The investment strategy that we utilize at O’Neil Global Advisors focuses on identifying leading companies in disruptive industry groups which have the potential to outperform the general market. We identify investment themes that are fundamentally creating a sea-change within their respective sectors and industry groups. We have found that companies exemplifying these disruptive themes usually have increasing earnings and sales growth, and tend to outperform the market over a 12-18-month holding period. A few historical examples of disruptive investment themes include the railroad sector in 1914, the rise of commercial aviation in 1962, and the global rise of the internet in 1990. Today, one of the ways to invest in a major disruptive theme is through the “shared economy”.
Image 2: Sector: Aviation – National Airlines, 1962. Increased 1,004% in 179 weeks.
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Image 3: Internet Networking: Cisco Systems, 1990. Increased 1,602% in 169 weeks.
William O’Neil + Co.
The shared economy is a new economic model that leverages peer-to-peer (P2P) or shared access to goods and services, facilitated by online community-based platforms. These shared economy platforms are possible due to advances in technology that allow users to generate revenue from unused assets in numerous sectors, such as hospitality, transportation, and leisure. Revenue generated from companies within the shared economy theme could reach $335 billion by 2025, according to PwC. The shared economy model will have profound societal and economic benefits and potentially improve the lives of countless individuals.
Image 4: Sharing Economy Versus Traditional Operating Business Model.
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In addition to the advances in technology that have enabled the shared economy, consumer preferences have shifted in the Millennial and Gen Z demographics. This shift stems from a new generation that demands a high degree of personal interaction along with numerous customizable options. Consumers now want community-based experiences rather than transaction-based experiences, resulting in a systemic change in the way companies operate.
According to PWC, the European Commission has found that ~ 75% of the one billion cars that are on road today are each operated by one individual. Additionally, private vehicles go unused for 95% of their lifetime. Further, 43% of Americans view auto ownership as an inconvenience and a hassle. These combined factors create an opportunity for consumers to generate revenue from unused automotive assets. As a result, the sector that has most benefited from these changes is the transportation and mobility area.
The transportation sector enables both car-sharing and ride-sharing services that allow individuals to generate revenue from unused assets. Ride-sharing typically offers short rides to consumers, while car-sharing services offer individuals longer rides at flexible and affordable prices. The two largest publicly traded companies benefiting from the ride-sharing trend are Uber (NASDQ: UBER) and Lyft (NASDAQ: LYFT). Uber generates annual revenues of more than $17.5 billion from over 101 million active users in over 900 metro areas worldwide. Similarly, Lyft, the second largest ride-sharing company, generates revenues of $3.2 billion annually in 644 cities in the USA and 12 in Canada.
Image 5: Transportation: Uber, 2022.
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Image 6: Transportation: Lyft, 2022
William O’Neil + Co.
Other sectors that have benefited from the shared economy are hospitality, retail and consumer goods. The hospitality industry benefits from both monetized home-sharing and home exchange programs. Home-sharing allows users to rent out an individual unused asset, which creates economic benefits for both parties. The leading company in this segment is Airbnb (NASDAQ: ABNB), with $6 billion in annual revenues. Airbnb has had exponential growth in the most recent quarters, with guest nights rising to 300 million in 2021, an increase of 55% versus 2020, demonstrating the validity of the home-sharing concept. The company has also achieved global scale, with over 6 million active listings in 220 countries and over 100,000 cities currently. To date, over one billion guests have stayed at an Airbnb. Demographically, Airbnb is very much on-trend, since 60% of its users are millennials.
Image 7: Hospitality: Airbnb, 2022.
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Traditional hotel companies using an old economic business model have taken notice of the growth in home-sharing programs, which is why Expedia (NASDAQ: EXPE) acquired home-sharing companies HomeAway and VRBO in recent years. Of note, Expedia also owns the brands Hotels.com, Orbitz, Travelocity, trivago, and CarRentals.com, and generated over $8 billion in revenue in 2021.
Image 8: Hospitality: Expedia, 2022.
William O’Neil + Co.
There are numerous small sectors that are also benefiting from the shared economy model. For example, platforms within the retail and fashion industries are enabling individuals to buy, sell, and rent clothes, resulting in a fundamental shift away from on-premise retailing and brick-and-mortar stores. One example is the recent IPO of Rent the Runway (NASDAQ: RENT), which was launched in November 2009 and allows users to rent or buy apparel and accessories from over 700 designers.
Image 9: Retail: Rent, 2022.
William O’Neil + Co.
Looking forward, strategic partnerships and the development of new products in the sharing economy should help accelerate future growth. The sharing economy is not only a disruptive and innovative investing theme, but also an opportunity for investors to generate wealth despite the challenging current market conditions.
Happy Hunting!
Randy Watts and Jason Thomson
Co-author statement
Jason Thomson, Portfolio Manager at O’Neil Global Advisors Inc. made significant contributions to the data compilation, analysis, and writing for this article.
Disclosure
No part of the authors’ compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed herein. O’Neil Global Advisors, its affiliates, and/or their respective officers, directors, or employees may have interests, or long or short positions, and may at any time make purchases or sales as a principal or agent of the securities referred to herein.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
