Kraft Heinz agrees to buy paleo company Primal Kitchen

Kraft Heinz agrees to buy paleo company Primal Kitchen

We have seen a growing number of food and beverage companies acquiring businesses to help reposition their offering to include healthy, natural and good for you food. Kraft Heinz is joining a group that includes Hershey, Kellogg, PepsiCo, and Coca-Cola among others as they look to rise the tailwinds associated with our Clean Living investing theme.

With the Kraft Heinz purchase of Primal Kitchen, we’d note the valuation of 4x sales, which helps explain why Kraft Heinz is also launching a venture arm, Springboard, that will work with food start-ups that we suspect will also be in tune with our Clean Living investing theme.

Kraft Heinz said Thursday it plans to buy paleo condiment and dressing company Primal Kitchen for about $200 million, as the ketchup maker looks for a platform to help compete against upstart brands.

Primal Kitchen is expected to generate about $50 million in revenue this year, Kraft Heinz said. The deal is expected to be completed in early 2019.

Primal Kitchen was founded by food blogger Mark Sisson, who started “Mark’s Daily Apple” in 2006 and has written a number of diet and exercise books. The company makes paleo-friendly products including mayo, avocado oil and dressings. It says its products are without processed or artificial ingredients, added sugars, soybean or canola oils.

Paleo diets focus on foods that were available in the Paleolithic era, like nuts, seeds, lean meats and vegetables. The idea, which has gained a strong following in recent years, is that the human body is best suited to eat the foods that early humans ate rather than the modern diet, which includes processed foods.

Kraft Heinz has begun to follow the playbook written by many of its peers seeking growth as eating habits change. For most Big Food companies, it is hard to duplicate the innovation and culture necessary to create the same success seen by younger brands like Kind Bar.

As such, Kraft Heinz joined other Big Food brands this year in launching a venture arm, Springboard, to partner with food start-ups.

Using Primal Kitchen as a platform would also echo a strategy that others have employed, to varying degrees of success. Kellogg has said it wants to use its $600 million acquisition of RXBar as a platform and Hershey is looking at its acquisition of Amplify Brands as a platform for its growing suite of snack brands.

Source: Kraft Heinz agrees to buy paleo mayo and dressing company Primal Kitchen

Weekly Issue: We aren’t out of the woods just yet

Weekly Issue: We aren’t out of the woods just yet

Key Points from this Issue:

  • We are downgrading Universal Display (OLED) shares from the Thematic Leaders to the Select List and cutting our price target to $125 from $150. In the coming days, we will name a new Thematic Leader for our Disruptive Innovators investing theme.
  • Given the widespread pain the market endured in October, Thematic Leaders Chipotle Mexican Grill (CMG), Del Frisco’s (DFRG), Axon Enterprises (AXXN), Alibaba (BABA) and Netflix (NFLX) were hit hard; however, the hardest hit was Amazon (AMZN).

 

This week we closed the books on the month of October, and what a month it was for the stock market. In today’s short-term focused society, some will focus on the rebound over the last few days in the major domestic stock market indices, but even those cannot hide the fact that October was one of the most challenging months for stocks in recent memory. In short, the month of October wiped out most the market’s year to date gains as investors digested both September quarter earnings and updated guidance that spurred a re-think in top and bottom line expectations.

All told, the Dow Jones Industrial Average fell 5.1% for the month, making it the best performer of the major market indices. By comparison, the S&P 500 fell 6.9% in October led by declines in eight of its ten subgroups. The technology-heavy Nasdaq Composite Index dropped 9.2% and the small-cap focused Russell 2000 plummeted 10.9%. That marked the Nasdaq’s steepest monthly drop since it posted a 10.8% fall in November 2008. The month’s move pulled the Russell 2000 into negative territory year to date while for the same time period both the Dow and S&P 500 closed last night up around 1.5%.

We are just over halfway through the September quarter earnings season, which means there are ample companies left to report and issue updated guidance. Candidly, those reports could push or pull the market either higher or continue the October pain. There are still ample risks in the market to be had as the current earnings season winds down. These include the mid-term elections; Italy’s next round of budget talks with Brussels; upcoming Trump-China trade talks, which have led to another round of tariff preparations; and Fed rate hikes vs. the slowing speed of the global economy.

