“A Zest of Crypto On Booming e-commerce Trends” is probably the best way to depict right now our Fintech certificate which is up 25% year-to-date (and 80% over the last 12 months).
We started building a crypto pocket in our portfolio and investing in several “crypto equities” (that mine or invest their cash reserves in digital currencies) in the last weeks of 2020, considering that Bitcoin endorsement from the two fintech leaders, PayPal and Square, was likely to impact the cryptocurrency supply/demand balance. Needless to say, the announcement yesterday by Tesla that it had bought $1.5bn in Bitcoin with its cash reserves strengthens this thesis. Now the main question is whether other large companies will join the Tesla initiative.
While we doubt that America’s traditional blue-chip corporates (Boeing, Coca Cola…) will buy Bitcoin as a corporate treasury asset, we view it as increasing likely that large Tech companies will follow Tesla considering their deep involvement in electronic payments (Apple, Google, Amazon…) and cryptos (Facebook, Nvidia, AMD…) and that they can afford to spend even a limited portion of their cash reserves on a moonshot project.
Then, the potential acceptance by Tesla of Bitcoin as payment for its cars “in the near future” would bring the discussion around the digital currency (and its valuation) to another league…
Overall, “crypto equities” are likely to remain core holdings in our Fintech certificate, even if we are likely to take some profits from time to time and if we have sized our positions to reflect the risk and volatility of these stocks.
If “crypto equities” are expected to remain a performance driver going forward, the core of our portfolio also offers a promising outlook. It is indeed highly exposed to accelerating online shopping transaction volumes and associated payment and consumer credit features (“buy now pay later”).
And while many investors see e-commerce as a 2020 story and expect a deceleration in online shopping activities in a post-Covid-19 world, we are much more sanguine on the future of the industry. One of the main reasons behind our bullish stance is that social media is emerging as an extremely powerful e-commerce force likely to rival Amazon in the future, reaching billions of users through a huge « salesforce » globally, consisting of millions of influencers and content creators selling products through livestreams.
All social media and big tech companies have been ramping up investments in entertaining shopping experiences lately:
- Facebook purchased Packagd in 2019 to make live shopping more prominent on its platform, whereas Facebook-owned Instagram has rolled out “Shops” in May 2020;
- Snapchat now features a guide to businesses and the experiences shared on their stories through “Places” in “Snap Map” since mid-2020;
- TikTok announced a partnership with Walmart in December and is reportedly set to launch a suite of new online shopping tools;
- Google launched Shoploop last summer, which provides businesses with an interactive online platform where they can make videos up to 90 seconds.
Meanwhile, Asian companies such as online retailer Pinduoduo have pioneered new dimensions of social media and e-commerce convergence, combining entertainment with online shopping by integrating ads vertically into the gaming features of a smartphone app. Users earn rewards and virtual coins by playing games, that they can use for product purchases in a virtual mall. Users also collect virtual coins by inviting their friends, browsing products, and completing other tasks.
Finally, another source of monetization for social media is subscriptions. While Twitter is considering adding subscriptions fees for some features, companies such as Patreon support over 100,000 artists, vloggers, musicians, podcasters, and other creators in making their living by receiving recurring subscriptions for exclusive content.
In conclusion, the emerging e-commerce trends described above spell a bright future for online shopping and engagement, and for all the fintech companies that handle electronic payments and offer various financial services in relation with online activities.