TAMIM Asset Management
TAMIM Australian Equities – Company Spotlight – Global Data Centre Group
ASX AI thematic play with this data centre investment company. See why we took a position?
Disc: ASX: GDC is held in TAMIM Portfolios as at 25 June 2024. All investing entails risk – please read disclaimer on our website for more details – www.tamim.com.au.
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TAMIM Asset Management
TAMIM Australian Equities – Company Spotlight – Clearview Wealth
Presented by Ron Shamgar, Head of Australian Equities at TAMIM Asset Management
Disc: ASX: CVW is held in TAMIM Portfolios as at 25 June 2024. All investing entails risk – please read disclaimer on our website for more details – www.tamim.com.au.
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iple geographies and channels.
The fund manager’s competitive fee structure has also played a role in its success, with the majority of its revenue coming from asset-based fees. Performance fees accounted for just 5.4% of total revenues in the first half of 2024, underscoring the stability of its income stream. With improving margins year over year, GQG reported a 54.9% increase in net operating income to US$273.2 million.
However, despite the strong performance, the growth was slightly below analyst expectations, falling short of the 65% growth forecast. This shortfall and an unexpected higher cost base may explain the recent pull back in GQG’s share price. Nonetheless, the company continues to demonstrate solid financial health, as evidenced by the increase in its quarterly dividend to 3.35 US cents per share, bringing the total dividend for the half-year to 5.66 US cents per share, a 46.3% year-on-year increase.
GQG trades on 12.5x PE multiple and a 7% dividend yield. We believe these metrics are too cheap to ignore for what is a high quality, high growth and founder led business.
The TAMIM Takeaway
We continue to focus on industry leading companies with aligned board and management teams that have shown a clear strategy to grow their respective businesses for the long term rather than focusing on short term goals. We believe this type of mentality leads to higher shareholder returns over time and in many cases to takeover offers at significant premiums.
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Disclaimer: Bravura Solutions Limited (ASX: BVS), Viva Leisure (ASX: VVA) and GQG Partners (ASX: GQG) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
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TAMIM Asset Management
Earnings Highlights: Bravura’s Turnaround, Viva Leisure’s Strategic Appeal, GQG continues to grow
Earnings season is well and truly underway with a number of companies in the TAMIM portfolio reporting last week.
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Two stand out and high conviction holdings that reported were Bravura Solutions Limited (ASX: BVS) and Viva Leisure (ASX: VVA). Coincidently we recently covered updates prior to earnings on both in Shamgar’s small cap summary.
Bravura Solutions Limited
https://tamim.com.au/wpv1/wp-content/uploads/2024/03/BVS_original.png Bravura Solutions Limited released their full year results last week with continued signs of the business turning its fortunes around.
We wrote back in November last year that we believed this could be a turnaround story but it has even caught us by surprise at the pace of change. Arguably this is one of the quickest turnarounds we have seen.
FY24 Result and On Market Buyback
Bravura Solutions reported an impressive return to profitability following significant transformation efforts.
The company achieved gross revenue of $250.4 million, marginally surpassing FY23, with operating earnings reaching $25.8 million eclipsing the prior period by $26.1 million. The growth was driven by a substantial reduction in operating expenses, which fell 10% to $231 million. The strategic cost-cutting measures included a reduction in headcount and reorganisation of occupancy requirements. As a result, Bravura posted an adjusted net profit after tax of $8.8 million, marking a $31.9 million improvement from the previous year.
Bravura’s FY24 performance reflects the success of its recent restructuring, which has restored the company to a positive cash operating earnings.
The company is in a strong net cash position with $90 million as of June 30 2024, with a net cash inflow of $14.2 million and an additional $56 million of cash payment due in FY25 we discuss further below. Despite the success, Bravura has opted not to declare a dividend in FY24 but with a view to paying dividends in FY25.
Looking ahead, Bravura aims to further strengthen its financial position by targeting cash operating earnings of $28 million to $32 million in FY25.
Earlier in the month the company announced a proposed return of capital as part of its capital management strategy. The return of up to $75.3 million has been further enhanced by an additional $20 million on-market buyback of up to 10% of the company. The strategy will be funded by existing cash reserves and proceeds from its recent agreement with Fidelity International.
Bravura group signs agreement with Fidelity International
The company has entered into an agreement with Fidelity International, granting them a perpetual, non-exclusive licence to use and develop the Sonata software platform.
The deal includes a £29 million payment ($56 million AUD), with £24 million due upon software delivery in August 2024 and the balance in early 2025. While Bravura retains intellectual property rights, the move is designed to streamline Bravura’s operations. We believe that while it may have a minor revenue impact in FY26, there will be minimal effect on profitability.
While Bravura’s transformation continues, the company is moving into its next phase of sustainable growth with some large potential new logo wins being tendered and prospect of further work in the U.K. market with existing[...]
TAMIM Asset Management
The Power of Second-Level Thinking: Beyond the Obvious in Investing
In the world of investing, the difference between success and mediocrity often boils down to how deeply one thinks about opportunities and risks. Howard Marks, co-founder of Oaktree Capital Management, is renowned for his deep insights into market behavior, and one of his most influential contributions to the field is the concept of “second-level thinking.” This idea, explored extensively in his memo “First Level Thinking vs. Second Level Thinking” and his book The Most Important Thing: Uncommon Sense for the Thoughtful Investor, offers a framework for investors seeking to transcend conventional wisdom and achieve superior results.
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What is Second-Level Thinking?
At its core, second-level thinking is about going beyond the surface. Marks defines first-level thinking as simplistic, conventional, and reactive. It’s the kind of thinking that leads to conclusions like “This company is doing well; let’s buy its stock,” or “The economy is in trouble; sell your shares.” First-level thinkers tend to focus on the obvious and make decisions based on straightforward observations that are often already reflected in market prices.
Second-level thinking, on the other hand, is more complex, contrarian, and analytical. It requires asking deeper questions, such as:
* What is the consensus thinking, and why might it be wrong?
* If everyone believes the same thing, what are the implications?
* What are the second-order consequences of this event or decision?
* What might happen that others aren’t considering?
Marks summarises this by saying, “First-level thinking says, ‘It’s a good company; let’s buy the stock.’ Second-level thinking says, ‘It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; let’s sell.'”
This kind of thinking doesn’t just accept the obvious conclusion but instead digs deeper to uncover insights that aren’t immediately apparent. It’s about understanding the nuances of market behavior, investor psychology, and the hidden risks and opportunities that first-level thinkers often miss.
The Importance of Being Contrarian
Second-level thinking often requires investors to be contrarian in their thought process. Marks frequently points out that to achieve above-average results, one must be willing to think differently from the crowd. Markets are generally efficient, meaning that the consensus view is typically already reflected in prices. To outperform, an investor needs to identify situations where the consensus is wrong and act on that insight.
However, being contrarian doesn’t simply mean doing the opposite of everyone else. It’s not enough to be different; you must be different and right. Marks emphasises that successful second-level thinking requires both contrarianism and accuracy. This means having the insight to see things others don’t and the conviction to act on those insights even when they go against the grain.
Marks writes, “To achieve superior investment results, you have to hold non-consensus views regarding value, and they have to be accurate. That’s not easy.” Indeed, this is the essence of second-level thinking: seeing opportunities where others see none, and risks where others see only reward.
