Weekend Reading

29 June 2019 | by Ensemble Capital

A summary of this week’s best articles. Follow us on Twitter (@INTRINSICINV) for similar ongoing posts and shares.

How the Pursuit of Leisure Drives Internet Use (The Economist)

Technology in cellular phones has come a long way in the past twenty years advancing from Nokia’s popular snake game in the late 90’s to today’s phones equipped with live multiplayer capabilities.  Internet connectivity and cellular phones have experienced extensive growth, particularly in emerging market countries like India, where subscriptions for mobile broadband services more than doubled between the end of 2016 and the end of 2018 from 218m to 500m.  The availability of internet offers an endless supply of information but many also choose to use their newfound connectivity to be entertained, to express themselves, and to stay connected to each other.  This article examines the growth of cellular phones and internet connectivity and its relationship with a potentially increasing culture of leisure.

Mastercard on Facebook’s Libra Crypto Payments Future (PYMTS, @pymnts, PYMTS)

Blockchain technology and cryptocurrencies have attracted speculators, skeptics, investors, and cybercriminals since its introduction into the market and now Facebook is entering the arena with their own payment solution, Libra.  Global payments provider Mastercard is one of the founding members of the Libra Project and Jorn Lambert, Executive Vice President of Digital Solutions at Mastercard, was quoted on this topic saying “As you know, we’ve been looking at blockchain for quite a while, understanding the technology standards, doing pilots with banks and filing a number of patents. We absolutely think stablecoins will play a role in our future, that is [what] we have invested in over the years.”  This article explores Mastercard’s vision of combining cryptocurrenty with a private governing body to create something stable and ubiquitous enough to be used for payments across the globe.

The Truth about Growth and Value Stocks (Bin Jiang and Timothy Koller, @koller_tim, McKinsey & Company)

When evaluating investments it’s rare that they present themselves as black or white.  It takes deep analysis and research to truly find out what type of investment you’re buying in to.  This article discusses the all so commonly used “growth” vs. “value” terminology and how there’s much more to consider aside from how the security is labeled.  McKinsey conducted an analysis on growth vs. value companies and found that companies labeled as so called “growth stocks” don’t actually grow appreciably faster than “value stocks” but that the two categories display widely different returns on invested capital.  Ensemble Senior Analyst, Todd Wenning, CFA recently wrote about evaluating companies in his article Looking for the Next ROIC Machine.

Tweets, Trade and the Fed Now Have Markets Moving in Packs (Avantika Chilkoti, @AChilkoti, and Pat Minczeski, @pat_minczeski, The Wall Street Journal)

Constant updates about a US and China trade war, uncertainty in the Eurozone, and the Fed contemplating the direction of rates has the market behaving in a “risk-on, risk-off” mentality. This “phenomenon happens when markets essentially split into two broad buckets that move together: risk-off, or haven assets, which rally when investors grow skittish; and risk-on, or growth assets, which rally when risk appetite returns.” This articles examines the positive correlation between information distribution and market sentiment within currencies, stocks, and bonds.  Ensemble President and Chief Investment Officer, Sean Stannard-Stockton, CFA wrote about investing in this environment in his article Trade Wars & Recessions: Investing Under Conditions of Uncertainty.

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