Apple and Amazon are tipped for strong long-term growth. Guy Thornewill, Pie's Head of Research UK & Europe and Senior Investment Analyst, based in London, explains.
The success of global tech companies Amazon and Apple have provided great investment opportunities for Pie’s Global Growth 2 Fund. You might be customers of these two companies already. But what sets them aside from competitors, and makes them global market leaders?
Apple’s user experience
Apple has high market shares in high-end smartphones and devices, and great technology, but what makes it really unique is the user experience. This is really excellent, and it means that customers are happy to stay in Apple’s ecosystem as their experience of both products and services is so good. Apple’s latest move to enable its customers to enhance their privacy features on their devices is just another example. This means that Apple can charge premium prices and consumers are willing to pay for its high quality.
High profits and cash flow
Apple is also expanding its offer in services via the app store, music streaming and Apple TV, which further enhances its offer and builds its revenue streams. Apple can use its platform to get into other products – there have even been rumours of Apple cars. Putting this all together means Apple grows faster than its end markets and generates high profits and cash flow on a sustainable basis, meaning shareholders should keep getting rewarded in the long term.
Large logistics network
Amazon is a clear destination leader for online shopping. Its ease of use and unmatched range of products make it the first port of call for millions of customers. The pandemic has of course further accelerated the move to online shopping. However, what makes Amazon unique and a great investment is that it is much more than just an online marketplace with great brand recognition. It has a huge logistics network, plus offers video and music streaming services. And with AWS, it has the largest cloud computing service in the world which is also growing very fast.
Pharmacy and food delivery
Amazon is reaching more and more aspects of our lives, and as consumers if Amazon makes things easier we will use the service more – new examples include Amazon getting into online pharmacies and food delivery. Great companies leverage their investments and customer base to grow faster and add more value, and Amazon still has a long way to go here, making it a great investment for the long-term in our view.
Researching to find the right companies
So, why do we pick companies like Amazon and Apple, ahead of many other well-known brands? It’s not about picking just any well-known companies, but picking the right ones. This is where Pie’s active management strategy comes in.
Our investment team is able to get a much broader view of the companies we invest in because we are able to meet the suppliers and customers of these companies. This might be through talking to the management teams of other listed companies on a daily basis, visiting their factories or offices, or talking to experts in the market. We have equities researchers in New Zealand, Australia and the UK & Europe. Our on-the-ground approach, using fundamental analysis and many decades of experience between the team, allows us to get access to information that might not be so readily available to retail investors. This allows us to identify themes and trends early, as well as to make profitable investment decisions for our clients.
Information is current as at June 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.