Examples of Second-Level Thinking in Practice
To illustrate second-level thinking, consider a scenario where a company reports strong earnings growth. First-level thinkers might rush to buy the stock, driving up the price. However, a second-level thinker might dig deeper and ask questions like:
* Is this growth sustainable, or is it driven by one-time factors?
* How much of the positive news is already priced into the stock[...]
TAMIM Asset Management
Defence Alliance: The Future of AI-Driven Security
In an era marked by escalating geopolitical tensions and rapid technological advancements, certain companies have gained prominence due to their strategic importance and innovative capabilities.
The ongoing conflicts in regions like Eastern Europe and the Middle East have underscored the need for advanced defence technologies, driving interest in companies that serve military and intelligence sectors. Simultaneously, the rise of artificial intelligence (AI) has captured the imagination of investors and technologists alike, as AI promises to revolutionise industries.
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Palantir Technologies (NASDAQ: PLTR) stands at the intersection of these two powerful trends.
With its roots in providing critical data integration solutions to U.S. intelligence agencies, Palantir has expanded its reach to become a significant player in the commercial sector, particularly through its innovative AI-driven platforms. The company’s ability to blend cutting-edge AI technology with military-grade data processing capabilities has made it a standout in the market.
As geopolitical dynamics continue to evolve and AI advances further into mainstream applications, Palantir’s position as a leader in both arenas makes it a compelling subject for closer examination.
Who is Palantir?
Founded in 2003, Palantir Technologies began its journey by developing software solutions for the U.S. intelligence community, primarily to support counterterrorism efforts.
Over the years, the company has expanded its expertise to cater to a diverse array of commercial enterprises, offering solutions to complex data challenges that parallel those faced by government entities. Palantir has developed four principal software platforms—Gotham, Foundry, Apollo, and the Artificial Intelligence Platform (AIP). Gotham and Foundry enable organisations to integrate vast amounts of information into cohesive data assets, driving more informed decision-making. Gotham has been instrumental for global defence agencies and disaster relief organisations, while Foundry is increasingly becoming a central operating system for entire industries.
Apollo, introduced commercially in 2021, ensures the continuous operation of critical systems by managing software delivery, security updates, and platform configurations across any environment.
The company’s latest innovation, AIP, launched in 2023, integrates generative AI models and large language models with its existing platforms to operationalise AI within enterprise data environments. This innovation positions Palantir as a leader in enabling organisations to harness the power of AI while adhering to strict legal, ethical, and security standards. As Palantir continues to expand its market reach, it remains committed to forming long-term partnerships that transform how institutions leverage data in pursuit of their strategic goals.
Why is it popular?
Palantir has captured the attention of retail investors, largely due to its unique blend of military and AI associations.
Initially, Palantir’s reputation was built on its deep connections with the U.S. military and intelligence agencies. The company’s software has played a pivotal role in critical military operations, reportedly aiding in locating Osama bin Laden. This strong military association provided the stock with a certain allure, particularly among investors interested in defence and security sectors.
In recent years, Palantir has successfully rebranded itself as a leader in AI, thanks to its AIP.
This shift has attracted a new wave of investors who see the company as a key player in the AI revolution. This transformation has fueled a s[...]
TAMIM Asset Management
The Kiwi Insurer Towering Above the Competition
Insurance might not be the most exciting sector, but for certain investors, boring is beautiful. The consistent cash flow, disciplined risk management, and long-term stability that well-run insurance companies provide are exactly what make them attractive in any market environment.
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Tower Limited (ASX: TWR), though operating on a smaller scale, embodies these principles with its strong financial performance and strategic focus on innovation and efficiency. As an ASX-listed insurer with deep roots in New Zealand, Tower has recently upgraded its profit guidance, driven by improved claims performance and premium growth. This highlights the company’s ability to capitalise on market opportunities.
As Tower continues to innovate and optimise its operations, it stands out as a compelling investment opportunity within the insurance sector, offering a mix of stability and potential for growth.
Who is Tower?
Tower has a rich history that spans over 150 years.
Founded in 1869 as the Government Life Insurance Office, Tower has grown from a government-backed entity into New Zealand’s only Kiwi-owned and operated general insurer. The company’s deep roots in New Zealand are complemented by a strong presence across the Pacific, including Fiji, Tonga, Samoa, American Samoa, and the Cook Islands. Tower supports customers across diverse geographies with a comprehensive range of insurance products, including cover for homes, vehicles, contents, and businesses.
Tower’s evolution from a mutual association to a publicly listed company in 1999 listing on both the Australian and New Zealand stock exchanges in September 1999.
In November 2006, Tower’s New Zealand and Australian businesses were separated with the approval of its shareholders and the High Court.
As Tower continues to innovate, it remains focused on developing and providing market-leading benefits. The company’s commitment to growth and innovation positions it well for the future, as it continues to adapt to the evolving needs of its customers.
What’s Happened Recently?
We were particularly impressed by Tower’s strong first half results for 2024 reported back in May.
Underlying profit of NZD $36.6 million marked a significant turnaround from the previous period’s loss, driven by improved business-as-usual claims performance, premium growth, and enhanced operational efficiencies. The 20% increase in gross written premium (GWP) to NZD $291 million, alongside a reduction in the management expense, highlights Tower’s effective cost management and ability to navigate challenging market conditions. The company also announced a dividend of NZD $0.03 per share.
Another interesting marker to keep an eye on is the large weather events in New Zealand.
Most years, there are large weather events in the country which Tower provides for with a NZD provision of $45m. So far in 2024 (fingers crossed) there have been no major weather events hit New Zealand. With their financial year ending in September if there were nothing to occur over the next 2 months, that $45 million provision would be added back into the company’s profit and add $32 million after tax to the bottom line. Assuming this comes to fruition it would put the company on an earnings multiple of 5 which is much lower than the sector which trades on a multiple of around 12 to 13 times.
We also note that at the end of 2023 the company announced a strategic review.
Supported by its 20% shareholder Bain Capital, the review was put in place to explore options to optimise its capital structure and maximise value to Tower shareholders. What we like about this is the potential for corporate activity, particularly on the back of recent strong results.
Third Upgrade to Guidance
Tower recently a[...]
TAMIM Asset Management
Weekly Reading List – 8th of August
Welcome to this week’s carefully curated reading list, where we’ve mixed in a bit of everything to keep your mind sharp and entertained. From the Washington Post’s guide on keeping your data safe in a world that’s constantly trying to snatch it away, to Vox’s exposé on the oil industry’s dubious climate “solutions,” we’ve got your intellectual appetite covered. Ever wondered what happens when pallets disappear in the supply chain? The Wall Street Journal has the scoop with the ‘Pallet Detectives.’ Silicon Valley’s latest gamble on AI, PowerPoint’s unexpected rise in social circles, and Exxon’s near-miss with a trillion-dollar oil discovery are all here to spice up your reading. And for those who think the best ideas come while walking, HBR confirms it. Plus, don’t miss the BBC’s visual guide to the Olympics – a feast for your eyes. Dive in and enjoy the ride!
