INSIGHTS
COVID-19
Global markets are at the time of writing down over 20% in the past few weeks as market volatility has soared due to the crisis spawned by coronavirus (COVID-19). This is understandably unsettling for investors as markets have now fallen victim to another “black swan” in the form of a virus that has quickly developed into a pandemic.
The swiftness of the declines has caught even the savviest of investors off guard, including ourselves. Although this is the first time in modern financial history that a pandemic has caused a major financial market correction, it is not the first time that investors have endured a major shock.
Read our report on how we are navigating through these volatile times here.
Press Confirms our Analysis
Please find detailed below two recent articles from The Wall Street Journal & the Financial Times that confirm parts of our investment thesis on the long-term outlook of the luxury resale market and The RealReal as a market leader within this newly emerging sub-sector of luxury retail.
Sony - Make Believe
Elevation Capital Global Shares Fund investors own a share of Sony Corporation [SNE], a conglomerate which suffers from misplaced perceptions that it is still a slow-moving consumer electronics company.
The company has a long history of innovation which is still present in 2020. Sony dominates the gaming, music and semiconductor industries, all of which are experiencing significant economic tailwinds. As the company consolidates already profitable segments, divests from less profitable ones and invests in products facing significant increases in demand, Sony has many levers to pull for value creation to unfold.
Learn more about this business and why we believe it provides a compelling long-term investment opportunity by reading our Summary Report here.
The RealReal - the Resale Fashion Disruptor
Elevation Capital Global Shares Fund: Investors own a share of The RealReal [REAL.O], one of the largest online marketplaces for consigned luxury goods. The RealReal is leading the proliferation of a circular economy for fashion, giving additional life to luxury brands such as Gucci and Louis Vuitton. The RealReal’s unique flywheel means revenue can be expected to increase while maintaining costs by generating authentic reach turning buyers into consigners and vice-versa. The company has scalability and is positioned to benefit from the economic tailwinds in the resale industry.
Learn more about this business and why we believe it provides a compelling long-term investment opportunity by reading our summary report here.
Elevation Capital’s Research Featured in Value Investor Insight
Elevation Capital’s research once again featured by Value Investor Insight, a known favourite of Warren Buffett. The prestigious US publication highlighted our summary report on the Petcare Industry, the full report can be found here.
WELCOME TO 2020!
Elevation Capital wishes our investors and followers a Happy and Prosperous New Year. The Elevation Capital Global Shares Fund’s Top 10 positions* as we enter a new decade are as follows:
*as at 31 December 2019
ELEVATION CAPITAL GLOBAL SHARES FUND BIDS FAREWELL TO TIFFANY & CO.
The Elevation Capital Global Shares Fund divested its investment in Tiffany & Co. after Moët Hennessy – Louis Vuitton (LVMH) increased its bid to US$135.00 per share for the Company and the Directors recommended the offer. The fund held an investment in Tiffany for 7.61 years and generated a per annum (pa) return over the period of +18.4% p.a.
INTRODUCING SWITZERLAND
While references to German efficiency and Scandinavian welfare are common in discussions of economic and political issues, one little European nation which punches far above its weight is often overlooked. Switzerland’s streamlined government and open borders have fostered a globally competitive economy which is home to 13 of the top 100 European companies. Not bad for a small landlocked mountainous country with four official languages.
Learn more about Switzerland’s investor friendly environment by reading here.
Highlighting Trupanion
Elevation Capital Global Shares Fund: Investors in the fund own a share of Trupanion Inc. [TRUP.US], a monthly subscription that eliminates uncertainty around the cost of pet care. Trupanion provides medical insurance for cats and dogs in the US and Canada, where it is on course to become the largest player in the industry. Trupanion’s unique business model and higher relative value proposition renders the company well positioned to seize the opportunity provided by the strong tailwinds in the Petcare Industry.
Learn more about this business and why we think it provides a compelling investment opportunity by reading our Summary Report here.
