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Best In Class Dividend Aristocrat For Income Investors, Yield 6.5%
November 4, 2018 12:00 am|Comments (0)

Co-produced with Nicholas Ward for High Dividend Opportunities.

AT&T (T) has caught the eye of many income-oriented investors throughout 2018 because of its share price weakness. We have been long the stock as long-term investors and have been pounding the table due to the market’s irrational treatment of this company for a year now. We said that AT&T is cheap at these levels in the low $ 30s and that we think the Time Warner Acquisition will be a major boon for the company long term. In this regard, I personally have recently added a position recently. With all of this in mind, we thought it made sense to update on AT&T, which is yielding 6.5% after its recent sell-off.

Dividend Sustainability

The fact that the AT&T’s dividend yield is now more than double the interest rate on the U.S. 30-year bond seems to point towards the fact that the market believes AT&T’s yield is unsustainable. In short, we disagree. In this piece, we will examine the income-oriented metrics surrounding AT&T’s yield, as well as the value proposition that the shares present to investors at today’s beaten down levels. To us, the market’s current treatment of AT&T is irrational. T’s relative strength index has fallen well into oversold territory, and this treatment of the stock may be creating an attractive long-term opportunity for income-oriented investors.

We feel compelled to write this bullish report about AT&T because this is a company that so many love to hate, and honestly, we don’t see why. To a certain extent, we think AT&T has been politicized, either subconsciously or not, because of the current administration’s attacks on CNN and AT&T’s new ownership of that network via Time Warner. In this day and age, it seems that everything is overly politicized in this country. We think it is too bad. But, regardless of whether or not you watch CNN and enjoy the content it provides, the network continues to be profitable, which is what matters most for AT&T. Instead of focusing on sentiment-driven things like political opinions, we think investors are much better served focusing on T’s cash flows, its underlying fundamentals, and the valuation that its shares present.

Compelling Valuations

With this in mind, we want to highlight the fact that due to its current weakness, AT&T is now trading at valuations not seen since the trough of the Great Recession. As you can see on the F.A.S.T. Graph below, AT&T is currently trading for less than 8.8x Trailing 12 Months (‘TTM’) earnings, which is below the level that the stock hit in the spring of 2009!

Source: F.A.S.T. Graphs

We can’t rationalize that. Sure, AT&T has an enormous debt load which we will touch on, but as far as corporate outlook goes, we are not sure why the market is placing the same premium on shares today as it did when some believed that the modern financial system could potentially collapse.

On a forward looking basis, T is even cheaper. This is another reason that we believe the stock is being irrationally discounted. Analysts aren’t expecting to see a ton of EPS growth in 2019 and 2020, but they are expecting growth. This stock is being priced as if it’s going into a significant earnings recession, and that’s not the picture that the 30 Wall Street analysts who cover the company are painting. Right now, the average EPS estimate for 2019 is $ 3.61. The consensus EPS estimate for 2020 is $ 3.67. This means that the stock is trading for just 8.3x 2019 estimates and 8.17x 2020 estimates!

Recent Earnings Report

AT&T just reported its 3rd quarter results. During the earnings report and accompanying conference call, AT&T management reiterated full year EPS guidance of $ 3.50. That was slightly below the market’s expectation of $ 3.53; however, it still represents a strong, double-digit growth over 2017’s $ 3.05 figure. At this point, we think it is fair to note that not only did AT&T’s EPS increase by double digits during Q3, but sales, cash from operations, and free cash flows did as well. This $ 3.50 EPS guidance is well above the company’s $ 2.00 annual dividend, representing a payout ratio of 57% (or a dividend coverage of 174%).

Management also reiterated full year free cash flow (or FCF) guidance of ~$ 21b. This is well above the $ 17.6b of FCF that T generated in 2017. This figure is also well above T’s dividend responsibilities. In the recently reported Q3, T’s free cash flow dividend payout ratio was 56.1%. It’s worth mentioning that this ratio is lower than the 54.2% a year ago. That’s because T’s dividend related expenses growth outpaced free cash flow growth during the quarter. This large bump in both figures y/y is due to the Time Warner acquisition.

Continued Growth Moving Forward

Moving forward, we think it is likely that this trend reverses. We suspect that AT&T will increase its quarterly dividend by the normal $ 0.01/share when it announces the December dividend which should only increase the dividend expense in the low single digits while we think it’s possible that free cash flow growth at a mid-high single digit clip as AT&T further integrates Time Warner’s assets into its distribution model.

