. 2021. Mark S. F. Mahaney. McGraw Hill.
In , the well-known US technology analyst Mark Mahaney has summarized his life’s work in over 300 pages. The book provides 10 invaluable lessons that investors can use when picking technology stocks in the approaching years. These lessons are taught through business case studies, making the book fun to read.
The book provides an informative history of some distinguished technology stocks that thrived and others that failed. It covers Amazon, Facebook, Google, Netflix and Uber intimately, examining their product innovation, customer focus, revenue growth and management strength. The narrative also examines firms reminiscent of Yahoo, eBay, Priceline, Spotify, Blue Apron, Zulily, Groupon and Snap to uncover interesting insights.
Mahaney demonstrates analytical rigor by presenting his key points in a structured manner. For example, it provides three motion questions for coping with high valuations of Internet firms, 4 logical tests for measuring firms’ profitability potential, and a number of other key characteristics for assessing management quality.
The creator draws on his 23 years of research experience to offer concrete guiding principles that must be followed before investing in a technology stock. Companies which might be customer-focused relatively than investor-focused are successful in the long run, he says. Analysts should consider no less than three to 5 years of experience in the general public markets before drawing conclusions in regards to the quality of management. Mahaney also advises readers to make use of an organization’s app before investing decision.
In several places within the book, the creator offers private investors substitutes for sources of knowledge to which only institutional investors have access. What particularly stands out to me is the usage of a Netflix subscription as a proxy for a comprehensive consumer survey available to institutions. By purchasing a subscription, an individual can assess the standard of the content and ease of use.
Certain terms Mahaney uses, reminiscent of DHQs (dislocated high-quality stocks), DAM (Direct Addressable Market) and step-fixed costs, will ceaselessly be etched within the mind. More importantly, he managed to reply several questions that worry investors about new-age firms:
- How do you recognize positive and negative turning points for firms?
- Which metrics must be monitored commonly?
- Is profitability vital for high-growth technology firms?
- When should these stocks be sold?
There are a couple of other topics that I’d have liked to have seen covered within the book. First, it’s the best way markets increased the valuation metrics of tech firms as rates of interest fell. (More relevant now could be what happens to multiples when rates of interest rise.) Second is the role of exchange-traded funds (ETFs) in providing targeted inflows into these stocks and whether this affects valuations has. Third is the experience curves of international stocks, particularly in Europe and Asia. Fourth is how U.S. technology firms adapted to the environment outside the United States and why some failed. Finally, is it vital for tech firms to decide on investors correctly on their cap table? This query arises since the path to positive free money flow is long and due to this fact additional financing is required.
describes the technology stock experience from the creator’s perspective within the United States, however the powerful methods the creator provides also apply to new-age firms around the globe. The experience curves of technology stocks elsewhere could prove much like those within the United States. By the identical token, market participants who’re already conversant in U.S. Internet stocks through years of commentary should enjoy Mahaney’s narrative and learn some beneficial lessons for his or her evaluation. As the number and power of technology firms grow each inside and outdoors the United States, this book deserves a spot on investors’ bookshelves for years to return.
If you enjoyed this post, do not forget to subscribe.
Image courtesy of Paul McCaffrey
