Buyside FINAL

Spring 2016 Buyside Project

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Team Introduction

Pristine “Yiyi” Chen

•Senior, McGlinn Hall

•Finance & Applied Math

Kevin Rajput

•Senior, Dillon Hall

•Finance & Int’l Peace Studies

Daniel Riehle

•Junior, Knott Hall

•Science Business

Esther Lee

•Sophomore, McGlinn Hall

•Finance & Int’l Peace Studies

Bryan Lim

•Freshman, Keenan Hall

•Finance Intent

Phil Rim

•Freshman, Keough Hall

•Finance Intent & Sociology

Michael Romano

•Freshman, Stanford Hall

•Finance Intent & American Std

Introduction Millennials Trends Investments

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Executive Summary

Companies & Products

Amazon Uber VenmoRec. & Med. Marijuana

Wearable Technology

Driving Trends

Social Progressivism Sharing EconomyOn-Demand

EconomyFinancial

Technology

Millennial Trends

Lifestyle Education Work Financial


PROMPT: From your perspective, what do you believe will be the five best performing products

or companies over the next five years?This question will force you to examine your own consumer preferences, your spending habits, your brand

preferences, [and] cost considerations […] You should examine why these products or services will be so

relevant to your needs.

THE MILLENNIAL GENERATION

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Millennials

Lifestyle Education Work Financials

Companies

5Source: Goldman Sachs Millennial Generation Report

Definition & Characteristics

Four Major Areas

1984; MacintoshReleased

1990; Americans with Disabilities

Act

1995; First Pixar Movie was released

1998; Googlefounded

1999; First Blackberry

released

2002; No Child Left Behind Act

passed

2004; Facebooklaunched

2007; First iPhone released

2008; Barack Obama elected

President

2015; Same-sex marriage ruled legal in United

States

• Born between 1980 and 2000

• Millennial generation is the biggest in US history – even bigger than the Baby Boom

• Grown up in a time of great technological change and globalization

• Millennial population of 74.3 million people that spent $170 billion in 2015


Millennial Trends

Work Trends

▪ Millennials are more socially progressive

than any previous generation

▪ Becoming more secular

▪ Technology is more integrated into daily

life at a much younger age

▪ Active lifestyles influence trends in

industries from restaurants to fashion

▪ Flocking to athleisure clothing for their

go-to clothing for both leisure and work

6Sources: Business Insider, Time, NYTimes

Lifestyle Trends

Cross Generational Comparison Values Job Factors Valued as Important


▪ 49% of the working age population in 2020

will be millennials

▪ Value social media freedom, device

flexibility, and work mobility over salary

▪ Personal development is the most

important job factor

▪ 46% of millennials want to start their

own businesses within 5 years

▪ Transitory: an average of 3 years at a job

3028

25

5

12

50

12 12

0

10

20

30

40

50

60

Meaningful Work High Pay Sense ofAccomplishment

Responsibility

Millennialls Managers

2629

16

36

21 23

48

16

30

0

10

20

30

40

50

60

Marriage by 32 Religiouslyunaffiliated

Wouldn't letundocumented

immigrants stay incountry

Millennials Gen X Boomers%

%Millennials Managers

Millennial Trends

▪ Most educated generation; by 2013, 47%

received a postsecondary degree

▪ Total student outstanding loan debt

surpassed $1 trillion by the end of 2015

▪ More students rely on loans to pay for

post-secondary education

▪ Average balance has grown by 74% in

the last decade

Education Trends

▪ Preference to brands that can offer

maximum convenience at the lowest cost

▪ Making auto and student loans more of a

priority

▪ Lowest credit scores among generations

▪ Millennials have been turning to services

that provide access to products without

the burdens of ownership

7Source: New York Federal Reserve

Financial Trends

Preferred Banking Methods Non-mortgage Balances


0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

HELOC Auto Loan

Student Loan Credit Card

$ Billions $ Billions

88

72

5347

17

0

10

20

30

40

50

60

70

80

90

100

OnlineBanking

ATM In BranchBanking

MobileBanking

TelephoneBanking

%

DRIVING TRENDS

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Social Progressivism

Millennials Support:

9Sources: American Progress, New York Times, Washington Monthly

Description

Generational Support for Marijuana Examples

Social progressivism will be a dominant force of change in the next five years because of the growing

millennial demand for tolerance of actions or lifestyles that were previously taboo or illegal