A Dividend Aristocrat

Speaking of T’s $ 0.01 dividend increase, now’s the time to mention that we’re talking about a dividend aristocrat here. AT&T has increased its dividend for 34 consecutive years! The nice thing about adding reliable dividend growth to a high-dividend yield is that investors not only receive the passive income that they’re looking for, but the purchasing power of that income stream is protected from inflation. This is why we prefer owning equities to bonds when looking for passive income. Sure, bonds offer more security, but they don’t offer protection from the erosion caused by inflation over time.

This long history of increases is yet another reason why we believe that AT&T’s dividend is safe. Shareholders, both institutional and retail, rely on AT&T for income. They have had for decades. The company knows this. And therefore, it knows well that any dividend cut would lose the faith that it has built up with the income-oriented market and cause significant damage to the stock price.

No CEO wants to be the one in charge when a multi-decade dividend growth streak is at hand. Sure, this is all speculative and isn’t back up by concrete figures, but we are fairly certain that AT&T CEO Randall Stephenson would do whatever it takes, even if that meant selling off assets, to preserve the sanctity of T’s illustrious dividend (in the Q3 conference call slide show, AT&T management notes that non-core asset sales and capital market considerations are potential options, should free cash flow not cover debt requirements, yet they made no mention of cutting the dividend).

A Closer Look at the Debt

Thankfully, the CEO shouldn’t have to come to those drastic measures as to cut the dividend. The primary threat that many see when it comes to T’s yield is the company’s enormous debt load. At the end of Q3, T reported a total debt load of $ 183.4 billion and a net debt load of $ 174.7 billion. This is a worrisome figure, without a doubt. However, roughly 90% of the company’s debt is fixed rate, meaning that the company is protected from rising rates. Furthermore, as management noted in the recent conference call, rising rates are actually somewhat bullish for the company (so long as they rise at a slow and steady rate) because rising rates decrease the company’s pension liability, which serves as a bit of a hedge against the trouble that rising rates may have on the non-fixed portion of T’s debt portfolio.

Right now, T’s net debt to pro forma adjusted EBIDTA ratio is 2.85x. The company plans to pay down debt in the short term to reduce this figure to 2.5x by the end of 2019. Management expressed confidence that they’re on schedule to do this in the recent quarterly report. They also noted that they plan on returning it to normal historical leverage ratios by 2022.

Looking at AT&T’s debt maturities, we see that the company will need to retire $ 73b of debt during the next 5 years. That seems like an enormous amount, but it’s important to realize that this company is on schedule to produce $ 21b in free cash flow in 2018, and by 2023, it’s possible for that figure to be nearly $ 30b/year.

So, as long as T’s free cash flow growth outpaces the company’s dividend growth, it seems very likely that T will be able to both continue to provide investors with a reliably growing dividend and reduce the debt on schedule. The company currently receives a BBB credit rating from Standard & Poor’s. While this isn’t exactly stellar, it is investment grade, which will help them to receive competitive rates should they have to roll over any maturities moving forward.

An Unjustified Selloff

If debt doesn’t appear to represent a dire threat, then what other reason might have caused the stock to sell off nearly 22% year to date?

In a large part, it appears to be because of the company’s exposure to the media business. AT&T has chosen to go down the path of integrating media/entertainment assets into its existing distribution system. Some (like us) view this as a bullish divergence by management. The content that T can provide with its distribution network differentiates it from its competition.

We’re living in a digital age now. The 5G revolution appears to be just around the corner which will totally disrupt the traditional media landscape. High quality streaming content will be easily accessible once the 5G infrastructure is put in place. This, alongside the rise of the “internet of things”, should create immense demand for data from the providers. We believe that this demand will commoditize data over time. As the world becomes more dependent on broadband, I can foresee a time when these providers will be regulated like the utilities are with electricity. In this situation, having a diversified revenue model and access to alternative growth markets will lead to valuation premiums. AT&T should have this with its media/entertainment content as well as the advertising platform that it is developing alongside the Time Warner assets.

