Altana Market Outlook – October 2015 by Lee Robinson


Are Unicorns for Real?

As many of you know I am a big fan of innovation in business and real life. Such innovation can range from something as simple as art or humour through to complex new ideas such as DNA genotyping or Bitcoin. Trying to work out the winners and the effects on incumbent companies helping us to find buying AND selling opportunities makes my work fascinating. I have been a keynote speaker on the subject at the GAIM conference in 2014, and in 2015 for the YPO network and will be speaking Oct 7th at the Fund management forum in London. [We’ll post the presentation on our website if you are interested]. Those of you kind enough to view the Real Vision interview also know that I believe we are living in the most exciting period for new technology across a variety of sectors and sciences in my lifetime, perhaps of all time.

Anyway back to Unicorns, not those from Blade Runner or your children’s fairy tales but the imaginative name given to non-profitable start-ups valued at over $1 Billion such as Uber, Airbnb & Snapchat. Currently there are 140 Unicorn companies with cumulative value of over $500 Billion. The Nasdaq and other western stock markets are close to their peaks in conjunction with Unicorns at their highest ever valuations. The number of lossmaking companies coming to IPO are the largest ever, even greater than 1999. However, the number of paying consumers for hotel rooms, taxis, takeaway food etc. is unlikely to have materially changed as a percentage of GDP especially as real incomes have been falling in the developed world for over ten years. So either the public companies or the Unicorns valuations are too high. Perhaps both but I suspect the disruptors will prove to be the winners.

One of the mental tests we undertake as to whether the incumbent or the disruptor would survive is to reverse timelines and see if the incumbent could play the role of the disruptor. For example, let’s say Amazon has existed for decades but retail bookstores did not. For retail bookstores to disrupt the incumbent online model the industry would then need to raise capital with a business plan to buy enormous inventory, take out long leases in expensive locations, train and pay expensive labour etc. Amazon has none of these costs. Finally the business plan assumes higher prices for the customer, less choice and smaller margins for the investors. Do you really think any investor would back that business model? Clearly the retail stores fail the test.

Easy to back test, we hear you say? So let’s look at some current Unicorns. Uber is the most highly valued Unicorn and is dismantling the barriers to entry for taxis causing Medallion Financial Corp, a specialty finance company that originates and services loans financing the purchase of taxicabs, share price to collapse. The incumbents though have reacted by the use union and regulatory pressures. Whilst I believe people are adults and can decide freely to take a cheaper option with an unqualified driver or not, the governments of Europe and US have mostly capitulated to the unions. This is a disruptive threat to a disruptor. We certainly wouldn’t value Uber as the most expensive Unicorn. There are also many copycat and other cheap options for Uber to overcome.

The 3rd most highly valued is Airbnb. Airbnb is a service to connect home owners with people looking for a room for short stays. This may be more interesting. How do we book a hotel room? Go online and search by location, services, recommendations and price. How do we book a private room? Go online and search by location, services, recommendations and price. Airbnb has arguably a better and more personalised service, more dependent on repeat business with better prices, more privacy, more transparency of what you get and more practical facilities such as cooking , cleaning facilities that appeals to families. How do the incumbents compete against this threat? Regulatory pressure is much harder to enforce. Maybe with lower prices and adding more facilities. This all hits margins yet the Travel and Leisure index is up 30% over the last 12 months. We are comfortable in predicting that this is not the right market response and this whole sector will go lower over 24 months.

We could go on with further analysis such as 3D printing, peer to peer lending, Bitcoin and others that are threatening the status quo of their sectors. The really big disruptor I believe we are all ignoring is voice recognition. Google, Skype and others are very close to mastering this area. Scientists have been developing ideas for decades. Voice recognition means translation is possible. Translation means outsourcing of work to the lowest cost language speakers is possible. The effect on labour and government revenues in the developed world will be immense with value moving to those nations with greater cheap labour. Competition will grow globally with lower wages the end result. Finally, I would recommend Clayton Christensen’s book ‘The Innovators Dilemma’ to those interested. It is one of the few truly useful business books ever written.

Summarising, the world is a rapidly changing place. We see lots of disruption with many losers and winners. For asset owners, spotting and removing those stocks and bonds that could fall 80-100% is just as important as finding those new winners. Arguably the former is much easier than the latter.


We believe the future of the web/mobile will be video. With faster download speeds this is becoming the norm. We expect 95% of all websites including financial ones will have videos embedded on their sites within the next 3 to 5 years. We are certainly moving that way with our revamped website. Our friends over at Real Vision TV, , have started a video channel focusing on superior and intelligent financial interviews. This is not the usual mundane, scripted and controlled comment which we see on the satellite networks but the best channel for high quality interviews with thought and money making ideas. I was asked in late April to give an interview on a breadth of topics. The link to the video is (Please click on the “>” sign in between the large numbers in the centre of the page). If you like what Real Vision has to offer then Real Vision are also offering Altana clients a discount of $100 off the $400 annual fee. Use the code ALTANA on the link asking you to join.

Altana News

We are pleased to announce that our Turnaround Stock Fund will launch as a sub-fund under our Altana UCITS umbrella in January 2016. The fund, managed by Thierry Vignal, has successfully navigated through the choppy waters of 2015 and delivered a performance of +6.59% year to date, versus -6.74% for the relevant benchmark index. These performance figures are based on real money ($1mn), which has been run in a sub-strategy within one of my own private investment vehicles as we test before launch. Stocks within the ATSF must have a minimum market cap of $1bn, so the performance is not flattered by the small AUM. We are more than happy with the results, considering the difficult investment environment in 2015.

Should you wish to receive any further information on this fund, please contact

Yours Sincerely,

Lee Robinson

This report is prepared by Altana Wealth Ltd (“Altana”) authorised and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom. The investment products and services of Altana are only available to persons who are professional clients and eligible counterparties as defined in FCA’s rules. They are not available to retail clients. The distribution of this report may be restricted in certain jurisdictions and it is the responsibility of any person or persons in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. Past performance is not a guarantee of future results.

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Altana Wealth Limited is authorised and regulated by the "Financial Conduct Authority". Altana Wealth SAM is authorised and regulated by the "Commission de Contrôle des Activités Financières".

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