09/2021
The latest 2Q2021 earnings results from FAAMG continued to be stellar, astounding and resounding. The 5 FAAMG, namely FB, APPL, AMZN, MSFT and GOOGL posted a combined stellar $332 BILLION in revenue, up an astounding 36% on a year-on-year comparison. All 5 posted resounding profits that crushed market expectations. It is as if the FAAMG spent the pandemic making gobs of money.
Last March in the throes of the Covid-19 Pandemic sell-off, I emphasized and taught that the market has gifted investors a rare opportunity to buy the FAAMG on the cheap. I continue to buy them still.
The results reflect that their products and services are increasingly being used more by consumers and have become ingrained in many of our daily lives, even after the Covid-19 Pandemic. They also reflect that the 5 FAAMG have the best business models with all fabric of our lives tied in them. They offer a way for the smart and sharp investor to invest in the global economy’s most important dynamic trends from 5G, AIOT, E-commerce, Cloud Computing, Edge Computing, Digital Marketing to Gaming.
TRACK RECORD
GCP Global has exhorted and recommended in the 5 FAAMG for already a decade. We continue to believe that just as software is eating the world, FAAMG are eating the stock market. The 5 FAAMG constitute about 23% of the S&P 500 at end-August 2021. When we first recommended them to our investor students in our investment classes, media interviews and monthly publications a decade ago, they were just 7.5% of the S&P 500. Yes, they have more doubled your wealth and we still think they should be part of your core investment portfolio.
The investment upside for FAAMG comes from different opportunities and challenges. Investors should also not ignore the competitive advantages that Big Tech have gained from their large scale and global reach.
PUSHBACKS AGAINST FAAMG
Regulators and lawmakers are currently on an aggressive mission to identify and unveil if Big Tech have manipulated acquisitions to avoid notifying regulators. They are particularly on the look out for how unreported deals allow companies to consolidate markets and shut down rival products. FB’s recent acquisition of Giphy is a case-in-point.
The US system for screening mergers was created by the Hart-Scott-Rodino Antitrust Improvements Act in 1976. The law requires companies to notify regulators about deals that meet annually adjusted thresholds on deal size and asset size. Presently, deals over US$368 million must be reported.
The other push back on FAAMG, ironically, has been their outperformance. The latter has led to doubling and tripling of their share prices from a decade ago when we first recommended them to our 8,000 GCP Global student investors world-wide. Then again, many prognosticators have come and gone trying to predict a peak in FAAMG valuations. Perhaps, they have misread the competitive advantages and leverage that comes with scale for Tech, something that we emphasize in-depth in our classes.
Let’s delve into AMZN as an example.
AMAZON (AMZN)
AMZN best illustrates the current loquacious issues of current challenges and possibly untapped potential facing FAAMG. AMZN is also the most obvious example of a possible post-pandemic hangover where businesses and consumers could return to days of old, more analogue than digital in shopping habits and buy patterns.
Despite posting a phenomenal net profit rise of 48% to US$7.77 billion in 2Q2021, AMZN stock was hammered down by 7% following the release of the results as the market chose to focus on the lower revenue guidance of 10% - 16% for 3Q2021. Never mind that operating profit from its North America segment (which is majority e-commerce) sky rocketed up 47% to US$3.147 billion Y/Y, bringing up TTM Sales to a record US$226.6 billion.
AMZN also suffered from negative news flow as it seem to be in the crosshairs of regulators and lawmakers. The FTC is reviewing its proposed US$8.45 billion of MGM studio. Should the FTC block the deal, it will clearly signal a shift in how regulators approach Big Tech acquisitions going forward.
However, for the perspicuous Tech investor, one should not be side tracked from the big picture by the current battle with law makers. I see AMZN as clearly benefiting from four most important elements of the current economy and Tech changes –
1. Deeper entrenchment in e-commerce
2. Dominant position in cloud computing and
3. Growing fulfilment and entrenchment in logistics
4. Growing in new areas like Healthcare
Even with a current market capitalization of US$1.6 billion at end-August 2021, AMZN might still be a bargain based on its cloud business alone. Growth at AWS is accelerating and operating profits grew 25% Y/Y to hit US$4.193 billion on revenues of US$14.809 billion which grew 37% in 2Q2021. AWS therefore notched up another record TTM Sales of US$52.7 billion.
Table 2 - If revenue from AWS continue to hit 37% in the next 2 years, it is on track to hit annualized $100 billion in 2 years
If revenue from AWS continue to hit 37% in the next 2 years, it is on track to hit annualized $100 billion in 2 years. Valuing the cloud business at say 15 times sales (a conservative multiple considering that peers like Snowflake trade at way above 75x Sales) would imply a market value of US$1.5 billion. This would mean that investors are getting AMZN traditional e-commerce business and fast-growing advertising business almost for a song.
Student investors who joined us in our investment classes would have reaped more than 300% return on FAAMG stocks. Even if you have joined us last year in our Triple Your Wealth with Global Tech Stocks, you would have bought into the likes of GOOGL at US$1,700 or FB at US$226 which we specifically sliced and synthesized in detail in our class.
