The funding technique that we make the most of at O’Neil Global Advisors focuses on figuring out main corporations in disruptive business teams which have the potential to outperform the final market. We determine funding themes which are essentially making a sea-change inside their respective sectors and business teams. We have discovered that corporations exemplifying these disruptive themes often have growing earnings and gross sales progress, and have a tendency to outperform the market over a 12-18-month holding interval. A number of historic examples of disruptive funding themes embrace the railroad sector in 1914, the rise of economic aviation in 1962, and the worldwide rise of the web in 1990. Today, one of many methods to spend money on a significant disruptive theme is thru the “shared economy”.
Image 1: Sector: Railroads – Bethlehem Steel, 1914. Increased 1,400% in 99 weeks.
Image 2: Sector: Aviation – National Airlines, 1962. Increased 1,004% in 179 weeks.
Image 3: Internet Networking: Cisco Systems, 1990. Increased 1,602% in 169 weeks.
The shared economic system is a brand new financial mannequin that leverages peer-to-peer (P2P) or shared entry to items and companies, facilitated by on-line community-based platforms. These shared economic system platforms are potential on account of advances in know-how that enable customers to generate income from unused property in quite a few sectors, reminiscent of hospitality, transportation, and leisure. Revenue generated from corporations inside the shared economic system theme may attain $335 billion by 2025, in keeping with PwC. The shared economic system mannequin can have profound societal and financial advantages and doubtlessly enhance the lives of numerous people.
Image 4: Sharing Economy Versus Traditional Operating Business Model.
In addition to the advances in know-how which have enabled the shared economic system, shopper preferences have shifted within the Millennial and Gen Z demographics. This shift stems from a brand new era that calls for a excessive diploma of non-public interplay together with quite a few customizable choices. Consumers now need community-based experiences fairly than transaction-based experiences, leading to a systemic change in the best way corporations function.
According to PWC, the European Commission has discovered that ~ 75% of the one billion vehicles which are on street right this moment are every operated by one particular person. Additionally, non-public autos go unused for 95% of their lifetime. Further, 43% of Americans view auto possession as an inconvenience and a trouble. These mixed components create a possibility for shoppers to generate income from unused automotive property. As a end result, the sector that has most benefited from these adjustments is the transportation and mobility space.
The transportation sector allows each car-sharing and ride-sharing companies that enable people to generate income from unused property. Ride-sharing sometimes affords brief rides to shoppers, whereas car-sharing companies supply people longer rides at versatile and reasonably priced costs. The two largest publicly traded corporations benefiting from the ride-sharing development are Uber (NASDQ: UBER) and Lyft (NASDAQ: LYFT). Uber generates annual revenues of greater than $17.5 billion from over 101 million lively customers in over 900 metro areas worldwide. Similarly, Lyft, the second largest ride-sharing firm, generates revenues of $3.2 billion yearly in 644 cities within the USA and 12 in Canada.
Image 5: Transportation: Uber, 2022.
Image 6: Transportation: Lyft, 2022
Other sectors which have benefited from the shared economic system are hospitality, retail and shopper items. The hospitality business advantages from each monetized home-sharing and residential trade packages. Home-sharing permits customers to hire out a person unused asset, which creates financial advantages for each events. The main firm on this section is Airbnb (NASDAQ: ABNB), with $6 billion in annual revenues. Airbnb has had exponential progress in the latest quarters, with visitor nights rising to 300 million in 2021, a rise of 55% versus 2020, demonstrating the validity of the home-sharing idea. The firm has additionally achieved world scale, with over 6 million lively listings in 220 international locations and over 100,000 cities presently. To date, over one billion visitors have stayed at an Airbnb. Demographically, Airbnb may be very a lot on-trend, since 60% of its customers are millennials.
Image 7: Hospitality: Airbnb, 2022.
Traditional lodge corporations utilizing an previous financial enterprise mannequin have taken discover of the expansion in home-sharing packages, which is why Expedia (NASDAQ: EXPE) acquired home-sharing corporations HomeAway and VRBO lately. Of word, Expedia additionally owns the manufacturers Hotels.com, Orbitz, Travelocity, trivago, and AutomobileRentals.com, and generated over $8 billion in income in 2021.
Image 8: Hospitality: Expedia, 2022.
There are quite a few small sectors which are additionally benefiting from the shared economic system mannequin. For instance, platforms inside the retail and trend industries are enabling people to purchase, promote, and hire garments, leading to a elementary shift away from on-premise retailing and brick-and-mortar shops. One instance is the current IPO of Rent the Runway (NASDAQ: RENT), which was launched in November 2009 and permits customers to hire or purchase attire and equipment from over 700 designers.
Image 9: Retail: Rent, 2022.
Looking ahead, strategic partnerships and the event of latest merchandise within the sharing economic system ought to assist speed up future progress. The sharing economic system just isn’t solely a disruptive and revolutionary investing theme, but additionally a possibility for buyers to generate wealth regardless of the difficult present market circumstances.
Happy Hunting!
Randy Watts and Jason Thomson
Co-author assertion
Jason Thomson, Portfolio Manager at O’Neil Global Advisors Inc. made important contributions to the info compilation, evaluation, and writing for this text.
Disclosure
No a part of the authors’ compensation was, is, or might be instantly or not directly associated to the particular suggestions or views expressed herein. O’Neil Global Advisors, its associates, and/or their respective officers, administrators, or staff might have pursuits, or lengthy or brief positions, and will at any time make purchases or gross sales as a principal or agent of the securities referred to herein.