Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi James and Team, I hope you all had a Happy New Year. Over the Christmas break I listened to a podcast which took a deep dive into two overseas companies Universal Music Group (UMG:NL) and NextEra Energy (NEE:US). I found the company models to be quite interesting and was wondering if you had an opinion on the potential growth prospects of these companies. (General Advice Only) Kind Regards, Jack
Hi Jack, a great Christmas & New Year, I haven’t had a bad one yet!
Universal Music (UMG:NL) represents artists like Justin Bieber and Taylor Swift and is enjoying considerable streaming revenues. If we cast our mind back 5-10 years, these sorts of companies (and the artists they represent) where jumping up and down about streaming and the negative impact this would have on the industry, alas, that has not proven to be the case. We like UMG and agree with you that it has a powerful model, Bill Ackman of Pershing Square who I view as a very canny investor owns 10% of them while Tencent also owns a large stake.
In terms of NextEra Energy (NEE:US), this is a $166bn US company providing a roadmap for what AGL Energy (AGL) should / could do, although the scale in the US is obviously huge. NEE is actually one of the worlds largest generators of renewable energy which clearly has a big future. My concern in this space is around it being too frothy in terms of valuation. However after its 10% pullback, the risk/reward around $US84 looks good but I would leave some ammunition in the tank to average if this dip extends towards $US70.
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