4 platforms each have almost a billion monthly active users besides Instagram but it's not far behind.  I do not know about you guys but each of these apps are very sticky.   

 

1) FB (There will be other social platforms)

2) MSFT (Lower switching costs than in the past?)

3) AMZN (Great leader and business model but retail is tough)

4) AAPL (Higher switching costs than MSFT?)

5) GOOG (Natural monopoly)

 

That's true, but MySpace had a large user base too. Plus, WhatsApp and Instagram were bought not built. It's feasible someone comes up with the next big thing..

 

I think Apple's ecosystem (esp on the consumer side) is stickier than what most people believe because everything is integrated.

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You guys do understand what FB owns? -Whatsapp, messenger, Instagram and Facebook.  These 4 platforms each have almost a billion monthly active users besides Instagram but it's not far behind.  I do not know about you guys but each of these apps are very sticky.   

 

1) FB (There will be other social platforms)

2) MSFT (Lower switching costs than in the past?)

3) AMZN (Great leader and business model but retail is tough)

4) AAPL (Higher switching costs than MSFT?)

5) GOOG (Natural monopoly)

 

That's true, but MySpace had a large user base too. Plus, WhatsApp and Instagram were bought not built. It's feasible someone comes up with the next big thing..

 

I think Apple's ecosystem (esp on the consumer side) is stickier than what most people believe because everything is integrated.

Remember when everyone was on BBM? MSN Messenger? ICQ? Social networks can go down very quickly when something new/better comes along.

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I think there is some confusion here between personal/user view and investor view. Some people distinguished the two, some did not.

 

FB is very sticky across huge population - but that is investor point of view.

 

From personal/user point of view, if it disappeared, some of us would not notice.  8)

 

One can argue that this is true for other companies mentioned. E.g. Apple users would not notice if MSFT disappeared. MSFT users would not notice if Apple disappeared. Bing/DuckGoGo/Apple users would not notice if Google disappeared (except Youtube perhaps - Youtube is right now quite unique although some weak competitors exist). Walmart.com/Jet users would not notice if AMZN disappeared.

 

So perhaps personal/user point of view is not very useful.  8)

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Going by the guidelines of the nytimes article, Facebook and Microsoft were my first choices to drop and also the most popular first choices to drop of the five.  Really tells you something about moats but not perhaps investment merit.  Facebook can decline in popularity, especially among the younger users and still increase the relatively new monetization of their platforms.  All the advertisers I know are doing more on Facebook, not less.  Poor Mr. Softie doesn't get much love.  The only MSFT products I use are Excel and Word, but I'm sure a lot of what I interact with on a daily basis runs on MSFT products without me knowing it.  Our 17 yr old is on his xbox one a lot.

 

It's a tough call between the other 3.  I would give up Google before Apple and Apple before Amazon.

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Fair point however those companies never adapted to changing environments e.g. BBM chose to remain on a shrinking ecosystem which was their downfall.  Look at Facebook, they integrated Snapchat's story function across instagram/WhatsApp etc to ensure they stay ahead/with the curve.

 

You guys do understand what FB owns? -Whatsapp, messenger, Instagram and Facebook.  These 4 platforms each have almost a billion monthly active users besides Instagram but it's not far behind.  I do not know about you guys but each of these apps are very sticky.   

 

1) FB (There will be other social platforms)

2) MSFT (Lower switching costs than in the past?)

3) AMZN (Great leader and business model but retail is tough)

4) AAPL (Higher switching costs than MSFT?)

5) GOOG (Natural monopoly)

 

That's true, but MySpace had a large user base too. Plus, WhatsApp and Instagram were bought not built. It's feasible someone comes up with the next big thing..

 

I think Apple's ecosystem (esp on the consumer side) is stickier than what most people believe because everything is integrated.

Remember when everyone was on BBM? MSN Messenger? ICQ? Social networks can go down very quickly when something new/better comes along.

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So the summary is:

 

Pretty much nobody on CoBF cares about FB.

 

Apple fans would drop MSFT close to first. Microsoft users would drop Apple close to first.

 

Most people think AMZN and GOOGL are close to irreplaceable.

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So the summary is:

 

Pretty much nobody on CoBF cares about FB.

 

Apple fans would drop MSFT close to first. Microsoft users would drop Apple close to first.

 

Most people think AMZN and GOOGL are close to irreplaceable.

 

Hence I own AMZN and GOOGL. :D

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Following this thread with interest. 

 

What is interesting to me is that MSFT is trading at 530 B market cap today.  It reached 600 B thereabouts 17 years ago.  Accounting for inflation it is maybe 40% cheaper than at that time. 

 

To me that kind of shows us the expected returns from this basket of stocks going forward for the  next 17 years.  But then I have felt that way about everyone on this list, expect MSFT for the last few years, so what do I know? 

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Following this thread with interest. 

 

What is interesting to me is that MSFT is trading at 530 B market cap today.  It reached 600 B thereabouts 17 years ago.  Accounting for inflation it is maybe 40% cheaper than at that time. 

 

Totally not fair. PEs and P/FCFs are not even comparable to the top of tech bubble. (Oh, yeah, AMZN... one out of five... is that your example of the bubble?)

 

To me that kind of shows us the expected returns from this basket of stocks going forward for the  next 17 years.  But then I have felt that way about everyone on this list, expect MSFT for the last few years, so what do I know?

 

The problem with 17 year bets is that even tech giants may not survive 17 years of creative destruction. But then KO and BRK might not survive it either. So... I won't take a bet on 17 years. But I would take a bet for 10 years and against practically any company you choose (including BRK) if I can choose any subset of the five. 8)

 

I would not take 10 or 17 year bet against index though.

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From a bubble perspective , these situations are not comparable atleast to GOOG. This made me go look for some

context at that time . Valuations today are not cheap, but they are not 2000 levels

 

MSFT  for year 2000

 

Net cash : ~ 20b

Net income: ~ 10B

Rev growth: 25%

PE at 600B:  ~ 60

Interest rates: Higher than today

 

 

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Jurgis and Gjangal,

 

I didn't use the word bubble. 

 

From an investment perspective which is after all what we are doing here, can you show me how any of the companies on the list will grow greater than single digits going forward.  In other words, the best days for their STOCK price growth are behind all of them. 

 

It may not be a bubble situation but they are certainly all more than fairly valued. 

 

 

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