Weekly Issue: Del Frisco’s Sends Strong Signals of Potential Take Over Bid

Weekly Issue: Del Frisco’s Sends Strong Signals of Potential Take Over Bid

Key points inside this issue

  • The stock market continues to move higher even as global growth slows and S&P 500 earnings prospects for the current quarter slump further.
  • Our long-term price target on Thematic King Amazon (AMZN) shares remains $2,250, which offers more than 35% upside following its December quarter earnings report.
  • As Living the Life Thematic Leader Del Frisco’s Restaurant Group (DFRG) gets serious with its strategic alternatives, our price target remains $14.
  • We are issuing a Buy on and adding the Del Frisco’s Restaurant Group (DFRG) September 20, 2019, 10.00 calls (DFRG 190920C00010000) that closed last night at 0.60 with a stop loss at 0.30.
  • On the housekeeping front, we were stopped out of the Nokia (NOK) July 2019 7.00 (NOK190719C00007000) calls last Friday (Feb. 1).

 

Stocks rebounded in a pronounced manner as we started off 2019, making it the best January showing since 1989. The data continues to point to a slowing global slowing economy, especially in China and in the eurozone with Italy in a recession and France not too far behind. The December-quarter concerns, however, have rolled back and propelled the market higher, especially during the last week of the month when the Fed signaled patience with its speed of further interest rate hikes. For the month in full, the S&P 500 finished up just shy of 8.0%, ahead of the Dow Jones Industrial Average’s 7.2% rise, but trailing the tech-heavy Nasdaq’s 9.7% surge.

On top of Friday’s blockbuster January Employment Report, a stronger-than-expected ISM Manufacturing Index reading for January came in, which showcased a rebound in new order activity. On the back of those two reports, the domestic stock market started February off in the green, as that data suggest the U.S. remains the brightest spot in the global economy. That view was supported by the January PMI data released Friday morning by IHS Markit, which showed the U.S. manufacturing economy picking up steam while that activity in the eurozone and Japan slowed, and China marked the second month in contraction territory.

 

Another positive inside the ISM Manufacturing Report was the month-over-month drop in the Prices component. Pairing that with falling prices in the eurozone data, it’s another reason the Federal Reserve can take its finger off the interest rate hike button for the time being. That patient stance, shared by the Fed this week after its latest FOMC meeting, has walked the dollar back some, but as we see in the chart below the greenback’s year-over-year strength will likely continue to be a headwind for companies during the first half of 2019.

 

The current mismatch between U.S. economic data and that for China has raised hopes for U.S.-China trade talks. Also lending a helping hand on that front were several positive tweets from President Trump exiting this week’s round of trade talks. I remain cautiously optimistic but will once again remind subscribers it’s the details that we’ll be focused on when they are released. 

As we move deeper into February, just over half of the S&P 500 companies have yet to report their quarterly results and given the slowing global economy and dollar headwinds we are likely to see further downward revisions to earnings expectations for the S&P 500 in the coming weeks. Along with the market’s push higher in January that has extended into February, should those revisions come to pass it means the market gets incrementally more expensive. This means we should continue to tread carefully in the near-term.

 

As we do this, known catalysts to watch in the coming weeks will be incremental developments on U.S.-China trade and potential moves by the European Central Bank. Following the weakening economic data in the eurozone, ECB President Mario Draghi said, “The European Central Bank is ready to use all its policy tools to support Europe’s softening economy, including by restarting a recently shelved bond-buying program.” There is also the possibility of another government shutdown should Congress fail to reach an agreement on immigration. Who said 2019 was likely to be boring?

 

Tematica Investing

As I have said numerous times, we do not buy the market, but rather invest in companies that are well positioned to capitalize on the tailwinds from our 10 investment themes. From time to time, we are given opportunities to scale into existing positions and in my view, we are seeing that now with Thematic King Amazon (AMZN). The reason for this latest bout of weakness in Amazon’s share price is management’s comments that it will once again investment more than Wall Street expected and the news over e-commerce regulations in India.

