How can investors profit from the advances in technology that make up the Internet and social media? While we missed the boat on pioneering these platforms, we are familiar with their uses, given how many people rely on them in their daily lives at home and work.
Here are a couple of companies that pass our Un-Common Sense criteria, one that doesn’t, and another that is unavailable publicly, but may in fact be the most disruptive technology in years.
Amazon.com, Inc. (AMZN)
We watched Amazon from the sidelines for years, as both the company and its share price headed north. We admired Jeff Bezos for expanding the company’s scope beyond being just an Internet retailer. Still, the company kept failing at one of our amber-light indicators — it never showed profits. So we waited.
Fast-forward to present day and the company has recently announced an excellent (and unexpected) net profit to go along with its multi-pronged revenue streams. Amazon’s diverse businesses include Internet security, web designing, online book delivery (through its Kindle division) and Amazon Video — a site for online streaming. It’s this last piece that made us swing hard. Specifically, the company just signed the hosts of BBC’s Top Gear to create an exclusive online show. What’s the big deal? Top Gear is the world’s most-watched TV show with 385 million weekly viewers. It’s also the BBC’s most profitable entity. A lot of loyal viewers will need to subscribe to Amazon Prime if they want to keep getting their fix of Jeremy Clarkson and friends every week, and that’s great news for Amazon.
We bought AMZN in January 2015 at US$358.92. It currently trades at US$539.54, for a return of 50.3%.
Priceline Group Inc. (PCLN)
When was the last time you heard of someone younger than 60 using a travel agent to book a vacation? People book their vacations online, and the bulk of online booking occurs through two competitors and their affiliated sites.
Three popular sites that people use to book their vacations are priceline.com, booking.com, and kayak.com. The Priceline Group owns them all. And you may be surprised to learn that Priceline’s market cap is nearly 500% larger than Expedia’s. The confusion is likely due to Expedia’s higher North American market share. But that advantage doesn’t continue elsewhere, where Priceline and its websites are the dominant player.
And hotels, which are the real customers of Priceline, have to pay for exposure and traffic on Priceline’s sites. Priceline also owns Opentable.com, which handles the online reservation system for 31,000 restaurants worldwide, and processes 15 million reservations every month. Priceline is the dominant player in the online booking space.
We bought PCLN in January 2015 at US$1,019.15. It currently trades at US$1289.55, for a return of 26.5%.
Twitter Inc. (TWTR)
I’m a Twitter junkie. I like its quick-hit format to get the latest news because it fits in with today’s attention-span-challenged society.
But my issue with owning Twitter is twofold: I can’t see how the company can effectively monetize the platform; and it’s a one-trick pony. Its shelf life relies on how long it takes for some techie designer to come up with a new and better platform that kids prefer. And I purposely say kids, because if they choose an alternate mode of communication, Twitter’s days as a go-to app are numbered. Just ask Facebook how it enjoys being labelled as your parents’ social media. So, we do not own TWTR.
Uber, which isn’t publicly traded, has the power to revolutionize how we request and receive services. We know how disruptive Uber has been in the taxi world, but there are also Uber-like offerings in the snow-plowing, lawn-cutting, truck-rental and courier businesses. Essentially, Uber quickly connects service providers with those that need that service, and this will ultimately lower the cost of providing those same services. So I predict the popularity of Uber will rise, and we will likely buy the stock when it becomes available.
The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Incorporated. Manulife Securities Incorporated is a member of the Canadian Investor Protection Fund. This material is not to be construed as an offer or solicitation. The securities mentioned may not necessarily be considered suitable investments for all clients. Contact your Investment Advisor to discuss your individual investment needs.