Disruption doesn’t stop because markets fall…

Alex PollakPress

It’s only a year ago that we highlighted the incredible progress made by US robotics pioneer Boston Dynamics with its four legged ‘robot cheetah’, and now we see the two legged version – looking more humanoid, with better balance, better recovery, more power-to-weight. They won’t stop, obviously (check out what they are saying here).

Meanwhile, as the markets have been hypnotised by the falling oil price and China, quarterly earnings have been released. Google, in particular, was frankly startling. Consolidated revenue in q4  grew 18% (24% in constant currency) to US$21b. Operating profit (including moonshot losses) was up 25% to US$5.7b, so $6.7b (up 55% from US$4.36b) excluding the moonshots. This is huge growth, in an already huge company. It also suggests a profit margin on the incremental revenue of over 50%. The stock has bounced, predictably.

Baidu (which is the Chinese equivalent of Google) released on Friday and guided to around 30% revenue growth in 2016. It is about one eighth the size of Google and also bounced (it’s a company we have invested in, so full disclosure). The discussion has been all about how Chinese industry is slowing production, and it is, but the Chinese consumer has discovered all the things he or she can do on a smart-phone. It’s not that these things weren’t previously do-able some other way – they were, if you had enough time – but now they can be done within hours or even minutes. Things like ordering take-out food, or buying movie tickets, or taking a taxi. This isn’t just about buying vitamin E cream on-line, it’s a revolution in the way ordinary people live, and it continues to gather pace from a very low base (in China, note). And Baidu is monetising much more deeply in the transaction than Google did, taking a share through the Baidu wallet, which is something that Google struggled with.

So while the falling oil price will disrupt, as we have previously noted, there are still solid companies to buy. We’ll see how this turns out…


We invest in global change.

Google, one of the top ten listed US stocks, did not exist 20 years ago.

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