Outlook

In the short term, we suspect that T’s exposure to media could continue to act as a headwind. The markets hate uncertainty, and the cord cutting phenomena is creating quite a bit of that in the media landscape. However, once that process plays itself out, we suspect that the leaders left on the playing field will be those who have the strongest content portfolios. Historically, we’ve seen consolidation happen in the entertainment industry, and I don’t think that’s going to change. Scale is important when selling advertisements and, ultimately, the brands with the largest eyeball appeal will win out.

T is well on its way to becoming one of those successful giants with the Time Warner assets, which include CNN, TNT, TBS, the Warner Bros studios, and one of the most successful over the top platforms in existence: Home Box Office (‘HBO’). With Time Warner, AT&T now has exposure to a nice variety of programmed and live television, including extensive sports rights (especially with the NBA, which is probably the hottest sports league in America with regard to growth), and major film productions. Very few media names can compete with T’s portfolio at the moment, and we expect to see it continuing to build out that portfolio over time with excess cash flows (once debt is reduced to normal levels in the medium term).

Media names are very attractive now. This is in large part due to what we call the Wall-E thesis, which is based upon the future reality depicted in the Disney animated film where it got its namesake where humans essentially sit around all day, get fat, and consume content while robots take care of them. We don’t think it will necessarily play out exactly like that, but as 5G ushers in increased automation, human society will become ever more efficient. This should lead to more free time for individuals, and that should result in increased demand for entertaining content that will fill a lot of this void. We want to own the companies who will benefit from this trend. The vast majority of them are low yielders like Walt Disney (DIS) or Comcast (CMCSA), but for those seeking high-dividend opportunities, AT&T is one of the best options out there.

Bottom Line

So, in conclusion, we think AT&T offers investors an intriguing opportunity in the high-yield space. The company is yielding 6.5%, offers a safe dividend with a 174% dividend coverage, a long history of dividend growth, showing that the company has a culture of generosity towards its shareholders, and a dirt cheap valuation. It’s rare that a single investment checks all of these boxes. The debt is the major downside to AT&T at the moment, but as discussed, management appears to have a plan to reduce it, and the company’s massive cash flows support this plan. Any equity investment comes with risk. No dividend in the market is inherently safe; they’re all at risk of being cut. However, companies like AT&T don’t become dividend aristocrats on accident and when looking for reliable high yield, we have been willing to bet a portion of our savings on this wonderful company. The recent pullback creates a unique entry point for conservative dividend investors; A high quality 6.5% yield selling on the cheap.

A note about diversification: To achieve an overall yield of 9%-10% and optimal level of diversification, we recommend a maximum allocation of 2%-3% of the portfolio to individual high-yield stocks like AT&T, and a maximum of 5% allocation to high-yield exchange traded products (such as ETFs, ETNs and CEFs). For investors who depend on the income, diversification usually results in more stable dividends, mitigates downside risk, and reduces the overall volatility of your portfolio.

If you enjoyed this article and wish to receive updates on our latest research, click “Follow” next to my name at the top of this article.

Disclosure: I am/we are long T.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tesla Is Facing a ‘Deepening Criminal Probe’ About Misleading Investors on Its Model 3 Production, Report Says
October 27, 2018 12:00 am|Comments (0)

Tesla, the pioneering electric-car manufacturer that posted blowout earnings this week, may be facing an FBI investigation over investor communications it made regarding the production levels of its Model 3 sedans, the Wall Street Journal said Friday.

Earlier this month, Tesla settled with the SEC over charges that it misled investors after CEO Elon Musk tweeted that he had secured funding to take Tesla private. The SEC, which alleged that the tweets were fraudulent, at first sued Musk, before reaching a settlement that required Musk and Tesla to each pay $ 20 million in fines, while finding an independent chairman to replace Musk.

According to the Journal, Tesla the FBI “has intensified” its investigation into whether Tesla misstated data on the production of its Model 3, its lowest-priced sedan. Tesla has invested heavily in the Model 3 production, adding to losses in recent quarters. Last quarter, however, Model 3 sales pushed Tesla into the black.

In a statement, Tesla disputed some of the Journal’s report. “Earlier this year, Tesla received a voluntary request for documents from the Department of Justice about its public guidance for the Model 3 ramp,” a Tesla spokesperson said in a statement to Fortune. “We have not received a subpoena, a request for testimony, or any other formal process, and there have been no additional document requests about this from the Department of Justice for months.”

The Journal reported that former Tesla employees, who received subpoenas earlier in the investigation, have been contacted in recent weeks by the FBI for further testimony.