From time to time we’ve seen Amazon step up its investment spending and historically its been a great time to load up on the shares because those investments have paved the way for future growth. From opportunities in grocery, mobile payments, streaming video and gaming services, healthcare following its PillPack acquisition as well as expanding the scale and scope of its Amazon Prime service further in the US and abroad, there are ample thematic opportunities for the Amazon business. I also suspect that with FedEx (FDX) looking to collapse order times to under 24 hours for its retail partners, that Amazon too is working on growing its Prime Now offering at the same time.

Let’s turn to the new e-commerce regulations in India and their potential impact on Amazon. The issue is that while these new regulations permit full foreign ownership of ‘single brand’ retailers such as IKEA, restrictions are in place with ‘multibrand’ stores such as supermarkets from outside India. Odds are we will see a rebranding of sorts by the likes of Amazon, Walmart (WMT) and others that are looking to tap into this New Global Middle-Class market. Candidly, given Amazon’s growing private label business that spans apparel, furniture, food, electronics, and other categories, I’m not all that bothered by this. And let’s face it, not only are the folks at Amazon pretty smart, but we have yet to see a market that shuns two-day delivery. I doubt India and its growing middle-class will be the first.

The bottom line with this Thematic King is it is a stock to own as the company is poised to further disrupt other markets, sectors and other business models in the coming quarters.

  • Our long-term price target on Thematic King Amazon (AMZN) shares remains $2,250, which offers more than 35% upside following its December quarter earnings report.

 

 

Del Frisco’s gets serious about entertaining take out bids

After a few weeks of no big news from Living the Life company Del Frisco’s Restaurant Group Inc. (DFRG) after it pre-announced its fourth-quarter revenue in early January, we have a new development that in my view reinforces our belief that the company is putting itself up for sale. More specifically, Del Frisco’s announced on Monday that it has executed a cooperation agreement with its third-largest shareholder, Engaged Capital — the same shareholder that criticized the management team in late 2018 and suggested the company examine its strategic alternatives.

Included in the agreement is the appointment of Joe Reece not only to the Del Frisco’s board but also as the Chairman of the Transaction Committee that is overseeing the company’s previously announced review of strategic alternatives. There are other conditions with the cooperation agreement, but it is the naming of Reece and the comments contained inside the accompanying press release that gives us some insight into his background. The comments read in part:

Glenn W. Welling, the founder and Chief Investment Officer of Engaged Capital, said, “I am pleased to have reached this agreement as part of a constructive dialogue with Del Frisco’s. In addition to his decades of experience working inside boardrooms, Joe Reece brings exceptional experience in investment banking and the capital markets to Del Frisco’s which will be instrumental as the Board evaluates the various opportunities available to maximize value for all shareholders.”

 Joe Reece has over 30 years of experience as a business leader. His experience working with executives at corporations, financial sponsors, and institutional investors, as well as serving on several public company boards, will bring an added dimension to the Board.

Mr. Reece is the Founder and Chief Executive Officer of Helena Capital. Mr. Reece previously served as Executive Vice Chairman and Head of the Investment Bank for the Americas at UBS Group AG from 2017-2018 as well as serving on the board of UBS Securities, LLC.

 

More on Reece’s background is contained in the press release, but as the above excerpt notes, he has ample investment banking experience. In our view, the naming of Reece as chairman of the Del Frisco’s Transaction Committee means two things. First, the company is serious about examining alternatives to remaining a stand-alone company. Second, it is also serious about extracting the greatest value for its business and brands.

As shareholders, this news has increased my degree of confidence that a transaction, be it with private equity or a strategic partner, is likely to happen. As such, we will continue to keep DFRG shares as a Thematic Leader for the time being to capture these potential gains.

  • As Living the Life Thematic Leader Del Frisco’s Restaurant Group (DFRG) gets serious with its strategic alternatives, our price target remains $14.