Despite the very recent rebound in the stock market, CNN’s Fear & Greed Index remains at Extreme Fear (7) as I write this – little changed from last week. What this likely means is we are seeing a nervous rebound in the market, and it will likely some positive reinforcement to make the late October rebound stick. As we navigate that pathway to the end of the year, we will also be entering the 2018 holiday shopping season, which per the National Retail Federation’s annual consumer spending survey should rise more than 4% year over year.

This combination of upcoming events and sentiment likely means we aren’t out of the woods just yet even though we are seeing a reprieve from the majority of October. As is shared below, next week has even more companies reporting than this week as well as the midterm elections. The strategy of sitting on the sidelines until the calmer waters emerge as stock prices come to us is what we’ll be doing. At the right time, we’ll be adding to existing positions on the Thematic Leaders and Thematic Select List as well as introducing new ones.

Speaking of the Thematic Leaders and the Select List, as the mood shifts from Halloween to the year-end shopping season,  we have several companies including Amazon (AMZN), United Parcel Service (UPS), Costco Wholesale (COST), Del Frisco’s Restaurant Group (DFRG), McCormick & Co. (MKC) and Apple (AAPL) among others that should benefit from that uptick in holiday spending as well as our Digital Lifestyle, Living the Life and Middle-class Squeeze investing themes in the next few months.

 

UPDATES TO The Thematic Leaders and Select List

Given the widespread pain the market endured in October, we were not immune to it with the Thematic Leaders or companies on the Tematica Select List. Given the volatility, investor’s nerves it was a time of shoot first, ask questions later with the market – as expected – trading day to day based on the most recent news. I expect this to continue at least for the next few weeks.

The hardest hit was Amazon, which despite simply destroying September quarter expectations served up what can only be called a conservative forecast for the current quarter. For those that didn’t tune in to the company’s related earnings conference call, Amazon management flat out admitted that it was being conservative because it is too hard to call the second half of the quarter, which is when it does the bulk of its business during the frenetic holiday shopping season. I have long said that Amazon shares are one to hold not trade, and with the move to expand its private label product, move into the online pharmacy space as well as continued growth at Amazon Web Services, we will do just that. That conservative guidance also hit United Parcel Service (UPS) shares, but we see that as a rising tide this holiday season as digital shopping continues to take consumer wallet share this holiday shopping season.

Both Chipotle Mexican Grill (CMG), Del Frisco’s (DFRG), Axon Enterprises (AXXN), Alibaba (BABA) and Netflix (NFLX) have also been hit hard, and I’m waiting for the market to stabilize before scaling into these Thematic Leader positions. As we’ve moved through the current earnings season, comments from Bloomin’ Brands (BLMN), Del Taco (TACO), Wingstop (WING), Habit Restaurant (HABT) and others, including Chipotle, have all pointed to the benefit of food deflation. Chipotle’s Big Fix continues with progress had in the September quarter and more to be had in the coming ones. Del Frisco’s will soon report its quarterly results and it too should benefit from a consumer with high sentiment and lower food costs.

With Axon, the shares remain trapped in the legal volley with Digital Ally (DGLY), but as I pointed out when we added it to the Leaders, Axon continues to expand its safety business with law enforcement and at some point, I suspect it will simply acquire Digital Ally given its $30 million market cap. Turning to Alibaba (BABA) and Netflix (NFLX), both have been hit hard by the downdraft in technology stocks, with Alibaba also serving as a proxy for the current US-China trade war. In my opinion, there is no slowing down the shift to digital streaming that is driving Netflix’s business and its proprietary content strategy is paying off, especially outside the US where it is garnering subscriber growth at price points that are above last year’s levels. This is one we will add to as things settle down.

The same is true with Alibaba – there is no slowing down the shift to the Digital Lifestyle inside of China, and as Alibaba’s other business turn from operating losses to operating profits, I expect a repeat of what we saw with Amazon shares. For now, however, the shares are likely to trade sideways until we see signs of positive developments on trade talks. Again, let’s hang tight and make our move when the time is right.