📚 Our data isn’t safe. Resist giving it up whenever you can (Washington Post)
📚 Oil companies sold the public on a fake climate solution — and swindled taxpayers out of billions (Vox)
📚 When This Supply-Chain Essential Goes Missing, It’s Time to Bring in the ‘Pallet Detectives’ (The Wall Street Journal)
📚 Silicon Valley’s Trillion-Dollar Leap of Faith (The Atlantic)
📚 Exxon Almost Walked Away From Its $1 Trillion Oil Discovery (Bloomberg)
📚 Don’t Underestimate the Power of a Walk (Harvard Business Review)
📚 A visual guide to the Olympics (BBC)
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are components will surge, driving growth within the semiconductor industry.
Companies that specialise in these foundational technologies will play a pivotal role in supporting the AI revolution, ensuring that the necessary infrastructure is in place to sustain AI’s rapid development.
Energy: Powering the AI Revolution
The energy sector is both a beneficiary and a driver of AI innovation. AI technologies are optimising energy production, distribution, and consumption, leading to more efficient and sustainable practices. Nation-states increasingly recognise the importance of energy independence as a national security priority.
This surge in energy demand presents numerous opportunities in the build-out of electrical infrastructure. The adoption of electric vehicles (EVs), the expansion of data centres, and the growth of cryptocurrency mining are all contributing to this increased energy consumption.
Additionally, AI is revolutionising energy management through smart grids and data analytics, enhancing efficiency, reducing outages, and lowering costs for businesses and households.
Surge in Infrastructure Needs
As AI advances, the infrastructure required to support its power demands is surging. The proliferation of AI applications is driving a significant increase in electricity consumption, necessitating substantial upgrades to the electrical grid. This includes the construction of new power plants, the expansion of transmission networks, and the modernisation of existing infrastructure to handle higher loads and improve resilience. The rise of AI-driven industries such as data centres and EVs requires robust and reliable power sources. This growth in infrastructure development presents numerous investment opportunities in sectors related to power generation, grid management, and energy storage.
Optimising Renewable Energy Sources
The integration of AI in renewable energy sources like solar and wind is enhancing their efficiency and reliability. AI algorithms can better predict weather patterns and optimise the operation of renewable energy plants, ensuring maximum energy production. This not only makes renewable energy more viable but also supports global efforts to combat climate change. AI is being used to improve battery performance, predict maintenance needs, and extend the lifespan of energy storage systems. This is essential for ensuring a stable and reliable energy supply, particularly as the world transitions to more sustainable energy sources.
Smart Grids and Energy Management Systems
Smart grids, powered by AI, represent a significant advancement in energy distribution. These grids use real-time data analytics to balance supply and demand, prevent outages, and optimise the flow of electricity. This technology enables utilities to respond quickly to changes in energy consumption patterns and integrate renewable energy sources more effectively. For businesses and households, AI-driven energy management systems provide insights into energy usage, helping to identify areas for improvement, reduce waste, and lower costs.
Money: The Fuel for AI Growth
Investment in AI is crucial for its continued development and adoption. Financing this technology is expensive, and sovereign governments are increasingly providing the necessary financial resources. The United States, with its position as the global reserve currency, is in a powerful position to lead this investment. However, this dominance is being challenged by the BRICS nations (Brazil, Russia, India, China, and South Africa) and the increasing importance of gold.
AI is not just a technological advancement; it is a security issue. As such, AI will not be a luxury but a necessity. Governments recognise this and are ramping up their investments in AI research and development to maintain national security and comp[...]
g-term value that can be delivered to ASX investors.
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Disclaimer: Dropsuite Limited (ASX: DSE), Bravura Solutions (ASX: BVS) and Viva Leisure Limited (ASX: VVA) are currently held in TAMIM Portfolios.
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TAMIM Asset Management
Shamgar’s Small-Cap Summary
The market continues to present opportunities for the strategic investor ahead of the upcoming earnings season.
Amidst recent volatility, the small-cap space remains a fertile ground for potential, as demonstrated by the latest developments in the TAMIM Australian Equity portfolios. Below are three companies held with an update on recent developments.
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Viva Leisure Expands with Key Acquisitions and Membership Growth
https://tamim.com.au/wpv1/wp-content/uploads/2024/08/041817_c565716c72b34206820b0870d5363bc6mv2-2.png Viva Leisure Limited (ASX: VVA), a leading provider of health and fitness clubs across Australia, has announced the early completion of three Western Australian acquisitions, marking a significant milestone in the company’s expansion strategy. Originally scheduled to finalise by the end of August 2024, these early completions will provide an additional month of contribution to the FY2025 results.
With these acquisitions, Viva Leisure introduces its Club Lime brand to its sixth State/Territory, further solidifying its position as Australia’s largest non-franchised health club brand. The acquisitions, totaling $15.7 million, include eight locations with approximately 20,000 members. These additions are expected to contribute over $3.9 million in EBITDA annually, with forecasted synergies of $1.0 million from FY2026.
CEO and Managing Director, Harry Konstantinou highlighted the company’s success, stating, “Our recent achievements mark a significant milestone for Viva Leisure. Surpassing the upper end of our revenue guidance for FY2024 underscores our relentless pursuit of excellence and growth.”
In addition to acquisitions, Viva Leisure has seen robust membership growth. Corporate memberships have exceeded 210,000, marking a 15% increase since June 2023. Network memberships have also grown to over 385,000, reflecting a 12% increase. The company now operates 180 corporate locations and 356 network locations, further establishing its market presence.
The company’s strategic refurbishment program, announced in August 2023, has also been completed successfully, with 27 locations undergoing enhancements. Plus Fitness, one of Viva’s brands, continues to break records, securing 21 new locations in FY2024 and surpassing 200 operating locations globally.
Looking ahead, Viva Leisure is poised for continued success with a strong pipeline of greenfield locations and ongoing acquisition strategies. More importantly management noted they are on track for the upper end of guidance achieved for Q4 and FY2024 revenue. The company’s full-year results for FY2024 will be released on 14 August 2024, promising a comprehensive update on these significant achievements.
Bravura Solutions: Proposed Return of Capital and Updated Guidance
https://tamim.com.au/wpv1/wp-content/uploads/2024/03/BVS_original.png Bravura Solutions (ASX: BVS) has announced a proposed return of capital to shareholders.
Contingent on receiving the necessary approvals from shareholders at the upcoming Annual General Meeting (AGM) and securing a favourable Class Ruling from the Australian Taxation Office (ATO) the company intends to distribute up to $75.3 million or 16.7 cents per share. This decision follows a thorough review of Bravura’s capital management strategy, following on from the previous management’s decision to raise capital in March 2023 and the significant transformation executed during FY24. The board has determined that the business is overcapitalised and aims to return excess capital to its shareholders within three months of the AGM, pending the requisite approvals.
This follows on from the July market update where Bravura announced an upgrade to its FY24 financial guidance.
The unaudited operating earnings guidance has been increased to approxi[...]
me. Common fears about staying invested during market downturns often lead to poor decision-making. Investors might be tempted to sell their holdings during a dip, but this approach frequently results in missing out on subsequent recoveries.
Two fundamental aspects are crucial for the long-term stock market investor. On the one hand, you have to trust that things will continue to improve in the long run.
