Our investment professionals share and challenge each other’s views, creating a diverse marketplace of ideas for the Wellington Blog.
In the wake of the latest growth stock sell-off, I’ve been reviewing my equity opportunity sets across the market sectors and subsectors that I cover, including digital advertising, e-commerce, and video games. For now, I’d like to focus specifically on that latter segment of the market. The upshot: In general, I remain positive on the future of gaming and find a number of the stocks to be potentially attractive investment plays as of this writing.
Many of these stocks outperformed amid the height of COVID-19 and the widespread physical lockdowns triggered by it — to no one’s huge surprise really, because many people were more or less “stuck” at home for months on end, with ample time (and desire) to indulge in leisure activities like gaming that they might not be able to partake of under more “normal” societal conditions. But, and again not that surprisingly, many of the same stocks have underperformed this year as much of the world (thankfully) has begun to shed or loosen the pandemic-induced shelter-in-place orders, business closures, travel restrictions, and so on.
Interestingly, however, my research and anecdotal evidence suggest that the amount of time global consumers have actually spent on gaming entertainment…
Question: Could rising “short-termism” actually provide an alpha opportunity for longer-term-oriented equity investors? Ironically, yes in my view. Let’s look at today’s financial technology (fintech) sector as an illustrative example.
I’m concerned about growing froth in the fintech initial public offering (IPO) market because much of the recent activity there signals that investors are continuing to take on more and more risk in pursuit of hoped-for near-term rewards. Here are some behaviors that, to me, highlight the potential for…
The recently announced intended merger of two key financial technology (fintech) players will be the second-largest deal ever in the global payments sector. Here’s my latest perspective on the broader implications of this major acquisition and the related investment opportunity in the fast-growing “buy now, pay later (BNPL)” space, which I believe has now reached an inflection point in its young storyline.
Given the size of the total addressable market (TAM) for global payments, I’d say fintech companies have been little more than a thorn in the sides of the old guard thus far, but I think that’s poised to change. Indeed, I believe the recent blockbuster transaction noted above may have…
In my recent blog post, I outlined why I believe large-scale public payment processors will maintain compelling long-term growth rates even as fintech disruptors take market share. I think that share will largely come at the expense of banks instead. Banks are still the largest players in the payments market, and their 50% – 60% market share is the easiest target for these fintech companies. In addition, in my view, many banks have weak product offerings and a lack of strategic focus in this space that results in a large amount of payments volume sitting in the weakest hands in the industry. This transition may also benefit scale processors if banks look to partner with them to maintain share. We are seeing this begin to play out in Europe, but I expect the trend to continue, if not accelerate, across most geographies.
Despite this long-term growth potential, some investors have wondered why these scale processors’ performance has recently lagged that of cyclical recovery stocks. The main reason is that these stocks have never acted as a cyclical element of portfolio construction in the past and therefore aren’t viewed that way by the market.
These scale processors are now being compared to peers that have had drastically different experiences in the pandemic due to distinct business models. The stocks that have underperformed have generally been impacted by…
In my last blog post, I shared some high-level thoughts on the financial technology (“fintech”) industry and what its increasing relevance means for traditional financial services. Beyond the fast-growing digital payments space, I identified two broad categories of fintech “disruptors” that will present opportunities going forward:
How legacy financial services players (particularly banks) tap into the new infrastructure providers and respond to…
Over the past few years, I have discussed at length the potentially compelling long-term investment opportunity in financial technology (“fintech”) — which we define as companies creating or leveraging technology to disrupt traditional financial services. While much of our internal dialogue has focused specifically on the fast-growing digital payments space, I’d also like to share my thoughts on the fintech industry more broadly and what the increasing relevance of its products means for traditional financial services.
In future blog posts, I will explore some of the below points in more detail for investors who want a deeper dive. For now, the main takeaways I want to leave you with are…
In many ways, the COVID-19 crisis has fundamentally altered the way we live and work (and continues to do so). From an investment standpoint, that has been a big catalyst for long-term value creation across certain sectors. The technology sector is a notable case in point.
To illustrate, consider how my own life has changed over the past several months:
All of this is enabled by technology. None of it is new per se, but what has changed on the back of COVID-19 is the speed and alacrity with which…
“I acknowledge that the fintech sector has done well so far, but I feel very strongly that we’re still early in the growth curve for the adoption of financial technology.”
— Bruce Glazer
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