 

Downgrading Universal Display shares to the Select List

Last night Thematic Leader Universal Display (OLED) reported rather disappointing September quarter results that fell well short of expectations and guided the current quarter below expectations given that the expected rebound in organic light emitting diode materials sales wasn’t ramping as expected despite a number of new smartphones using organic light emitting diode displays. On the earnings call, the company pointed out the strides being had with the technology in other markets, such as TV and automotive that we’ve been discussing these last few months but at least for the near-term the volume application has been smartphones. In short, with that ramp failing to live up to expectations for the seasonally strongest part of the year for smartphones, it speaks volumes about what is in store for OLED shares.

By the numbers, Universal now expected 2018 revenue in the range of $240-$250, which implies $63-$73 million for the December quarter vs. $77.5 million for the September quarter and $88.3 million in the year-ago one. To frame it another way, that new revenue forecast of $240-$250 million compares to the company’s prior one of $315- $325 million and translates into a meaningful fall off vs. 2017 revenues of $335.6 million. A clear sign that the expected upkeep is not happening as fast as was expected by the Universal management team. Also, too, the first half of the calendar year tends to be a quiet one for new smartphone models hitting shelves. And yes, there will be tech and consumer product industry events like CES, CEBIT, and others in 2019 that will showcase new smartphone models, but candidly we see these new models with organic light emitting diode displays as becoming a show-me story given their premium price points. Even with Apple (AAPL) and its September quarter earnings last night, its iPhone volumes were flat year over year at 46.9 million units falling short of the 48.0 million consensus forecast.

In my view, all of this means the best case scenario in the near-term is OLED shares will be dead money. Odds are once Wall Street computes the new revenue numbers and margin impact, EPS numbers for the next few quarters will be taken down and will hang on the shares like an anchor. Given our cost basis in the shares near $101, and where the shares are likely to open up tomorrow – after market trading indicates $95-$100, down from last night’s closing price of $129.65 – we have modest downside ahead. Not bad, but again, near-term the shares are likely range bound.

Given our long-term investing style and the prospects in markets outside of the smartphone, we’re inclined to remain long-term investors. That said, given the near-term headwinds, we are demoting Universal Display shares from the Thematic Leaders to the Select List. Based on revised expectations, we are cutting our price target from $150 to $125, fully recognizing the shares are likely to rangebound for the next 1-2 quarters.

  • We are downgrading Universal Display (OLED) shares from the Thematic Leaders to the Select List and cutting our price target to $125 from $150. In the coming days, we will name a new Thematic Leader for our Disruptive Innovators investing theme.

 

Clean Living signals abound

As we hang tight, I will continue to pour through the latest thematic signals that we see day in, day out throughout the year, but I’ll also be collecting ones from the sea of earnings reports around us.

If I had just read that it would prompt me to wonder what some of the recent signals have been. As you know we post them on the Tematica Research website but during the earnings season, they can get a tad overwhelming, which is why on this week’s Cocktail Investing podcast, Lenore Hawkins (Tematica’s Chief Macro Strategist) and I ran through a number of them. I encourage you to give it a listen.

Some of the signals that stood out of late center on our Clean Living investing theme. Not only did Coca-Cola (KO) chalk up its September quarter performance to its water and non-sugary beverage businesses, but this week PepsiCo (PEP) acquired plant-based nutrition bar maker Health Warrior as it continues to move into good for you products. Mondelez International (MDLZ), the company behind my personal fav Oreos as well as other cookies and snacks is launching SnackFutures, a forward-thinking innovation hub that will focus on well-being snacks and ingredients. Yep, it too is embracing our Clean Living investing theme.

Stepping outside of the food aspect of Clean Living, there has been much talk in recent months about the banning of plastic straws. Now MasterCard (MA) is looking to go one further with as it looks to develop an alternative for those plastic debit and credit cards. Some 6 billion are pushed into consumer’s hands each year. The issue is that thin, durable card is also packed with a fair amount of technology that enables transactions to occur and do so securely. A looming intersection of our Clean Living, Digital Infrastructure and Safety & Security themes to watch.

