Previously on the next Amazon Share...
Welcome back to#issue 3. Make sure you catch up on the previous two key parts before reading this one. I just need to make sure the readers are syncing with me on why I focus on ‘disruptive technology’ type companies. Companies with their own novelty tend to ‘make’ or ‘break’. These companies can challenge and drive market demands upwards if the general public accepts the new order change. Alternatively, these companies can fall hard if the business plans are not executed properly.
Revealing my 4 high potential UK shares.
There have been plenty of IPO’s seen on the UK and China stock exchange recently. Most or all of them are overpriced as soon as they go public from day one. US and China economies are obviously bigger and always receiving hypes from economist media before launch to secure as many public funds as possible. However, the UK market is less popular and generally grow quietly well. The UK is still a great innovative place for personal investors investment ground. Till today there are a total of just over 1000 personal/self-investors who are self-made millionaires from investing in small high growth companies. Today I would like to share 4 great companies with excellent novel ‘disruptive technology’ which potentially could grow like the next Amazon share.
1. Ocado (OCDO) - currently at 1020.31 GBX as of 7th July 2018
Started as an online supermarket in 2000. I notice Ocado back in 2007 when I bought my first property and my mailbox was flooded with a free £25 voucher to spend online. I never ordered because I find them expensive than other supermarkets.
Ocado has transformed into a technological company who supply advance logistics solutions to other supermarkets who are battling with Walmart and Amazon.
French (Casino), Canada (Sobeys) and US (Kroger) have collaborated with Ocado for online logistics advance robotics to cut cost with less human employees.
Future of Ocado
There is still plenty of room to grow for Ocado. I highly suspect there may be a potential takeover as the company is only worth £7bn.
Ocado are growing faster than the management future plans can cope with. Other major players such as Alibaba and Amazon have been invested hundreds of millions in warehouse robotics logistics. Many smaller rival companies may find it cheaper in just acquiring Ocado services.
Observation from the trends, Ocado will jump each time a major supermarket signs a contract for warehouse and logistics expansion.
The success of Ocado sustainability is yet to be seen.
Ocado P/E ratio = 500
Market Capital of £7bn
2017 Revenue of £1.5bn
Ocado is way overpriced. There is an element of risk if the interim and full year financial performance is not meeting expectations. Shares could potentially lose more than half its current value.
Revenue needs to start doubling every year to meet expectations.
2. Just Eat (JE) - currently at 820.40 GBX as of 7th July 2018
AirBnB does not own Hotels
Uber does not Own Taxis
JustEat does not own restaurants!
A company which supplies a simple online product to gap between all types of restaurants and customers eating at home.
A simple business model which works and changing the way we eat. A platform which supplies an online tool to allow food merchants to deliver their local delicacies at an affordable price.
Millennial are cooking less as it is easier to get food sent to your home as you return from work.
Future of JustEat
JustEat Business model is too easy to copy. There have been many copycats alike in various countries. America’s Grubhub and UberEats are great threats.
JustEat not only needs to focus on capturing market share, but also to re-evolve with new technology to control the market rivals. Other companies are trailing drone deliveries.
Deliveroo is another threat to JustEat in the UK market, where the company hire self-employed cyclist to deliver food within a set distance which could cut the cost lower to customers.
JustEat P/E ratio = 66
Market Capital of £5.5bn
2017 Revenue of £550m
Future looks challenging for JustEat. They have started out well and now its time to evolve technologically.
Netflix was once a DVD rental company turned into a mega-billion dollar company with streaming. This only worked when internet speed started improving.
JustEat cannot evolve alone. The millennials needs and requirement of takeaway food will determine the future of this brilliant company.
3. Purple Bricks (PURP) - currently at 320.40 GBX as of 7th July 2018
Purple Bricks are looking to dethrone realty estate agents. In the UK Estate agents charge between 0.75-1.5% commission on selling a property.
PB are only asking for £849 regardless of a sale or not. Any additional services like viewing, survey, solicitor close out would require additional fees. Overall would still work out to be lower than your local realty estate agent.
If you sold a £1.5m mansion, your local state agency would make about £15,000 from the sale plus extras. With PB it’s only £849. That’s a lot of difference.
Future of Purple Bricks
PB has a business model to execute. High capital spending on marketing and buy out of companies in other international countries to set a foothold and drive their business.
The company only floated 2 years ago and already today the bears are lurking for them to fail.
In the UK, PB are driving a huge recruitment drive to get local agents in areas to establish local knowledge and know-how.
The company is still going through a learning curve which perfectly fine.
The company is yet to make any profit yet and will be for a number of fiscal quarters or years before we start to see positive cash flow.
PB P/E ratio = None
Market Capital of £0.9bn
2017 Revenue of £93m
An excellent business model and seriously disrupting all these set-up boxes estate agents.
As a seller and buyer, we want the most cost-effective way to minimise our cost and Purple Bricks is giving us that option.
Remember the days when LastMinute.com emerge. Many sceptics were uneasy about the prospect of making their own bookings. How many high streets travel agents do we see today?
4. Plus 500 (PLUS) - currently at 1800 GBX as of 10th July 20187
Trading short fixed-term CFD from your phone device? Yes, Plus 500 was one of the first few starters and now established reputable companies.
This company is disrupting gambling companies, investment firms and banks.
Many people are looking for getting rich quick schemes and Plus 500 are providing that choice.
It’s a high risk option of making a living to be trading your cash on CFDs on international markets, ETFs and Forex. Plus 500 allows you do to that on your mobile phones and providing all the analytical tools and quick execution functionality. No need for middle-man and investment fund managers.
Future of Plus 500
The future of Plus 500 sits in the hands of millennial. Today’s generations understand the stocks information than the last baby boomers. You do not need a finance degree to understand the science of the fluctuating forex and commodities.
How hard can trading be? Its either going up or down? Place your bets and hope for the best.
The only issue with plus500 in the UK is that CFD is not tax-free compared to spread betting which other companies offer. The only downfall of Plus500 is not evolving enough to compete with its competitors.
PLUS P/E ratio = 23.45
Market Capital of £2.02bn
2017 Revenue of £437m
Still a growing company with respectable profits. Aiming to focus on international expansion to set their foothold in other countries. Still catching up to their rivals IG Group.
Please read important key points!
These wonderful high potential UK emerging companies do come with a significant amount of risk. These shares could rise as well as fall. Check out the 6 simple steps on how to start your first portfolio.
Make sure you have a robust portfolio and amount of savings before committing. My personal strategy is 10%. I only take a 10% high risk shares in my overall portfolio. Strategically I would allocate 40% to high dividend pay out shares from good quality companies (BMW, Shell, Unilever, etc) and index (SNP500, Nikkei, FTSE). Another 40% goes to high growth companies such as Facebook, Amazon, Apple, Nvidia and Tencents. Another 10% of cash holdings. Finally a 10% for high risk shares.
Worse case scenario, the 10% high risk companies goes bust. I would lose 10% of my portfolio. However if they grow and double I am boosting my overall portfolio by 9% which is satisfactory.
Alternatively if I burden my portfolio with 50% high risk shares and these companies failed. Then I lose 50% of my portfolio.
All the best to all of you!!