Auto Insurance Voices Caution As Self-Driving Cars Near

We analyzed over 9 million financial documents, covering more than 10,000 companies across the globe, for mentions of the self-driving car theme. We found that interest in self-driving cars has grown 8.5x in the past two years, but suspect that there is much more interest to come. Predictably, car and technology vendors were earliest in bracing for the technology’s impact, but the insurance industry is now beginning to take the threat seriously.

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Self-driving cars are approaching quickly. Google unveiled its self-driving project just four years ago, while Tesla shipped the first car with its famous auto-pilot feature just one year ago. Though impressive progress has been made, much more is needed before self-driving cars reach scale. In the meantime, there have been setbacks. Last May, the first person was killed in a car operating on auto-pilot, while Uber ended its San Francisco self-driving project after a week amid permit conflicts with the DMV, along with several sightings of its cars running red lights. (The project continues in Arizona.) Despite the inevitable bumps along the way, self-driving cars—also known as “autonomous vehicles”—will almost certainly become a reality within the next two decades, and their impact will be felt massively across the transportation and logistics industries, among others. (more…)

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Guest Post: 5 Oil Patch Themes You Should Be Following In 2017

Guest Post courtesy of happy Sentieo client and energy expert Philip Dunham .

2016 was a volatile year for oil and gas. WTI traded to lows in the mid $20s, then rebounded to finish the year around $54. The road to recovery for the energy industry in 2017 can be characterized as cautiously optimistic as WTI prices have stabilized over the past couple of weeks and energy companies have started to slowly hire and ramp activity.

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There were a number of themes that emerged as the year progressed including:

  • Rebounding rig counts and the return of service cost inflation
  • The Dallas Fed and Permian-focused E&Ps expressing concerns over rich Permian Basin acreage valuations
  • Another year of low oil prices and OPEC production cuts
  • The RINsanity of ethanol blending and a possible border adjustment tax
  • Natural gas coming out from the shadow of oil with demand catching up to supply

We will review the themes of 2016 and those themes going forward into 2017. (more…)

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Wall Street Consensus Trades Fell Apart in 2016: 16.2% Underperformance

Following Consensus Trades worked in 2013 and 2014, and started to lose some money in 2015. After running the numbers, we were shocked to see this developing consensus underperformance trend accelerate by 1270bps for 2016.

We analyzed Thomson Reuters’ I/B/E/S dataset and looked at instances where analysts were unanimously bullish or bearish on a stock.  It turns out that analysts recommendations correlated strongly with share price performance.  However, there was one tiny caveat: the buys dramatically underperformed the sells in 2016.  The unanimous buys were up 4.5% while the unanimous sells were up 20.7% so a market neutral consensus portfolio lost ~16.2% last year.  It turns out that 2016 was a year where betting against the analyst herd paid off!

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The chart above shows the distribution in share price performance between both cohorts. (The bullish group had outliers up +1618% and +1189% that are not shown.) While the winners in both groups performed roughly the same, the losers in the bullish group fell more than the bearish group.

One major factor behind the underperformance was the bullishness surrounding small-cap development-stage pharma stocks.  For healthcare stocks (which were mostly small-cap pharma names in our cohorts), the number of consensus buys outnumbered the sells by a factor of 13.7X versus a baseline rate of 2.24X.

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Why $SNAP Will Be The Most Unprofitable Social Media IPO Ever

Note: The S-1 dropped on Feb 2nd revealing that Snap made $400m in 2016 but spent $900m, which means we severely underestimate the degree of losses at Snap. Chief among the negative surprises was the negative gross margin indicating the very costly hosting needs of Snapchat’s services. Follow our live annotations for more.


 

Snapchat lost $130m in 2014. Despite getting serious about monetization and growing revenues 11,000%, we estimate operating losses have grown significantly, making $SNAP the most unprofitable social media IPO in history.

Allegations of misrepresented growth numbers are flying today after a heavily redacted copy of a lawsuit from Snap’s former head of Growth was leaked to local media. Although the company is no stranger to high profile lawsuits, sentiment on the famously reclusive company will focus on the few datapoints that the market has. We aim to help clarify the discussion by compiling the public consensus and filling in the blanks for the unknowns so far, from Fidelity’s consecutive writedowns to a rash of extremely expensive acquisitions. We provide a full working model for Snap’s revenues and costs and demonstrate why Snap needs to represent high octane growth for its upcoming IPO (hint: show me the money!)

The potential reallocation dollar shift. Source: hootsuite

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Mosaic Quick Take: $FIT needs a new New Year’s Resolution (and guide)

Fitbit (FIT) surged over +7% earlier this week after the Fitbit app jumped to the #2 spot on iTunes on Christmas Day. Although short interest was 30% of float, there was a desire in the market not to be offside if the company’s wearable bands were once again a popular gift for the holiday season. 

It was not long before some analysts and news outlets pointed out that Fitbit was not highlighted as a top overall best seller by amazon.com this year (Link: http://blogs.barrons.com/techtraderdaily/2016/12/27/fitbit-wasnt-a-winner-in-amazons-holiday-press-release-notes-cfra/). Momentum reversed and the stock fell back to previous levels in a few days.

In this post we show how subscribers used Mosaic to track Fitbit in realtime.