 

Turning to next week

During the week, the Atlanta Fed published its initial GDP forecast of 2.6% for the current quarter, which is essentially in line with the same forecast provided by the NY Fed’s Nowcast, and a sharp step down from the initial GDP print of 3.5% for the September quarter. Following the October Employment Report due later this week, where wage growth is likely to be more on investor minds that job gains as they contemplate the velocity of the Fed’s interest rate hikes, next week brings several additional pieces of October data. These include the October ISM Services reading and the October PPI figure. Inside the former, we’ll be assessing jobs data as well as pricing data, comparing it vs. the prior months for hints pointing to a pickup in inflation. That will set the stage for the October PPI and given the growing number of companies that have announced price increases odds are we will some hotter pricing data and that could refocus the investor spotlight back on the Fed.

Next week also brings the September JOLTS report as well as the September Consumer Credit report. Inside those data points, we expect more data on the continued mismatch between employer needs and available worker skills that is expected to spur more competitive wages.  As we examine the latest credit data, we will keep in mind that smaller banks reporting higher credit card delinquency rates while Discover Financial (DFS) and Capital One (COF) have shared they have started dialing back credit spending limits. That could put an extra layer of hurt on Middle-class Squeeze consumers this holiday season.

Also, next week, the Fed has its next FOMC meeting, and while it’s not expected to boost rates at that meeting, we can expect much investor attention to be focused on subsequent Fed head comments as well as the eventual publication of the meeting’s minutes in the coming weeks ahead of the December meeting.

On the earnings front, following this week’s more than 1,000 earnings reports next week bring another 1,100 plus reports. What this means is more than half of the S&P 500 group of companies will have issued September quarter results and shared their revised guidance. As these reports are had, we can expect consensus expectations for those companies to be refined for the balance of the year. Thus far, roughly 63% of the companies that have issued EPS guidance for the current quarter have issued negative guidance, but we have yet to see any meaningful negative revisions overall EPS expectations for the S&P 500.

Outside the economic data and corporate earnings flow next week, we also have US midterm elections. While we wait for the outcome, we would note if the Republicans maintain control of the House and Senate, it likely means a path of less resistance for President Trump’s agenda for the coming two years. Should the Democrats gain ground, which has historically been the case following a Republican presidential win, it could very well mean an even more contentious 24 months are to be had in Washington with more gridlock than not. Should that be the case, expectations for much of anything getting done in Washington in the medium-term are likely to fall.

Yes, next week will be another busy one that could challenge the recent market rebound. We’ll continue to ferret out signals for our thematic lens as we remain investors focused on the long-term opportunities to be had with thematic investing.

 

 

 

 

Mastercard says plastic credit cards should go green

Mastercard says plastic credit cards should go green

Over the last few months, we’ve seen a growing intolerance for plastic. From cups to containers and straws, companies from Starbucks to Marriot International and Hyatt are ditching plastic straws catering to consumers that are increasingly focused on our Clean Living investing theme. With 6 billion plastic credit and debit cards pushed out each year, that is a lot – A LOT – of plastic that credit card issuers are putting in the hands of consumers. Mastercard recognizes this and is putting forth an agenda to reduce the use of PVC plastic in card manufacturing. Unlike what we’ve seen straw replacements, that have included paper, bamboo, metal and even pasta replacements, these debit and credit cards need a replacement material that can handle the transactional and security technologies enclosed inside the cards as well as one that is ample and cheap to manufacture.

We see this as the beginning of the conversation, and it will take some time to see if this catches fire in the industry or if it’s just a lot of talk with little action.

 

 

The world has a plastic problems — a fact illustrated earlier this week when researchers from the Environment Agency Austria and the Medical University of Vienna jointly presented evidence that there is so much plastic in the environment that we’ve actually begun to inadvertently eat it. Scientists are now looking for more funding to get a better understanding as to how so much plastic has made it into human digestive tracts worldwide — but the big takeaway, Mastercard President of Cyber And Intelligence Solutions Ajay Bhalla told PYMNTS, is pretty obvious.

To push that goal, Mastercard — in partnership with the world’s three largest card manufacturers, Gemalto, Giesecke & Devrient and IDEMIA — has officially launched the Greener Payments Partnership to establish environmental best practices and reduce first-use PVC plastic in card manufacturing.

“Going green, historically, in cards has been linked to purchases, If the customer spends X amount in dollars, the card donates a set amount to an environmental cause. We have yet to take the next step, which is in changing the actual materials that are used,” he said.

