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

<p>This week, Third Point's Dan Loeb wrote a letter to Disney urging it to spend more on content. We agree. Disney's stock has languished this year due to the havoc COVID has unleashed on its business model. Longer term, we think Disney's streaming service could be worth more then the stock today. </p><p></p><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>

This week, Third Point's Dan Loeb wrote a letter to Disney urging it to spend more on content. We agree. Disney's stock has languished this year due to the havoc COVID has unleashed on its business model. Longer term, we think Disney's streaming service could be worth more then the stock today. 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.

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>Our thesis on Sony and the PS5 has emphasised that their approach to next gen emphasising the SSD would address consumer pain points better than Microsoft’s strategy. New information regarding Sony’s licencing of compression technology called Oodle from RAD Game Tools suggests that even the Xbox Series X’s edge in TFLOPS could become irrelevant.</p>

Our thesis on Sony and the PS5 has emphasised that their approach to next gen emphasising the SSD would address consumer pain points better than Microsoft’s strategy. New information regarding Sony’s licencing of compression technology called Oodle from RAD Game Tools suggests that even the Xbox Series X’s edge in TFLOPS could become irrelevant.

Sony – PS5’s SSD Is “Oodles” Faster and This Makes Series X’s Graphics Edge Irrelevant

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>Performance between US Value funds and Aggressive Growth funds has diverged over the last decade, with 2020 seeing an acceleration of the trend.</li>
<li>The difference in performance is down to their vastly different portfolios, with Value funds heavily reliant on Financials and Health Care stocks and Aggressive Growth funds heavily exposed to Tech and Communication Services. </li>
<li>However, there is some overlap.  There are a number of stocks that appear to offer something for both Value and Growth investors, including <a href="https://www.smartkarma.com/entities/visa-inc-class-a-shares" target="_blank" data-smartkarma-citation="entities:8707:1" rel="noopener">Visa Inc Class A Shares (V US)</a>, <a href="https://www.smartkarma.com/entities/lowe-s-companies-inc" target="_blank" data-smartkarma-citation="entities:4156:1" rel="noopener">Lowe's Companies Inc (LOW US)</a> and <a href="https://www.smartkarma.com/entities/schwab-charles-corp" target="_blank" data-smartkarma-citation="entities:13610:1" rel="noopener">Schwab (Charles) (SCHW US)</a> </li>
<li>In this analysis, we explore a portfolio that combines stocks that are owned by more than 10% of both the Value funds and Aggressive Growth funds in our analysis.  </li>
</ul>


Performance between US Value funds and Aggressive Growth funds has diverged over the last decade, with 2020 seeing an acceleration of the trend.
The difference in performance is down to their vastly different portfolios, with Value funds heavily reliant on Financials and Health Care stocks and Aggressive Growth funds heavily exposed to Tech and Communication Services. 
However, there is some overlap.  There are a number of stocks that appear to offer something for both Value and Growth investors, including Visa Inc Class A Shares (V US), Lowe's Companies Inc (LOW US) and Schwab (Charles) (SCHW US) 
In this analysis, we explore a portfolio that combines stocks that are owned by more than 10% of both the Value funds and Aggressive Growth funds in our analysis.  


US Value Vs Growth:  The Goldilocks Portfolio

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p>Kingsoft Cloud is one of the best cloud computing stocks in China. Since completing its IPO in May 2020 at an IPO price of $17 per share, Kingsoft Cloud's share price has risen 90% to $32.29. Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.  On 21 September, Kingsoft Cloud announced another equity offering and many investors did not like this move and they pushed down the stock price by 12.5% on Tuesday, 22 September. <strong>Now, Kingsoft Cloud's share price is now down 25% from the 52 weeks high and we believe this is a good opportunity to pick up shares of this company. </strong></p><div class="content-highlight">
<p><strong>Kingsoft Cloud's Enterprise Cloud business has been experiencing a surging growth in the past three years. The company's Enterprise Cloud Services revenues increased by 415% YoY in 2019 and by 183% YoY in 1H 2020. The Enterprise Cloud Services accounted for 1.2% of total revenues in 2017, and this ratio increased to 14.6% in 1H 2020. </strong></p>
<p>In this insight, we provide a comparison of Kingsoft Cloud to Amazon AWS. This is a good framework to compare Kingsoft Cloud since it gives a greater amount of confidence that once the company's annual sales reach about $2 billion to $3 billion, then the probability increases that Kingsoft Cloud may also start to generate positive operating profits. In terms of time frame,<strong> 2022 to 2023</strong> could be a<strong> "sweet spot"</strong> for the company in reaching an annual revenue of $2 billion to $3 billion and achieve positive operating profit. </p>
</div>

