Everyone who has ever thought of investing in stocks and shares has asked himself that age-old question: How do I know which company is the best/safest/most probable to succeed in the (near) future? Well, Saber Capital Management Inc. may just have the answer for you.
We read their report The Common Denominator: Tencent, Facebook, Google in which they tried to get to the bottom of these money-making machines and their strategies. The report looked for the “common denominator” for Facebook, Amazon, Netflix, Google, Tencent, and JD.com. Actually, there is more than one: Underearning, Rapid Growth, Culture, ROIC, Large Markets, and Network Effects. Out of all these, the key to becoming rich and successful seems to lie in culture and customer satisfaction.
Apparently, all the big names haven’t started off with enormous figures on their minds. Their initial idea was what they are focused on even today, and that is the happiness of their client, i.e. a product that works. If your product is making the customers happy, consider yourself to be on the right path. To show us what it really means in practice, Saber introduces us to an extremely profitable Chinese company – Tencent.
Tencent – a prosperous Chinese conglomerate that made use of the specific Chinese internet and the rising middle class. They deal with digital advertising, video game publishing, mobile payments, media subscriptions, and e-commerce. Saber explains this in a very simple way by asking us to picture a corporation owning Facebook, WhatsApp, YouTube, MasterCard, Nintendo, PayPal, Apple Music, EA Sports and Netflix, and all of that mixed into one. Pretty incredible, right? It’s hard to imagine a Western company embracing all of these, but this is precisely what Tencent does, and it’s earning high revenues because of it.
As a result, today we witness just the beginning of Tencent’s fairy tale. They have developed WeChat, an application which already has over 1 billion users. As opposed to some other widely downloaded applications, this one seems to have it all. Actually, ordinary apps seem rather obsolete and lacking services when we compare it to WeChat. If we told you it’s used for shopping online, reading comments, or chatting, that would make it sound like just another app, wouldn’t it? However, WeChat is what people use to pay for goods, taxis, food deliveries, theater tickets, and even hospital appointments.
In addition, Saber drew a comparison between Tencent and Facebook, and it does not look good for the latter.
To summarize, Saber Capital believes such culture oriented companies (Tencent, Facebook, and Google) are actually rather cheap compared to their (upcoming) success on the market. Their main assets are valuation multiples. Similar to Coca-Cola, for example, only better. Their culture and an enormous network can vouch for their expected success, and it is going to be bigger than ever before. Just take a look at the latest stunning Tencent figures.