44%

66% 61%

77%

17%

38%47%

63%

0%

20%

40%

60%

80%

100%

Silent Boomers Gen. X Millennials

Democrats Republicans

Legalization of recreational and medicinal marijuana

Same-sex marriage

Racial & gender equality

Secularity

Immigration reform

Universal healthcare

Redistribution of wealth

The desire to continually improve social conditions for

all individuals as well as increase tolerance for differing

lifestyles and choices

2008, 2012 Election and Reelection of

President Obama

2010Implementation

of the Affordable Care Act

2015Legalization of

same-sex marriage

Key Events

Sharing Economy

• An economic model in which individuals are

able to borrow or rent assets owned by

someone else

• Trust, convenience, and a sense of

community are biggest driving factors

• Transportation, hospitality, and media sharing

economy sectors are the largest

• Smartphones are rapidly facilitating its growth

• Companies forced to invest in IT and social

media, as they are large driving forces

10Sources: PwC, Statista

Description

Rise of the Sharing Economy Examples

The sharing economy will be a dominant force of change in the next five years as graduating students

prioritize paying back student loans over owning new assets or spending


61%10% 9% 2%

78%70% 68%

52% 54%

68%

81%73% 71%

43% 44%

66%

0%

20%

40%

60%

80%

100%

Asia-Pacific LatinAmerica

Middle East/ Africa

NorthAmerica

Europe GlobalAverage

Willing to share own assets Willing to share from others

% US Adults Agree the Sharing Economy:

86% Makes life more affordable

83% Makes life more convenient and efficient

89% Based on trust between providers and users

81% Is less expensive to share goods than to own them

individually

72% Feel that this economy’s experience is not consistent

69% Will not trust sharing economy companies until they are

recommended by someone they trust

Key Statistics

On-demand Economy

11Sources: Next Juggernaut, The On-Demand Economy, The Atlantic

Description

Age of On-Demand Workers Examples

The on-demand economy will be a dominant force of change in the next five years because of advancements

in technology that allow for faster and more efficient service to meet the demand for immediate service


1%

4%

11%

16%

29%

39%

0% 10% 20% 30% 40% 50%

65 years +

55 to 64 years

45 to 54 years

35 to 44 years

25 to 34 years

18 to 24 years

• “The economic activity created by digital

marketplaces that fulfill consumer demand via

immediate access to and convenient

provisioning of goods and services”

• “the advancement of the commerce-based

solutions that make day-to-day life simpler and

more efficient”

• Emergence of more smart devices and

advancements in technology are making services

more accessible and readily available

# of Americans who have used on-demand services 86.5 M

# of Americans who have offered on-demand

services

45.0 M

Percentage whose financial situation has improved 51%

Percentage that are satisfied with their work 70%

Percentage of workers with a college degree 29%

Percentage working because of flexible schedule 46%

Overall median hourly wage (across industries) $18

Key Statistics

Financial Technology

Online Lending Awareness by Age

12Sources: CME Group, Business Insider, Barrons

Description

Global Marketplace Loan Issuance ($BB) Corporate Examples

Financial technology will be a dominant force of change in the five years because the convenience of

financial transactions will increase the velocity of money, making access to capital more liquid


0%

20%

40%

60%

80%

100%

18-34 35-55 55+ Total

Used Aware Unaware

$-

$50

$100

$150

$200

$250

$300

$350

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

US UK China Australia

CAGR: 76.1%

• Financial technology is has been the target of

numerous venture capital firms

• Online loans based on algorithms have shown to

be more accurate at forecasting risk especially

for those with poor or nonexistent credit

• Millennials are increasingly aware of these

platforms and are being targeted based on their

limited credit history

• Marketplace lending is looking to explode,

fueled by online platforms

SELECTED INVESTMENTS

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Amazon

Drivers

• Retail sales

• Amazon Web Services

• Kindle content sales

• Third-party businesses

• Home grocery delivery

Risks

• Competition such as Walmart and Jet

• Profit uncertainty

• Minimal international revenue and price competition

Future Value Creation

Function: E-commerce and cloud computing

company that sells and distributes goods to

consumers

Sales Strategy:

14Source: Amazon 10-K, Bloomberg, Yahoo Finance

Description

Two-Year Stock Chart Drivers & Risks

Amazon is positioned to become a top-performing company because of its dominance as a number one online

marketplace and because of its innovative initiatives to disrupt competitive markets in groceries and movies


Growth in cloud computing services

Increasing e-commerce trends such as AmazonFresh

Expansion to emerging markets (i.e. India & China)

