@caridinacapital

Michael Szumielewski's avatar

$18.1M follower assets

Full-time value investor · All about the stock market & investing in quality companies · App developer & entrepreneur, built a 7-figure app business with 2M MAU
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Streaming businesses bad
Amazing, $DIS surpassed $NFLX in subscribers.

I’m staying far away from streaming businesses. Highly competitive, cash-burning, and hard to predict. Some players like $AAPL don't even care if they get profitable anytime soon. IMO, not a good niche to invest in.

Am I wrong?
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Wow this is news! To be honest I've always been a Disney fan but didn't think it would surprise Netflix's subscribers this soon.
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Meta AI chatbot
$META recently released a new AI research project called BlenderBot 3, a sophisticated chatbot that can converse naturally with people, who can then provide feedback to the model on how to improve its responses. Basically, Meta released yet another improvement to its chatbots which are getting really good.

While the media is focusing on AI doomsday scenarios and debating if this neural network is sentient, I want to direct your attention to a very real use case for this AI: Monetizing WhatsApp

Have you ever wondered why Meta doesn’t simply slap ads on WhatsApp and be done with it? Well, there are valid reasons to keep away from this simple solution. Maybe the most important issue would be that to make the ad targeting really great, the platform would need to read user messages to serve relevant ads. This would most likely lead to a pretty big outcry, so that’s not the way to go.

Instead, IMO, WhatsApp will focus on B2B, offering businesses a platform for sales and support. There is already a business API for WhatsApp for Business that is priced on a tiered per-message basis. I’m expecting this to be extended, so every business can do automated tasks via the messenger. Imagine automated customer support, sales routines, and ordering products.

And here, Meta’s AI efforts come into play. Once the chatbot capabilities are advanced enough that it feels like you are talking with a real person, the possibilities are endless. If done correctly, this could be a fantastic win-win proposition. Customers get better and faster interactions with businesses, and businesses get more efficient support and sales capabilities.

With more than 2B monthly active users on WhatsApp, this could be huge for Meta.
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I think its a good idea from Meta to not generate Revenue in Whatts App via Ads. What people are writing is highly private and no one would like to see ads about things you recently wrote about. Also diversifying revenue streams from ad revenue is a good idea. But i wish i would see more execution in the monetization strategy of Whatts App. A simple money sending funktion would be a great addition as a start.
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Thoughts on Nvidia's gaming segment slowdown
A few thoughts on $NVDA. Yesterday, the company announced preliminary Q2 results that were quite bad. The gaming segment is down -44% QoQ and -33% YoY, an unexpected decline falling short of management’s original guidance.

This slowdown has been somewhat expected since gaming demand is lower than during the pandemic and especially because of the cryptocurrency crash.

I have posted about falling GPU prices a few times already. IMO, Nvidia is understating the importance of crypto mining to their GPU sales, or they just don’t know the exact number.

As I see it, the crypto crash is forcing some crypto miners to unwind their operations and sell their equipment. Used GPUs are totally fine for most gamers, so if they are available on the market, they will buy used ones before buying brand-new cards. This leads to inventory build-up at Nvidia combined with the slowing gaming demand.

Another factor is the upcoming Ethereum update. While we don’t know when it will come, once it’s done, miners will not use Nvidia GPUs anymore. Some anecdotal evidence, if you look at crypto miners on TikTok showing off their setups, it's almost always big racks of RTX 3070 GPUs running in the background with a weirdo explaining how to get rich from crypto mining. This is going away to some extent, especially if the crypto downturn continues for an extended period of time.

IMO, Nvidia might be up for a few rough quarters because of the gaming segment. The same thing happened in the last crypto crash in 2018. Long-term, this wide-moat company will be fine, especially because of the fantastic data center segment which is growing +61% YoY.

As of today, I have not bought Nvidia, but shares are beginning to look attractive. Historically, this has been an excellent stock to buy when the company had temporary issues. Therefore, I’m patiently waiting for the share price to come down to at least $140 to start building a first position.

What do you think about Nvidia?
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I prefer to play the highly cyclical semiconductor industry with "safer" stocks like $TXN (super high diversification and very low cost items that are necessary for most electronic applications) and $ASML with a monopoly and +$30 billion in backlog.
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KLA earnings analysis
$KLAC recently reported earnings, successfully ending its fiscal year. KLA Corporation is dominant in the process diagnostic & control segment of the semiconductor equipment industry. In layman's terms, they provide the tools to inspect wafers for defects which helps its customers improve their semiconductors output. An essential tool that awards KLA a wide economic moat.