The stock market is not the right place for pessimists.
One must have almost unshakeable confidence that the economy and quality of life will continue to improve over time. On the other hand, you have to be realistic. Conditions will not improve every day, every month, or every year. The path will rather be strewn with pitfalls.
Forecasts are often useless because most of the time, they are wrong.
There is no point in trying to predict what is coming; instead, we must prepare for any eventuality that could arise at any time. Saving like a pessimist allows for freedom and security when inevitable drawdowns occur. These are opportune moments to invest rather than run for the hills.
Additionally, with the beginning of a new era of technology and innovation, there is great cause for optimism when you take a long-term view. By maintaining this balanced perspective, investors can navigate market fluctuations and capitalise on the enduring growth opportunities the market offers.
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Disclaimer: Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT) and Tesla (NASDAQ: TSLA) are currently held in TAMIM Portfolios.
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Don’t Lose Gains: The Illusion of Pessimism
Would you bet your retirement on predicting the daily weather forecast over the next five years? Just as that gamble would be absurd, so too would be the attempt to perfectly time the stock market.
Negative stories and the allure of market timing can be persuasive, often suggesting that a bubble is forming and a crash is imminent. Gloom seems to be what sells these days. After all, “If it bleeds, it leads” has been said in newsrooms across the world for a hundred years. When it comes to the world of economics and investing, negative opinions also get more attention. Focusing on the potential risks and things that could go wrong seems to add to one’s credibility.
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In contrast, those with a glass half-full view can be mistaken for being overly relaxed. After all, could they really have done enough research if they hadn’t unearthed a looming crisis?
However, when it comes to investing, being an optimist pays off. Indeed, over the past 20 years, there have been sharp pullbacks, but the S&P 500 is up over 500% and the NASDAQ 1000% in that period.
It’s easy to see how investors could have been convinced to sell everything in 2019 or during the turmoil of early 2020. However, those who did missed the fastest market rebound of all time and a subsequent remarkable bull run, leaving them with cash on the sidelines. Sitting in cash waiting for another crash hasn’t been fruitful either – inflation has eaten away at your purchasing power while you tried to time the market.
To achieve long-term success, investors need to recognise the illusion of pessimism and avoid poor market timing behaviours.
Bear Markets are Shorter, Bull Markets are Longer
Historically, bear markets tend to be shorter and less frequent than bull markets. The S&P 500 index has delivered an annual return of greater than 10% over the past 30 years, including reinvested dividends. If you ha’d invested $100,000 in 1994 and left it alone, it would have grown more than 20-fold, surpassing $2,000,000. Australian shares have delivered close to the same, just over 9% annually, and even the smaller New Zealand market has returned 8.5% annually over that period.
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Source: Vanguard
Consider the myriad challenges the world has faced during that time: the September 11 terrorist attacks, numerous wars, a US housing crash, a global pandemic, and multiple recessions in the US and parts of Europe. There have been at least 14 occasions where the S&P 500 fell by more than 10%, including four instances where it dropped over 20%. Twice, the market was cut nearly in half. Despite these significant setbacks, those who stayed invested reaped substantial long-term rewards.
According to Invesco, using data from 1968 to 2020, the average length of a bear market was 349 days, while the average bull market lasted 1,764 days. Research indicates that over the last 92 years, markets have been rising 78% of the time, with only about 20 years spent in bear markets. This historical perspective underscores the importance of staying invested and maintaining a long-term optimistic outlook.
The belief that things will get better, mixed with the reality that the journey will include setbacks, disappointments, surprises, and shocks, is a fundamental principle of investing. Embracing this mindset helps investors avoid the pitfalls of market timing and focus on the sustained growth that historically always follows bear markets.
The Pessimism Bias in News and Investing
Negative news tends to dominate headlines, significantly impacting investor sentiment. Studies have shown that bad news is more likely [...]
gs. While the shift in technology is internally disrupting Ai-Media’s service revenue, it is having the same impact on competitors. The issue for Ai-Media’s competitors is that it doesn’t have the iCap advantage. With ambitions to expand iCap’s dominance globally and upsell Lexi services, Ai-Media’s strategy presents a promising area for investors to watch.
The potential for global network expansion coupled with impressive automatic speech recognition (ASR) capabilities positions Ai-Media as a noteworthy player in the broadcast technology market.
Recent Results
Ai-Media is due to report the full year 2024 results in August.
In its most recent update for the first half in February, AI-Media reported strong financial results. The company’s revenue increased by 10% to $37.2 million compared to the prior corresponding period. While not a huge jump overall, the technology side of the business grew revenue by 38%, driven by the growth in Lexi. The higher margin growth in technology revenue led to a 16% increase in gross profit to $20.5 million, with group gross margin increasing to 63%. This flowed through to improved operating earnings. The companies saw a 39% increase in operating earnings compared to the prior period to $1.9 million.
AI-Media’s cash position remained strong, with $11.7 million in cash and no debt as of December 31, 2023. The company also reported positive operating cash flow of $3.6 million for the period.
The company’s strategic focus on expanding its technology offerings and improving operational efficiency positions it well for its continued transition towards profitability.
The TAMIM Takeaway
As AI continues to revolutionise industries, AI-Media exemplifies how embracing technological disruption can lead to significant competitive advantages.
The strategic integration of AI-powered tools like LEXI and the iCap Cloud Network has not only elevated their service offerings but also fortified their market position. By focusing on technological advancements and operational efficiency, AI-Media has successfully transitioned from a reliance on legacy services to becoming a leading innovator in the broadcast technology market.
With an ever growing technology segment and improving operating earnings, the company is well positioned to move toward break-even profitability in the future. With its strong cash position, Ai-Media is well-equipped to continue expanding its global network and enhancing its ASR capabilities.
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Disclaimer: AI-Media Technologies (ASX: AIM) is currently held in TAMIM Portfolios.
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e, saw an annual inflation increase for the first time since September 2022. This rise was driven by high prices in automotive fuel, significant price increases in fruit and vegetables, and higher costs in clothing and footwear due to global supply chain issues.
Tamim’s Takeaways
Despite the overall rise in CPI, several indicators suggest that inflationary pressures might be moderating. The trimmed mean and weighted median show a reduction in the rate of inflation, indicating that the most volatile price changes are beginning to stabilise. Additionally, deflationary trends in categories such as communication and furnishings could offset rising costs in other areas. The significant drop in domestic holiday travel and accommodation prices might also reflect broader trends in discretionary spending, which could help moderate overall inflation.
Looking ahead, while housing and food prices remain high, the stabilisation in other categories suggests that the overall inflation rate may begin to decline in the coming quarters. Factors such as continued policy interventions, potential improvements in supply chains, and changes in consumer behavior could all contribute to this moderation.
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TAMIM Asset Management
TAMIM Australian Equities – Company Spotlight – Superloop
Leading disruptive and high growth telco in consumer and wholesale markets. Possible ASX Takeover Target.
Presented by Ron Shamgar, Head of Australian Equities at TAMIM Asset Management
Disc: ASX: SLC is held in TAMIM Portfolios as at 25 June 2024. All investing entails risk – please read disclaimer on our website for more details – www.tamim.com.au.
