- Wealth PMS
🔆 Old Buffett makes billions, Young ARKK loses them
“Beware the investment activity that produces applause; the great moves are usually greeted by yawns.” – Warren Buffet.
In this edition, we cover:
- Start-Up: Have your cake, eat it and pay later – the Zomato way
- World Markets: Buffett shunned tech for decades and then bit Apple
- Hot Money: Cathie’s ARKK, the flood of money, and greater fools
- Connect: Investing lessons from Wordle
- Behaviour Finance: Understanding the riskiness of an investment
- Pop Poll: Which asset class would you invest in for the next 5 years?
Zomato spreads its wings 💸
Zomato had come up with its Q3FY22 results on Feb 9th, and they were kind of muted.
- Revenues up 82.4% YoY to 1112 Cr. EBITDA loss stood at 488.8 Cr compared to 110.7 Cr last year. This is due to a 2x increase in Employee benefit costs (ESOP expenses), a non-cash item.
- Net loss came down from 352 Cr last year to 63.2 Cr.
Overall a mixed bag and the stock was down 6% on Friday. However, the game is only getting bigger for the company.
On Jan 27th, Zomato released a press note that it had set up an NBFC and venturing into BNPL. And why not? – Swiggy collaborated with LazyPay for BNPL, Bigbasket with Simpl, Make My Trip with Capital Float, Ola Money, Flipkart Pay Later, etc all have their wings spread into BNPL.
It won’t be a stretch to say but the costliest real estate currently in the world is the payments page of an e-commerce company. Companies are spending billions to have a pie of it. Hence, Zomato may have thought to leverage its platform, build a BNPL and keep the customers with themselves.
What about the underwriting risk?
Not much. Zomato knows your eating preferences more than you.
It exactly knows how much we spend on drinks, Pizzas, Biryanis, and our entire spending habits. All these loans are in the range of 500-1000/-. It comes at an almost zero disbursement cost. Keep in mind, the main agenda of Zomato’s BNPL is not to build a ~1B loan book. But to keep the customer stay in its ecosystem without drifting him out to another Fintech.
Zomato VC Fund
In Nov 2021, the company announced its plan to deploy $1 billion over the next 1-2 years into the quick-commerce start-ups. In the last 6 months, the company has already invested around $345 million in start-ups like Blinkit, Curefit, Shiprocket, magicpin, etc.
Why is Zomato on a buying spree?
They have a war chest of $1.7 Billion cash on their books. They are investing in businesses that are difficult to build in-house. They are creating optionality for their business. They are also creating multiple M&A options for themselves to grow in the future. This strategy is inspired by Alibaba and Tencent. They are both financial & strategic investments.
On the other hand, Zoamto is showing no signs of slowing down its ambitious growth targets. Only time will tell, how much Zomato secured in Maths and Chemistry, which the entire market will keep an eye on.
Buffett – Late to the party and yet owns the room😎
Buffet didn’t like tech. He was quite vocal about it in 2012 when he said he’d never buy Apple or Google because he “just didn’t know how to value them”. That was 10 years ago, and today, he’s hit a home run with his investment in Apple.
- Why Buffett shunned tech
- The case for Apple
- Tim Cook cold calls Buffett
- Ranking the best tech investments
Right Investment. Wrong Time. All the time.🤦♂️
History may not repeat but it sure does rhyme. Investors keep getting attracted to “hot” stocks (or funds) that have recently gone up and, almost every time, buy in when the prices have peaked. Making them the greatest fools holding the bag at the end. This chart shows how more and more money poured into ARKK when its value spiked and subsequently how the newer investors lost money.
Everyone loves Wordle 😍
Wordle is a fascinating game. You start with knowing nothing about the word and almost always end up figuring it out. The journey of intelligently guessing the 5 letter word is exciting and gripping.
There’s more – there are good investing lessons to learn from this simple, yet powerful, game.
The riskiness of your risky investments 🎯
We often hear long-winded stories from people in the financial industry about how we should not compare two things with different “risks”. So don’t compare a mid-cap fund with a large-cap fund. Don’t compare a fixed deposit with a debt mutual fund. Don’t compare equity with derivatives. And so on.
This is unnecessary jargon and designed to confuse people. And it’s time to call it that.
Pop Poll 📝
If you can invest in only one, which asset class would you invest in for the next 5 years?
- Real Estate
- Crypto / NFT
(h/t to Warikoo’s newsletter for this poll idea)
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