Revenues grew by +29% YoY to $2.49B thanks to continued strength in the semiconductor process control segment. Net income came in at $867M with an operating margin of 41.8%. Management expects KLA will grow revenues by at least 20% in calendar 2022, although the company is dealing with supply chain constraints.

Baring a serious escalation between China and the US, KLA should continue growing in 2023 as demand is strong. This is important because revenues from China and Taiwan combined account for 54%. Foundries like $TSM are their biggest customers.

The stock had a good run in recent weeks. For some reason, the company is a bit underfollowed. IMO, KLA is a well-managed, wide-moat company with strong financials riding the long-term secular semiconductors trend.
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HR management companies are on a roll
Payroll and human capital management solutions companies have been performing well in recent weeks. I like these companies because they benefit from high switching costs, scale-based cost advantages, intangible brand assets, and powerful referral networks, all built up over years and decades of hard work.

The following businesses are in my selection:

All of them posted good earnings results with solid outlooks recently. If you are not yet aware of these businesses, they are definitely worth a look.
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I’ll have to look at the others. I’ve loved $PAYX every time I’ve looked at it; just can’t get past the valuation to actually pull the trigger. If I pay that high a multiple (>30 P/E) it has to be A+ growth & profitability. I’ll do a peer comparison tomorrow and be back🤙
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Meta’s $10B bond sale
It’s happening, Meta is selling $10B in corporate bonds. Reportedly, S&P Global Ratings has assigned Meta a AA- investment-grade rating and the bonds have been issued with very favorable terms. Fun fact: Meta has been one of just 18 companies in the S&P 500 without debt to this point.

Proceeds from the sale can be used for capital expenditures, stock buybacks, acquisitions and other investments. Since Q3 2021 there has been a significant uptick in buybacks. Unfortunately, until January 2022, these have been made with quite high prices, not the very best capital allocation.

But the situation has changed. The stock is down significantly and IMO it’s a great opportunity for Meta to buy back stock now with low yield debt. Meta has been using cash to repurchase stock, including $5.1B in the Q2, and had $24.3B available for buybacks as of June 30.

If you are a shareholder, it would be advantageous for the stock to stay down for a while longer, so the company can buy back more cheap shares. With patience, this should yield great results in the long term.

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Acquirers don't pay bubble prices
$AMZN is acquiring $IRBT for a bit more than 1x sales and roughly -55% of its all-time high price. Meaning, if you are holding a speculative tech growth stock that you bought during the bubble times last year, the danger is very real that if the company gets acquired, it will be for a far lower price than the ATH price.

Important to keep in mind, these bubble prices will not come back for a long time, if ever.

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How do you think this fits into Amazon's electronics strategy? Are there any synergies here?
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Amazon acquiring iRobot
$AMZN is acquiring $IRBT for $61 a share in an all-cash deal. iRobot is the maker of the vacuum cleaner robot Roomba.
House-cleaning Alexa incoming? 🤖
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Mine is connected to Alexa and Google Home. "Start cleaning" and off he goes
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Impressive cloud growth continues 🚀
According to Synergy Research Group, in Q2 2022, the global cloud market grew by +29%. Quarterly cloud infrastructure service revenues (including IaaS, PaaS, and hosted private cloud services) were $54.7B, and trailing twelve-month revenues reached $205B.

The strong US Dollar had a significant impact on the numbers. Had exchange rates remained constant over the last year, the growth rate would have been around six percentage points higher.

Amazon leads the pack with almost 34% market share, increasing its #1 position by over a full percentage point. Alphabet also meaningfully increased its market share. Combined, Amazon, Microsoft and Alphabet had a 65% share of the worldwide cloud market in the quarter, up from 61% a year ago.

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Adobe Experience Cloud
FC Bayern München partners with $ADBE to further digitalize its business processes and fan experience. While this deal won’t significantly move the needle for Adobe, it’s nonetheless interesting to take a look at what they are partnering on: Adobe Experience Cloud.

Adobe Experience Cloud is a collection of integrated online marketing and web analytics products by Adobe. It contains tools like Advertising Cloud, Analytics Cloud, Marketing Cloud, and Magento Commerce Cloud. Basically everything a business needs to run its marketing efforts including digital marketing analytics, campaign management, and customer engagement.

On the balance sheet, Adobe Experience Cloud is reported under the Digital Experience segment which generates 25% of revenues and is growing by +17% YoY. Adobe initially built up this segment by smart acquisitions and later achieved organic growth through further product developments.

Adobe has built a comprehensive marketing platform in a highly competitive digital marketing environment. Marketing professionals are flocking to its platform given Adobe’s decades-long experience in the digital space. There are significant switching costs to leaving the platform, especially given the breadth of solutions the company has to offer.
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