buyside final
TRANSCRIPT
Spring 2016 Buyside Project
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Team Introduction
Pristine “Yiyi” Chen
•Senior, McGlinn Hall
•Finance & Applied Math
Kevin Rajput
•Senior, Dillon Hall
•Finance & Int’l Peace Studies
Daniel Riehle
•Junior, Knott Hall
•Science Business
Esther Lee
•Sophomore, McGlinn Hall
•Finance & Int’l Peace Studies
Bryan Lim
•Freshman, Keenan Hall
•Finance Intent
Phil Rim
•Freshman, Keough Hall
•Finance Intent & Sociology
Michael Romano
•Freshman, Stanford Hall
•Finance Intent & American Std
Introduction Millennials Trends Investments
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Executive Summary
Companies & Products
Amazon Uber VenmoRec. & Med. Marijuana
Wearable Technology
Driving Trends
Social Progressivism Sharing EconomyOn-Demand
EconomyFinancial
Technology
Millennial Trends
Lifestyle Education Work Financial
Introduction Millennials Trends Investments
PROMPT: From your perspective, what do you believe will be the five best performing products
or companies over the next five years?This question will force you to examine your own consumer preferences, your spending habits, your brand
preferences, [and] cost considerations […] You should examine why these products or services will be so
relevant to your needs.
THE MILLENNIAL GENERATION
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Millennials
Lifestyle Education Work Financials
Companies
5Source: Goldman Sachs Millennial Generation Report
Definition & Characteristics
Four Major Areas
1984; MacintoshReleased
1990; Americans with Disabilities
Act
1995; First Pixar Movie was released
1998; Googlefounded
1999; First Blackberry
released
2002; No Child Left Behind Act
passed
2004; Facebooklaunched
2007; First iPhone released
2008; Barack Obama elected
President
2015; Same-sex marriage ruled legal in United
States
• Born between 1980 and 2000
• Millennial generation is the biggest in US history – even bigger than the Baby Boom
• Grown up in a time of great technological change and globalization
• Millennial population of 74.3 million people that spent $170 billion in 2015
Introduction Millennials Trends Investments
Millennial Trends
Work Trends
▪ Millennials are more socially progressive
than any previous generation
▪ Becoming more secular
▪ Technology is more integrated into daily
life at a much younger age
▪ Active lifestyles influence trends in
industries from restaurants to fashion
▪ Flocking to athleisure clothing for their
go-to clothing for both leisure and work
6Sources: Business Insider, Time, NYTimes
Lifestyle Trends
Cross Generational Comparison Values Job Factors Valued as Important
Introduction Millennials Trends Investments
▪ 49% of the working age population in 2020
will be millennials
▪ Value social media freedom, device
flexibility, and work mobility over salary
▪ Personal development is the most
important job factor
▪ 46% of millennials want to start their
own businesses within 5 years
▪ Transitory: an average of 3 years at a job
3028
25
5
12
50
12 12
0
10
20
30
40
50
60
Meaningful Work High Pay Sense ofAccomplishment
Responsibility
Millennialls Managers
2629
16
36
21 23
48
16
30
0
10
20
30
40
50
60
Marriage by 32 Religiouslyunaffiliated
Wouldn't letundocumented
immigrants stay incountry
Millennials Gen X Boomers%
%Millennials Managers
Millennial Trends
▪ Most educated generation; by 2013, 47%
received a postsecondary degree
▪ Total student outstanding loan debt
surpassed $1 trillion by the end of 2015
▪ More students rely on loans to pay for
post-secondary education
▪ Average balance has grown by 74% in
the last decade
Education Trends
▪ Preference to brands that can offer
maximum convenience at the lowest cost
▪ Making auto and student loans more of a
priority
▪ Lowest credit scores among generations
▪ Millennials have been turning to services
that provide access to products without
the burdens of ownership
7Source: New York Federal Reserve
Financial Trends
Preferred Banking Methods Non-mortgage Balances
Introduction Millennials Trends Investments
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
0
100
200
300
400
500
600
700
800
900
1000
1100
1200
HELOC Auto Loan
Student Loan Credit Card
$ Billions $ Billions
88
72
5347
17
0
10
20
30
40
50
60
70
80
90
100
OnlineBanking
ATM In BranchBanking
MobileBanking
TelephoneBanking
%
DRIVING TRENDS
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Social Progressivism
Millennials Support:
9Sources: American Progress, New York Times, Washington Monthly
Description
Generational Support for Marijuana Examples
Social progressivism will be a dominant force of change in the next five years because of the growing
millennial demand for tolerance of actions or lifestyles that were previously taboo or illegal
Introduction Millennials Trends Investments
44%
66% 61%
77%
17%
38%47%
63%
0%
20%
40%
60%
80%
100%
Silent Boomers Gen. X Millennials
Democrats Republicans
Legalization of recreational and medicinal marijuana
Same-sex marriage
Racial & gender equality
Secularity
Immigration reform
Universal healthcare
Redistribution of wealth
The desire to continually improve social conditions for
