The reason is investors are worrying that preventing the outbreak will slow down the economy and send the demand down.Last December, OPEC and Russia agreed to deepen production cuts in an attempt to prop prices, but they still need to…deepen further because of Coronavirus. In China, the second largest oil-consumption country in the world, the government imposed restrictions on transportation. This would crimp demand for products made from crude oil, such as jet fuel. Then when demand decreases, oil price will continue to fall
The article is typical in defining competitive advantage in the marketplace: it is based on the company’s core strength. The example is Apple selling Ipad with Ibooks and ebooks on it, while Amazon is selling Kindle with ebooks, also. Although they are direct competitors, they chose to collaborate (Kindle App is put in IPad) as the core product of Apple is IPad, and for Amazon is ebooks. Then it’s reasonable for both companies to sacrifice the sales of their peripheral segments: ebooks of Apple and hardware of Amazon.
A huge wave of capital has vaulted Asian corporate to rapid growth, but this influx has not been accomplished by the economic returns. While investment has tripled over the past ten years, Asia has gone from an average economic profit (profit-cost of capital) $152B (2007) to an economic loss of $207B: a turnaround of $359B. The key to this profit paradox is how Asia allocates that capital, mostly to low-capital return industries like energy and material sectors.
Intel reported it beating-investor-expectation performance, which draws a bright 2020 future. Its bread-and-better division, microchip manufacturing is selling more to Amazon, Microsoft and Google as they are rushing up to build their data center to meet rising demand. Also, the old school division: PC business got a boost-up as people are looking for upgrade their PC in the untimely demise of Window 7. However, two giants are challenging their growth: AMD -rival chipmakes poaching their share and Amazon -with its newest announcement unveiling its own data chip
I mentioned a foreseeable trade war between US and Europe in my Jan 22 post. Yeah, it is about to happen,Trump met with European Commission President Ursula von der Leyen in Switzerland, and the pair said they’d work on a deal. Three topics are hammered out:
Food safety: The U.S. isn’t happy the EU won’t import its hormone-treated beef and “chlorinated” chicken. EU officials are looking for a way to import more American shellfish as a compromise, Bloomberg reports.
Taxes: Several EU countries are weighing digital services taxes and carbon taxes that would impact U.S. firms. Last week, France agreed to pause its digital tax as it works with the U.S. to avert a tariff showdown.
Brexit: Trump could prioritize talks with the soon-to-be-Brexiting U.K., but those tough EU food safety standards and access to the National Health Service could complicate negotiations. Plus, the U.K. is also negotiating trade terms with the EU
Experts point out two reasons leading to Coronavirus’s intensification. First, A bureaucracy that discourages local officials from reporting problems early. Second, decentralized regulations that failed to supervise livestock markets like the one where the virus is believed to have originated (yesterday, Beijing temporarily banned the trade of wild animals)
This article impressed me as I do not usually think that gender balance is that much important in company control. Goldman Sachs CEO confirmed that companies with a diverse member board have performed significantly better than their counterparts within this four years.
The dangerous virus comes at the busiest travel year for the most crowded country in the world. Stocks of hospitality and travel companies sank yesterday. In this dark time, people tend to buy three more things: (1) Face masks (with janked-up price); (2) Macabre video games (same like SARS) and (3) Safe haven assets like gold and US Treasury
Reuben Lai (MD of Grab SEA) mentions four mega challenges and three recommendation for companies in SEA to tackle those challenges.
Four mega challenges include economy, physical infrastructure, financial infrastructure and people. First, with a population higher than the US and a growth higher than China, SEA owns massive growth opportunities. Second, we need to use technology to invest in, expand and transform physical infrastructure to fuel the growth chance. Third, 70% of the population are unbanked and 400M people (larger than size of the US) need to join in the financial ecosystem, that poses a question of how to serve them with new techniques?. Finally, a young population, ⅗ population under 30, is tech savvy and looking for opportunities to leapfrog new technologies to make their lives more efficient and better
Three recommendations are focus, partnership and technology. First. All companies should focus their resources to resolve these challenges with the government. Second, a partnership-led approach is wise in the situation of a fast.-changing economy. Third, to unlock these opportunities, it’s better to focus on technology. For example, Grab utilize their ecosystem to collect customer data, crunch and make sense of it.
It was 2 hassle days for me (Tet holiday in Vietnam), then I decided to listen to podcasts and videos instead of reading e-news.
My list for these Tet holiday: Rửa bát. All of them are related to the aviation industry.
