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The keyboard is mightier than the sword

The pen is mightier than the sword, so the saying goes. Although I guess that would be the keyboard now. It certainly seems accurate given the carnage a few Trump Tweets can sow. A jab at Amazon here, a couple of protectionist moves against Chinese imports there and all of a sudden the market’s looking a little shaky again. I thought I’d try my hand at a few reckless tweets myself over Easter, but luckily my phone doesn’t get much reception in Berry!

Long term, strategic investors don’t let this type of thing worry them though. This week’s Santos bid is a case in point. The Yank PE outfit have been eyeing Santos for a while now and they are clearly serious with their $6.50 bid (albeit in various components and with lots of conditions). This is well above any target price I’d seen for the stock and although it is subject to currency fluctuations, investors’ first 10,000 shares will get that price. That’s an easy 10% upside from the last close of $5.84.

The Board’s recommended no action at this point, so a further sweetener can’t be ruled out. The risk is of course that the bid falls over. The most likely spoil-sport is FIRB and their annoying but probably sensible concerns around domestic energy assets falling into foreign hands. Everyone has a view on what could happen here, so give me a call and let’s chew it over. Not you though Trump – I’ll just read your Tweets!

Spotify’s New York listing went well. The founders wanted to list the company but didn’t need fresh capital, for themselves or the company. This meant they could simply list without the razzmatazz (and massive Investment Banking fees) of a traditional IPO process. Others may follow suit, but not many. Spotify is one of the so-called Unicorns. Companies that have raised money privately at valuations in excess of US$1bn. A stealth listing’s probably only advisable for members of this particular club, who already have plenty of investor interest. I’d expect even they would prefer to see how Spotify goes for a while longer before doing the same. 
 
It will be interesting to see how Spotify performs. Could it be another Netflix? Maybe. It sells content for about a tenner on a monthly subscription basis. It’s music not movies/TV, but the principles the same.
 
This short-term subscription, cloud-based consumption model isn’t restricted to these big names though. It is the definition of a SaaS model (Software as a Service) and there are plenty of them on the ASX. Not all of them are success stories of course. Get Swift’s (GWS) dodgy market updates come to mind. But there are a number of good quality SaaS businesses that have pulled back considerably and are worth sifting through. Take Wisetech (WTC) for instance. on February 20th this year it closed at $14.65. The next day it reported revenue and EBITDA growth of 30-odd percent and maintained FY18 guidance. Sounds pretty good. But today it’s down almost 40%. Clearly the market wanted more and maybe Trumps trade wars aren’t good for a software provider to the global logistics industry. But still, if you think the game’s over for WTC then I’d be interested to hear why.
 
If none of that tickles your fancy, it’ll be bank reporting season again soon. Their recent weakness has improved their yields, so it’s probably worth buying a few cum dividend at these levels. NAB and WBC would be my picks.
 
Call to discuss.

Chris

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