Motley Fool Money: 09.19.2014

Podcast Summary

• Alibaba's IPO: High Valuation and Unknowns Make it Less Attractive for Some: Consider less risky investments with proven track records instead of Alibaba due to its high valuation, lack of public company history, and being a Chinese-based business. Utilize resources like the Think Fast, Talk Smart podcast for communication skills improvement.

  Alibaba's IPO, despite its massive success, may not be an attractive investment opportunity for some due to its high valuation, lack of track record as a public company, and the unknowns associated with being a Chinese-based business. Dylan Lewis from Motley Fool Money recommends considering less risky investments with proven track records, even if they may not have the same potential for rapid growth as Alibaba. Meanwhile, the Think Fast, Talk Smart podcast offers valuable insights on communication skills that can be beneficial in business and personal situations. Hosted by Stanford lecturer Matt Abraham, the podcast features interviews with experts on various topics, from managing speaking anxiety to taking risks in communication. With nearly 43 million downloads and a focus on practical tips, it's a worthwhile resource for anyone looking to improve their communication abilities.

• Alibaba's Business Model and Market Dominance in China: Alibaba's control of the Chinese market and first-mover advantage contribute to its 43% margin, but concerns over insider selling, Jack Ma's control, and regulatory risks make it a riskier investment compared to US companies.

  Alibaba, a Chinese e-commerce giant, has achieved impressive success in controlling the Chinese market, with a 43% margin and first-mover advantage. However, concerns about insider selling in the IPO, Jack Ma's control over the company, and potential regulatory risks make some investors wary. Alibaba's business model, which relies on controlling a Chinese management team through contracts that may violate Chinese law but are also used by the Chinese government, adds to the uncertainty. The company's lack of significant competition in the US, as shown by the stable performance of Amazon and eBay, suggests that Alibaba may not pose a major threat to US companies. Despite Alibaba's impressive business model and impressive market share in China, the lack of transparency and regulatory risks make it a riskier investment compared to some US-based companies.

• Alibaba's IPO and Yahoo's Future Plans: Alibaba's IPO could bring Yahoo a financial boost of $5-7 billion, but the focus is on how Yahoo will use this newfound wealth, with suggestions ranging from returning funds to shareholders to acquisitions in advertising technology or companies like Pinterest. FedEx reported strong Q1 profits and plans expansion and hiring for the holiday season.

  Alibaba Group functions primarily as an online marketplace for merchants to sell directly to consumers, generating high margins through consistent traffic. However, they are not yet able to challenge Amazon's dominance due to their lack of customer service, fast delivery, and reliable returns. Alibaba's impending IPO could bring Yahoo a significant financial boost, estimated at $5-7 billion, but the focus is now on how Yahoo will use this newfound wealth. Opinions vary, with some suggesting returning the funds to shareholders, while others propose acquisitions in advertising technology or companies like Pinterest. FedEx also made headlines with strong Q1 profits, showing growth in all divisions and plans to expand ground delivery and hire 50,000 employees for the holiday season. Despite a minor legal issue, the company's overall performance is positive.

• Companies facing challenges can still perform well: Despite data breaches, labor law changes, and leadership transitions, companies like Home Depot and Oracle have shown resilience and adaptability, maintaining strong stock performance

  While companies like Home Depot face significant challenges such as data breaches and potential labor law changes, their stocks can still perform well. For instance, Home Depot saw shares rise despite the revelation of a massive data breach, as the company was candid about the issue and investors may have been expecting a negative announcement. Similarly, Oracle, with its long-term growth and impressive returns, continues to be a force in the tech industry even with the departure of its iconic CEO Larry Ellison. Despite potential uncertainties, these companies demonstrate the resilience and adaptability of businesses in the face of challenges.

• Larry Ellison's Business and Personal Endeavors: Despite dropping out of college, Larry Ellison's success story shows the potential benefits of a 4-year head start on building a business or career. However, Oracle faces challenges in transitioning to cloud revenue, while potential mergers in the beer industry may face antitrust issues.

  Larry Ellison, the co-founder of Oracle, continues to expand his business and personal endeavors, despite having dropped out of college. Ellison owns part of Hawaii, a large yacht, and a significant portion of Oracle. He's also involved in movie producing with his children and owns tennis matches. Ellison's success story highlights the idea that dropping out of college can provide a 4-year head start in building a business or career. However, Oracle is currently facing challenges in transitioning from lucrative license software revenue to slower-coming cloud revenue. In the beer industry, SABMiller's attempt to acquire Heineken was rejected, and Anheuser Busch InBev is reportedly considering buying SABMiller in a deal worth over $120 billion. This potential merger could face antitrust issues, but may be possible with divestitures. In other news, InvenSense (INVN), a maker of motion sensors for smartphones, tablets, and gaming devices, is on investors' radar as Samsung's largest customer, with many waiting to see if they will be included in the iPhone 6.

• Companies Offering Higher Yields by Taking on More Risk: Invenco and Apollo Investment offer higher yields through risky loans, while Skyworks Solutions and Facebook represent opportunities with varying levels of risk and potential reward in the semiconductor and tech industries respectively.