Musk told investors on earnings calls that Tesla would be producing between 5,000 and 20,000 Model 3s per month by the end of 2017, the Journal said. In reality, Tesla ended up producing only 2,700 Model 3’s for all of 2017. The FBI is reportedly investigating such discrepancies.

While Tesla admits it did not meet its early and ambitious production goals, it said it was “transparent about how difficult it would be… and that we were entering ‘production hell.’” Tesla further noted that “it took us six months longer than we expected to meet our 5,000 unit per week guidance,” but that its approach has been “to set truthful targets – not sandbagged targets that we would definitely exceed and not unrealistic targets that we could never meet.”

Tesla’s stock, which rose 5.2% Friday during official trading, was down 1.8% in after-hours trading.

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Corporations Are Starting To Perform On Climate Issues, Investors Say
June 28, 2018 6:21 am|Comments (0)

Royal Dutch Shell Plc agreed in January to buy a 44 percent stake in Silicon Ranch Corp., the Nashville-based owner and operator of U.S. solar plants. Here workers torque mounting brackets on a row of solar panels during construction of a Silicon Ranch Corp. solar generating facility in Milligan, Tennessee. Large oil companies in Europe are continuing to diversify their holdings and increase clean-energy investments.  Photographer: Daniel Acker/Bloomberg

Now that activist investors have convinced most major corporations to disclose climate-related risks, they have begun to press them for mitigation, and some investors report seeing results.

“We’re beginning to see real signs that we’re entering transition,” said Adam Matthews, the director of ethics and engagement for the Church of England Pension Board and co-chair of the Transition Pathway Initiative.

“I think it’s something you’ve got to be careful about calling, but at the same time I think that there are signs out there that the engagement is beginning to show impacts. You’re seeing companies that are moving totally out of coal, you’re seeing other companies saying they intend to make no further investments in this, you’re seeing the likes of Shell and Total breaking ranks with their sector and taking certain ambitions to reduce all of their emissions.”

Matthews has noticed the change just in the last six or seven months, he said in a webinar Tuesday hosted by Climate Action, and so has Catherine Howarth of ShareAction UK, a charity that promotes responsible investment.

“It started very much as disclosures,” Howarth said. “We as shareholders want stronger disclosures from you as a company about how you’re considering, for example, climate-related risk. And we’re moving now to resolutions that are a bit more directive and based on investors really claiming a sense of agency over handling how they manage climate risk in their portfolios.”

Howarth cited recent successes with Rio Tinto, a mining company that faced a shareholder revolt over its participation in coal lobbying efforts in Australia, and Royal Dutch Shell, where shareholders pressed the company to establish, publish and meet emissions targets that align the company with the goals of the Paris Agreement.

“We really need to be comfortable that you’ve understood the climate risk,” Howarth said, characterizing the message delivered by shareholders, “which is a risk for our entire portfolio, not just for you as an individual stock, and we need to see action now.”

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Investors, lawmakers, advertisers pressure Facebook over data
March 22, 2018 6:05 pm|Comments (0)

WASHINGTON/LONDON (Reuters) – Facebook Inc Chief Executive Mark Zuckerberg’s apology for how his company handled 50 million users’ data did little on Thursday to ease investor worries about the cost to fix mistakes and lawmakers’ dismay that his response did not go far enough.

Germany’s second-largest bank Commerzbank AG has suspended advertising on Facebook until further notice, Handelsblatt newspaper reported on Thursday, following in the steps of Mozilla, which runs the Firefox web browser.

Allegations that political consultancy Cambridge Analytica improperly accessed data to build profiles on American voters and influence the 2016 presidential election has knocked more than $ 50 billion of Facebook’s market value this week.

Five days after the scandal broke, Zuckerberg apologized on Wednesday that mistakes were made and promised to restrict developers’ access to user information as part of a plan to improve privacy protection.

On Thursday, Facebook executives were still saying sorry. “It was a mistake”, Campbell Brown, head of news partnerships at Facebook, said at The Financial Times FT Future of News Conference in New York City.

Zuckerberg’s apology and promises were not enough to ease political pressure on the world’s largest social media company.

“It shouldn’t be for a company to decide what is the appropriate balance between privacy and innovation and use of data. Those rules should be set by society as a whole and so by parliament,” British minister for Digital, Culture, Media and Sport, Matt Hancock, told BBC Radio. “The big tech companies need to abide by the law and we’re strengthening the law.”