Making that change, though, will be difficult, Bhalla acknowledged, because plastic is standard, easy and cheap. Attempts have been made at finding some alternatives (corn-based plastics have been used), but these efforts are not nearly large enough to really draw any conclusion. The goal, he said, is not to make 100,000 cards, but to find a replacement material that will work for the literal billions of cards out there, and work as well as those cards do today.

Consumers, he noted, love their plastic cards — study after study has demonstrated they like being able to pull them out and use them at will. That means changing the make of those cards has to preserve the experience that customers favor.

Source: Mastercard: Plastic Credit Cards To Go Green | PYMNTS.com

Consumers are getting smarter when it comes to sugar and leaving it behind

Consumers are getting smarter when it comes to sugar and leaving it behind

More data supporting the drivers behind our Clean Living investing theme is turning up as more people opt to consume less sugar. In aggregate, there is still much more to go to get the American Heart Associations daily added sugar limit, but the progress we have seen has led to companies shaking up their food and beverage formulation. Of course, the key is to do so while still retaining the flavor and taste consumers prefer and in some cases remember. This pain point has created an opportunity for certain companies, one of which is on the Tematica Investing Select List.

Like a snowball that rolls downhill and gets bigger in the process, odds are this choice to limit or omit sugar consumption on the part of consumers will continue, driving demand for these flavor saving companies in the process. it also means we’ll continue to see food, beverage and snack companies introduce new products or acquire existing ones to shore up their respective portfolios.

Per-capita consumption of sugar and other caloric sweeteners was down in the U.S. in 2017 for the third straight year — and 13th out of the past 18. And this time, consumption of refined sugar, which had been rising over the past decade as consumers (and soft-drink makers) turned away from high-fructose corn sweeteners, fell as well.

There had already been talk of a global “sugar glut” brought on by booming production in Asia, ebbing demand in developed countries, and slowing demand growth in emerging markets.

The American Heart Association’s current recommended daily added sugar limitis 36 grams for men and 25 for women. The per-capita 2017 numbers reported by the USDA come out to almost 159 grams a day.

Source: Americans Keep Getting Smarter About Sugar – Bloomberg

SodaStream to help Pepsico ride the Clean Living slipstream

SodaStream to help Pepsico ride the Clean Living slipstream

From reducing salt and fats from its snack business to the introduction of Bulby, its own line of flavored seltzer waters, PepsiCo continues to transform its business in line with shifting consumer preferences that are reflected in our Clean Living investing theme. With the acquisition of SodaStream, Pepsico takes several steps forward as it not only gains entrance into the home market but with a solution that is plastic bottle free and further shifts it away from sugary products and introduced healthier alternatives.

This move follows the recent introduction of healthier beverages at Starbucks and Coca-Cola testing vending machines offering clean, water-based drink alternatives.  While we may not be in the wee-early innings of this Clean Living transformation, we are still quite far from anywhere near the 7th inning stretch. We expect more M&A activity of publicly traded clean(ish) companies, as well as private ones in the coming quarters as entrenched food and beverage companies, look to ride the Clean Living tailwind.

 

Beverage and snack giant PepsiCo announced plans Monday to acquire at-home carbonated drink maker SodaStream for $3.2 billion.

Purchase, New York-based PepsiCo agreed to pay $144 per share in cash for SodaStream’s outstanding stock, a 32 percent premium to its 30-day volume weighted average price.The deal gives PepsiCo a new line through which it can reach customers in their homes rather than through stores.

It comes as U.S. grocers are in a state of transformation, with 70 percent of shoppers expected to buy groceries online by 2025, according to Food Marketing Institute and Nielsen. Meantime, retailers are squeezing brands on price and giving increasing shelf-space to upstart and private label brands.

“We get to play in a business — home beverages — where we don’t play,” PepsiCo CFO Hugh Johnston told CNBC.With this move, PepsiCo is doubling down on its drinks business, which has struggled in North America as consumers move away from sugary, carbonated beverages. It also seemingly addresses the challenge that buying new drink brands risks cannibalizing its legacy beverages.

Tel Aviv-based SodaStream makes a machine and refillable cylinders through which users can make their own soda or carbonated water drinks.

