Things I Learned This Week – December 24th

I have been reading this book titled Technology-as-a-Service Playbook by Thomas Lah and J.B. Wood. This is a great book for anyone in the software business, which is rapidly transitioning to the cloud as a subscription service. This is also a great book for people working for companies that sell subscription service in industries other than software.

A few things I have learned just from chapter 1 are:

  • For software companies offering their technology as a service, business execution around the code – not just their ability to write code – that will determine their success or failure.
  • The employee skills sets that companies covet will expand from the traditional obsession with hiring technical and sales skills (that built the last generation of tech companies) to including deep vertical industry and business process expertise.  Suppliers will start hiring experts from their customers. Any human being that combines both deep vertical market expertise and either great technical or great sales skills will write their own ticket.
  • Legacy software vendors had great operating margins selling license agreements for their products. But, high sales costs, customer churn, and offer commoditization create downward drag on profitability of the subscription business model.  The sharing economy is not yet proving a panacea for profitability in tech.


(Source: Barnes & Noble)

Article: Profiting Off Others’ Mistaskes, Barron’s December 25th, 2017

This article has a profile of Raife Giovonazzo, Portfolio Manager of Fuller & Thaler Behavioral Small-cap Equity Fund.  Some of the companies that he has invested in are:

Landstar Systems (LSTR) – Asset-light integration transportation management provider, Sally Beauty Holdings (SBH), and Bob Evans Farms (BOBE)


(Source: Barron’s)

Article: PG&E Looks Like a Buy, Barron’s, December 25th, 2017

PG&E surprised investors by suspending its dividend, but the author of this article thinks that sell-off in the stock has been overblown.  The stock is down 35% since October 11th, the day before the fires started, costing the company about $12.5 billion in market value.  This may be the worst case scenario for the utility. Sempra Energy (SRE) and Edison International (EIX) also fell this past week amid concerns about their liability for this month’s wildfire outbreak in Southern California.


(Source: Barron’s)

Article: Bracing for The Next Downturn, Barron’s, December 25th, 2017

Pamela Rosenau – Managing Director at The Rosenau Group:

“Going back to 1953, through 12 administrations, the two variables that mattered were the value of the stock market at the beginning of the term and the umemployment rate.”

Richard Saperstein – Managing Director of HighTower’s Treasury Partners:

“Corporate debt is now at record highs of$6 trillion on nonfinancial S&P 500 companies, and now we have tax reform that will limit the deductibility of interest expense at the same time that we have these elevated levels of corporate debt.”

“One more consequence of tax reform: The elimination of SALT means that investors in high-tax states might need to add in-state municipal bonds because they’ll have greater value.”

Spuds Powell – Managing Director of Kayne Anderson Rudnick Wealth Advisors Investment Management

“Another unintended consequence with the tax reform is that some businesses will use repatriation and the new tax bill as an opportunity to reduce the prices they charge in an attempt to pick up market share.  That would be deflationary.”

Jordan Waxman – Managing Partner HSW Advisors:

Jordan talks about his clients asking for reduced carbon footprint investment vehicles. Jordan recommends PAX Global Environmental Markets (PGINX).

Exhibit: Top 10 Holdings of PAX Global Environmental Markets (As of 11/30/2017)


(Source: PAX Global Environmental Markets)

The SUEZ Environmental Co. on the list intrigued me for some reason and I went their website to find a good article/blog post written by their CEO.

“For example, in emerging countries, waste will be responsible for between 8% and 10% of global emissions in 2025 if we don’t do anything. But biogas capture solutions for landfill sites exist, and they deserve to be funded, in view of their capacity to avoid greenhouse gas emissions.” – Jean-Louis Chaussade, SUEZ CEO









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