Disruption? It’s happening

Alex PollakPress, Uncategorized

Disruption, its happening

Disruption, its happening

By Alex Pollak and Anshu Sharma, CIO and PM at Loftus Peak.

Below are the top ten listed companies by market capitalisation in 2007, and today. Look at how the top ten has changed.

Two of the firms on the list are Chinese – for example Tencent, now valued at US$523b is running neck and neck with Facebook at US$531b. Same with Alibaba, just behind Amazon, its closest competitor. Both are bigger than Walmart. Woolworths and Coles don’t rate a mention.

With the exception of bank JP Morgan Chase, all of the companies in the top ten are already active in Australia (yes, Berkshire Hathaway isn’t, but the companies it invests in, like Coke, are). Amazon sent the Australian retailers down 15% earlier this year when its announced its local launch. Apple effectively sucked the value out of Telstra simply by creating a product which leveraged digital disruption – providing movies on a mobile phone – something the incumbent just couldn’t begin to compete with.

What’s next?

What will this list look like in 10 years from now? Should we expect the list composition to change as dramatically? Do the present constituents give us some data points? These are the questions that all investors should be asking today. Our mantra at Loftus Peak is to seek future leaders by identifying dominant themes and the winners and losers that result as these themes play out. We are looking for the top 10 companies of the coming decade.

An obvious and visible example – electric cars. Just as the mobile phone resulted in the write-off of tens of billions of manufacturing equipment used to make CD players, the tape recorder and the film camera, the electric car will do the same to the fossil fuel car makers, with their multi-billion dollar plant and equipment clutch assemblies, turbos, gear boxes, exhaust systems. The list is long.

So after the entrees in advertising and communications come the main courses – transport, manufacturing and energy and of course banking.

Disruption used to be something that happened in other countries to other portfolios – but it is coming for the whole economy.

 

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