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I’ve been encouraged to share my ideas in a public forum, to provide insight into how I have been able to generate alpha over an extended period of time
So, here’s my first thread: “Investing in Experiences” ↓ ↓ ↓
So, here’s my first thread: “Investing in Experiences” ↓ ↓ ↓
1/ An idea generation process that is scalable, repeatable, and efficient can (and should) still have small qualitative factors
An example of a qualitative factor is a company profile – the value drivers behind the numbers. I.e., a firm’s economic moat or pricing power
An example of a qualitative factor is a company profile – the value drivers behind the numbers. I.e., a firm’s economic moat or pricing power
2/ One such focus area that is difficult to quantify is something I call “Investing in Experiences.” It ties into branding and marketing, identifying positive emotional connections between consumers and a product / service
3/ Investing in experiences focuses on the utility a consumer derives from a product or service – which is slightly different than a user’s experience
4/ Consider what type of experience $AMZN creates when a consumer receives a package? Or the experience a user receives by posting a picture on Instagram / $FB? Or the experience a woman feels when first wearing a pair of $LULU leggings?
5/ The dopamine released by opening a package from $AMZN, receiving likes from Instagram / $FB, and wearing a pair of $LULU leggings all increases the emotional connection to the brand
6/ The experienced is then reinforced every time a user places an order or posts a picture, creating a positive flywheel effect. The better the experience, the higher the retention of a customer
7/ Valuing a customer’s experience is difficult, but I view it as a positive correlation to Customer Lifetime Value (CLV). Specifically focusing on the retention aspect. The stronger the experience, higher the retention, and ultimately higher the CLV
8/ I screen for companies that have a positive flywheel effect of customer experiences. Starting with my belief in the directional relationship of the CLV and the experience the product creates for a costumer
9/ Ultimately, I place a range of values around the experience by using sensitivity analysis to better understand the value of a company’s customer base relative to competitors
10/ So, the next time you’re dissecting financials statements and are piecing together the company’s puzzle – think about the unique experience the company creates