all individuals as well as increase tolerance for differing
lifestyles and choices
2008, 2012 Election and Reelection of
President Obama
2010Implementation
of the Affordable Care Act
2015Legalization of
same-sex marriage
Key Events
Sharing Economy
• An economic model in which individuals are
able to borrow or rent assets owned by
someone else
• Trust, convenience, and a sense of
community are biggest driving factors
• Transportation, hospitality, and media sharing
economy sectors are the largest
• Smartphones are rapidly facilitating its growth
• Companies forced to invest in IT and social
media, as they are large driving forces
10Sources: PwC, Statista
Description
Rise of the Sharing Economy Examples
The sharing economy will be a dominant force of change in the next five years as graduating students
prioritize paying back student loans over owning new assets or spending
Introduction Millennials Trends Investments
61%10% 9% 2%
78%70% 68%
52% 54%
68%
81%73% 71%
43% 44%
66%
0%
20%
40%
60%
80%
100%
Asia-Pacific LatinAmerica
Middle East/ Africa
NorthAmerica
Europe GlobalAverage
Willing to share own assets Willing to share from others
% US Adults Agree the Sharing Economy:
86% Makes life more affordable
83% Makes life more convenient and efficient
89% Based on trust between providers and users
81% Is less expensive to share goods than to own them
individually
72% Feel that this economy’s experience is not consistent
69% Will not trust sharing economy companies until they are
recommended by someone they trust
Key Statistics
On-demand Economy
11Sources: Next Juggernaut, The On-Demand Economy, The Atlantic
Description
Age of On-Demand Workers Examples
The on-demand economy will be a dominant force of change in the next five years because of advancements
in technology that allow for faster and more efficient service to meet the demand for immediate service
Introduction Millennials Trends Investments
1%
4%
11%
16%
29%
39%
0% 10% 20% 30% 40% 50%
65 years +
55 to 64 years
45 to 54 years
35 to 44 years
25 to 34 years
18 to 24 years
• “The economic activity created by digital
marketplaces that fulfill consumer demand via
immediate access to and convenient
provisioning of goods and services”
• “the advancement of the commerce-based
solutions that make day-to-day life simpler and
more efficient”
• Emergence of more smart devices and
advancements in technology are making services
more accessible and readily available
# of Americans who have used on-demand services 86.5 M
# of Americans who have offered on-demand
services
45.0 M
Percentage whose financial situation has improved 51%
Percentage that are satisfied with their work 70%
Percentage of workers with a college degree 29%
Percentage working because of flexible schedule 46%
Overall median hourly wage (across industries) $18
Key Statistics
Financial Technology
Online Lending Awareness by Age
12Sources: CME Group, Business Insider, Barrons
Description
Global Marketplace Loan Issuance ($BB) Corporate Examples
Financial technology will be a dominant force of change in the five years because the convenience of
financial transactions will increase the velocity of money, making access to capital more liquid
Introduction Millennials Trends Investments
0%
20%
40%
60%
80%
100%
18-34 35-55 55+ Total
Used Aware Unaware
$-
$50
$100
$150
$200
$250
$300
$350
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
US UK China Australia
CAGR: 76.1%
• Financial technology is has been the target of
numerous venture capital firms
• Online loans based on algorithms have shown to
be more accurate at forecasting risk especially
for those with poor or nonexistent credit
• Millennials are increasingly aware of these
platforms and are being targeted based on their
limited credit history
• Marketplace lending is looking to explode,
fueled by online platforms
SELECTED INVESTMENTS
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Amazon
Drivers
• Retail sales
• Amazon Web Services
• Kindle content sales
• Third-party businesses
• Home grocery delivery
Risks
• Competition such as Walmart and Jet
• Profit uncertainty
• Minimal international revenue and price competition
Future Value Creation
Function: E-commerce and cloud computing
company that sells and distributes goods to
consumers
Sales Strategy:
14Source: Amazon 10-K, Bloomberg, Yahoo Finance
Description
Two-Year Stock Chart Drivers & Risks
Amazon is positioned to become a top-performing company because of its dominance as a number one online
marketplace and because of its innovative initiatives to disrupt competitive markets in groceries and movies
Introduction Millennials Trends Investments
Growth in cloud computing services
Increasing e-commerce trends such as AmazonFresh
Expansion to emerging markets (i.e. India & China)
Improvement in margins
$200
$300
$400
$500
$600
$70052-week high: $696
52-week low: $369
Current price: $598
1. Retail Sales2. E-Books &
Content
3. Commission on Reseller
Sales
4. Prime Monthly
Subscriptions
Uber
Drivers
• Lower fuel prices
• Higher disposable income
• Domestic travel
• International expansion
• Network effect
Risks
