Issue #9: Netflix for learning, the $53b data storage opportunity and building tech for the Chinese real estate industry 🔌
Ticker Nerd Platinum Report

Issue #9: Netflix for learning, the $53b data storage opportunity and building tech for the Chinese real estate industry 🔌

Sam Renotte

March 24, 2021

April 2, 2021
5 min

What are the best books to learn about investing?

I found a great thread on Reddit this week that answers that exact question.

Here are some of the books that were mentioned:

  • The Little Book of Common Sense Investing by John Bogle
  • One Up On Wall Street by Peter Lynch
  • Thinking, Fast and Slow by Daniel Kahneman
  • Reminiscences of a Stock Operator by Edwin Lefèvre
  • Fooled by Randomness by Nassim Nicholas Taleb

What makes the list great is that it covers topics that aren't all strictly related to stocks. But are still super important if you want to succeed as an investor.

It includes books on psychology, decision making and probability.

You can check out the full list here.

Let's get into this week’s report. Here’s what we found:

  • A company that's becoming the Netflix for educational content growing over 80% year on year.
  • A company that is rapidly stealing market share from HP, Dell and IBM in the data storage market.
  • A company that is disrupting the $3.5 trillion Chinese real estate market.

CuriosityStream Inc. ($CURI)

$16.47- Share price at time of writing

Source: MarketStream.io

Summary:

  • CuriosityStream is a factual streaming platform. It's essentially comparable to Discovery on demand (Discovery+).
  • Their content focuses on engaging educational content covering topics such as science, nature, history, technology, society, and more.
  • Investors are attracted to this fast growth story, which is eyeing up more than 80% year-on-year growth for 2021.

What they do:

Founded in 2015, CuriosityStream is a streaming platform started by John Hendricks, an entrepreneur who has over 30 years of experience running channels such as Discovery Channel and Animal Planet.

They focus mainly on fact-based entertainment content in the form of television shows, documentaries, and short clips. In just 6 years of existence, they've managed to rack up over 13 million users in over 175 counties.

Why they’re spiking in interest:

According to MarketStream.io, total Reddit mentions of CURI increased by 510% when comparing February 2021 to March 2021.

Despite CuriosityStream's closest competitor Netflix having a larger amount of total mentions over the same period, their growth in mentions was mostly flat month on month.

Positive Reddit mentions increased steadily in late February after CuriosityStream's founder John Hendricks acquired 74,000 shares in the company at an average price of $13.50/share.

💸 Signal: Jim Simons, a billionaire hedge fund manager, purchased over 27,500 CURI shares in Q4 2020 and is currently still holding these shares. Source - cheaperthanguru.com

Why CURI could be valuable:

In October 2020, CuriosityStream became the leading streaming service in fact-based programing, and one of the biggest streaming services, standing by the side of giants such as Netflix.

The service works on the same principle as Netflix. You sign up, and with just a couple of clicks, you have access to one of the largest libraries of award-winning documentaries and originals.

At the end of Q3 2020, CuriosityStream scored a total of 13 million paying subscribers, up 108% YoY, and with quarterly revenues of $8.7m, up 83% YoY.

The company has achieved this growth by acquiring users through DTC products like streaming, while combining exposure to traditional media, by licensing out its content to established telecom players with large TV provider businesses.

This approach lets CuriosityStream get paid by these TV providers while helping their content get shown to a wider base of viewers. By leveraging both traditional TV providers and their DTC platform, CuriosityStream can continue scaling their business quickly.

What the risks are:

The most notable risks to CuriosityStream would come from their failure to keep costs down and external forces forcing them to spend capital on more diversified content.

This could arise from competition from other factual-based content providers. That could force CuriosityStream to not only produce more content but expand their content reach, by paying for content licenses.

Pure Storage Inc. ($PSTG)

$22.01 - Share price at time of writing

Source: marketstream.io

Summary:

  • Pure Storage offer a pay-as-you-need data storage solution that lets customers easily set up storage services and pay for it on an as-you-go basis.
  • Over the past six months, shares of Pure Storage have nearly doubled as investors began to put more faith in the company's fundamentals.
  • Continued buildup of value-added software and a heightened margin profile, plus chatter about a possible takeover scenario, have increased Pure Storage's profile.

What they do:

According to their site Pure Storage "delivers a modern data experience that empowers organizations to run their operations as a true, automated, storage-as-a-service model seamlessly across multiple clouds."

Pure helps their customers put data to use while reducing the complexity and expense of managing the infrastructure behind it.