Introduction to the Petcare Industry
The Petcare Industry is continuing to experience secular growth both in scale and the revenue it generates on a per pet basis. The developing world is spending more on pets than ever before. The industry growth is driven by a growing population, higher rates of pet ownership among younger generations, and the trend of “pet humanisation” - the phenomena of considering pets and their dietary, medical, and other needs, as on par in importance with the human members of a family.
Learn about the Petcare Industry and why we believe our “best friends” provide compelling long-term investment opportunities by reading our summary report on the sector here.
VIACOM+CBS IS ALMOST HERE
Viacom Inc. and CBS Corporation are expected to close their historic merger next week, on December 4th, and begin trading as ViacomCBS on December 5th. The Elevation Capital Global Shares Fund owns shares in both Viacom and CBS. This merger is the latest round of large consolidations in media as legacy players continue seeking scale to weather industry disruption. The new company, ViacomCBS, will operate everything from CBS Communication’s lucrative television networks to the iconic Paramount movie studios. We believe that in a world where “content is king” the merger will generate value for shareholders by creating the largest content spender after Netflix and Disney (the latter of which the Fund also owns shares in).
Read more about this merger and the scale/brand of the two companies on our blog here.
Zooplus, Europe’s Online Pet Store
Elevation Capital Global Shares Fund: Investors in the fund own a share of Zooplus A.G. [ZO1G.DE], the leading online retailer for pet supplies in Europe. The company sells around 8,000 products for the most popular types of pets. The product range includes pet food, accessories, and toys in all price categories. Zooplus customers not only enjoy an extensive product range with fast and free delivery, but also benefit from a variety of interactive content and community offers. Zooplus AG has already successfully launched its business model in 30 European countries. This makes Zooplus the only genuinely pan-European online retailer for pet supplies. Since its initial public offering in 2008, the company's sales have risen from €80million to a total of €1,342million in the 2018 financial year.
Learn more about this business and why we think it provides a compelling investment opportunity by reading our Summary Report here.
DISNEY LAUNCHES ITS DIRECT-TO-CONSUMER STREAMING SERVICE: DISNEY+
Elevation Capital Global Shares Fund: On 19 November Disney launched Disney+, its direct-to-consumer streaming service in New Zealand and Australia following its launch in the US a week earlier. Disney+ has thousands of hours of content from such powerhouse brands as Marvel, Star Wars, Pixar, and Fox. We believe that in a world where “content is king” that The Walt Disney Company presents a compelling long-term investment for the fund.
Read more about the launch of Disney+ in our mailer (released 15 November 2019) here and learn why we believe The Walt Disney Company is a compelling investment opportunity by reading our Investment Summary here.
ELEVATION CAPITAL’S GLOBAL SHARES FUND BENEFITS FROM TWO TAKEOVER OFFERS
Elevation Capital Global Shares Fund: Last month Tiffany & Co received a US $14.5 Billion takeover offer from Louis Vuitton Moet Hennessy (LVMH), at an approximate +30% premium to the prevailing share price. Tiffany & Co is the largest positions in the Fund which seeks to acquire companies trading below their intrinsic value and that are out of favour with many investors. Another holding in the fund, QMS Media, also received a takeover offer last month at a +22% premium to the prevailing share price.
These announcements add to a history of takeovers in the Fund since its inception which we have tracked on our Takeover Timeline:
Read more about the most recent takeover offers Elevation Capital has benefited from in our mailer (released 17 November 2019) here.
HIGHLIGHTING FLUGHAFEN ZURICH
Elevation Capital Global Shares Fund: Investors in the Fund own a share of Flughafen Zurich AG, the owner and operator of the largest international airport in Switzerland which serviced over 31 million passengers in 2018. Population growth, economic development, the increasing internationalisation of business, along with our modern lifestyles, are all driving demand for global mobility by air. Due to this market tailwind the airport has been experiencing high demand and capacity constraints at peak times for many years now, which we find is a good problem to have. Read about Flughafen Zurich and why we established a position in the company in our monthly mailer (released 06 September 2019) here.