 

Weekly Issue: Making a strategic move on  Del Frisco’s options

Weekly Issue: Making a strategic move on Del Frisco’s options

Key points inside this issue

  • The stock market continues to move higher even as global growth slows and S&P 500 earnings prospects for the current quarter slump further.
  • Our long-term price target on Thematic King Amazon (AMZN) shares remains $2,250, which offers more than 35% upside following its December quarter earnings report.
  • As Living the Life Thematic Leader Del Frisco’s Restaurant Group (DFRG) gets serious with its strategic alternatives, our price target remains $14.
  • We are issuing a Buy on and adding the Del Frisco’s Restaurant Group (DFRG) September 20, 2019, 10.00 calls (DFRG 190920C00010000) that closed last night at 0.60 with a stop loss at 0.30.
  • On the housekeeping front, we were stopped out of the Nokia (NOK) July 2019 7.00 (NOK190719C00007000) calls last Friday (Feb. 1).

 

Stocks rebounded in a pronounced manner as we started off 2019, making it the best January showing since 1989. The data continues to point to a slowing global slowing economy, especially in China and in the eurozone with Italy in a recession and France not too far behind. The December-quarter concerns, however, have rolled back and propelled the market higher, especially during the last week of the month when the Fed signaled patience with its speed of further interest rate hikes. For the month in full, the S&P 500 finished up just shy of 8.0%, ahead of the Dow Jones Industrial Average’s 7.2% rise, but trailing the tech-heavy Nasdaq’s 9.7% surge.

On top of Friday’s blockbuster January Employment Report, a stronger-than-expected ISM Manufacturing Index reading for January came in, which showcased a rebound in new order activity. On the back of those two reports, the domestic stock market started February off in the green, as that data suggest the U.S. remains the brightest spot in the global economy. That view was supported by the January PMI data released Friday morning by IHS Markit, which showed the U.S. manufacturing economy picking up steam while that activity in the eurozone and Japan slowed, and China marked the second month in contraction territory.

 

Another positive inside the ISM Manufacturing Report was the month-over-month drop in the Prices component. Pairing that with falling prices in the eurozone data, it’s another reason the Federal Reserve can take its finger off the interest rate hike button for the time being. That patient stance, shared by the Fed this week after its latest FOMC meeting, has walked the dollar back some, but as we see in the chart below the greenback’s year-over-year strength will likely continue to be a headwind for companies during the first half of 2019.

 

The current mismatch between U.S. economic data and that for China has raised hopes for U.S.-China trade talks. Also lending a helping hand on that front were several positive tweets from President Trump exiting this week’s round of trade talks. I remain cautiously optimistic but will once again remind subscribers it’s the details that we’ll be focused on when they are released. 

As we move deeper into February, just over half of the S&P 500 companies have yet to report their quarterly results and given the slowing global economy and dollar headwinds we are likely to see further downward revisions to earnings expectations for the S&P 500 in the coming weeks. Along with the market’s push higher in January that has extended into February, should those revisions come to pass it means the market gets incrementally more expensive. This means we should continue to tread carefully in the near-term.

 

As we do this, known catalysts to watch in the coming weeks will be incremental developments on U.S.-China trade and potential moves by the European Central Bank. Following the weakening economic data in the eurozone, ECB President Mario Draghi said, “The European Central Bank is ready to use all its policy tools to support Europe’s softening economy, including by restarting a recently shelved bond-buying program.” There is also the possibility of another government shutdown should Congress fail to reach an agreement on immigration. Who said 2019 was likely to be boring?

 

Tematica Investing

As I have said numerous times, we do not buy the market, but rather invest in companies that are well positioned to capitalize on the tailwinds from our 10 investment themes. From time to time, we are given opportunities to scale into existing positions and in my view, we are seeing that now with Thematic King Amazon (AMZN). The reason for this latest bout of weakness in Amazon’s share price is management’s comments that it will once again investment more than Wall Street expected and the news over e-commerce regulations in India.