Why they’re spiking in interest:

According to MarketStream.io, Reddit mentions of PTSG increased by over 300% when comparing February 2021 to March 2021.

This growth in mentions was a result of discussion around Cathie Wood's investment in the company. ARK Innovation exchange-traded fund (ARKK), holds about 7% of Pure Storage’s shares outstanding.

Notable comment from Reddit:

"I'm long pure storage. Slow moving but room to run overtime compared to competitors like Dell." - BrownieKhan

Why PSTG could be valuable:

Pure Storage is one of the best storage names in our coverage, and its All-Flash Array's are considered the best in the industry.

Pure Storage reported exceptional F4Q21 results and guided up for both F1Q22 and FY22 results. Pure Storage reported revenue of about $503 million, well above the $480 million estimate. EPS came in at $0.13 versus the consensus estimate of $0.09.

Pure Storage's focus on attacking enterprise customers is finally paying off. The company continues to displace incumbents such as Hewlett Packard Enterprise Company, Hitachi, IBM, and Dell.

Although enterprise clients tend to have longer deal cycles, these deals can be worth eight figures each.

Customers continue to love Pure's storage products, which is reflected in a high NPS (Net Promoter Score) of 86. On top of this, independent analysts such as Gartner consistently rank Pure Storage as an industry leader.

What the risks are:

Risks to Pure Storage include increasing competition from large vendors such as NetApp, Dell-EMC, and HPE. These large vendors have deep pockets and can discount their products for specific strategic customers.

These vendors also have large distribution networks that can tap into opportunities that might be out of reach for smaller players such as Pure Storage.

KE Holdings Inc. ($BEKE)

$60.66- Share price at time of writing

Source: marketstream.io

Summary:

  • KE Holdings (BEKE) is a leading Chinese real estate service platform with a unique business model and technological advantage.
  • The company is a first-mover from offline to online in the $3.5 trillion Chinese real estate market (more than 6.5 times the US investment volume) and is expanding.
  • Has good growth potential given its expanding business (registering about 50% growth per year by GTV) in a growing RMB 22 trillion real estate market, with few competitors.

What they do:

BEKE is a combination of two distinct businesses – an 18 year-old household name offline brokerage business Lianjia, and two year old online platform Beike Zhaofang.

Lianjia adopted a strategy that charges a higher but transparent commission rate (3%) and provides superiors services to existing options. Using this approach it gradually captured almost 20% of the existing home sales market.

BEKE also launched an Agent Cooperation Network (ACN), consolidating information and processes for each stage of real estate transactions. It evenly distributes incentives at each step, attracting collaboration from different brokers/agents.

Why they’re spiking in interest:

According to MarketStream.io, Reddit mentions of BEKE increased by over 500% when comparing February 2021 to March 2021.

Its US equivalent Opendoor was flat in Reddit mention over the same period.

Notable comment from Reddit:

"All my Chinese picks are tech stocks. I’ll want all of them for the long term. I confirmed that BEKE and NIO have PWC as their accounting firm and comply with the proposed ADR requirements." - GraybushActual916

💸 Signal: Cathie Wood and Ray Dalio, purchased over 691,000 and 6.64 million BEKE shares (respectively) in Q4 2020 and are currently still holding these shares. Source - cheaperthanguru.com

Why BEKE could be valuable:

The residential property market in China is the largest in the world, estimated at about CYN 22 trillion ($3.5 trillion) by gross transaction value) and grew by 3% year-on-year in the last year, according to CIC research consultancy in Hong Kong.

There have been attempts by other players to enter the digital domain in China but none has so far made a significant impact.

BEKE has a unique and effective business model, which integrates two previous businesses: an 18-year-old offline brokerage business “Lianjia” and a two-year-old online market platform “Beike Zhaofang”.

Lianjia is expanding with offices and agents in 29 cities across China. It is the first mover in technology transformation, moving from an offline to a hybrid (offline and online) business model.

BEKE has several advantages over its competitors.

It is a veteran in real estate brokerage, and has a deep understanding of the challenges facing digital transformation in the Chinese real estate market (e.g. fragmented and lack of transparency).

The company’s gross transaction value (GTV) grew by 50% per year in the past two years. It has a good overall upside and limited downside risks, and is expected to be profitable this year.

What the risks are:

The Chinese real estate market is sensitive to economic conditions. A severe or prolonged downturn in the global or Chinese economy could negatively affect the business, financial condition and operating results.

A substantial portion of BEKE’s revenue is concentrated in a few major urban areas (specifically Beijing and Shanghai). Economic downturns in these cities could have a significant impact on BEKE’s revenue streams.