In Washington, Zuckerberg’s media rounds did little to satisfy lawmakers in either political party who have demanded this week that the billionaire testify before Congress.

Facebook executives were expected to brief two congressional committees on Thursday, after being grilled for nearly two hours by staff for the House Energy and Commerce Committee on Wednesday.

Facebook Deputy Chief Privacy Officer Rob Sherman and other executives were unable to answer many questions at Wednesday’s meeting, according to two aides who were present. The executives said they had written down a list of 60 questions they promised to answer, the aides said.

The Republican chairman and top Democrat of the U.S. House Energy and Commerce Committee said they will in coming days formally ask Zuckerberg to testify.

REPUTATIONAL COSTS

Wall Street analysts expressed relief that there were no signs so far of a more fundamental shift in the company’s advertising-driven revenue model, but some said there would be costs to shore up its reputation.

Facebook, with more than 2 billion monthly active users, made almost all its $ 40.6 billion in revenue last year from advertising.

A 3D-printed Facebook logo is seen in front of displayed stock graph in this illustration photo March 20, 2018. Picture taken March 20. REUTERS/Dado Ruvic

Stifel analyst Scott Devitt cut his price target on Facebook by $ 27 to $ 168, while BofA Merrill Lynch slashed its target by $ 35 to $ 230.

“Facebook’s current plight reminds us of eBay in 2004 – an unstructured content business built on trust that lost that trust prior to implementing policies to add structure and process,” Devitt said.

“Warren Buffett has his own thing called a “too hard” pile, and we are choosing to put Facebook shares in it,” he wrote.

Facebook shares were down 2.2 percent on Thursday in heavy trading.

Slideshow (4 Images)

Analysts said that Zuckerberg’s promises to investigate thousands of apps, and to give members a tool that lets them turn off access, would not substantially reduce advertisers’ ability to use Facebook data – the company’s lifeblood.

Nevertheless, open-source browser and app developer Mozilla said it was “pressing pause” on its Facebook advertising after the revelations prompted it to take a closer look at the site’s default privacy settings.

“We found that its current default settings leave access open to a lot of data – particularly with respect to settings for third party apps,” Mozilla, it said in a blog post.

“When Facebook takes stronger action in how it shares customer data, specifically strengthening its default privacy settings for third party apps, we’ll consider returning.”

Commerzbank said it, too, was pausing its campaign on Facebook. “Brand safety and data security are very important to us,” head of brand strategy Uwe Hellmann told Handelsblatt. The comments were confirmed by a spokesman for the bank.

The Times newspaper reported that British advertising group ISBA, which represents thousands of well-known brands, has threatened to withdraw ads if investigations show user data has been misused.

“We think this issue is more likely to snowball than recede and that advertisers are reaching a tipping point at which spending on not only Facebook and other online platforms, is re-evaluated,” brokerage Liberum said in a note.

Technology stocks have fallen along with Facebook this week as investors worried about tighter scrutiny of global platforms like Google, Twitter and Snapchat.

British police removed cordons around the London headquarters of Cambridge Analytica on Thursday after they deemed a suspicious package which sparked a security alert to be safe.

Efforts by Britain’s information watchdog to investigate Cambridge Analytica were delayed when a judge adjourned for 24 hours its application to search the company’s head office.

Additional reporting by Munsif Vengattil and Paul Sandle; Editing by Nick Zieminski

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Rookie crypto investors look past risks, flock to London show
March 12, 2018 6:01 pm|Comments (0)

LONDON (Reuters) – Dozens of stallholders, pitching anything from a happy retirement to commercial property to the future of electronics, set up shop in central London last weekend to pitch their wares.

Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018. REUTERS/Dado Ruvic/Illustration

The companies and their salesmen were not there to part ways with the actual product, however. They just wanted to encourage buying into the digital coin craze that is raising billions of dollars.

At what organizers claimed to be Britain’s first large-scale “Crypto Investor Show”, attendees were looking to get in on the next initial coin offering (ICO).

The talk of Silicon Valley, ICOs are a mostly unregulated funding mechanism for start-ups to raise capital by creating and then issuing their own virtual coins or tokens. Last year, they raised a record sum as interest in cryptocurrencies like bitcoin surged.