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TAMIM Asset Management
Weekly Reading List – 22nd of August
Welcome to this week’s TAMIM reading list, where we explore the dynamic intersections of business, technology, law, and science. Dive into the lifecycle of companies with insights from “At the Money,” followed by a deep dive into the dark side of AI with an exposé on the “Deepfake Elon Musk” scam. Next, we unravel the monopolistic strategies that have shaped giants like Walmart and Amazon. Shifting gears, we look at how hotels might be colluding to inflate room rates and consider the legal turmoil surrounding Trump’s immunity case. Environmental concerns are front and center with articles on climate tipping points and carbon laundering in Africa. We round out the list with a glimpse into the elite world of Paradise Cove, the enigmatic potential explosion of Betelgeuse, and the spiritual journey of Olympian Sydney McLaughlin. Each article provides a unique lens on the forces shaping our world today.
🎙️ At the Money: Learning Lifecycles of Companies
📚 How ‘Deepfake Elon Musk’ Became the Internet’s Biggest Scammer
📚 The one weird monopoly trick that gave us Walmart and Amazon and killed Main Street
📚 How hotels are colluding to jack up room rates, according to two lawsuits
📚 ‘Originalism is a dead letter’: Supreme Court majority accused of abandoning legal principles in Trump immunity ruling
📚 How Close Are the Planet’s Climate Tipping Points?
📚 Laundering Carbon and the New Scramble for Africa
📚 The Reintroduction of Kamala Harris
📚 Inside ‘Billionaires’ Bluff’: Why Paradise Cove Keeps Drawing the Superrich
📚 If Betelgeuse Explodes, Just How Bright Will It Get?
📚 The Spiritual Realm of Sydney McLaughlin
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clients. In addition Continued cost reduction initiatives and a focus on maintaining a strong balance sheet remain at the forefront of the company’s future plans.
Viva Leisure
https://tamim.com.au/wpv1/wp-content/uploads/2024/08/041817_c565716c72b34206820b0870d5363bc6mv2-2-1.png Viva Leisure delivered an impressive set of financials for FY2024, marked by a 15.9% increase in revenue to $163.6 million, driven by organic growth.
Operating earnings rose by 21.0% to $35.4 million, with enhanced margins and improving operational efficiency. Viva Leisure was cashed up with $22.3 million on hand as of June 30, with significant free cash flow reinvested in acquisitions, greenfield sites, refurbishments, and technology platforms.
Membership growth was a key highlight, with a 10% increase in owned locations to 200,067 members, despite the removal of over 15,000 low-yielding Fitness Passport members.
The company completed 27 site upgrades, achieving a return on investment of over 75%. Viva executed strategic acquisitions, including four Plus Fitness sites and seven independent locations. Furthermore, following the end of financial year the company expanded its footprint by acquiring assets from three Gold’s Gym locations and Surge Enterprises Pty Ltd, adding five more locations in Western Australia.
Looking ahead, Viva Leisure is well-positioned for continued growth, supported by its newly secured Commonwealth Bank facilities, which increase its funding capacity to $165 million. The new facility is designed to increase the free cashflow substantially enabling to grow without the need to raise equity. Q4 exit run rate is currently $39.2 million Ebitda with incremental benefits to flow on from Viva pay and the recent WA acquisitions we estimate starting base of $44 million Ebitda for FY25 before any further growth or M&A.
The company plans a smaller strategic refurbishment program in FY2025, building on the success of FY2024, while also focusing on expanding its digital signage and vending machine networks, and launching its online supplement business, Supp Society.
Viva Leisure CEO and Managing Director Harry Konstantinou said:
“We are thrilled with the outstanding results achieved this financial year, which reflect the strength and resilience of our business model. The significant growth in revenue, EBITDA, and membership underscores our commitment to operational excellence and strategic expansion.
Our focus on organic growth, coupled with prudent investments in our people, technology, and facilities, has positioned us strongly for continued success. These results are a testament to the hard work and dedication of our entire team, and we look forward to building on this momentum as we continue to deliver value to our members and shareholders.”
We certainly know a takeover opportunity when we see one.
We believe Viva Leisure is beginning to look like an appealing acquisition. We feel the company could be a prime takeover target due to its industry-leading position, founder-led management and growing profitability. The valuation is cheap, trading at 4 times enterprise value to operating earnings.
These factors often attract strategic interest, making it a compelling candidate for acquisition or market re-rating.
GQG Partners Half-Year Results: Strong Growth in FUM and Revenue
https://tamim.com.au/wpv1/wp-content/uploads/2024/08/GQG_Partners.png GQG Partners (ASX: GQG) experienced a significant 46.5% increase in average FUM during the first half of 2024, reaching US$139.5 billion. This growth was fueled by positive net flows and strong investment performance, reflecting the trust clients place in GQG’s consistent long-term returns.
Management attributes the positive net flows of US$11.1 billion during the half to the firm’s strong client relationships and the consistency of its investment strategy. Looking ahead, GQG anticipates continued positive flows throughout 2024, supported by a robust pipeline of client demand across mult[...]
?
* What are the risks that could derail this growth story?
* What happens if the broader market sentiment shifts?
By asking these questions, the second-level thinker might conclude that the stock is overvalued and decide to sell or avoid buying, even as others are piling in. This deeper analysis helps avoid overpaying for a company just because it has shown recent success.
Another example could involve a market downturn. While first-level thinkers might react to bad news by selling in a panic, a second-level thinker might look for opportunities that arise from the market’s overreaction. They might ask:
* Are certain sectors or companies being unfairly punished due to broader market fears?
* Could this downturn be an opportunity to buy quality assets at discounted prices?
* What are the long-term implications of this event, and how might the market’s perception change?
By thinking in this way, the second-level thinker is more likely to buy when others are fearful, capturing value that might not be immediately apparent.
Developing Second-Level Thinking
Marks’ work suggests that developing second-level thinking is less about intelligence and more about mindset. It requires a willingness to be skeptical of the obvious, to dig deeper into data and narratives, and to think independently of the crowd. It also demands patience and discipline, as the conclusions reached through second-level thinking often take time to be validated by the market.
Investors looking to cultivate second-level thinking can start by questioning everything. Instead of accepting a company’s success at face value, consider the reasons behind it, the sustainability of its business model, and the assumptions baked into its stock price. In times of market euphoria or panic, ask whether the market has become too optimistic or too pessimistic, and consider the potential for mean reversion.
Marks also stresses the importance of understanding the psychology of other investors. Since markets are driven as much by emotions as by fundamentals, second-level thinkers need to consider how sentiment might shift and what impact that could have on prices. Understanding behavioral finance and the common biases that affect decision-making can give second-level thinkers an edge.
The Tamim Takeaway
Howard Marks’ concept of second-level thinking is a powerful tool for investors seeking to outperform the market. By looking beyond the obvious, questioning consensus views, and thinking more deeply about the implications of events and decisions, investors can gain a significant edge.
Second-level thinking isn’t about being smarter than everyone else—it’s about thinking differently, more critically, and more independently. It’s about understanding that markets are complex and driven by a myriad of factors, many of which are psychological and behavioral. By cultivating second-level thinking, investors can navigate this complexity with greater confidence and clarity, positioning themselves for long-term success in the ever-unpredictable world of investing.
