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FAANG growth and getting into new verticals


cameronfen
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It occurred to me that one reason the FAANG stocks (- Netflix, + Microsoft) seem to outperform, is that people always value them based on the market value of their current businesses.  But because these companies encompass so many important verticals in tech, and that they have the best talent, and because there is so much business in tech that is up for grabs, they can much more easily start a new business in some promising vertical.  That businesses never has to worry about funding and already has a natural user base of the parent's company.  People don't really take into account this option value because it is hard to quantify, I think.  It's easiest to see in Google, where people just add back moonshot expenses.  But the investment in moonshots has already been paid back just by Deepmind's improvement in Google's search algorithms, not to mention Waymo is also probably a 10-100 bagger in terms of capital put in.  You basically have a lot of Knightian uncertainty that is working in your favor.  I don't know what to add to that, but those were my thoughts. 

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100% with Google. The greatest investment might have been Youtube which at the time some thought would destroy the company. Waymo has been great and specular in its own right in that it isn't really something that has relied on the existing user base. Although Waze does help with it. Thats been a project that to me, has validated their ability to go outside the core business and put something real together.

 

Entire sectors dinged when AMZN announces its looking into a new business venture, so I argue this is priced into AMZN.

 

Netflix I guess I just fail to appreciate, but outside of first mover status, I fail to see what keeps others from taking that space eventually. Content is king. Disney and ATT have made HUGE moves in the past few years. They're playing the long game.

 

Microsoft is just a beast. I've never appreciated it for how diverse it's businesses are until it went bonkers. I remember looking at this in maybe 2013 at $35 or so and thinking it would outperform an index but not by much. Totally wrong. They've got nearly a dozen billion dollar businesses and the scale to do whatever they want. Interestingly enough they also seem to escape any anti trust talk.

 

FB to me is a ticking timebomb. They have the users but growth just shifts from one(FB) to another(Instagram/Whatsapp) business and eventually needs to be more than just an ad company who does sketchy shit with your info. To me they resemble Google when all they had was search.

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100% with Google. The greatest investment might have been Youtube which at the time some thought would destroy the company. Waymo has been great and specular in its own right in that it isn't really something that has relied on the existing user base. Although Waze does help with it. Thats been a project that to me, has validated their ability to go outside the core business and put something real together.

 

Entire sectors dinged when AMZN announces its looking into a new business venture, so I argue this is priced into AMZN.

 

Netflix I guess I just fail to appreciate, but outside of first mover status, I fail to see what keeps others from taking that space eventually. Content is king. Disney and ATT have made HUGE moves in the past few years. They're playing the long game.

 

Microsoft is just a beast. I've never appreciated it for how diverse it's businesses are until it went bonkers. I remember looking at this in maybe 2013 at $35 or so and thinking it would outperform an index but not by much. Totally wrong. They've got nearly a dozen billion dollar businesses and the scale to do whatever they want. Interestingly enough they also seem to escape any anti trust talk.

 

FB to me is a ticking timebomb. They have the users but growth just shifts from one(FB) to another(Instagram/Whatsapp) business and eventually needs to be more than just an ad company who does sketchy shit with your info. To me they resemble Google when all they had was search.

 

Yeah, I have no idea how the market values Amazon.  And I don't see Netflix getting into adjacent verticals.  But IMO the rest have that optionality (even if FB is a ticking time bomb regarding other aspects, their whole copy everything that Snapchat does and then bully the first mover out of their own market screams this same ability)

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100% with Google. The greatest investment might have been Youtube which at the time some thought would destroy the company. Waymo has been great and specular in its own right in that it isn't really something that has relied on the existing user base. Although Waze does help with it. Thats been a project that to me, has validated their ability to go outside the core business and put something real together.

 

Entire sectors dinged when AMZN announces its looking into a new business venture, so I argue this is priced into AMZN.

 

Netflix I guess I just fail to appreciate, but outside of first mover status, I fail to see what keeps others from taking that space eventually. Content is king. Disney and ATT have made HUGE moves in the past few years. They're playing the long game.

 

Microsoft is just a beast. I've never appreciated it for how diverse it's businesses are until it went bonkers. I remember looking at this in maybe 2013 at $35 or so and thinking it would outperform an index but not by much. Totally wrong. They've got nearly a dozen billion dollar businesses and the scale to do whatever they want. Interestingly enough they also seem to escape any anti trust talk.

 

FB to me is a ticking timebomb. They have the users but growth just shifts from one(FB) to another(Instagram/Whatsapp) business and eventually needs to be more than just an ad company who does sketchy shit with your info. To me they resemble Google when all they had was search.

 

Didn't Netflix just miss on user growth by a few million? You're absolutely right when you say it's all about content. This "r&d" cost will likely skyrocket as competition increases and the need to push out better content quicker to compete grows. However, I do think Netflix has some pricing leverage on the table that they aren't currently utilizing.

 

How do you feel about FB Libra. The company in general seems to constantly put themselves in the crosshairs of big government. But who knows? I mean Nancy Pelosi does have a bunch of LEAPS.

 

Also have been looking at MSFT. Took a small position when it was in the 90's earlier this year and will certainly add if another opportunity presents itself.

 

Can't really say enough good about Google. They are the gold standard in so many sectors.

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https://www.wsj.com/articles/with-stocks-at-fresh-highs-investors-portfolios-look-alike-11564306201?mod=rsswn

 

“This huge world of investible assets has shrunk down to a small cohort,” said Savita Subramanian, equity and quantitative strategist at Bank of America Merrill Lynch. “We’re all in this echo chamber where everyone goes to the same dinners and drinks the same Kool-Aid.”

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