As both GOOGL and FB are up 64.7% and FB 59.3% respectively over a veryshort 1-year period, you would have made your maiden step on the wonderful pedestal to triple your wealth with FAAMG over the long term. For a heads up on which where the FAAMG and other global tech stocks are heading, do join us for our upcoming Quarterly Tech class, Investing Profitably in FAAMG and Ever-Changing Tech Stocks on 25 Sep 2021.
Feedback from our last few classes –
“You are my first investment teacher to start my journey in investment. Attended most of your lessons in SGX (20 – 25 years ago). Yes, Very fulfilling. One of the best profit I ever done (on Osim stock recommended then). Thanks to you and God. Amen”
Mr Joe Chan
Went on to build a university and hospital in Cambodia
“Pinterest shot up 24% because of the metrics you shared...wished I bought it earlier..”
Mr Darren Tan,
Owner & Entrepreneur
“Thanks for the very comprehensive presentation. Really changed my mind on the tech stocks. Look forward to the next class”.
Mr Lionel Loo
Who has been attending our regular classes for almost 7 years now
GCP GLOBAL RECOGNISED AS ASIA’S FOREMOST EDUCATOR IN REITS IN THE SINGAPORE CORPORATE AWARDS 2019
https://www.facebook.com/gabrielyap17/videos/740467253053012/
OUR LATEST MEDIA INTERVIEW ON REITS, TECHNOLOGY & DISRUPTOR INNOVATORS IN 2Q2021 –
1. China REITs could give S-REITs some competition – 21 Jun 2021, Business Times
2. IMPACT OF CHINA REITs on S-REITs – 14 Jun 2021, LianHe Zaobao
3. WISDOM EYE ON BUSINESS – 25 May 2021, Wisma Geylang Serai, South East Community Development Council of Singapore
4. How to Make Millions in REITs – 30 Apr 2021, FM96.3 HAO in Mandarin
5. Bottom Fishing for Tech & China Tech – 25 Apr 2021, BUSINESS TECH ASIA
https://youtu.be/QVqUfI2Bsxw
6. How do investors spot REIT mergers that destroy value? – 19 Apr 2021, PRIME TIME MONEY FM89.3
https://www.moneyfm893.sg/guest/gabriel-yap-gcp-global/?fbclid=IwAR0_qCcYb3fEpyCjQ-8zbPxHOSP9FxUaXWWHR-k8KGIDL-zCZleW8kfWCm8
7. Mainland Investors flock to S-REITs – 26 Apr 2021, LIAN HE ZAOBAO
https://www.facebook.com/gabrielyap17/photos/pcb.1315235015518995/1315233215519175/
8. Most S-REIT mergers have destroyed shareholder value? – 16 Apr 2021, BUSINESS TIMES
9. Opportunities to Accumulate Tech and China Internet Stocks – 11 Apr 2021, BUSINESS TECH ASIA
10.How to Make Millions in REITs – 30 Apr 2021, FM96.3 HAO in Mandarin
11.Bottom Fishing for Tech & China Tech – 25 Apr 2021, BUSINESS TECH ASIA
https://youtu.be/QVqUfI2Bsxw
12.How do investors spot REIT mergers that destroy value? – 19 Apr 2021, PRIME TIME MONEY FM89.3
https://www.moneyfm893.sg/guest/gabriel-yap-gcp-global/?fbclid=IwAR0_qCcYb3fEpyCjQ-8zbPxHOSP9FxUaXWWHR-k8KGIDL-zCZleW8kfWCm8
13.Mainland Investors flock to S-REITs – 26 Apr 2021, LIAN HE ZAOBAO
https://www.facebook.com/gabrielyap17/photos/pcb.1315235015518995/1315233215519175/
14.Most S-REIT mergers have destroyed shareholder value? – 16 Apr 2021, BUSINESS TIMES
15.Opportunities to Accumulate Tech and China Internet Stocks – 11 Apr 2021, BUSINESS TECH ASIA
REITS FOR A GOOD CAUSE
GCP Global students donate to help Covid-19 victims
OUR PARTNERSHIP WITH MONEY FM89.3 IN ITS MAIDEN LAUNCH OF MONEY MATTERS https://www.facebook.com/352565835119256/posts/1126789454363553/
OUR LATEST PUBLICATIONS -
1. WHAT KINDA REIT ACQUISITIONS WILL DRIVE SHARE PRICES
2. SEVEN & HALF YEARS ITCH IN S-REITS – THE ITCH CONTINUES WITH SEVERE RAMIFICATIONS
3. SEPERATING THE SHEEP FROM THE GOAT IN S-REITS
https://gcpglobalsg.wixsite.com/gcpglobal/post/separating-the-sheep-from-the-goat-in-s-reits
4. WHERE & HOW to make your next Million in the Year of the Ox
5. 7th Year Itch for S-REITs and its severe ramifications for the REIT investor
https://gcpglobalsg.wixsite.com/gcpglobal/post/7th-seven-year-itch-for-s-reits-its-severe-ramifications
6. Tripling Your Money with Global Tech stocks
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