For those striving to elevate their investment game, the Tamim takeaway is clear: don’t settle for the obvious. Challenge assumptions, think deeper, and strive to see what others don’t. It’s in these often-overlooked spaces that the true opportunities—and the real rewards.
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nnounced upgraded profit guidance reflecting the company’s continued strong performance.
The insurer now anticipates an underlying net profit after tax (NPAT) exceeding $45 million for the financial year ending 30 September 2024, up from the previously projected $40 million. This marks the third upgrade to guidance since April.
The improved business-as-usual claims performance, driven by targeted underwriting actions and unusually mild weather in New Zealand, along with expected gross written premium (GWP) growth at or above the top end of the 10% to 15% range, reinforces our positive outlook on the company.
This updated guidance assumes full utilisation of the FY24 large events allowance which is conservatively set at $45m. As mentioned earlier, no large events have been recorded in the financial year to date. Any unused portion of the large events allowance at year end will increase underlying NPAT to improve the full year result.
Tower’s conservative approach to its large events allowance further strengthens its position, with potential for additional NPAT growth if large events remain absent.
The TAMIM Takeaway
Tower Limited’s combination of a rich heritage and forward-looking strategy positions it as a company to watch in the insurance sector.
The business’s recent run of strong financial results, supported by its upgrades to profit guidance, is an example of the company’s operational excellence and effective risk management. We are particularly encouraged by Tower’s disciplined approach to underwriting and cost management, which has not only improved profitability but also positioned the company to capitalise on favourable weather conditions this year. With a strategic review underway and there’s also potential for corporate activity that could unlock further value for shareholders.
Trading at a low earnings multiple compared to its peers, Tower offers a compelling blend of stability, growth potential, and value, making it an attractive investment opportunity in today’s market.
________________________________________________________________________________
Disclaimer: Tower Limited (ASX: TWR) is held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
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TAMIM Asset Management
Weekly Reading List – 15th of August
This week’s TAMIM reading list covers a diverse range of topics, from the rapid evolution of the EV industry to the financial risks of excessive leverage during market rallies. We explore the surprising psychological struggles of wealthy “tightwads,” the expanding health benefits of GLP-1 drugs like Ozempic, and the powerful networks shaping political landscapes. Additionally, you’ll find insights on essential investment strategies, the U.S. drone race, and the geek takeover of the Paris Olympics. Each article offers valuable perspectives on the forces driving change in our world today.
📚 The Well-Off People Who Can’t Spend Money: Tightwads drag around a phantom limb of poverty, no matter what their bank account says.
📚 The Benefits of Ozempic Are Multiplying: There’s mounting evidence that GLP-1 drugs have health benefits beyond diabetes and weight loss, for conditions ranging from addiction to Parkinson’s—and scientists are evolving theories of why.
📚 Inside the powerful Peter Thiel network that anointed JD Vance: A small influential network of right-wing techies orchestrated Vance’s rise in Silicon Valley — and then the GOP. Now the industry stands to gain if he wins the White House.
📚 The ‘big four’ of health: What I learned at America’s most advanced doctor’s office: Even in a world of genetic screening and rapid blood tests, the best things you can do to live longer are pretty much the same.
📚 Why America fell behind in drones, and how to catch up again: Like much of our electronics, the majority of drones deployed in the United States are made in China. It’s a bigger hole in our industrial base than you might think. Drones operate behind the scenes of every American industry — they inspect our civil infrastructure and electric grid, shoot movies, conduct land surveys, detect diseases in crops, prospect for minerals, locate gas leaks, and create 3D models.
📚 I’m an oncologist. Here’s what I do to reduce my own cancer risk. A recent study estimated that 40 percent of new cancer diagnoses in U.S. adults were due to modifiable factors such as diet and lifestyle.
📚 Nerds and geeks are taking over the Paris Olympics: Geeks find an obsessive interest that most others don’t share, then pursue it intelligently. That’s why they’re having so much success at the Summer Games.
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etitive advantage. Public funding is being directed towards building the necessary infrastructure, such as data centres and high-performance computing facilities, which are essential for AI development. Additionally, governments are establishing frameworks and regulations to guide the ethical use of AI, ensuring that its deployment benefits society as a whole.
To hedge against financial uncertainties, traditional safe havens like gold and emerging assets like Bitcoin and other derivatives are being considered. These alternatives potentially provide a buffer against inflation and economic instability. Money is a critical component that pertains to all pillars of power, and they are all intricately interconnected. The strategic allocation of financial resources will determine the pace and direction of AI advancements.
This convergence of financial support will help overcome the substantial costs associated with AI development and ensure its integration into various aspects of society, ultimately fueling growth and technological progress.
The TAMIM Takeaway
The wave of AI investment is just beginning, and the opportunities it presents are vast and varied. It’s important to comprehend that AI and the opportunities surrounding it are still in their early stages. Patience is required, as the journey towards realising AI’s full potential will take time. While current big names in the industry may seem dominant, the future winners could very well be emerging companies that are not widely known today.
Investors should remain open-minded and vigilant, seeking out an understanding of less prominent smaller and mid-size players that are poised to become the next leaders in AI. By embracing the long-term view and understanding that the landscape will continue to evolve, investors can ride this wave of AI investment towards a future of unprecedented possibilities.
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TAMIM Asset Management
Riding the AI Waves: A New Era for Tech, Energy and Money
As we stand on the brink of a new era, the wave of artificial intelligence (AI) investment is just beginning.
This transformative technology promises to revolutionise industries, reshape economies, and redefine the boundaries of human potential. For investors, the burgeoning AI landscape presents an unparalleled opportunity to capitalise on the next phase of innovation, much like the creation of the automobile and the internet before it.
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Below we explore the major themes of this technological revolution, focusing on what we believe are the three overlapping sectors that unite around AI: Technology, Energy and Money.
Technology: The Backbone of AI Innovation
AI is only at the beginning of its journey, and we foresee four broad stages that will unfold as technology, energy, and money support growth and innovation.
Phase 1: Model Training
The initial phase of AI involves developing robust models capable of learning from vast amounts of data. This stage is exemplified by models like ChatGPT, which transform quality data into actionable intelligence. The rapid adoption of ChatGPT underscores the potential of AI; it reached 1 million users in just five days, a feat that took Netflix (NASDAQ: NFLX) 3.5 years to achieve. The focus in this phase is on creating foundational AI models that can process and learn from diverse data sets.
Phase 2: Edge Devices and Data Utilisation
In the second phase, significant advancements are made as major players like Apple (NASDAQ: AAPL) leverage AI, such as it’s planned Apple Intelligence, to gain a competitive edge through data and edge devices. This stage involves integrating AI into everyday devices, such as smartphones and wearables, to enhance their functionality. AI enables these devices to offer personalised experiences, process data in real-time, and improve efficiency. The synergy between AI and edge devices marks a critical step in making AI ubiquitous in consumer technology.
Phase 3: Application Proliferation
The third phase sees the widespread proliferation of AI applications and software across various industries. AI-driven solutions will become integral to business operations, healthcare, finance, and more. This stage focuses on developing specialised AI applications that cater to specific industry needs. The advancements in AI software will lead to more intelligent systems capable of performing complex tasks, automating processes, and providing insights that drive decision-making.
