David Fuller and Eoin Treacy's Comment of the Day
Category - Autonomies

    Baidu brings its search engine to Brazil

    This article by Jordan Novet for venturebeat.com may be of interest to subscribers. Here is a section: 

    Brazil’s flavor of the Baidu search engine went live this morning, giving it a presence in one of the growing BRICS countries and helping it stand out more against competitors like Google, Yahoo, and Microsoft’s Bing. The Baidu search engine has also popped up in Egypt, Japan, and Thailand.

    The Brazil rollout comes a couple years after Baidu opened up shop in Brazil. Next up, we can imagine an operational Baidu search engine in the United States, the home of the top search engines in the world.

    After all, Baidu co-founder and chief executive Robin Li harbors ambitions of making the company a brand name in half of all countries in the world, according to a 2011 report in PCWorld.

    Baidu opened a lab in Silicon Valley two months ago. Artificial intelligence smarts for a U.S. version of the Baidu search engine could certainly be possible, given that Baidu hired Andrew Ng, founder of Google’s deep-learning project and director of Stanford’s artificial intelligence lab (and a co-founder of massively open online course provider Coursera). And the Baidu lab is hiring.

     

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    The next industrial revolution: Moving from B-R-I-C-K-S to B-I-T-S

    Thanks to a subscriber for this report from Goldman Sachs exploring the industrial applications of the Internet of Things (IoT). Here is a section: 

    While IoT spans a variety of industrial sectors, the focus of this report is on Home Automation. Previous reports in this series addressed the applications of IoT to CommTech, Semiconductors and Software. In this report, we address the impact of the IoT on the industrials space, with a deeper dive into Home Automation within the Building Automation opportunity below. We expect a series of follow-up reports touching the following topics.

    Building Automation focuses on improving energy efficiency and occupant comfort/utility within the home or commercial building. Key advantages include improved security, remote monitoring of devices, and energy management.

    Manufacturing applications of IoT could help facilities to reduce downtime through predictive maintenance, have better visibility into inventory and energy management, and improve operational efficiencies overall.

    Resources could benefit from real-time equipment monitoring, energy efficiency (smart meters), and fuel reduction (O&G).

     

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    Big Plan by Google to Race Amazon to Your Door

    This is an informative article by Jason Del Rey for Recode.net and may be of interest to subscribers. Here is a section: 

    Big retailers, however, are clearly taking these partnerships seriously. Instead of sending mid-level business development executives to strike deals with Google, some are negotiating at the top. Costco’s CEO, for instance, flew out to Google’s Mountain View, Calif., campus to meet with Google CEO Larry Page before agreeing to participate in the Google Shopping Express program. Costco CFO Richard Galanti also met with execs at Google on a separate trip. Galanti said it’s important for Costco to consider new sales channels as more shoppers make purchases online.

    “Why wouldn’t Google just eliminate the merchant from the middle?” Faisal Masud, e-commerce chief at Staples

    “We’re pretty good at knowing what we know how to do and what we don’t,” Galanti said.

    “We’re not arrogant about it.”

    What’s keeping some retail bosses awake at night, however, is the ongoing suspicion that Google could eventually build an Amazon-like marketplace in which the search giant sells products directly to shoppers and cuts out brick-and-mortar retailers altogether. Even some current Google Shopping Express partners see the potential for such an approach.

    Fallows, for his part, was adamant that Google will not pursue this strategy.

    “Very firmly no,” he said. “Google is a platform and partnership business. We can’t say that strongly enough.”

    Another fear among some retailers, according to RetailNet Group’s Anderson, is that as long as the purchases keep running through Google instead of the retailer’s site, Google will start to collect more and more valuable information on who buys what. Google could then use that data to attract more money from brands looking to promote their own product through Shopping Express no matter which retail store it comes from. Some of that marketing money, Anderson believes, could in turn be shifted away from funds these brands typically allocate to retail stores to promote individual products.

    “Google may be in a position to go to Procter & Gamble and say, ‘Why would you give [marketing] dollars to Target when you can just give them to us and we’ll promote the brand whether the shopper decided to buy from Target or another retailer?’” Anderson said.

    Despite these concerns, Google has assembled a respectable group of partners to the program. Several of them say participating in the Google Shopping Express program gives them a way to evaluate whether it’s more cost effective to offer same-day and next-day delivery themselves, through a partner or whether they should at all.

     

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    What is Quality?