From time to time we’ve seen Amazon step up its investment spending and historically its been a great time to load up on the shares because those investments have paved the way for future growth. From opportunities in grocery, mobile payments, streaming video and gaming services, healthcare following its PillPack acquisition as well as expanding the scale and scope of its Amazon Prime service further in the US and abroad, there are ample thematic opportunities for the Amazon business. I also suspect that with FedEx (FDX) looking to collapse order times to under 24 hours for its retail partners, that Amazon too is working on growing its Prime Now offering at the same time.

Let’s turn to the new e-commerce regulations in India and their potential impact on Amazon. The issue is that while these new regulations permit full foreign ownership of ‘single brand’ retailers such as IKEA, restrictions are in place with ‘multibrand’ stores such as supermarkets from outside India. Odds are we will see a rebranding of sorts by the likes of Amazon, Walmart (WMT) and others that are looking to tap into this New Global Middle-Class market. Candidly, given Amazon’s growing private label business that spans apparel, furniture, food, electronics, and other categories, I’m not all that bothered by this. And let’s face it, not only are the folks at Amazon pretty smart, but we have yet to see a market that shuns two-day delivery. I doubt India and its growing middle-class will be the first.

The bottom line with this Thematic King is it is a stock to own as the company is poised to further disrupt other markets, sectors and other business models in the coming quarters.

  • Our long-term price target on Thematic King Amazon (AMZN) shares remains $2,250, which offers more than 35% upside following its December quarter earnings report.

 

 

Del Frisco’s gets serious about entertaining take out bids

After a few weeks of no big news from Living the Life company Del Frisco’s Restaurant Group Inc. (DFRG) after it pre-announced its fourth-quarter revenue in early January, we have a new development that in my view reinforces our belief that the company is putting itself up for sale. More specifically, Del Frisco’s announced on Monday that it has executed a cooperation agreement with its third-largest shareholder, Engaged Capital — the same shareholder that criticized the management team in late 2018 and suggested the company examine its strategic alternatives.

Included in the agreement is the appointment of Joe Reece not only to the Del Frisco’s board but also as the Chairman of the Transaction Committee that is overseeing the company’s previously announced review of strategic alternatives. There are other conditions with the cooperation agreement, but it is the naming of Reece and the comments contained inside the accompanying press release that gives us some insight into his background. The comments read in part:

Glenn W. Welling, the founder and Chief Investment Officer of Engaged Capital, said, “I am pleased to have reached this agreement as part of a constructive dialogue with Del Frisco’s. In addition to his decades of experience working inside boardrooms, Joe Reece brings exceptional experience in investment banking and the capital markets to Del Frisco’s which will be instrumental as the Board evaluates the various opportunities available to maximize value for all shareholders.”

 Joe Reece has over 30 years of experience as a business leader. His experience working with executives at corporations, financial sponsors, and institutional investors, as well as serving on several public company boards, will bring an added dimension to the Board.

Mr. Reece is the Founder and Chief Executive Officer of Helena Capital. Mr. Reece previously served as Executive Vice Chairman and Head of the Investment Bank for the Americas at UBS Group AG from 2017-2018 as well as serving on the board of UBS Securities, LLC.

 

More on Reece’s background is contained in the press release, but as the above excerpt notes, he has ample investment banking experience. In our view, the naming of Reece as chairman of the Del Frisco’s Transaction Committee means two things. First, the company is serious about examining alternatives to remaining a stand-alone company. Second, it is also serious about extracting the greatest value for its business and brands.

As shareholders, this news has increased my degree of confidence that a transaction, be it with private equity or a strategic partner, is likely to happen. As such, we will continue to keep DFRG shares as a Thematic Leader for the time being to capture these potential gains.

  • As Living the Life Thematic Leader Del Frisco’s Restaurant Group (DFRG) gets serious with its strategic alternatives, our price target remains $14.

