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Leonard Tan

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Leonard Tan

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Leonard Tan

108Upvotes
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Leonard Tan
Leonard Tan
Level 6. Master
Updated on 07 Jun 2019
I would hold off to see how well subscribed Disney+ becomes. Currently from their aggressive pricing strategy of 6.90, we can see they are pricing below NFLX (half of netflix's 13USD monthly) and going for a market penetration strategy, targeting higher user adoption rates and top-line revenue generating strategy rather than profit making. ! With a 12% increase in stock price since the announcement, I would say street sentiment has priced in optimism on the announcement as well as future NPV of 36billion in market capitalization currently. Not sure exactly how big of a growth projection and numbers they are expecting. I would potentially look at NFLX/ AMZN and Hulu when they started out- taking an average to see how they would fair by next quarter. Definitely DIS bulls will hope to see better than expected numbers coming in nxt earnings report possibly from the existing quality content Disney already has and does not need to re-establish themselves. Going forward however, Disney must be able to continue generating content to retain its acquired users against strong competition from NFLX's market dominance.
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Investments

Leonard Tan
Leonard Tan
Level 6. Master
Updated on 07 Jun 2019
I think Jansen pretty much explained the typical reactions of stock movement towards quarterly reports. To value add to his point, I think its pretty interesting to see how market reacts to companies that have been forecasted to peform poorly. I want to bring up Snapchat's price actions against their quarterly report aka 10Qs. For Snapchat, their recent quarter results sent stocks soaring 22% purely from after-hours trading, despite DAUs has been shrinking consistently. The company ended the year with 186 million daily users, down from 187 million users a year earlier. To quote, "But the number was the same as it had in the third quarter of last year, marking the first time in three quarters that Snap’s daily user count hadn’t fallen." ! Of course, rev growth and EPS losses were better than expected, but it was still interesting to see immense capital gains potential from a stock with consistent negative sentiment. Recent earnings call for Grubhub was also pretty interesting. 10Q results was taken up with dissapointment with a immediate steep selloff of -20%, missing multiple analysts projections and prev quarter's guidance. However 1 day later investor earnings call address managed to spin $GRUB was on track in their growth plans, resulting in a delayed correction in stock price back to initial levels. ! Note the sharp drop, near the bottom was the investor earnings address.
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Leonard Tan
Leonard Tan
Level 6. Master
Updated on 07 Jun 2019
I personally hold some investments in more risky stocks and as someone below 30, I think I am qualified to call myself young;) This is how I see it: At a younger age, individuals tend to have less financial obligations and commitments, and therefore we can afford to subject my investments to greater risk especially when you have a steady income flow monthly. Not everyone sits well with the same risk appetite and so ultimately it depends on the individual, but I would say general circumstances would support younger people holding more aggressive portfolios(conversely for how retirees hold safer passive portfolios- less incentive for larger risk appetite)

Securities

Equities

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Leonard Tan
Leonard Tan
Level 6. Master
Updated on 07 Jun 2019
Just a little meme I found online:) ! But in all seriousness, I think a good simple reference point would be to look at Boeing before they announced their Airmax 737 model. I would assume instituitional and retail analysts then would have forecasted their future Cashflows based off that and priced in their stock. However that would not factor in the recent scare and fall in public confidence towards Boeing planes in general. This would be hard to calculate, but the good news is if you are looking to capitalize at an opportunity like this, the fall in public confidence is probably temporary in your opinion against the LR potential of the company. If so, unless you feel markets are underreacting to the current track of flight bans- or that the worst is not over, there already exists a good opportunity to buy into Boeing right now.
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Bonds

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Leonard Tan
Leonard Tan
Level 6. Master
Updated on 07 Jun 2019
Bonds are much safer than stocks - largely due to bonds not being exposed to market risk- which is of course compensated with greater return. That being said there are still a multitude of risks bond investors are exposed to: Default risk - Non govt bonds hold small % of default risk no matter how insignificant it might be. Interest rate risk - This is the main risk! While bond interest payouts will not change , the real yield and prices of bonds will drop as interest rates(or inflation) increases. Call risk - Only applies to callable bonds. Bonds may be prematurely terminated. Reinvestment risk - Coupon value might not be able to be reinvested at same rate as original bond.