  Some companies, like Invenco and Apollo Investment, offer higher yields by taking on more risk. For instance, Invenco's CEO, Baro Taube, impressed attendees at a Motley Fool event, and Apollo Investment makes risky loans with an average yield of 11.1%, allowing them to pay a 9.2% yield to investors. Skyworks Solutions, on the other hand, focuses on semiconductors for wireless connectivity and is capitalizing on the Internet of Things trend. The company, which is in many smartphones, is growing quickly and has strong margins. Facebook, which was the focus of David Kirkpatrick's book "The Facebook Effect," is a company that grew rapidly and impressed Kirkpatrick with its young founder Mark Zuckerberg and its impressive user base. These companies represent different opportunities for investors, with varying levels of risk and potential reward.

• Facebook's Transformational Impact and Business Success: The speaker saw Facebook's potential as a transformational force for society and a massive business success, leading him to write a book about it. With over 1.3 billion users, Facebook's impact continues to exceed expectations.

  The speaker identified Mark Zuckerberg and Facebook as a transformational force for society and a massive business success early on, despite popular skepticism. He was impressed by Zuckerberg's big-picture thinking and the company's rapid growth, which he saw as having significant social, economic, and political implications. The speaker's belief in Facebook's potential led him to write a book about the company as an investment in the idea. Since then, the company's impact has exceeded even his initial expectations, with over 1.3 billion users and a global presence. The speaker continues to view Zuckerberg as one of the greatest business leaders in history due to Facebook's unprecedented reach and impact.

• From desktop to mobile: Zuckerberg's pivot: Zuckerberg's ability to learn from mistakes, adapt, and lead Facebook's pivot to mobile technology resulted in soaring mobile revenues.

  Mark Zuckerberg's ability to adapt and learn from his mistakes, combined with his humility and internal influence, allowed Facebook to pivot successfully from a desktop-focused platform to a mobile-first one. Initially, Zuckerberg underestimated the importance of mobile, but when he recognized his mistake, he quickly brought in talented individuals and restructured the company's development efforts towards mobile technology. Despite the initial skepticism during Facebook's IPO, the company's mobile revenues soon started to soar. Zuckerberg's visionary thinking and the strong internal support he enjoys at Facebook enabled him to make bold decisions and lead the company towards success.

• Transformative Founders and Their Impact on Business: From Zuckerberg to Jobs and Gates, transformative founders prioritized growth and impact over revenue, inspiring new generations of entrepreneurs despite current market focus on profits.

  Mark Zuckerberg and Facebook are driven by a mission to change the world and make it more open and connected. This ethos is reminiscent of other technology founders like Steve Jobs and Bill Gates, who also had massive visions at a young age. The principles that people aspire to from these founders include prioritizing growth and impact over revenue. However, the current market landscape is different from the late 90s, with companies now focusing on profits before going public. While there is still a bubble in the private markets, it is not as pervasive as it was then, and the concern lies more with venture capitalists and angel investors. Despite this, the impact of the startup community on public company valuations should not be underestimated. Overall, the legacy of these transformative founders continues to inspire new generations of entrepreneurs.

• Zuckerberg's Long-Term Approach to Taking Facebook Public: Zuckerberg prioritized long-term growth and control over short-term profits when taking Facebook public, which has contributed to the company's continued success.

  Mark Zuckerberg's approach to taking Facebook public was significantly different from many other tech companies of the late 1990s. While others rushed to go public and make as much money as possible, Zuckerberg held off for as long as he could, maintaining control of the company for the long term. This mindset, as author David Kirkpatrick suggests, may have been driven by Zuckerberg's focus on the company's potential for growth and innovation, rather than just maximizing short-term profits. With Facebook's continued success and Zuckerberg's long-term vision, it's clear that this approach has paid off. The company is in its second inning, with a market opportunity of reaching everyone in the world. While there may be adjustments needed to stay relevant, Facebook's future is in the hands of its visionary founder.

• Facebook's Adaptation to Technological Change: Facebook, with its massive market cap, must adapt quickly to stay relevant. Acquisitions of Oculus and WhatsApp illustrate this. Despite volatility and risks, Facebook's long-term trend is likely up due to its strong financials and visionary founder.

  The pace of technological change is accelerating, and companies like Facebook, with their massive market caps, need to adapt quickly to stay relevant. Mark Zuckerberg's acquisitions of Oculus and WhatsApp are examples of this. As for Facebook's stock performance, while it's a volatile investment due to its size and the scrutiny it faces, the long-term trend is likely to be up. However, there are risks, such as governmental pushback and emerging competitors, that could impact the stock negatively. Overall, while Facebook is a great company with excellent financials and a founder who is likely to be at the helm for years to come, investors should be prepared for volatility and potential setbacks.

• Staying adaptable in tech: The next big thing might not be mobile: David Kirkpatrick emphasizes the importance of staying adaptable in technology, suggesting virtual reality as the potential future platform, and urging businesses to prepare for the shift despite challenges.

  Learning from this week's edition of Motley Fool Money is the importance of staying adaptable in the ever-evolving world of technology. David Kirkpatrick, a tech entrepreneur and journalist, shared his insights on the future of technology and the risks of relying too heavily on current platforms. He believes that mobile, though significant today, may not be the platform of the future and suggests the possibility of virtual reality taking its place. However, with 1.3 billion customers, making the shift to a new platform will not be an easy task for companies. Despite the challenges, it's crucial for businesses to stay ahead of the curve and prepare for the next big thing. As Kirkpatrick puts it, "You gotta stay on that train whenever it goes to the new station." To stay updated on the latest investing news and trends, visit foolone.com and listen to more interviews on Motley Fool Money.