Phase 4: Tangible Innovations
In the final phase, AI will bring about tangible innovations such as robots, self-driving cars, and other autonomous systems. This stage represents the culmination of AI development, where the technology is fully integrated into society, transforming how we live and work. The deployment of autonomous systems will revolutionise industries by increasing productivity, enhancing safety, and reducing operational costs. AI’s impact will be felt across all sectors, driving significant economic and societal changes.
The Role of Semiconductors and Hardware Supply Chain
Semiconductors are the essential building blocks that enable AI to function, much like how the internet and cloud computing laid the groundwork for today’s digital world. The hardware supply chain for semiconductors, including the production of wafers, cables, sensors, and processing power, is critical for creating these four phases of AI development. As AI technology advances, the demand for high-performance semiconductors and other hardw[...]
mately $25 million, up from the previously forecasted range of $18 million to $22 million. Additionally, Cash operating earnings guidance stands at around $10 million. CEO Andrew Russell attributed this upgrade to the successful execution of Bravura’s transformation strategy, which has stabilised the business and surpassed budget expectations.
We have previously discussed how we believe Bravura is a turnaround story and with the company’s proactive capital management and upgraded financial guidance position the business continues to show signs of this being the case.
Dropsuite’s Strong Q2 FY24 Results
https://tamim.com.au/wpv1/wp-content/uploads/2024/06/dropsuite.png Dropsuite Limited (ASX: DSE) reported its Q2 FY24 update displaying an encouraging set of results.
The company showcased significant growth across several key performance indicators. We’ve previously written about how Dropsuite is approaching an inflection point and the company continues to focus on expanding its market presence and enhancing its product offerings. As a result, the Q2 numbers have yielded impressive outcomes, particularly in Annual Recurring Revenue (ARR), the number of paid users and churn rate.
One of the standout metrics from Dropsuite’s Q2 FY24 report is the remarkable growth in ARR.
The company reported an ARR of AUD 39.92 million, representing a 31% year-over-year increase. This substantial growth confirms Dropsuite’s ability to attract and retain customers through its comprehensive suite of cloud-based backup and archiving solutions. The ARR growth is a testament to the company’s successful execution of its strategic initiatives and further solidifies our thesis that the company can scale its business and expand its customer base via its partner ecosystem.
During Q2 FY24 the company brought its churn rate back down to below 3%, consistent with its historical performance.
This follows on from an increase in the March quarter to just under 5%. Dropsuite previously reported that the increase was primarily due to increased competition on pricing especially in the Europe, Middle East, and Africa (EMEA) region. It was noted last quarter that the company had been introducing the necessary measures to address and mitigate churn going forward which appear at this stage to be working.
Dropsuite has seen a significant increase in its paid user base.
The number of paid users grew by a record 112k during the quarter to reach a total count of 1.35 million. This growth is indicative of the strong demand for Dropsuite’s solutions and the company’s ability to penetrate new markets. The expanding user base is a critical driver of Dropsuite’s recurring revenue model, providing a stable and predictable income stream.
Dropsuite CEO Charif Elansari commented:
“Continued growth in the global data protection market, combined with our leading position and customer-centric approach, drove record seat additions in Q2 2024. This momentum, along with continued expansion of our MSP partnerships, fuels our optimism for future growth. Furthermore, churn returned to its historical level of <3%
Dropsuite’s Q2 FY24 results reflect the company’s impressive business model and its ability to execute its growth strategies effectively. The significant increases in ARR and paid users demonstrate Dropsuite’s strong market position and its potential for continued success.
The TAMIM Takeaway
The market continues to present opportunities for the strategic investor ahead of a flurry of earnings reports expected over the next month.
Despite recent volatility, we believe there are still a number of opportunities in the small-cap space that remain ripe with potential, as evidenced by the three companies highlighted above. Strong results, capital returns, upgraded guidance, and ongoing merger and acquisition activity underscore the abundant opportunities available.
The proactive management and growth potential within the current market reinforced our confidence in the lon[...]
TAMIM Asset Management
TAMIM Global Mobility – Semiconductor Stocks – Analog Devices and Texas Instruments
Are semiconductors the new oil? Company Spotlight – Analog Devices (NASDAQ: ADI) Company Spotlight – Texas Instruments (NASDAQ: TXN)
Disclaimer: NASDAQ: ADI and NASDAQ: TXN are held in TAMIM portfolios as at 18 June 2024. All investing entails risk – please read disclaimer on our website for more details – www.tamim.com.au.
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to be reported and shared, a phenomenon known as the “negativity bias.” This bias can lead investors to make poor decisions based on fear rather than facts.
Famous bearish predictions, such as those forecasting extensive market crashes in the wake of events like the Ukraine war or a follow-on from the COVID-19 pandemic, often do not materialise. Even more pertinent is the fact that, beyond the relatively short and painful period of corrections and bear markets, bulls take over and drive markets to new all-time highs.
Investors who reacted to these dire predictions frequently miss out on subsequent market rallies. In late 2022, headlines were that rising interest rates would be the death of technology and growth. The technology-focused mega-cap leaders dubbed the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla), climbed 75.71% as a collective during 2023.
“Pessimists sound smart, optimists make money.”
– Nat Friedman
By focusing on the long-term potential rather than short-term volatility, optimists are better positioned to benefit from the market’s inherent upward trajectory.
Seizing Opportunities Amidst Technological Advancements
There is a lot of hype around AI, and it is understandable why some investors might think it’s best to “wait for a crash” before diving in. The market concentration in the top five stocks of the S&P 500—Apple, Microsoft, Amazon, Nvidia, and Alphabet—could easily fool anyone into believing the entire market is overvalued. However, this perspective overlooks the broader opportunities available within the AI sector.
The AI market is projected to grow at a compound annual growth rate (CAGR) of 37% through 2030, according to data from Grand View Research. Last year, the industry reached nearly US$200 billion, and this trajectory suggests it could achieve close to US$2 trillion by the end of the decade.
“Over time, AI will be the biggest technological shift we see in our lifetimes. It’s bigger than the shift from desktop computing to mobile, and it may be bigger than the internet itself. It’s a fundamental rewiring of technology and an incredible accelerant of human ingenuity.”
– Sundar Pichai (CEO of Google)
The AI value chain is extensive, encompassing everything from semiconductor manufacturing to cloud computing infrastructure. Companies involved in producing the essential components for AI, such as wafers, cables, sensors, and processing power, stand to benefit significantly. Additionally, the demand for AI applications necessitates energy infrastructure, robust data storage and cloud computing solutions, creating opportunities for companies in these sectors.
We never suggest investors blindly throw money into the market, nor do we think index investing is the best method for compounding wealth. However, we do know that the next phase of technological invention and innovation is really in its early days and attempting to perfectly time market entries and exits can lead to missed opportunities.
While large-cap stocks get most of the attention and some valuations may seem extended, there is a vast sea of opportunities in small and mid-cap companies. These smaller firms often fly under the radar but are poised to benefit from decades of growth in AI technology and energy innovation. By focusing on these areas, investors can position themselves to capitalise on the transformative potential of AI while avoiding the pitfalls of market timing.
