Archive for the ‘Investment Themes’ category

The Disruption of Cable Television Has Arrived

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We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.

– Bill Gates

What is the future of television? This is a question I have asked myself multiple times over the past few years – lately with increased frequency. The answer, I believe, is starting to reveal itself.

Let me begin with a basic premise: viewable content is viewable content, irrespective of the form. It doesn’t matter if you’re watching a broadcast TV show, a YouTube video, or a movie on demand – all of these are just different forms of the exact same thing.

So why then do we have to access them differently? Why do you have to toggle between different TV inputs and navigate different UIs to find something to watch? (First world problems, I realize, but the investment implications here are enormous.)

My answer is this: we are forced to toggle between multiple inputs because we’re in the midst of a transitional period where new competitors are beginning to overtake the incumbent television companies. Multiple inputs are merely a symptom of this transition.

The trend away from traditional television to internet-based content delivery has been enabled by a few key developments (hat tip: Mark Suster):

The Buyside Notes Investment Approach

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As you can probably tell by my notes to date, in the hedge fund research world I am considered a generalist, which means I am unconstrained in my investment approach – I can invest in any asset class and in any geography. This approach has many positives, the biggest of which is being able to go where the value is. But it also has one big drawback: focus. When you are free to invest absolutely anywhere, how do you winnow down the investable universe so that your brain doesn’t explode at the sheer number of opportunities? The way I deal with this problem is by taking a thematic approach: at any given time I will have 3 – 7 investment themes that help guide and concentrate my research efforts. Themes are cyclical or secular forces of change that create opportunities for investors. Generally, the themes I pursue are longer-term in nature (6 months to 6 years) but there are short-term tactical opportunities that arise due to market dislocations – these can range anywhere from 1 month to 6 months in duration. While I can – and do – invest outside of these themes, I’ve found that identifying large trends and riding the wave not only helps me focus but provides an Olympic-sized pool of money-making opportunities.

Once a theme is identified and researched, I do a deep dive into the opportunities within each theme. And since my background is deep value investing, I generally focus on mispriced / misunderstood situations where I believe the market is providing a compelling risk-reward opportunity. I’ll invest anywhere in the capital stack (senior debt, unsecured debt, prefs, etc) but tend to prefer equity given its asymmetric return profile.

The secular themes currently driving my research efforts are:

  1. Unconventional Oil
  2. Couch Commerce
  3. Ten Billion Humans
  4. Global Warming
  5. Internet of Things
  6. Mobility

In future notes, I’ll cover these themes in detail and showcase write-ups of the more interesting opportunities within each theme.

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