 

Tematica Options+

As I noted above, it increasingly looks to me that Del Frisco’s is priming itself to be acquired. Over the last several years, we’ve seen several high-end steakhouses, such as Morton’s, Fleming ’s and the Capital Grille, acquired by either strategic or financial buyers. As we’ve discussed before in regard to Del Frisco’s business, these fine dining establishments tend to be less susceptible to economic downturns than casual and fast-casual dining restaurants. This makes them a sought after jewel in a restaurant portfolio, and with few stand-alone steakhouses like Del Frisco’s left, odds are it is only a matter of time before it too is acquired.

Therefore, while we own DFRF shares as part of the Thematic Leaders, we are going to add the Del Frisco’s Restaurant Group (DFRG) September 20, 2019 10.00 calls (DFRG 190920C00010000) that closed last night at 0.60 to our Options+ holdings. The timing of these calls will give the company’s Transaction Committee ample time to conduct a thorough process, which will likely include multiple bidding rounds. Because there is the possibility, no matter how slim it might be, that Del Frisco’s and would be buyers do not agree on price, we are going to set a stop loss on these calls at 0.30.

 

 

India’s Mobile Monsoon

India’s Mobile Monsoon

 

An article in this week’s Economist points out some phenomenal data that speaks to our Global Rise of the Middle Class investing theme. While the Middle Class in many developed nations is under pressure, part of our Middle-Class Squeeze investing theme, we are seeing technology help leapfrog infrastructure needs in many emerging markets. In India, mobile data is giving people access to the global economy in ways that was utterly impossible just a few years ago.

Just three years ago there were only about 125m broadband internet connections in India; by last November the number had reached 512m. New connections are growing at a rate of 16m per month, almost all on mobile phones. The average Indian phone user now consumes more mobile data than most Europeans.

Incredible economies of scale possible in the most populous nation on earth make for business models that are not feasible elsewhere.

So as not to limit the market to people who can afford smartphones, Jio also launched its own 4g feature-phone, the JioPhone, which it says is “effectively free”. Customers pay only a refundable deposit of 1,500 rupees ($21) for the device, with which they can use WhatsApp, watch YouTube and take pictures. As Mr Ambani said last year, for most users their Jio connection “is not only their pehla [first] phone but also their pehla radio and music player, pehla tv, pehla camera and pehla Internet”.

Which has lead to incredible adoption rates.

Data in India now cost less than in any other country. On average Jio’s users each download 11 gigabytes each month.

The opportunities here are staggering, but as we’ve seen pushback on globalization in much of the developed world, so too is India looking to protect is domestic companies from foreign competition. Draft rules revealed last July would require internet firms to store data exclusively in India. Another set of rules that went live last October require financial firms to store data locally, too. On December 26th India passed rules that hit hard at Amazon (AMZN) and Walmart (WMT), which dominate e-commerce there, preventing them from owning inventory in an attempt to protect local digital and traditional retailers.

Investors are well served to look beyond just the U.S. economy which is facing growth headwinds from slowing population growth, aging demographics and enormous debt loads with a mountain of unfunded liabilities across pensions and Social Security. In India, a country with a massive population that is relatively young and with productivity levels well below those of developed economies, small improvements can generate enormous returns for both its citizens and investors.

Source: Mukesh Ambani wants to be India’s first internet tycoon – India’s new Jiography

China accounted for nearly half of app downloads in 2018

China accounted for nearly half of app downloads in 2018

It’s not only the pace of the smartphone market that is slowing here in the US, so is the rate at which we are downloading apps even though Apple’s App Store and Google Play remain dominant platforms. A new report shows that China, India, Brazil, and Indonesia are the driving force behind app downloads and app-related revenue growth, which likely reflects the deployment of 4G networks and the adoption of smartphones. No wonder Apple is keen on cracking China and India. To us, this is our Rise of the New Middle-class investing theme intermingling with our Digital Lifestyle theme.

Global app downloads topped 194 billion in 2018, up 35 percent from 2016, according to App Annie’s annual “State of Mobile 2019” report released today. Consumer spending across app stores was up 75 percent to reach $101 billion. The report, which analyzes trends across iOS, Android and the third-party Android stores in China combined, follows the company’s earlier report released at year-end, which looked at downloads and spending across just iOS and Google Play.