PepsiCo has made its own efforts at sparkling water, launching Bubly earlier this year to help fight against LaCroix.

Source: PepsiCo to buy SodaStream for $3.2 billion

PayPal to acquire iZettle and challenge Square

PayPal to acquire iZettle and challenge Square

The world of cashless consumption continues to expand as PayPal (PYPL) makes a direct move to compete with Square (SQ) on its home turf by acquiring iZettle. This also brings it into competition with Verifone (PAY) and other payment/transaction hardware companies. Our view has been the mobile payments landscape, like many that are in their early innings, is highly fragmented but moves like this one by PayPal and Ingenico’s recent strategic tie up with Tematica Investing Select List resident USA Technologies (USAT) suggest it is starting to mature. As consolidation continues, lines will be drawn and features refined that are likely to foster greater mobile payment adoption. Now if only consumer would understand that mobile payments are more secure than online ones…

PayPal (PYPL) confirmed on Thursday it’s reached a deal to buy payments start-up iZettle for $2.2 billion — the biggest acquisition in its history.U.S.-based PayPal already operates in more than 200 countries around the world but is working to expand its offerings.  IZettle provides mobile card readers and other digital payment products to small businesses. A merger would catapult PayPal into hundreds of thousands of brick-and-mortar storefronts globally in an effort to bring its digital payments tool into physical retailers and compete with companies, like Square.

Source: PayPal buying start-up iZettle for $2.2 billion, rivaling Square

Voice Recognition Technology Hears Whispers of M&A

Voice Recognition Technology Hears Whispers of M&A

Earlier this month we had CES 2017 in Las Vegas, a techie’s mecca of new whiz-bang products set to hit the market, in some cases later this year, but in others in 2018 and beyond. A person tracking the CES trade shows over the years likely remembers the changes in inputs from clunky keyboards and standalone number pads to rollerball driven mice to laser based ones, which gave way to trackpads and touchscreen technology. Among the sea of announcements this year, there were a number that focused on one aspect of our Disruptive Technology investing theme that is shaping up to be the next big change in interface technology — voice recognition technology.

Over the years, there have been a number of fits and starts with voice technology dating all the way back to 1992 when Apple’s (AAPL) own “Casper” voice recognition system that then-CEO John Sculley debuted on “Good Morning America.” As the years have gone by and the technology has been further refined, we’ve seen more uses for voice recognition technology in a variety of applications and environments ranging from medical offices to interacting with a car’s infotainment system. As far back as 2004, Honda Motor’s (HMC) third generation Acura TL sported an Alpine-designed navigation system that accepted voice commands. No need to press the touchscreen while driving, just use voice commands, (at least that was the dream — but for those of us that tried to change the radio station and ended up switching the entire system over to Spanish, it wasn’t so useful!)

More recently with Siri from Apple, Cortana from Microsoft (MSFT), Google Assistant from Alphabet (GOOGL) and Alexa from Amazon (AMZN) we’ve seen voice recognition technology hit the tipping point. Each of those has come to the forefront in products such as the Amazon Echo and Google Home that house these virtual digital assistants (VDAs), but for now, one of the largest consumer-facing markets for voice interface technology has been the smartphone. Coming into 2016, market research and consulting firm Parks Associates found that nearly 40 percent of all smartphone owners use some sort of voice recognition software such as Siri or Google Now.

In 2016, the up and comer was Amazon, as sales of its Echo devices were up 9x year over year this past holiday season and “millions of Alexa devices sold worldwide this year.” If you’re a user of Amazon Echo like we are, then you know that each week more capabilities are being added to the Alexa app such as ordering a pizza from Dominos (DPZ), calling for an Uber, checking sports scores, shopping with your Amazon Prime account, hearing the local weather forecast and getting the latest news or perhaps some new cocktail recipes.

Not resting on its laurels, Amazon continues to expand Echo’s capabilities and announced that Prime members can voice-order their next meal through Amazon Restaurants on their Alexa-enabled devices including the Amazon Echo and Echo Dot. Once an order is placed, Amazon delivery partners deliver the food in one hour or less. Pretty cool so long as you have Amazon Restaurants operating in and around where you live. We’d point out that since you’re paying with your Prime account, which has a credit card on file, this also expands Amazon’s role in our Cashless Consumption investment theme as does Prime Now which lets Prime members in cities in which the service is available get deliveries in under two hours from Amazon as well as from local participating stores.