“I came here to learn about ICOs. You have to do your research, but I would invest, it’s the upcoming thing,” said 30-year-old Shahzad Anwar, who installs electric charging points and had traveled down from the central England town of Solihull with his brother to attend.

“To me, stocks and shares and bonds are over, they are done,” he said, as attendees listened to a pitch at a nearby stall for an ICO wanting to raise tens of millions of dollars to build and race a supercar. Another promised to build a network of rest homes for the elderly.

Regulators say ICOs are highly speculative and investors should be prepared to lose everything. Unlike stocks, most ICOs do not confer ownership rights in the underlying business, just the possibility that the tokens will be worth more in future.

Supporters say ICOs are revolutionizing the capital-raising industry, a crowdfunding alternative that gives ordinary people the chance to invest in start-ups, normally the preserve of the venture capitalist elite.

From circulating on tiny online chatrooms a few years ago, cryptocurrencies and ICOs have moved to the mainstream, with public advertising common.

Some companies have pushed back, however. Facebook said it would ban all crypto adverts because of the risks to investors. Twitter said it was taking measures to prevent cryptocurrency-related accounts from running scams on its platform.

GENERAL PUBLIC

London regularly hosts conferences on blockchain, the technology underpinning cryptocurrencies, where tech wizards exchange ideas, but the London show was geared towards the general public as well as experts.

The crowds arrived, some families for a day out, touring the stalls and listening to panelists. As well as marketing, there were sessions that discussed the risks.

Several attendees who worked in the industry said they were disappointed with the ICOs on offer, with staff hired for the day to hand out flyers and with little understanding of blockchain technology, or if it was even relevant to their idea.

“Don’t fall for some of the marketing out there … [You have to ask] is it actually solving a problem or is it just making one up?” said Linda Leaney at Globcoin, which claims to be a stable cryptocurrency backed by global currencies and gold.

One Leeds-based company, offering a token backed by commercial property, crypto trading and the founder’s online discount shopping platform, said it had raised $ 4 million in seed investment, and was targeting $ 10 million, with bonus tokens and referral awards for attendees that emailed their details.

Nearby, one programmer and salesman after another took to a small stage to explain their business. No company promised anyone a specific financial return, and aside from the price of each token and early-bird discounts, they stuck to talking up their product.

Sam Smit, a 34-year-old electronics engineer from Horsham in southern England, is a self-styled “dirty flipper” – someone who buys a token at the pre-ICO stage before token sales are opened to the general public, then sells them when they begin trading on an exchange.

“Have you seen `Wolf of Wall Street’? This is the same, pump and dump!” he said, referring to the 2013 film about the stock broker and convicted fraudster Jordan Belfort.

“People here are illiterate idiots. Often after the pre-ICO stage, it’s already too late to buy,” he said – while admitting that he had lost around $ 400,000 in January when cryptocurrency prices slumped.

Editing by Sujata Rao, Larry King

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The #1 Lesson Cryptocurrency Investors Can Learn from the Dot-com Bubble
January 31, 2018 6:01 am|Comments (0)

Life as we once knew it drastically changed in the mid-90s. The Internet’s popularity was on the rise, and many savvy businesses and companies saw the potential of a hyper-connected, digital world. This lead to the dot-com bubble–a sharp rise, and fall, in stock prices that was fueled by investments in Internet-based companies.

With experts predicting we are now in a cryptocurrency bubble, it seems as if history is at risk of repeating itself.  

While we’ve moved far past the early stages of Internet start-ups and e-commerce companies, digital is continuing to change our everyday lives–from how we work, live, and play to the future of money itself. Interest in cryptocurrency, similar to the frenzy we saw in the early days of the dot-com bubble, is reaching a crescendo–yet many experts are already predicting its demise.

Warren Buffet has gone on the record saying that crypto will come to a bad ending. Jamie Dimon, J.P. Morgan’s CEO, called Bitcoin a fraud before later admitting that he regretted making that statement.

Meanwhile, other big-name investors and companies are going out of their way to invest in crypto–from Richard Branson to Microsoft .

But are the naysayers right? Are we headed toward a catastrophic implosion of dot-com level proportions?

Yes, the crypto market is volatile. There are too many unknowns to be certain, but if we look at the histories of companies like Amazon, eBay, Priceline, and Shutterfly, then maybe we can gain some clarity.