According to the “State of Mobile” report, China accounted for nearly 50 percent of total downloads in 2018 across iOS and the third-party stores, despite the slowdown related to a nine-month game license freeze in the country. China also accounted for nearly 40 percent of consumer spending in 2018.

Emerging markets played a role in fueling downloads, as well, accounting for three out of the top five markets for downloads (India, Brazil and Indonesia). Download growth in the U.S., meanwhile, has slowed.

Developing markets played little role in consumer spend, however. Instead, the countries contributing the most on that front were (in order): China, the U.S., Japan, South Korea and the U.K.

It found that Chinese mobile gaming giant Tencent was the global leader for overall revenue across iOS and Android, not counting the third-party Android app stores. It was also the leader in game revenue. Tencent topped the non-game app chart for 2018, too, with its Tencent Video app clocking in at No. 3.

Source: China accounted for nearly half of app downloads in 2018, 40% of consumer spend | TechCrunch

India to have over 800 million smartphone users by 2022

India to have over 800 million smartphone users by 2022

Even though new smartphone subscriptions in the U.S. market are slowing dramatically as demand matures, becoming increasingly reliant on replacement demand, tailwinds associated with our New Global Middle-Class investing theme explain why Apple CEO Tim Cook is so keen on breaking into India in a meaningful way. A new report from Cisco Systems forecasts smartphone growth in India to grow by 425 million users over the 2017-2022 period – roughly 180% of the U.S. smartphone subscriber base in the US this year. This growth will not only drive tailwinds for our Digital Lifestyle theme but also place demands on existing infrastructure that should drive a spending tailwind for our Digital Infrastructure one as well.

The number of smartphone users is expected to double to 829 million by 2022 from 404.1 million in 2017, projects a new Cisco report.This proliferation of smart devices will propel India’s per capita data consumption to nearly 14 gigabytes (GB) by 2022 from 2.4 GB in 2017, according to Cisco’s latest “Visual Networking Index (VNI)” report.“By 2022, the smartphone data consumption will increase by five time in India — which proves the dominance of smartphones as the communications hub for social media, video consumption, communications, and business applications, as well as traditional voice,” Sanjay Kaul, President, Asia-Pacific and Japan, Service Provider Business, Cisco, said in a statement on Monday.

Key predictions for 2022 (India)

· In India, there will be 840 million total Internet users (60% of the population) by 2022, up from 357 million (27% of the population) in 2017.

· In India, there will be 2.2 billion networked devices by 2022, up from 1.6 billion in 2017.

· In India, Smartphones will account for 38% (829.0 million) of all networked devices by 2022, compared to 26% (404.1 million) in 2017, (15.5% CAGR).

· In India, Smartphones will average 17.5 GB per month, up from 3.5 GB in 2017.

· India’s IP traffic grew 53% in 2017 and reached 3.3 Exabytes per month in 2017, up from 2.1 Exabytes per month in 2016.

· In India, IP traffic reached 2.4 Gigabytes per capita in 2017, up from 1.6 Gigabytes per capita in 2016. Per capita Consumption will reach 13.9 GB by 2022.

· In India, Internet video traffic grew 73% in 2017 and reach 13.5 Exabytes per month by 2022, up from 1.5 Exabytes per month in 2017. This account for 77% of all Internet traffic by 2022, up from 58% in 2017..

Source: India to have over 800 million smartphone users by 2022: Cisco study | tech | Hindustan Times

The new middle-class boom in the coming decade

The new middle-class boom in the coming decade

Amid the concerns of rising interest rates and what it may do in the near to medium term for Middle-class Squeeze consumers, new research from the Brookings Institute remind us of the positive economic force to be had with our Rise of the New Middle-class investing theme over the coming decade-plus. No wonder Apple CEO Tim Cook has been sharing upbeat thoughts about the coming demographic wave in India. He’s not alone, as other consumer product companies from Starbucks to Mondelez International and Proctor & Gamble are all focused on the sales and profits to be had from meeting this expected demand surge.