But we digress…

Virtual digital assistants cut across more than just smartphones and devices like Amazon Echo and the Google Home. According to a new report from market intelligence firm Tractica, while smartphone-based consumer VDAs are currently the best-known offerings, virtual assistant technologies are also beginning to emerge within other device types including smart watches, fitness trackers, PCs, smart home systems, and automobiles – hopefully, this time not switching us into Spanish.

We saw just that at CES 2017 with some landscape changing announcements for VDAs such as withAlphabet that had several announcements surrounding its Google Home product, including integration into upcoming Hyundai and Chrysler models; and acquiring Limes Audio, which focuses on voice communication systems, and will likely be additive to the company’s Google Home, Hangouts and other products. Microsoft also scored a win for Cortana with Nissan.

While those wins were impressive, the big VDA winner at CES was Amazon as it significantly expanded its Alexa footprint on deals with LG, Dish Network (DISH), Whirlpool (WHR), Huawei and Ford (F). In doing so Amazon has outflanked Alphabet, Microsoft and even Apple in the digital assistant market, but then who doesn’t find Siri’s utility subpar? To us, that’s another leg to the Amazon stool that offers more support to the share alongside the digital shopping/services, content, and Amazon Web Services businesses.

To be fair, Apple originally did not license out its Siri technology. It was only in June 2016 that Apple announced it would open the code behind Siri to third-party developers through an API, giving outside apps the ability to activate from Siri’s voice commands, and potentially endowing Siri with a wide range of new skills and datasets, potentially making a mistake similar to the one that originally cost Apple the Operating System market to Microsoft. Amazon, on the other hand, has been eager to bring other offerings onto its Alexa platform.

Tractica forecasts that unique active consumer VDA users will grow from 390 million in 2015 to a whopping 1.8 billion worldwide by the end of 2021 – Juaquin Phoenix’s Her is closer than you’d think!  During the same period, unique active enterprise VDA users will rise from 155 million in 2015 to 843 million by 2021.  The market intelligence firm forecasts that total VDA revenue will grow from $1.6 billion in 2015 to $15.8 billion in 2021.

In the past when we’ve seen new interface technologies come to market and move past their tipping point, we tended to see slowing demand for the older input modalities. Case in point, a new report from Technavio forecasts compound annual growth of just 3.63 percent for the global computing mouse market between 2016-2020. By comparison, Global Industry Analysts (GIA) expects the global market for multi-touch screens to reach $8 billion by 2020 up from $3.5 billion in 2013, driven by a combination of mobile computing and smart computing devices. For those who are less than fond of doing time calculations, that equates to a compound annual growth rate of 11 percent. We’d also point out that’s roughly half the expected VDA market in 2021.

One potential wrinkle in that forecast is the impact of VDAs. Per eMarketer, 31 percent of 14-17-year-olds and 23 percent of 18-34-year-olds regularly use a VDA.

Putting these two together, we could see slower growth for touch-based interfaces should VDA adoption take off. Looking at the recent wins by Amazon and Google, factoring in that Apple and Comcast (CMCSA) are favoring voice technology in Apple TV and XFINITY TV and growth in the smartphone market is stalling, there is reason to think the GIA forecast could be a tad robust, especially in the outer years.

Turning our investing gaze to companies that could be vulnerable should the GIA forecast prove to be somewhat aggressive, we find Synaptics (SYNA), whose tag line is “advancing the human interface,” and the “human machine interface” company that is Alps. Both of these companies compete in the smartphone, wearables, smart home, access control, automotive and healthcare markets — the very same markets that are ripe for voice technology adoption.

From a strategic and thematic perspective, one could see the logic in Synaptics and Alps looking to shore up their market position and customer base by expanding their technology offering to include voice interface. Given the head start by Apple, Alphabet, Microsoft, and Facebook, while Synaptics and Alps could toil away on “made here” voice technology efforts, the time-to-market constraints would make acquiring a voice technology company far more practical.