These e-commerce companies were born during the dot-com era, and they weathered the storm and emerged as some of the most successful and stable companies in history. The dot-com crash didn’t destroy the concept of e-commerce or the fact that consumers want to buy airline tickets, antiques, or pet food online–there was simply a gold rush in the early development stages. Once the dust settled, however, the strong survived.  

Don’t call it a comeback

In the end, the dot-com bubble was a movement. Smart investors saw the future of digital-based commerce and, as they invested, the movement snowballed into madness. Many of the companies that popped up during that time were run by people who were in over their heads, or they didn’t have the technology to keep up with the demand. When the crash happened, it thinned the herd.

Mona El Isa, the chief executive and co-founder of Melonport, summed this notion up at a recent TechCrunch conference when she said, “The dot-com bubble was messy, but if we look at some of the largest companies that exist today they are a result of the dot-com bubble and they are part of our everyday lives.”

Which leads us back to what we’re seeing with cryptocurrency today. Even if this bubble bursts, the concept of digital currency will not go away. It may wipe out 90% of today’s existing startup currencies, but the strong will survive. Companies, like Kodak, who try to create a currency without providing real customer value may see efforts go to waste. And this will pave the way for the Amazon of cryptocurrency to make its mark on the world.

To further the power of this movement, it’s important to remember that cryptocurrency isn’t a company. It doesn’t have shareholders. It isn’t VC-backed. Which means this movement extends beyond any other economic bubble we’ve seen–it’s happening in an arena that’s removed from the stock markets. So, when, and if, the bubble bursts, it won’t go quietly into that good night. The parameters may change drastically from what we are seeing today, but digital currency–in one form or another–is the future.

How to invest in a movement

So, if cryptocurrency is the future–how do you invest? From a business standpoint, it’s important to look at crypto through a risk-management lens. Business leaders and board members should be learning everything they can about this new trend so they can determine how, where, and why it might affect or fit into the business. Is there a way to offer customers value through cryptocurrency? Is the time right to execute? Is there a long-term strategy in place that will take advantage of the crypto movement when the stormy waters calm down?

These are the types of questions you need to consider. Do what’s best for your business and what’s best for your customer. As with any digital movement, you need to be aware of the trends and aware of how it could change your business. This is the only way to defend your company from possible disruption.

Final word

For anyone who is considering investing in cryptocurrency, it’s important to remember that this is a long-term movement. Our world is becoming increasingly smaller and more reliant on digital means–currency transformation is inevitable.

It’s the smart investors who understand that this isn’t a fragile economic trend. Digital currency will continue to adapt and change over the next few years–and the companies and entrepreneurs who pay close attention now will have the best chance at deftly navigating the troubled waters.

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Wall Street Breakfast: Investors Prepare For Earnings Tsunami
January 29, 2018 6:13 pm|Comments (0)

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Google, Temasek coming in as new investors in Indonesia's Go-Jek: sources
January 18, 2018 6:00 am|Comments (0)

SINGAPORE (Reuters) – Alphabet Inc’s Google (GOOGL.O), Singapore state investor Temasek Holdings Pte Ltd and Chinese online platform Meituan-Dianping are investing in a fundraising round of Indonesian ride-hailing start-up Go-Jek, sources familiar with the matter said.

Go-Jek’s existing investors such as global private equity firms KKR & Co LP (KKR.N) and Warburg Pincus LLC are also participating in the funding round of Go-Jek, which is raising about $ 1.2 billion in total, the sources said.

Google, KKR, Warburg and Temasek [TEM.UL] declined to comment. Meituan-Dianping and Go-Jek did not immediately respond to requests for comment. The people declined to be identified as they were not authorized to speak to the media.

Reporting by Anshuman Daga; Additional reporting by Julie Zhu in HONG KONG; Editing by Muralikumar Anantharaman

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Why Investors Should Support The Tesla SolarCity Merger
October 18, 2016 7:25 pm|Comments (0)

Tesla and SolarCity is a great, and necessary, idea for building the next platform for autos and sustainable electricity. Investors should vote to support this deal.


Cloud Computing

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Oracle, Ellison Accused of Misleading Investors on Cloud Revenue
June 8, 2016 10:45 am|Comments (0)

Oracle Chairman Larry Ellison is quoted in Klarfelds complaint touting Oracle in March as the top company in the world by new cloud-computing …


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