According to research from the Brookings Institution, more than half of the planet can now be considered “middle class” or “rich.” It is estimated that some 48 percent of the world’s population earns between $11 and $110 per day in PPP-adjusted dollars—a standard definition of the middle class using absolute (rather than relative) cut-offs—while another 2 percent earns more than $110 per day. According to projections and measures, the middle class will reach 4 billion people worldwide by the end of 2020 and 5.3 billion by 2030. This expansion has been driven by two phenomena: a steep decline in poverty around the world since the 1980s and rising household incomes in Asia.

There should be reasons to cheer this global “tipping” point. For the first time in recorded history, the majority of the world’s population will not consist of impoverished peasants or workers but of wage-earners who can afford to buy cellphones, washing machines and televisions, to go out to restaurants and theaters, and to take vacations with their families.

A growing middle class is supposed to be good for society. Their consumerism is supposed to boost global production of durable goods and make businesses more efficient and innovative in targeting these new customers. The global middle class is also committed to the education of their children. The middle class is more entrepreneurial than either the rich or the poor, and it demands more transparency from policymakers and tolerates less corruption. Because the middle class does not owe its wealth to privileges granted by the state, its members are more likely to support protections for property rights, as well as greater access and representation in decision-making.

Source: Fear and Loathing in the Global Middle Class – Lawfare

India’s rising middle-class to drive energy alternatives in the long run

India’s rising middle-class to drive energy alternatives in the long run

We have another confirming data point that India is poised to become one of the key economies when it comes to driving global growth. The underlying reason ties with the other data points that point to this – India’s expanding middle-class, which will spur demand for a variety of goods and service. And yes, India and its evolving demographics is one of the geographies associated with our  Rise of the New Middle Class investing theme.

Longer-term, it also appears it could be a meaningful driver when it comes to the adoption of alternative energies that are a part of our Clean Living investing theme at the expense of oil. Something to watch in terms of the adoption curve for electricity, solar, wind and other alternatives as they continue to move down the cost curve. We’ll also be watching for the adoption of other aspects of our Clean Living investing theme – food, snacks, beverages, and other products – as that middle-class continues to swell and the accompanying increase in disposable income opens numerous doors for consumers in India.

 

India is set to overtake China as the biggest source of growth for oil demand by 2024, according to a forecast announced Monday by research and consultancy group Wood Mackenzie.The country’s oil demand is set to increase by 3.5 billion barrels per day from 2017 to 2035, which will account for a third of global oil demand growth. India’s expanding middle class will be a key factor, as well as its growing need for mobility, according to Wood Mackenzie.

On the other hand, China — currently the second-largest oil consumer in the world — may soon need less oil. In 2017, it overtook the U.S. as the biggest importer of crude oil, but it’s set to see a decline in oil demand growth from 2024 to 2035, Wood Mackenzie Research Director Sushant Gupta told CNBC.That’s due to two trends: Alternative energy sources such as electricity and natural gas are displacing the need for gasoline and diesel. And, a more efficient freight system and truck fleet will also result in sluggish road diesel demand, Gupta said.

Source: India set to overtake China as top driver of global oil demand growth

Ikea open for the growing middle-class in India

Ikea open for the growing middle-class in India

We can now add Ikea to the throes of companies that are targeting the growing middle-class in India. We’ve acknowledged for some time that market in India is one of the drivers behind our Rise of the New Middle Class investing theme, and the latest data from the International Monetary Fund finds India to be the world’s fastest-growing major economy in 2018. With a household furniture market that is expected to be worth $2.7 billion by 2022, odds are other companies like Walmart and Amazon will be attacking this market as they look to expand their presence in India.

Ikea has finally opened its first store in India on Thursday, targeting the country’s growing middle-class in an environment that Chief Executive Jesper Brodin has described as “more committed to progress.”

India presents businesses with one of the world’s largest consumer markets. Its 1.3 billion citizens means that it is the world’s second most populous country after China. But, gross domestic product (GDP) per capita remains less than a quarter that of its fellow Asian giant.