What’s next for the airline industry? (Goldman Sachs)
The podcast answers 3 questions: (1) What is the biggest problem in the aviation industry, (2) What comes after Boeing Max 747 toll? and (3) What are trends in the upcoming decade. To (1), it’s still the cost problem, with the categories ranging from ground maintenance, labor to fuel,…To (2), declining revenue, definitely, and also recurring cost from cancelled flights.. To (3), they are consolidation (mostly for cost synergy purpose); diversification of product offerings: more seat options and more in-flight services and the upsurge of business travel.
After listening to the podcast, I remember three major differences between air travel today and years ago. Firstly, after many years, the aviation industry has experienced five profitable years, more than any other period before. The catalyst is the structural change in revenue management when most of the profits come from ancillary revenue (in-flight services, advertising, frequent flyer programs, seat upgrade,…). Second, while airline is a capital, fix-cost heavy industry, it is the only one that can pull down its cost year by year, making air travel accessible to everyone. Thirdly, companies are diversifying their product offerings: more seat type, more in-flight service,…)
Besides, the guests also talked about two rising trends in the future: flyskam and flying taxis. Flyskam (a campaign opposing commercial travel as it contributes largely to global carbon emission) is a threat to European companies, as the expense of a weekend regional flight is nearly equal to the expense of staying at home and going to pub/ a football match. Flying taxis is expected to happen in the near future (at least ten years from now) due to the lack of energy density in the current electric battery.
Why don’t we have electric planes yet (CNBC)
Electric airplanes are the future with many life-changing applications: air taxis, more affordable regional flights and more environmentally friendly long-haul flight. However, it will not come soon due to the burden of electric battery: we cannot produce the E-battery which is able serve regional flights for the next 10 years.
Both of these companies are the first-mover in the industry, Boeing from America and Airbus from EU. (2) They excel other competitors, esp new entrants in capital capacity and technology knowledge. (3) They are supported by governments (lobbying for a long time)
Southwest experienced a loss as the ground of Boeing 747 Max has continued to take it toll on the carrier. Follow the loss, but fewer is American Airlines, and Delta is the winner when all of its fleet originating from Airbus.
Yes. They do, and this revenue stream even accounts for a large pie of their top line. However, in recent years, these seat types are exposing to threats from the shift from physical meetings to video conferencing, leading to the decreasing number of business travel.
Berkshire Grey, a robotics and AI startup specialized in retail fulfillment automation has completed its series B funding, led by SoftBank, BG said that its robots help curbing 70-80% labor cost and increasing throughput by 25-35%. This event marks the rising trend of robotics in retail fulfillment, after many investments of Amazon, Walmart,… They are actively seeking automation in their fulfillment centers as robots don’t need break and they are injury-proof, compared to humans.
Panasonics’ portfolio includes appliances, life solutions, automotive, connective solutions and industrial solutions. The company has set up a joint-venture with Toyota to produce prismatic batteries for Toyota’s hybrid cars and EVs. The battery business is expected to be the growth driver of the company in the next 5 years. Meanwhile, other revenue segments are performing well. Panasonic plans to set up a new factory in China, focus on home appliances and life solutions (the two biggest revenue stream), to take advantage of the upsurge population of the local country.
Before reading this analysis, it’s better to know what happened from my sister’s summary on this case. This article digs deeper into what Visa and Plaid are, and their role in the payment system around the world. Visa’s already dominated the credit card market, but it is looking to expand its presence in the burgeoning field of electronic payments, where trillion dollars are sent by wire transfer or between bank accounts globally each year. Plaid will help Visa to achieve this mission by its software, which helps developers to get access to customer financial information from their bank accounts.
I updated this topic on Jan 17. Kristina Hooper provided a quite insightful picture of this first deal. First, she believed that this action is inconsequential, yet extremely important. It is inconsequential as US still leaves most of its exclusive tariffs in Chinese goods (only tariffs in $120B out of $500B were reduced) and the deal only tackled low-hanging fruits such as trade imbalance, but not other serious issues. Meanwhile, the deal has a “psychological” effect on companies: the tension is bottoming out, then they will feel economics policy is getting more certain, then they will spend more, esp on capex. Secondly, Kristina pointed out that it’s hard for China to commit to this deal based on their historical purchase of US goods, as well as new agreements with countries like Brazil. She called this “some flies in the ointment”. Thirdly, the trade war between US and EU is poised to be on the horizon. Trade war with EU brings less damage to US than with China, but it still leads to negative psychological effects on companies: make them tamp down capex spending
After WeWork with its ill-fated IPO, many smaller players are laying off their employees to curb operating cost. The new players of this “plummeting” club is Knotel with nearly one third of employees stopped working with the company. The leader from Knotel stated that the decision is to align the supply and demand for these leasing businesses in big cities. This trend makes me wonder why some coworking start-ups in Vietnam like UpGen still remain healthy?