Robo-Advisors

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Investments

Leonard Tan
Leonard Tan
Level 6. Master
Updated on 07 Jun 2019
Here's my personal thoughts if you are looking to invest- go with Robo Advisors. If you are looking for entire portfolio mgt advice, perhaps FAs might suit you better. First off understanding todays context, Robo Advisors has entered only within the past few years and been picking up traction recently, undercutting not just FAs but traditional fund managers and fundhouses in terms of attractiveness of charges. In fact, FMs and FHs and now scaling back their margins to simply stay relevant. Essentially, the business models of Robo Advisors has been designed to minimise the inefficiencies of existing traditional structures- going through FAs-FA's company-Investment product's company-before reaching the Fund Management Team(all of whom take a cut along the process). Of course there is the question of whether Robo Advisors perform as well as Traditional Fund Management Teams, but I believe a little researching would reveal Robo Advisors are not much worse off, if at all, to justify the hefty charges of Traditional FMTs, much less transacting bottom up through FAs. That being said, there is still due diligence to be done on the consumers end. There are now plenty of credible Robo Advisors in Singapore- eg. Autowealth, Smartly, Stashaway. In fact, Banks such as OCBC are catching on with RoboAdvisors of their own. My advice- look not just on their charges but beyond that, eg. the teams credibility with managing funds, whether they publish their existing portfolio track record, i.e indicators that show how their algorithms and strategies have been performing against index benchmarks. If such information is not readily available online, set up a meeting with their company team and request for these. Clarify as many queries as you have. As an potential investor, you deserve to know as much there is to know.

Investments

Valuation

Leonard Tan
Leonard Tan
Level 6. Master
Answered on 22 Apr 2019
Misconceptions 1. VCs get approached with pitches and business proposals they will read through before deciding whether to invest. A lot more goes into the work behind that. First of all, the more established your VC name, the greater inflow of investment proposals and pitch ideas. Not all VCs have the luxury of enough quality inflows and thus resort to researching and sourcing potentially promising companies to invest in.But it is true the idea must pique the VCs interest before they decide to consider and research further. It is simply inefficient and frankly impossible to evaluate every idea in depth. 2. VCs invest in companies purely based on their financial projections and ROI. VCs cannot simply trust financial projections of business proposals. Very often the VC already has a strong background understanding in their niche selected market and will still research further for things such as market sizing, competitors and their USP. Ultimately, VCs still prioritise the founding team both expertise and experience, product and service provided before lastly looking at financials. Therefore VCs going into the specific number projections are usually keen to invest to a certain extent already. The importance of ROI however is v important. I would recommend reading this as it explains the math very well https://hackernoon.com/vc-math-2848971a34a0. A summarised explaination: Based off Pareto Principle aka 80-20 rule, your returns are likely uneven and to come from the top 20% of portfolio companies. Therefore to hit their expected return to investors, VC funds must invest in a portfolio consisiting of more companies giving exceptionally higher multiple of returns for the law of numbers to work. And as the article states, there has been cases the author has rejected companies simply because they do not offer high enough promised returns, not because their business model or projections are poor. !
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Investments

Fundamentals

Leonard Tan
Leonard Tan
Level 6. Master
Updated on 22 Apr 2019
I would say it is really difficult to pick one or two. For one, you must look at various metrics to get a better understanding of the company and that is why people even bother looking at annual report in the first place. Metrics like Revenue, EPS, forward growth guidance are usually reported firsthand in quarterly releases already. In fact for US listed companies there are data crawlers that instantly extract the moment quarterly financial statements are out and to immediately prices in news releases to their DCF valuations. Therefore there is often no point trying to evaluate if stocks are correctly priced from a fundamental quantitative perspective. I would say it is more important to look at things outside of quarterly statements. While many people tend to focus on overarching metrics like P/B, EV/EBITDA and Sales/Revenue (esp for growth stocks). I would focus on yearly data aggregation through things such as revenue breakdown by geographical or product segment, in depth look at cashflow management of company and their exsiting ST and LT debt management.