Nonetheless, India is expected by the International Monetary Fund (IMF) to be the world’s fastest-growing major economy in 2018. The country’s household furniture market is expected to be worth $2.7 billion by 2022, according to The Economist Intelligence Unit.

Indian consumers are unused to traveling to stores to buy self-assemble furniture, Reuters reported. Instead, furniture is usually delivered to customers fully built. To solve this problem, Ikea has set up a 150-strong in-house team to help customers put products together.

According to one analyst, Ikea’s latest venture into India is likely to be a success — and this is not just down to the country’s economic fundamentals. “With high real estate prices forcing more and more Indians to live in small apartments, Ikea’s minimalist and multi-purpose furniture will be expected to register strong demand,” Barsali Bhattacharyya, deputy lead companies analyst at The Economist Intelligence Unit, told CNBC via email Thursday.

Chicken and vegetarian variations of Ikea’s famous meatballs are sold in the Hyderabad store to account for India’s prevailing religious beliefs.

Source: Ikea opens first India store in Hyderabad

Amazon targets Medplus and two of our investing themes

Amazon targets Medplus and two of our investing themes

As we saw this past Prime Day 2018, Amazon is targeting international expansion of its Prime services. It’s also doing the same with its acquisition of online pharmacy as PillPack it looks to disrupt the pharmacy market, an event that we here at Tematica are anxiously awaiting. As Amazon builds on PillPack that acquisition should pave the way for Amazon feeling the benefits of our Aging of the Population tailwind to a much greater degree. Now with Amazon reportedly looking to acquire MedPlus, an Indian pharmacy chain, it looks to leverage both of these strategies — targeting international markets and disrupting the pharmacy market — which would serve to expand its footing inside our New Middle Class investing theme as well as our Aging of the Population one.

 

Amazon is reportedly engaged in deal talks about acquiring MedPlus, the Indian pharmacy chain.According to Reuters, citing FactorDaily, the Indian news website, sources said the talks are in the early stages. MedPlus Health Services operates more than 1,500 pharmacies in India, and also operates lab testing centers and has a surgical equipment distribution unit. “We do not comment on what we may do or may not do in the future,” an Amazon spokesperson told Reuters.In late June, Amazon announced it had inked a deal to acquire PillPack, the pharmacy focused on people in the U.S. who take multiple daily prescriptions.

Source: Amazon In Talks To Acquire India’s MedPlus | PYMNTS.com

The Rise of the New Middle-Class theme lets India air traffic take off and much more

Month to month economic and industry data can fluctuate, which is why we look at the data over a longer term. While passenger air traffic spiked in February, we see the annual growth rate of more than 20% over the last several years reflecting the growing economy and rising disposable income that are drivers of our Rise of the New Middle Class investing theme. In addition to incremental spending on travel, other areas benefitting from this theme include leisure spending, housing and furnishings, premium branded apparel, higher end autos, restaurants and connected devices. In short, those devices and activities that denote some degree of status have been achieved.

Even though Goldman Sachs (GS) lowered its real gross domestic product (GDP) forecast on India for the year to March 2019 to 7.6% from 8%, the level of growth is far stronger than anything expected in the US, a country that sees more signs of our Middle-Class Squeeze investing theme.

 

Passenger air traffic in India grew at the fastest pace in 13 months in February, even as fears mount over demand weakening due to rising air fares.

The number of passengers flown last month jumped almost 24% on-year to 10.7 million, according to government data.Air travel in India traditionally records a spurt from October through March, rebounding from a lean period in the previous months.

The country’s air travel has grown at an annual pace of more than 20% in the past few years as rising incomes and the advent of no-frills carriers prompted more people to shun trains for long-distance travel.

The south Asian nation is already the third-largest aviation market behind the U.S. and China with domestic traffic of more than 100 million passengers.

Source: India aviation traffic rises at fastest pace in 13 months- Nikkei Asian Review