DISNEY, THE GREAT STORYTELLER
Elevation Capital Global Shares Fund: Investors in the Fund own a share of The Walt Disney Company, a global mass-media and entertainment powerhouse with strong brand equity and wide familiarity among consumers. Disney recently unveiled Disney+, its upcoming direct-to-consumer streaming service soon to be home to content stemming from powerhouse Disney brands such as Marvel, Star Wars, Pixar, National Geographic, and Fox. Disney is expecting to have between 60 million and 90 million subscribers by fiscal year end of 2024.
Read more about The Walt Disney Company in our monthly mailer (released 28 August 2019) here and our Investment Summary here.
CONTENT IS STILL KING
CBS Corporation and Viacom Inc. have announced they will combine in an all-stock merger to create ViacomCBS, a global producer and distributor of premium content. The Elevation Capital Global Shares Fund owns shares in both Viacom and CBS. The two companies combined spent more than US$13billion on content creation in the last 12 months. The combined entity will be the third largest content spender after Netflix and Disney (the latter of which the Fund also owns shares in).
In a world where “content is still king” we believe this merger will create significant value for shareholders by bringing together the most-watched US broadcast TV channel with the owner of the Paramount Pictures film studio and a portfolio of cable channels.
CBS Corporation and Viacom Inc. have announced they will combine in an all-stock merger to create ViacomCBS, a global producer and distributor of premium content. The Elevation Capital Global Shares Fund owns shares in both Viacom and CBS. We first invested in Viacom in 2014 and a copy of our original presentation may be found here.
Both companies are controlled by the Redstone family which has been a dominant force in US media for decades. CBS and Viacom have been independent companies since 2006 when Sumner Redstone, who popularised the phrase “content is king” in the mid-1990s, broke them up to crystalise value in Viacom. We agree with his daughter and chairperson of the combined entity Shari Redstone that in the wake of current media industry trends, and the mega-mergers of Disney with Fox and AT&T with Time Warner, it is a “logical move” to re-unite the two halves of this historic media empire.
In a world where “content is still king” we believe this merger will create significant value for shareholders by bringing together the most-watched US broadcast TV channel with the owner of the Paramount Pictures film studio and a portfolio of cable channels.
CBS and Viacom combined spent more than $13billion on content creation in the last 12 months. The combined entity will be the third largest content spender after Netflix and Disney (the latter of which the Fund also owns shares in).
This is not where the story ends. The merger will deliver an estimated $500million in annualized run-rate synergies and increase financial scale with substantial free cash flow. It would be strategically logical for ViacomCBS to acquire one of the smaller content producers (listed in the graph above) and overtake Netflix in content spend.
The Fund owns shares in Discovery Communications which targets youth and niche audiences that are complimentary to the ViacomCBS’ own presence in these demographics. We expect Discovery to be a prime candidate for merger discussions with ViacomCBS. You may learn more about Discovery Communications by reading our research and investment thesis on the company here.
Christopher Swasbrook Shares Some Lessons with the University of Auckland Investment Club
Elevation Capital’s - Christopher Swasbrook presented to the University of Auckland Investment Club sharing some of the lessons he has learnt since founding Elevation Capital using real-life examples. We were pleased to see an encouraging turnout of students eager to learn about investing and look forward to engaging with the University in the future.
ELEVATION CAPITAL VALUE FUND CHANGES NAME TO GLOBAL SHARES FUND
We are pleased to announce that the Elevation Capital Value Fund has changed its name to the Elevation Capital Global Shares Fund.
The name change better reflects what the Fund undertakes — global investment in shares of companies around the world. There are no other changes to the Fund and no change to the investment strategy.
You may locate updated documents and learn more about the Global Shares Fund by viewing the new fund website here.