TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Equity Bottom-Up

<div><p>While we are long term holders of Google, we think this quarter’s report was the most disappointing of large cap tech, and given Google’s crowded long status, we would be inclined to short Google vs. the under owned Amazon over the next few quarters.</p></div><div><div><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div></div></div>

While we are long term holders of Google, we think this quarter’s report was the most disappointing of large cap tech, and given Google’s crowded long status, we would be inclined to short Google vs. the under owned Amazon over the next few quarters.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

Google: Mediocre Results, Mediocre Disclosures

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<p>Summary:</p>
<p>Square, an AI first commerce ecosystem provider, has uniquely married enterprise grade software, payment processing, and personal financial services with a seamless “consumer” like UX to attack massive and previously underserved TAMs: small and medium sized businesses and the tens of millions of “underbanked”. Square’s “Apple like” brand advantage provides a customer acquisition cost moat from which to offer an ever-expanding array of high margin software, loan products, and investing tools previously out of reach to small businesses and individuals. Encroachment from larger “Android” like rivals (e.g. Clover) will fall flat, enabling Square to maintain ~30%+ revenue growth for longer than expected while EBITDA margins can eventually expand well past 40%.</p>
</div><div><p>The Insight is meant to be used by investors as a road map to evaluate Square's progress over the next few quarters. We start with a Best Working Thesis which reflects our initial conclusions from the case study. Key Questions positively answered would make us incrementally more bullish, while evidence of rising Thesis Threats may potentially puncture our view.</p></div><div><div><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div></div></div>


Summary:
Square, an AI first commerce ecosystem provider, has uniquely married enterprise grade software, payment processing, and personal financial services with a seamless “consumer” like UX to attack massive and previously underserved TAMs: small and medium sized businesses and the tens of millions of “underbanked”. Square’s “Apple like” brand advantage provides a customer acquisition cost moat from which to offer an ever-expanding array of high margin software, loan products, and investing tools previously out of reach to small businesses and individuals. Encroachment from larger “Android” like rivals (e.g. Clover) will fall flat, enabling Square to maintain ~30%+ revenue growth for longer than expected while EBITDA margins can eventually expand well past 40%.
The Insight is meant to be used by investors as a road map to evaluate Square's progress over the next few quarters. We start with a Best Working Thesis which reflects our initial conclusions from the case study. Key Questions positively answered would make us incrementally more bullish, while evidence of rising Thesis Threats may potentially puncture our view.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

Square: Impending Return to Darling Status

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/115/943/original/2020-02-01_07-00-20.png?1580599138" class="editor-image img-responsive" data-smartkarma-image-id="115943"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/115/944/original/2020-02-02_08-38-57.png?1580600364" class="editor-image img-responsive" data-smartkarma-image-id="115944"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>30TH JANUARY ROUNDUP</strong> - The downward trends in both our Results Score and Forecast/Revision Scores that have been building all week are now more apparent last Friday. On the second-busiest day of this quarter's 'calendar', there were 407 results and 114 forecasts or revisions announcements. The Results Score declined by nine basis points to 0.68, the lowest since April 2017 while the Forecast/Revision Score fell by 15bps and was last this low in December 2016. The 'upside gap' between the market and both Scores is still larger than at any time since our data series commenced and needs to close further. The Bank of Japan bought ETFs on three days last week and will be back in action on Monday.</p><hr><p style="text-align: center;"><strong>• SECTOR TIMELINE •</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/115/946/original/2020-02-02_09-01-27.png?1580601710" class="editor-image img-responsive" data-smartkarma-image-id="115946"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>SECTOR TIMELINE</strong> - This quarter's Sector winners and losers are now emerging.  The former are lead by <strong>Banks</strong>, <strong>Non-Bank Finance</strong>, <strong>Machinery</strong>, <strong>Technology Hardware</strong>, and <strong>Electrical Equipment</strong>, with the losers being <strong>Transportation</strong>, <strong>Consumer Services</strong>, <strong>Healthcare</strong>, <strong>Utilities</strong> and <strong>Building Materials</strong>.  Of the top ten positive changes in all-cap Results Score on Friday, eight were in the financial sectors. A shift in earnings momentum leadership from consumer to finance and technology-related Sectors is in train.</p>

Source • Japan Analytics30TH JANUARY ROUNDUP - The downward trends in both our Results Score and Forecast/Revision Scores that have been building all week are now more apparent last Friday. On the second-busiest day of this quarter's 'calendar', there were 407 results and 114 forecasts or revisions announcements. The Results Score declined by nine basis points to 0.68, the lowest since April 2017 while the Forecast/Revision Score fell by 15bps and was last this low in December 2016. The 'upside gap' between the market and both Scores is still larger than at any time since our data series commenced and needs to close further. The Bank of Japan bought ETFs on three days last week and will be back in action on Monday.• SECTOR TIMELINE •Source • Japan AnalyticsSECTOR TIMELINE - This quarter's Sector winners and losers are now emerging.  The former are lead by Banks, Non-Bank Finance, Machinery, Technology Hardware, and Electrical Equipment, with the losers being Transportation, Consumer Services, Healthcare, Utilities and Building Materials.  Of the top ten positive changes in all-cap Results Score on Friday, eight were in the financial sectors. A shift in earnings momentum leadership from consumer to finance and technology-related Sectors is in train.

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 31st January ►6861 ▲9433 8473 ▼3099 9062 4922

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<p>Despite the dithering around <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> shares the past few years, there has never been any controversy about the inherent business model: "We own the rights to the best oil fields in the world and you gave it to us"....quite a business model. When you own the oil, buy the dips.</p>
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<p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p>
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Despite the dithering around Facebook Inc A (FB US) shares the past few years, there has never been any controversy about the inherent business model: "We own the rights to the best oil fields in the world and you gave it to us"....quite a business model. When you own the oil, buy the dips.




Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.




<div><p>We  have been longtime <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a> bulls who recognize that entry points over the last decade have been few and far between. We are buyers of Amazon post 4Q19. </p></div><div><div><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div></div></div>

We  have been longtime Amazon.com Inc (AMZN US) bulls who recognize that entry points over the last decade have been few and far between. We are buyers of Amazon post 4Q19. Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

United States

Amazon.com, Inc. is an online retailer that offers a wide range of products. The Company's products include books, music, videotapes, computers, electronics, home and garden, and numerous other products.  Amazon offers personalized shopping services, Web-based credit card payment, and direct shipping to customers.

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Amazon (AMZN US)

Google: Mediocre Results, Mediocre Disclosures

While we are long term holders of Google, we think this quarter’s report was the most disappointing of large cap tech, and given Google’s crowded...

Aaron Gabin

Square: Impending Return to Darling Status

Summary: Square, an AI first commerce ecosystem provider, has uniquely married enterprise grade software, payment processing, and personal...

Aaron Gabin

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 31st January ►6861 ▲9433 8473 ▼3099 9062 4922

30TH JANUARY ROUNDUP - The downward trends in both our Results Score and Forecast/Revision Scores that have been building all week are now more...

Campbell Gunn

Facebook 4Q19: Buy This Dip

Despite the dithering around Facebook Inc A (FB US) shares the past few years, there has never been any controversy about the inherent business...

Aaron Gabin

Amazon: AWS-Some

We have been longtime Amazon.com Inc (AMZN US) bulls who recognize that entry points over the last decade have been few and far between. We are...

Aaron Gabin

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