The Classic Rules of Investing
Long-term investing has consistently proven to be beneficial. Historical performance data shows that despite periodic downturns, markets generally trend upwards over ti[...]
TAMIM Asset Management
Weekly Reading List – 1st of August
This week’s reading and viewing list covers Attack of the AI Voice Clones, Inside Mark Zuckerberg’s AI Era and The Magnificent 7 and the Dangers of Market Hype.
📺 Inside Mark Zuckerberg’s AI Era (Bloomberg, video (YouTube)
📚 Country Risk: My 2024 Update (Aswath Damodaran)
📺 Are We Now Too Impatient to Be Intelligent? (Rory Sutherland, Nudgestock (YouTube)
📚 Attack of the AI Voice Clones (David Epstein)
📚 Neglecting Equilibrium (Verdad)
📚 Let Compounding Do Its Work (Joe Wiggins, Behaviour Investing)
🎙️ The Magnificent 7 and the Dangers of Market Hype (The Intellectual Investor Podcast)
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TAMIM Asset Management
Changing the Game: AI Innovations in Media on the ASX
Artificial intelligence (AI) is fundamentally reshaping traditional industries, driving unprecedented change across multiple sectors.
From healthcare and finance to manufacturing and media, AI’s transformative impact is both disruptive and empowering. Legacy businesses face significant challenges as AI-driven solutions streamline processes, reduce costs, and enhance accuracy, often rendering traditional methods obsolete. For instance, the healthcare industry sees AI improving diagnostic accuracy and patient care, while in finance, AI algorithms enhance trading strategies and risk management.
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However, amid this disruption, some forward-thinking companies are seizing the opportunity to reinvent themselves.
We believe a prime example of this is AI-Media Technologies (ASX: AIM), a global leader in captioning, transcription, and translation solutions. By embracing change, AI-Media has successfully integrated cutting-edge technologies enabling them to deliver superior accessibility services.
This strategic self-disruption not only strengthens AI-Media’s competitive edge but also positions it at the forefront of innovation in the broadcast technology market.
About the Company
AI-Media offers a comprehensive suite of products, including LEXI, an AI-powered automatic captioning tool, various encoding tools for seamless caption delivery and the iCap network allowing integration of the process.
AI-Media’s acquisition of EEG Enterprises in May 2021 was a transformative move that significantly enhanced the company’s position in the captioning and video technology market. This strategic acquisition not only expanded AI-Media’s presence in North America but also added crucial technologies to its product suite, making it a fully vertically integrated player in the industry.
The integration of EEG’s technologies, including the LEXI automatic captioning solution and the iCap Cloud Network, allowed AI-Media to offer end-to-end solutions for captioning, transcription, and translation.
The iCap network, being the world’s largest and most secure captioning delivery network, processes over 9 million minutes of content monthly, giving AI-Media a significant competitive advantage. This vertical integration means AI-Media can now provide solutions at every stage of the captioning process, from encrypting source data to encoding, captioning, transcription, and translation.
The company’s solutions are trusted by world-leading broadcasters and organisations, including major sporting events and global media companies.
Ai-Media’s Competitive Advantage
Historically, human captioners were essential, serving as intermediaries who repeated spoken content and trained the model to recognise specific voice prints.
However, outside of complex scenarios, advancements in AI technology have diminished the necessity for these intermediaries. Despite slow group revenue growth in recent years, Ai-Media’s technology sector has experienced rapid expansion. Not only is the tech side of the business growing, it is doing so at a significantly higher gross margin than that of the legacy services business. A crucial piece of Ai-Media’s strategy is the iCap network, which transitioned from a free model to a fee-based one, thereby increasing reinvestment and reinforcing its competitive edge. This move underscored the businesses competitive advantage as rivals continued using iCap, unable to develop similar infrastructure independently.
Ai-Media’s iCap network not only sustains its dominance but also facilitates the upselling of its advanced ASR technology, including Lexi.
US broadcasters with existing encoding hardware/software are easily transitioning to Lexi, demonstrating the seamless integration and appeal of Ai-Media’s offerin[...]
TAMIM Asset Management
Understanding the Latest CPI Data: Is Inflation Moderating?
As investors, staying informed about economic indicators is crucial to making sound investment decisions. The Consumer Price Index (CPI) is one such indicator, providing insights into the inflationary trends within the economy. Today, the Australian Bureau of Statistics (ABS) released the CPI data for the June Quarter 2024, and it has significant implications for our investment strategy.
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Overview of the June Quarter 2024 CPI Data
The CPI data for the June Quarter 2024 reveals a 1.0% increase in prices over the quarter and a 3.8% increase over the past twelve months. While this marks a continuation of the inflationary trend, the underlying details provide a nuanced view of the economic landscape.
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Source: Australian Bureau of Statistics
Key Statistics and Detailed Analysis
The housing sector remains a significant driver of inflation. Prices in this category increased by 1.1% for the quarter and 5.2% over the year. The rise in housing costs was primarily driven by higher rents, which increased by 2.0% this quarter, reflecting strong demand and low vacancy rates. Additionally, new dwelling purchases by owner-occupiers rose by 1.1% due to higher labor and material costs. Electricity prices also saw a notable increase of 2.1%, influenced by the exhaustion of Energy Bill Relief Fund rebates.
In the category of food and non-alcoholic beverages, there was a 1.2% increase this quarter and a 3.3% rise over the year. Notable price movements included a significant rise in fruit and vegetable prices, up by 10.6% this quarter due to unfavorable growing conditions. Meals out and take away foods also increased by 0.6% quarterly and 4.2% annually, while non-alcoholic beverages rose by 1.1% this quarter.
The clothing and footwear sector experienced a 3.1% surge in prices this quarter and a 2.9% rise over the year. This increase was driven by new season stock and the end of promotional activities. Similarly, the alcohol and tobacco category saw a 1.5% quarterly rise and a 6.8% annual increase, primarily due to the biannual AWOTE indexation and residual impacts from the February excise increase.
Factors Contributing to Decreased Inflation
Despite these increases, some categories saw price decreases, helping to moderate overall inflation. Communication costs, for instance, decreased by 0.8% this quarter, although they remain 1.4% higher annually. This decline was primarily due to reduced costs in telecommunication equipment and services.
The furnishings, household equipment, and services category saw only a 0.8% increase this quarter and a -1.1% annual change, indicating some deflationary pressures. Additionally, domestic holiday travel and accommodation prices fell by 4.8% this quarter, contributing to lower overall inflation in the recreation and culture category.
Trends and Predictions
While the overall CPI indicates a continued rise in prices, underlying trends suggest a potential moderation in inflation. The trimmed mean, which reduces the effect of irregular or temporary price changes, rose by 0.8% this quarter, down from 1.0% in the previous quarter. Similarly, the weighted median increased by 0.8%, indicating a steadying of inflationary pressures.
Analysis of Non-Tradables vs. Tradables
Non-tradables, which are influenced primarily by domestic factors, remained high at 5.0% annual inflation. Key contributors included rents, which increased by 2.0% this quarter, medical and hospital services, which rose by 2.1%, and new dwelling purchases by owner-occupiers, which increased by 1.1%. On the other hand, tradables, affected by international trad[...]