They are the two peripheral segments: “Service” and “Wearables, Home and Accessories (WHA)”. The bread and butter – IPhone is going down due to the saturated smartphone market, longer life-cycle, reducing exported revenue because of the trade world,…. While IPhone remains the biggest pie of Apple revenue as it is the cynosure of a consumer’s connected ecosystem experience, Service and WHA will rise to curb its decreasing revenue. Regards to service, Apple is focusing on Appstore with the change from one-time purchase to subscription service, which is a more reliable and predictable revenue generator. Moreover, the company states that it is also investing in developing AR apps (a very lucrative pie in the future). About WHA, Apple is expanding the range of health-offering in its Apple Watch as it is the main driving force of purchase
The reason is why IMF expects more positive signs, other potential risks balance them out. It’s good for global growth as trade war came to first signed, the slump in manufacturing is bottoming out and central banks are cutting rates around the world. Countering them are the risk of renewed trade tensions, conflicts between US and Irad that could affect oil supply, social unrest and weather-related disasters.
Earpods has been so successful because it satisfies the 2 fundamental requirements of a viral wearable device. The first one is eco-system, which means it belongs to a selection of tools targeting different parts of the body. Second is “fashion”, the design makes people want to wear and to be “seen”. The blog is also interesting for the one who wants to follow Apple and their strategy.
The author, a proponent for selling oil stock and buying semiconductor stocks, recommended buying Broadcom now. After the trade tensions, Broadcom lost its biggest customer Huawei (3.4% total revenue), which made its revenue stagnant. However, the company is making strides to find new markets and expanding their product line to be less dependent from their current bread and butter: semiconductors. With the growing FCF 45.25% for the last 5 years, its stock is undervalued today.
Chinese has reported last quarter growth: 6.1%, the lowest rate since 1990, mainly blaming for the trade war. However, as the tensions ebbed, the growth is expected to be more stable next quarters. Also, the overall economy shows positive signs: investment shot up esp in manufacturing industry, and retail sales grew higher than expected. China’s strong performance, along with preliminary trade deals signed, could predict a brighter future ahead for the worldwide market.
Vietnam companies should focus on optimizing cash to maintain a steady course of sustainable profits. From PwC’s 2018 survey, despite robust revenue growth, companies were unable to convert sales into cash. Vietnam C2C days performance lags behind almost all ASEAN countries, and it even declined from 2017 to 2018. Some decliners are engineering & construction, consumer products and real estate.
A very interesting but technical-heavy article on whether to buy Amazon or Microsoft stock right now. While Amazon has retained their noteworthy grasp on leadership of the cloud computing market, their market share will decline due to the breakneck-speed growth of Azure (Microsoft).
American Apparel used to be an icon, but went down in 2016 for three main reasons. First reason is its reliance on US manufacturing (its promise), that led to the lack of blue collar workers, then the brand needed to hire illegal employees and get published after that. Secondly, the rising price of cotton led to mounting losses, along with the company effort of opening as many stores as possible in every capital city. Finally, American Apparel did not have the appropriate strategy to deal with all financial challenges. It changed its CFO 4 times in a year and withheld from Deloitee and committed to bad practices in financial reporting.
Goldman Sachs, after trailing behind his peer last 2019 quarter, how it plans to “use” its balance sheet. The company will look into wealth management for small customers, whose assets ranges from $1 million to $15 million. Also, it is looking for more wealth-management opportunities in China, with support from president Xi Jinping to boost its stake in the joint-venture investment bank. Besides, the new strategy includes the movement from reliance in private equity to wealth management due to regulatory scrutiny associated with this kind of investment.
After 2 days announcing the separation, GAP took it back. Why? The break-up of supply chain is too expensive and too complicated. Another reason is, the strongest proponent of this decision, former CEO Art Peck left the company last November.
Tesla is on its road to steady profitability and the primary catalysts are the increase of production capacity and geographical diversification. Elon Musk will open a new Gigafactory in China, the country with the highest EV sales last year. This action will also reduce the impact of the trade world on the price of Tesla cars, making it more affordable for local people. Besides, the company announced that it will set up a new factory in Germany in 2021. The new one will increase Tesla production in this country, taking advantage of new EV subsidies from the government.
Oyo’s losses mounted, and SoftBank demanded the company must be profitable, in EBITDA till the middle of 2020, which led to the company’s earliest action. Oyo has pulled out of a dozen cities (even a quarter of it in India), cut thousands of hotel rooms, slashing jobs to curb operating expenses as much as possible. This step contributes the heat to the steaming situation of SoftBank-backed start-ups (read more in my previous article)
Huy Luu's business blog 