Here’s the thing, we’ve already seen Alphabet acquire Limes Audio to improve its voice recognition capabilities. As anyone who has used Apple’s Siri knows, it’s far from perfect in voice recognition and voice to text. In our view, this means larger players could be sniffing around voice technology companies in the hopes of making their VDAs even smarter.

In many respects we’ve seen this before whenever a new disruptive technology takes hold alongside a new market opportunity — it pretty much resembles a game of M&A musical chairs as companies look to improve their competitive position. In our view, this means companies like Nuance Communications (NUAN), VoiceBox, SoundHound, and MindMeld among other voice technology companies could be in high demand.

Disclosure: Nuance Communications (NUAN) shares are on the Tematica Select List. Both Nuance Communications and Synaptics, Inc. (SYNA) reside in Tematica’s Thematic Index.

KB Home unveils first-ever Apple HomeKit-enabled community

KB Home unveils first-ever Apple HomeKit-enabled community

We’ve all been waiting for the Connected Home market to hit the tipping point. With the news Samsung will acquire Harman International it looked like the Connected Car market would be the next one to take off, but KB Home’s Apple-centric HomeKit community looks to catapult the Connected Home into the limelight. Apple announced last month that it expects to have more than 100 HomeKit-certified accessories available by the end of this year. After digesting the news, we’re wondering if there is a specific reason why Apple TV was left off of KB’s list of workable Apple products or it was just an oversight?

By integrating HomeKit during manufacturing, homebuilder KB Home aims to have the most seamless HomeKit support possible. Apple-certified accessories will allow homeowners control of lighting, temperature, door locks and more from an iPhone, iPad or Apple Watch.KB Home now has a model home to view at Promenade at Communications Hill. Pricing starts in the low $900,000s, though HomeKit packages run extra.

Source: KB Home unveils first-ever Apple HomeKit-enabled community in San Jose

Look out DirecTV Now, here comes Hulu’s live TV streaming service complete with ESPN

Look out DirecTV Now, here comes Hulu’s live TV streaming service complete with ESPN

The race to replace broadcast TV with streaming services has become even more competitive with Hulu tossing it’s hat in the ring alongside the soon to be launched DirecTV Now from AT&T that is likely to benefit from the announced Time Warner acquisition. To drive viewers, it’s all about the content and increasingly proprietary content like we’re increasingly finding at Netflix and Amazon. While the Disney relationship brings ESPN into its fold, it sounds to us like Hulu needs to get that balance sheet going.

Hulu said today it has partnered with Disney and 21st Century Fox for its upcoming live TV streaming service, launching next year. The deals involve Fox’s news, entertainment, sports, and other properties, along with Disney’s portfolio of networks from is ABC Television Group and ESPN, among other things. In total, the two agreements will bring more than 35 TV networks to Hulu’s live TV service.What this means for consumers who are considering cutting the cord with pay TV is that they’ll gain access to two of the top broadcast networks, Fox and ABC, on Hulu’s new streaming platform.In terms of sports, the two deals will include Fox Sports networks (Fox Sports 1 and 2), BTN, ESPN networks, including ESPN1, ESPN2, ESPN3, ESPNU, ESPN-SEC, and Fox’s regional sports networks in dozens of markets. Meanwhile, other popular cable TV channels will also be included, like Disney Channel, Disney XD, Disney Junior, Fox News, Fox Business, Freeform, FX, FXX, FXM, National Geographic and Nat Geo Wild.

Source: Hulu’s live TV streaming service will have channels from Fox & Disney, including ABC, ESPN & more | TechCrunch

Mastercard Data Show Chip Cards Are Worth the Wait When it Comes to Card Fraud

Mastercard Data Show Chip Cards Are Worth the Wait When it Comes to Card Fraud

 

While we may not be enthused with the longer check out times associated with the move to chip cards, data from MasterCard shows a few more minutes is making all the difference when it comes to credit card fraud.

Credit card fraud is down by more than 60% at Mastercard’s top five EMV-enabled merchants since chip cards were introduced late last year, according to the company.

Mastercard reports that 8 out of 10 of its U.S. cardholders have chips and counts 1.7 million chip-active merchants on its network — about 30% of total U.S. retailers. During a similar appraisal in May, Visa estimated 1.2 million stores were chip enabled.

Source: Mastercard: Chip cards cut fraud by 60% | Chain Store Age