Top 10 firm in 2022

Top 10 firm in 2022

Courtesy of Eddie Tam,  founder and CEO of Central Asset Investments.
His predictions, along with a table below: 

Berkshire Hathaway will drop out of Top 10

Berkshire Hathaway CEO Warren Buffett is now 86 years old, and he would probably have retired in five years from now. Buffett has had high praise for his colleague Ajit Jain since 2013, and market expects Jain to be a leading candidate to take over as the next Berkshire chairman. While there may be good options, I however believe Buffett’s achievement and wisdom can be hardly matched by any successor in the future.

Saudi Aramco will take the place of ExxonMobil

Saudi state-owned oil company Saudi Aramco is planning to go public and the country’s deputy crown prince Mohammed bin Salman has pegged the value of Aramco at US$2 trillion. Aramco’s plan is to sell 5 percent of its shares publicly in an IPO worth around US$100 billion – making it the world’s biggest IPO by market capitalization if things go according to plan.

ICBC will replace J.P. Morgan

China’s efforts toward financial deleveraging and cracking down on shadow banking would favor the nation’s Big Four lenders. For now, ICBC has a market capitalization of around US$250 billion with a price-to-book ratio of 0.82, while J.P. Morgan is worth US$300 billion with PB ratio of 1.31. When investors show renewed confidence over China’s economy, ICBC’s PB ratio will exceed 1, and the Chinese bank will surpass J.P. Morgan in market cap.

Alibaba will outpace Tencent

Alibaba is China’s largest provider of public cloud computing and is well ahead of Tencent and other rivals. Also, investors are gearing up for the IPO of Ant Financial, which could add US$30 billion to Alibaba valuation. With a lower P/E (28) and faster revenue growth pace (2017Q1 – 60 percent), Alibaba’s market cap is likely to beat Tencent by 2022.

Apple will be struggling to survive in Top 10

Apple has lagged behind Amazon and Tesla in the next generation high-tech race, e.g. artificial intelligence and electric cars. The lack of self-developed core technology has remained the Achilles heel of the company; Apple still relies on Samsung and other rivals for major components including OLED displays, DRAM and NAND chips. Apple is said to be designing its own underlying technology for Graphics Processing Unit (GPU), and potentially pull off a takeover of Disney or Netflix. However, I still remain conservative about Apple’s future.

Potential dark horses for the Top 10 list

1. Nvidia

Nvidia dominates the GPU market with a market cap of over US$80 billion. The company believes the total addressable market (TAM) of its GPU will approach US$66 billion after four years, a nine-fold increase from US$6.9 billion last year. Nvidia will be a strong candidate for the Top 10 list if it can maintain its market share. But the major concern is its big-name clients — Apple, Google and Tesla — are all stepping up efforts to design their own chips and compete directly with Nvidia.

2. Tesla & Uber

As the most valuable US car maker, Tesla is worth about US$50 billion now. Given the undeniably high valuation, it will be a demanding task to boost the market value ten-fold in next ten years. A better way is to merge with the “would-be” competitor Uber (valued at over US$70 billion in private market). The synergy of these two leading players teaming up will be exciting, but success will depend on whether the two aggressive tech tycoons, Elon Musk and Travis Kalanick, can get along well.

3. Ctrip & Priceline

I have a very positive outlook for online travel agency (OTA) sector. Total addressable market of China OTA will reach US$10 billion by 2020, a 3.5-fold increase from last year. It will be tough for Ctrip to join the Top 10, but an opportunity arises if Ctrip merges with Priceline (valued at about US$90 billion).

4. SoftBank & Vision Fund

The Japanese firm is worth around US$84 billion, with a considerable holding company discount. A potential merger between Sprint under SoftBank and T-Mobile in US would be a great booster for SoftBank’s market cap. Besides, SoftBank recently set up the world’s largest private-equity fund, Vision Fund, backed by Saudi Arabia, Abu Dhabi and technology giants such as Apple and Foxconn. The massive US$100 billion fund could invest in technology enterprises including Nvidia and ARM. If we take Vision Fund into account, SoftBank group can achieve US$1 trillion in market worth.

All the tech giants mentioned here are unlikely to face a threat from startups. The single greatest obstacle for the world’s largest tech firms, however, would be antitrust laws in major markets such as China, US and Europe.

This article appeared in the Hong Kong Economic Journal on May 23

Translation by Ben Ng

[Chinese version 中文版]

– Contact us at english@hkej.com

BN/RC

Is the financial crisis coming?

On 8/5/17, from the CNBC and according to Goldman Sachs, 

• Their model shows an increased 31 percent chance for a U.S. recession in the next nine quarters. That number is rising. But it's a good news, bad news story, and the good news is there is now a two-thirds chance that the recovery will be the longest on record.

• The current expansion has already lasted 95 months, now the third-longest in U.S. history in 33 business cycles going back to 1854, the economists said.

• The Goldman economists also say the medium-term risk of a recession is rising, "mainly because the economy is at full employment and still growing above trend."

On 9/5/17, Goldman Sachs CEO Lloyd Blankfein says the market's low volatility is worrisome.

• "I don't know what brings us out of the doldrums, but I do know this is not a normal resting state," Goldman Sachs CEO Lloyd Blankfein said.

• The CBOE Volatility Index, widely considered the best gauge of fear in the market hit its lowest intraday level since December 2006 on Tuesday.

• Equities have been on a tear lately, trading at record levels, but the S&P 500 has only posted two moves greater than 1 percent in 2017

On 8/5/17, New Bond King, Jeff Gundlach makes bets against U.S. stocks, for emerging markets. He is long the iShares MSCI Emerging Markets ETF and short the SPDR S&P 500 ETF specifically.

It is estimated that the two ETF might have substantial adjustment, which the time frame should be at least about six months time. This indicates that at the end of the year, the trigger point for major correction will be inseparable from the two: the Chinese factors and the uncertainty when the Federal Reserve starts trimming the balance sheet.


What do you think?