• Lawsuits & controversies
• Obtaining & retaining drivers
• Regulatory issues
• Strong competitors abroad (Didi Kauidi)
Future Value Creation
Function: To allow users to requests rides
through their phones and get nearly
immediate service
Sales Strategy:
15Sources: Bloomberg, Next Juggernaut, Vanity Fair, Investopedia, Venture Beat
Description
Company Valuation in Millions Drivers & Risks
Uber is positioned to become a top-performing company because it fulfills the millennial demand for
immediate transportation service in nearly any location
Introduction Millennials Trends Investments
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
2011 2012 2013 2014 2015 2016
• Food Delivery ServiceUberEats
• Courier ServiceUberRush
• Logistics-and-Delivery ServiceUberCargo
• Cars that do not require a driverSelf-Driving Cars
• Untapped markets abroadInternational Markets
Car Rides per km or mile bases
Surge Pricing
Revenue
Venmo
Drivers
• Mobile P2P payments is expected to reach $17 billion in transaction volume by 2019
• Free and instantaneous
• Adding 4 million users per quarter
Risks
• Campaign to enlist large retailers is exerting pressure on margins
• Increased transaction expense
Future Value Creation
Function: a free digital wallet that lets you
make and share payments.
Sales Strategy: Credit card transaction fees
and gains from interest
▪ 56% of Millennials are already using E-
Wallets
▪ Social engagement and simplicity factor
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Description
Venmo Quarterly Payment Volume Drivers & Risks
Venmo is positioned to become a top-performing company because it’s becoming a standard for how millennials think
about P2P payments
Introduction Millennials Trends Investments
0
0.5
1
1.5
2
2.5
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q32014
Q12015
Q22015
Q32015
Ramping up in-store payments through partnerships with large retailers
Target merchants that already accept payments through PayPal
Opening doors to merchants to accept payments
$mm
Marijuana
Drivers
• Legalization of both medical and recreational marijuana
• Companies gain capital as they apply to be listed on exchanges
• New efficient production techniques
Risks
• Possible high taxes
• Public backlash to marijuana use could prevent legalization
• Strict government regulation
Future Value Creation
Function: Can be used recreationally by
individuals or medicinally through doctors’
prescriptions
Sales Strategy: Sold at dispensaries in different
forms so consumers have different choices for
what to consume
▪ Dispensary owners in legal states are
beginning to accept credit cards and other
forms of payment
17Source: ArcView Market Research, Fortune
Description
Recreational Marijuana Market Growth Drivers & Risks
Marijuana is positioned to become a top-performing product because of the social progressiveness of the
Millennial generation and the decriminalization of Marijuana by state governments
Introduction Millennials Trends Investments
Legal
Legal by
2020
Not legal
Additionally, medical marijuana is legal in 23 states
There will be more legal sellers and the demand will increase
Competition between firms that produce marijuana would increase
They will be forced to improve the quality of marijuana and sell it at an affordable price
This would be very attractive to potential buyers
Wearable Technology
Drivers
• Customer discretionary income
• Battery technology
• Medical field acceptance / incorporation
• Fashion industry support
Risks
• Fashion trends can be unpredictable
• Vulnerable to economic cycles due to discretionary nature
• High R&D upfront costs require significant capital input
Future Value Creation: Partnerships
Function: Technology that doubles as an extension of phone/computer and a fashion item
Sales Strategy: Target the middle/upper-middle class as customer base and form partnerships with designers and brands▪ High ability to individualize items as
fashion▪ Increased accessibility
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Description
Wearables Market ($mm) Drivers & Risks
Wearable Technology is positioned to become a top-performing industry because it is a high growth industry
with medium to high barriers to entry due to patents and brand awareness
Introduction Millennials Trends Investments
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2010 2011 2012 2013 2014 2015 2016 2017 2018
Tory Burch + Fitbit Nike + Apple
Investment Portfolio
Amazon
Company, Mature
On-Demand Economy
Financial Technology
Uber
Company, Start-Up
On-Demand Economy
Sharing Economy
Venmo
Company, Start-Up
Financial Technology
Marijuana
Product
Social Progressiveness
Wearable Technology
Product
On-Demand Economy
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Introduction Millennials Trends Investments
Investment Thesis: By analyzing the different trends driving consumption and purchasing
decisions in the millennial generation, we created an investment portfolio of companies and
products, with a variety of different characteristics, that we believe best capitalizes on these
patterns.
THANK YOU!
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