Kingsoft Cloud is one of the best cloud computing stocks in China. Since completing its IPO in May 2020 at an IPO price of $17 per share, Kingsoft Cloud's share price has risen 90% to $32.29. Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.  On 21 September, Kingsoft Cloud announced another equity offering and many investors did not like this move and they pushed down the stock price by 12.5% on Tuesday, 22 September. Now, Kingsoft Cloud's share price is now down 25% from the 52 weeks high and we believe this is a good opportunity to pick up shares of this company. 
Kingsoft Cloud's Enterprise Cloud business has been experiencing a surging growth in the past three years. The company's Enterprise Cloud Services revenues increased by 415% YoY in 2019 and by 183% YoY in 1H 2020. The Enterprise Cloud Services accounted for 1.2% of total revenues in 2017, and this ratio increased to 14.6% in 1H 2020. 
In this insight, we provide a comparison of Kingsoft Cloud to Amazon AWS. This is a good framework to compare Kingsoft Cloud since it gives a greater amount of confidence that once the company's annual sales reach about $2 billion to $3 billion, then the probability increases that Kingsoft Cloud may also start to generate positive operating profits. In terms of time frame, 2022 to 2023 could be a "sweet spot" for the company in reaching an annual revenue of $2 billion to $3 billion and achieve positive operating profit. 


Kingsoft Cloud - Oversold on Equity Offering; Annual Revenues in 2020 Similar to AWS 9 Years Ago

<p>The TikTok saga is far from over. Heck, by the time you read this, China or Trump may have nixed the deal on national security concerns, national dignity concerns, or just on a whim. We sketch out updated thoughts on valuation and the companies affected by the deal. Hint: We like Microsoft's ZeniMax acquisition. </p><p></p><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>

The TikTok saga is far from over. Heck, by the time you read this, China or Trump may have nixed the deal on national security concerns, national dignity concerns, or just on a whim. We sketch out updated thoughts on valuation and the companies affected by the deal. Hint: We like Microsoft's ZeniMax acquisition. 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.

TikTok: Microsoft's "Console-Ation" Prize

United States

Microsoft Corporation operates as a software company. The Company offers applications, extra cloud storage, and advanced security solutions. Microsoft serves customers worldwide.

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Disney: Listen to Loeb

Disney's stock has languished this year due to the havoc COVID has unleashed on its business model. It should use the opportunity to spend more on...

Aaron Gabin

Sony – PS5’s SSD Is “Oodles” Faster and This Makes Series X’s Graphics Edge Irrelevant

Our thesis on Sony and the PS5 has emphasised that their approach to next gen emphasising the SSD would address consumer pain points better than...

Mio Kato

US Value Vs Growth: The Goldilocks Portfolio

Performance between US Value funds andtwo groups has diverged over the last decade, with 2020 seeing an acceleration of the trend.

Steven Holden

Kingsoft Cloud - Oversold on Equity Offering; Annual Revenues in 2020 Similar to AWS 9 Years Ago

Kingsoft Cloud is the largest independent cloud service provider and the third-largest internet cloud service provider in China.

Douglas Kim

TikTok: Microsoft's "Console-Ation" Prize

The TikTok saga is far from over. Heck, by the time you read this, China or Trump may have e

Aaron Gabin

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