#64 - ARKK Technology Fund, Brick and Mortar Alpha and the Expensify Pro Biden Letter to Customers.
In this week's episode of Reformed Millennials, we're talking about the businesses that are going to benefit most from Covid 19, we also touch on the Cathy Woods 8 billion dollar super ETF $ARKK and why its been so successful.
If you’re at all interested in brick and mortar real estate, technology investing and the most successful ETF since 2015 I highly recommend you tune into this episode.
If you aren’t in the Reformed Millennials Facebook Group join us for daily updates, discussions, and deep dives into the investable trends Millennials should be paying attention to.
👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
🚨Biggest Covid Winner: Category Leading Brick And Mortar 🚨
"Nothing accelerates change like success."
I believe the biggest long term beneficiaries of Covid will prove to be category leading brick and mortar retailers. By this I simply mean brick and mortar retailers who have dominant share in a category — whether it be home improvement, general merchandise, electronics or any other retail category. Their destiny has likely changed forever. Many of the perceived Covid winners such as e-commerce, video game and streaming media companies have simply been pulled a few years forward into a future that was inevitable. Their destiny did not change. The future for those businesses simply accelerated whereas the future for category leading “brick and mortar” retailers has changed dramatically as a result of Covid, more so than for any other business of which I can think.
The future was always going to be omnichannel.
Pundits have been prematurely predicting that omnichannel retail would be the solution for many years, but it is finally happening.
There is a belief in certain circles that the future will be e-commerce only and that brick and mortar stores have no value. This is strange because the worlds largest, most sophisticated e-commerce companies are all opening stores.
AMZN - Amazon opened dozens of “Amazon Go” stores in 2019 and is reportedly planning on opening up to 3000 of these stores by 2021 in the United States alone. Amazon already has multiple store formats in the United States: Go, Whole Foods, Book Stores and others.
BABA - In his 2017 letter to shareholders, Jack Ma wrote that “Commerce as we know it is changing in front of our eyes. ‘E-commerce’ is rapidly evolving into ‘New Retail.’
Alibaba is rapidly opening several different store formats throughout China. JD is also rapidly opening stores. Wayfair has stores. Led by Warby Parker, most DTC branded startups have stores.
Consumers are more likely to trust a brand they have seen in the real world. Ironic in a world where “CAC is the new rent” that one of the best ways to lower your online rent, i.e. CAC, is to pay rent offline for physical stores.
Economically, BuyOnlinePickupInStore will always be cheaper than same day delivery and large numbers of consumers are highly cost sensitive.
All brick and mortar companies had marketing budgets. E-commerce companies often do not have a strict, annually allotted marketing budget — they simply spend to a gross margin $ payback or LTV calc (I prefer the former) subject to a FCF constraint.
If most e-commerce companies have been pulled 1–3 years into the future in terms of their revenue, then the e-commerce businesses of most category leading brick and mortar retailers have been pulled 5–10 years into the future.
Wal-Mart’s digital revenue in Q2 was an annualized $42 billion, growing 94% — faster than Amazon. Best Buy’s digital revenue in Q2 was an annualized $19.4 billion, growing 242% — faster than Amazon.
Perhaps the simplest way to express what has happened during Covid is to note that Amazon has actually lost share in e-commerce during Covid. The largest e-commerce share gainers in most categories have been category leading physical retailers as well as the DTC businesses of most brands.
Brick and Mortar Conclusion:
The in-store experience will also continue to evolve and likely be more informed by online learnings. We will all eventually pay by face in stores, there will be personalized marketing while we are in stores, technology should significantly reduce shrink, knowing what customers near stores are shopping for online for should eventually help optimize in store inventory and distribution systems will be optimized for e-commerce, BOPIS and in store return in addition to simply shopping in the store. The more data driven cultures that are emerging at these retailers will be helpful to all of this. Frequency also really matters online and omni-channel drives more frequency, which creates more data, which will drive a better customer experience both online and offline.
🐣More on the Airbnb IPO🐥
Today, Airbnb announced that it will list its IPO on the Nasdaq.
The offering is expected to raise $3B, making Airbnb’s IPO the third biggest Nasdaq listing after Facebook and Mondelez.
The company declined to comment and did not give further detail.
Physical Bank Branches For centuries, “financial organizations” have relied on physical distribution to attract and serve customers. In ancient Greece, money changers gathered in Athens’ ports while, in Italy during the 14th century, Bardi, Peruzzi, and Medici organized physical branch networks. Meanwhile, in the 20th and early 21st centuries, financial institutions have evolved modern branch banking. Now, however, the internet and smartphones are transforming the distribution of financial services. Thanks to cellular services, we believe smartphones are distributing financial services much more efficiently and cost-effectively. Digital wallets - bank branches in user pockets – are rendering expensive physical infrastructure useless, putting at risk hundreds of billions of dollars of traditional financial institutions’ assets.
Brick and Mortar Retail While in-store retail sales in the US peaked in 2015, the coronavirus pandemic has accelerated the shift to e-commerce. Last mile autonomous delivery could provide another boost, making e-commerce much more cost-effective and convenient. In our view, companies with large retail real estate footprints will continue to suffer from a decline in foot traffic.
🌊 Hottest Links We Read Last Week 🌊
Bitcoin! Today, the cryptocurrency ticked a 2020 high of 13,767. Forbes thinks COVID-19 made BTC more interesting to investors this year. Paul Tudor Jones said he would buy Bitcoin to hedge against inflation:
[Buying Bitcoin] is like investing with Steve Jobs and Apple, or investing in Google early.
Microsoft reported strong earnings results after the close. Revenue was up 12% and its Azure public cloud grew 44%.
Here are the results: EPS: $1.82 vs $1.54 est. Revenue: $37.15B vs $35.72B est.
Microsoft CEO Satya Nadella said this:
The next decade of economic performance for every business will be defined by the speed of digital transformation. We are innovating across our full modern tech stack to help our customers in every industry improve time to value, increase agility, and reduce costs.
There’s water on the moon! 🤯 NASA’s space mission SOFIA discovered lunar water by reflecting wavelengths of sunlight off the moon’s surface. SOFIA was launched in a Boeing 747 equipped with a giant, flying telescope. Casey Honniball, the space mission’s leader, commented on NASA’s plan to keep hunting for H20:
We hope to map a majority of the moon to characterize the behavior of water. Does it vary across the lunar surface with lunar time of day and latitude? This will help us understand its sources and where it resides.
This is the best news of 2020.
Shopify & Tik Tok announced a new partnership today. 1M businesses will now have the ability to create ad campaigns directly on TikTok’s platform without leaving Shopify’s interface.
We are delighted to partner with Shopify and provide a channel for their merchants to reach new audiences and drive sales on TikTok.
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