Improvement in margins

$200

$300

$400

$500

$600

$70052-week high: $696

52-week low: $369

Current price: $598

1. Retail Sales2. E-Books &

Content

3. Commission on Reseller

Sales

4. Prime Monthly

Subscriptions

Uber

Drivers

• Lower fuel prices

• Higher disposable income

• Domestic travel

• International expansion

• Network effect

Risks

• Lawsuits & controversies

• Obtaining & retaining drivers

• Regulatory issues

• Strong competitors abroad (Didi Kauidi)


Function: To allow users to requests rides

through their phones and get nearly

immediate service

Sales Strategy:

15Sources: Bloomberg, Next Juggernaut, Vanity Fair, Investopedia, Venture Beat

Description

Company Valuation in Millions Drivers & Risks

Uber is positioned to become a top-performing company because it fulfills the millennial demand for

immediate transportation service in nearly any location


$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

2011 2012 2013 2014 2015 2016

• Food Delivery ServiceUberEats

• Courier ServiceUberRush

• Logistics-and-Delivery ServiceUberCargo

• Cars that do not require a driverSelf-Driving Cars

• Untapped markets abroadInternational Markets

Car Rides per km or mile bases

Surge Pricing

Revenue

Venmo

Drivers

• Mobile P2P payments is expected to reach $17 billion in transaction volume by 2019

• Free and instantaneous

• Adding 4 million users per quarter

Risks

• Campaign to enlist large retailers is exerting pressure on margins

• Increased transaction expense


Function: a free digital wallet that lets you

make and share payments.

Sales Strategy: Credit card transaction fees

and gains from interest

▪ 56% of Millennials are already using E-

Wallets

▪ Social engagement and simplicity factor

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Description

Venmo Quarterly Payment Volume Drivers & Risks

Venmo is positioned to become a top-performing company because it’s becoming a standard for how millennials think

about P2P payments


0

0.5

1

1.5

2

2.5

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q32014

Q12015

Q22015

Q32015

Ramping up in-store payments through partnerships with large retailers

Target merchants that already accept payments through PayPal

Opening doors to merchants to accept payments

$mm

Marijuana

Drivers

• Legalization of both medical and recreational marijuana

• Companies gain capital as they apply to be listed on exchanges

• New efficient production techniques

Risks

• Possible high taxes

• Public backlash to marijuana use could prevent legalization

• Strict government regulation


Function: Can be used recreationally by

individuals or medicinally through doctors’

prescriptions

Sales Strategy: Sold at dispensaries in different

forms so consumers have different choices for

what to consume

▪ Dispensary owners in legal states are

beginning to accept credit cards and other

forms of payment

17Source: ArcView Market Research, Fortune

Description

Recreational Marijuana Market Growth Drivers & Risks

Marijuana is positioned to become a top-performing product because of the social progressiveness of the

Millennial generation and the decriminalization of Marijuana by state governments


Legal

Legal by

2020

Not legal

Additionally, medical marijuana is legal in 23 states

There will be more legal sellers and the demand will increase

Competition between firms that produce marijuana would increase

They will be forced to improve the quality of marijuana and sell it at an affordable price

This would be very attractive to potential buyers

Wearable Technology

Drivers

• Customer discretionary income

• Battery technology

• Medical field acceptance / incorporation

• Fashion industry support

Risks

• Fashion trends can be unpredictable

• Vulnerable to economic cycles due to discretionary nature

• High R&D upfront costs require significant capital input

Future Value Creation: Partnerships

Function: Technology that doubles as an extension of phone/computer and a fashion item

Sales Strategy: Target the middle/upper-middle class as customer base and form partnerships with designers and brands▪ High ability to individualize items as

fashion▪ Increased accessibility

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Description

Wearables Market ($mm) Drivers & Risks

Wearable Technology is positioned to become a top-performing industry because it is a high growth industry

with medium to high barriers to entry due to patents and brand awareness


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Tory Burch + Fitbit Nike + Apple

Investment Portfolio

Amazon

Company, Mature

On-Demand Economy


Uber

Company, Start-Up

On-Demand Economy

Sharing Economy

Venmo

Company, Start-Up


Marijuana

Product

Social Progressiveness

Wearable Technology

Product

On-Demand Economy

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Investment Thesis: By analyzing the different trends driving consumption and purchasing

decisions in the millennial generation, we created an investment portfolio of companies and

products, with a variety of different characteristics, that we believe best capitalizes on these

patterns.

THANK YOU!

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Documents

Buyside FINAL