Investments

Valuation

Leonard Tan
Leonard Tan
Level 6. Master
Answered on 22 Apr 2019
Having recently networked with some VCs and currently in interview stages for VCs abroad, I am more aware of the framework behind VCs decision process. Evaluation process 1. Background understanding VCs usually have specialized niche sectors they are more invested in and have prior background understanding. They are more likely to invest in these areas and are up to date with latest developments are startups here. 2. Business Proposal(ideally given) If it is the VC got approached, they likely have access to this document. 3. Self Research VCs look out for promising startups and new kids on the block here and do their own backend research especially if they seem promising 4. Business Proposal(request if not given) VCs can be the one to approach these startups for this. VCs can view their financial projections and fully evaluate their business model and strategy with this. Pre-emptive VCs can even draw up their own valuation and financial projections for the company. 5. Listen to founders pitch Get pitched for funding and clear up any doubts and queries. 6. Bang out financial projections and eventual valuation Can be done prior to Step 5 if VCs are quite committed to investing already. 7. Ultimate Decision Time VCs will convene with Founders on another occassion to negotiate terms of investment including preventing excessive dilution, liquidation preference, board seats etc. Bare in mind this is not a one size fits all industry structure and might vary across practices between startup cultures in diff countries.

Investments

Stocks

Leonard Tan
Leonard Tan
Level 6. Master
Answered on 20 Apr 2019
Quick Market Analysis: Grubhub was one of the first players in the food delivery industry, incorporated in 2004 and established a large foothold of market share. In the height of its peak growth years(shown below), it merged with competitor Seamless and IPOed in 2014, and acquired Yelp24 in 2017. ! Today with over 9.18 million active diners, almost 300K daily orders, 75K restaurant partners, and presence in over 1,100 cities across the US & the UK, Grub is still the biggest player in the food delivery industry. However, they have been facing recent strong competition in recent years from major rivals such as UberEATS and Doordash who have been tailored their offerings to differentiate themselves from Grub. ! Some current market trends: 1. Food Offerings . Many of Grub's smaller rivals have positioned themselves by bringing onboard unique food listings with restaurants not currently on other platforms. This differentiated especially done by DoorDash has been a major reason for their recent growth success. It is estimated its share has fallen from more than 50% to less than 40% over the last year. KeyBanc said Grubhub's diner retention fell from 59% in the first quarter to 36% in the third quarter, and competition is only likely to increase, with DoorDash fresh off a new funding round and Uber and Postmate preparing for their IPOs. 2. Declining Sustainable Competitive Advantages. Against the threat of rising competition, Grubhub is fending to retain its marketshare by increasing expenditure in marketing and other areas. Despite many restaurant partnerships and acquisition strategy, Grubhub has no true competitive advantage in the long run, which makes its valuation less attractive taking into account more uncertainty in future cashflows. Even comparing against UberEATS case, Uber can better leverage on their existing services to better market and also their ridehailing network of drivers in many cities and countries to minimise entry costs. Moreover, UberEATS has been the most profitable area for the Giant so far. We can expect them to invest more and grow much bigger with regards to food delivery services. TLDR: I believe Grubhub despite capable management and early market entry to have grown rapidly established its significant marketshare today, is no longer as attractive as what its once was due simply to the change in food delivery landscape. While it may be trading at significant discounts to its original price, I believe the price is reasonably justified given it is still trading 52x P/E ratios.
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