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Using Google Chrome: some tips and tricks for equity analysts

Google’s web browser can save you time by loading web pages faster (sometimes 10X faster) than other browsers.  Here are some ways in which Chrome can save you even more time:

  • Add bookmarks to the Bookmarks bar that appears when you open a new tab.
  • Add shortcuts to Chrome’s address bar, letting you access websites with fewer keystrokes.
  • Re-open closed tabs with Crtl + Shift + T.

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Are You Tracking 2016’s Most Influential FinTweeters?

As part of our curated Twitter feature in our Equity Data Terminal, we have mountains of data on the most influential finance Twitter accounts.  To our surprise, the most influential accounts aren’t professional content creators or major news organizations.  Nor are they famous money managers with billions in assets under management.

While many equity analysts currently do not use finance Twitter, the early adopters of finance Twitter likely stand on the vanguard of where news is headed.  Firstly, traditional news outlets like newspapers and TV shows must create filler content on a slow news day.  Social media is a more flexible channel for receiving news, expanding where there is news (e.g. Trump winning the election) and contracting when there isn’t.  Secondly, curation by peers lets the cream rise to the top.  Formerly obscure research such as AZ Value’s blog was distributed on finance Twitter well before Valeant issued an 8-k rebutting AZ Value (and before the dramatic fall in Valeant’s share price).  That type of niche content is unlikely to appear in more mainstream channels.

As we get ready for 2017 and spending at least the next four years with a Tweeter-in-Chief in the White House moving markets, we often find our client conversations turning towards the effective use of social media in professional investment management. Consider this your cheat sheet.

High Level Takeaways

  • FinTwit’s most influential accounts are dominated by equity analysts who put out insightful content in their spare time.
  • Second to equity analysts, there are the activist shorts that use Twitter to promote their campaigns.  Like it or not, their ability to move markets makes them relevant and difficult to ignore.
  • Following the activists shorts, there are niche news accounts (e.g. Activist Shorts, Marketfolly) that mainly aggregate content and curate news specifically for equity analysis.  These accounts are far more influential than the official accounts of major news outlets, suggesting that most of finance Twitter prefers the curation of peers and aggregators.

The big picture is that peer-curated news is poised to become a bigger headwind for traditional news.  Whereas many newspapers previously enjoyed local monopolies, they now face massive competition in a social media world.  This is a world where anybody can create, distribute, and promote their content.  There are no barriers to entry anymore.  News titans like CNBC and Bloomberg (with their teams of professional journalists) have fewer finTwit follows than a hedge fund manager from Australia who blogs on the side (@John_Hempton).  If social media’s popularity grows, the trend will likely continue to erode the returns on capital that traditional media companies have enjoyed.

(more…)

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Fall of Dawn of Titans: $ZNGA’s Terrible, Horrible, No Good, Very Bad Launch with Apptopia data

ZNGA stock is off 15% since launching Dawn of Titans worldwide on Dec 8. While it is normal for gaming companies to see sell-the-news reactions following expected catalysts, the evidence that Mosaic users are seeing with Apptopia data indicate that there is serious cause for concern as the momentum at launch has completely fizzled out. We have gotten great feedback from you on our first post detailing what we were looking for on launch day, and thought it was time to take a look at the real data 2 weeks in.

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The Current State of Affairs

As we established in part 1 of this post, iOS is overwhelmingly likely to be the strongest driver of overall revenues. This is where the key worldwide numbers for DoT shake out two weeks in:

While engagement is still holding up at around 30%, downloads seemingly peaked at a total of 1.86m and DAU’s peaked out at 567k. This was likely not helped by the (well telegraphed) Dec 15 launch of Super Mario Run which is now firmly at the top spot in iOS rankings.

Heads Up

To the extent that Dawn of Titans was never meant to be a mass-appeal casual game, the lack of extended growth is fine as long as monetization of the hardcore gamers holds up, but we are also seeing revenue and ARPU peak out (although it is very early days still). Using Sentieo’s advanced visualization technology, we are able to put games heads up to each other to answer important questions: did Dawn of Titans meaningfully threaten Clash of Clans?

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The data does not look good.

As always, we welcome all feedback on these thoughts. As always, Sentieo Mosaic subscribers can request access to Apptopia data in their charts.

 

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Dawn of Dawn of Titans: Three Things $ZNGA Investors Should Know from Apptopia

Zynga’s 3D Clash of Clans killer Dawn of Titans finally dropped worldwide after years spent in beta (Press Release here). To say that this was highly anticipated is an understatement:

And reflected in Wall Street expectations (direct link for Sentieo subscribers only):

  • Wedbush (bull): “Our bookings estimate calls for q-o-q growth of $24 million, $15 million higher than consensus; we think that Dawn of Titans may add $25 million or more of bookings (in 1Q17)”
  • Cowen (bull): “We view the launch and performance of Dawn as a key catalyst for shares.”
  • Credit Suisse (bear): “It remains to be seen whether Dawn of Titans will add to the win streak.”

Because the app has already been in the wild for years AND is a material part of the investment case for ZNGA, this is a textbook example to analyze with Sentieo’s Mosaic tool and our newest data partner, Apptopia. Apptopia provides the most accurate app store downloads, revenue, and SDK data for every mobile app & every publisher in the world, and we are excited to partner with them to show how the best-informed investors are using their data to drive investment decisions. Our goal with Part 1 of this post is to provide “Three Things You Should Know” leading into the Dawn of Titans global launch. (more…)

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