    This report by Michael Hunstad for Northern Trust may be of interest to subscribers. Here is a section: 

    Higher quality stocks—as identified by the Northern Trust Quality Score (NTQS) definition—tend to outperform lower quality stocks and do so with considerably less risk. This phenomenon is seen across domestic, international developed and emerging markets.

    Unlike value or size, there is no single generally accepted definition of an equity quality factor. Although a wide range of attempts have been made to define quality, their ability to capture the quality phenomenon has been extremely varied.

    Much of the difficulty in defining quality stems from the lack of a theoretical justification. Classic models such as CAPM suggest the quality phenomenon should not exist so we lack a practical framework with which to form a definition. However, these models make restrictive assumptions such as uniformity of investor risk posture.

    On the other hand, our model of heterogeneity in investors’ views toward risk does a better job of explaining the quality phenomenon as well as the asymmetry of returns to quality during crises and recessions.

    Heterogeneity of risk postures suggests risk-seeking investors drive up the price of lowquality/ high-risk stocks until their expected values are negative. Risk-averse investors gravitate toward low-risk stocks where positive expected values, i.e., positive risk premia, are an equilibrium condition.

    With this guidance we can define quality as those features of a company that appeal to risk-averse investors – a definition that is inherently multidimensional and will vary by market segment.

    With metrics encompassing multiple dimensions of quality, the NTQS has performed exceptionally well relative to other alternative definitions. Implementation of Northern Trust’s quality philosophy, while integrated into the consistent framework that underlies our active equity products, varies by strategy and market segment.

    Tactically rotating in and out of quality is impractical since “junk rallies” are tied directly to macroeconomic cycles and are, hence, even more difficult to predict. Further, most of the return for holding low-quality names is concentrated into a few, relatively brief periods which are easily missed with factor rotation. 

    The quality and low-volatility phenomenon are only partially related. While there is strong overlap between low quality and high-volatility stocks, there is only a weak relationship between high quality and low-volatility stocks. Thus, the two phenomena are fundamentally different.

     

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    India to raise foreign investment limit in $60 bln insurance sector

    This article by Sumeet Chatterjee and Devidutta Tripathy for Reuters may be of interest to subscribers. Here is a section:

    India's insurance business was full of promise when it was thrown open to competition in 2000, but has been hobbled by losses, regulatory change, uncertainty and a sharp slowdown in the economy.

    The federal government's approval for a proposal to raise the limit to 49 percent has been kept pending for a long time due to opposition by nationalist politicians, frustrating many overseas investors lured by low penetration rates in India.

    Life insurance penetration in India is about 3.2 percent of gross domestic product in terms of total premiums underwritten in a year, much lower than more than 10 percent in Japan and nearly 6 percent in Australia.

    Dutch banking and insurance group ING Groep NV and New York Life have quit their Indian ventures in recent years, while some other foreign investors were said to be weighing their options.

    At the end of Sept 2013, India had 24 life insurers, which accounts for 80 percent of the sector's business. Only 17 of the 24 reported profits in the fiscal year ended March 2013, according to latest data available with the regulator.

    State-owned Life Insurance Corp of India Ltd controls about 70 percent of the life insurance business.

    "This measure should provide impetus for spurring growth of the insurance industry and enable foreign players to bring in capital required for growing distribution (and) product suite," said Shashwat Sharma, partner at consultant KPMG.

     

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    Email of the day on an Autonomies fund

    “You mention the Autonomies in your comment of the day quite regularly - Is there a fund I can invest in?”

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    Insights in 140 Words June 13th 2014

    Thanks to a subscriber for this edition of Deutsche Bank’s interesting weekly note which may be of interest. Here is a section on the comparison between Nike and Adidas:

    Nike versus Adidas - Forget about bragging rights during the World Cup (Nikes enclosed 70 per cent of those Brazilian and Croatian feet last night while a quarter wore Adidas boots) what matters to investors are returns. Here the big question is whether it is time to buy Adidas after years of underperformance versus Nike - although both share prices have more than quadrupled over the past decade. The German company is a third cheaper based on multiples of forward earnings. Partly that is due to forex headwinds and its struggling TaylorMade golf business (rounds played in America fell another 5 per cent in the first quarter). But what really matters is that Adidas’s footwear sales in the US are 30 per cent down on last year with a 9 per cent market share falling fast. Stop that slide and a switch looks more compelling.

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