The Wrap: Faux - Stake New Zealand

The Wrap: Faux

A deeper look into one of the world’s biggest hidden industries, a chance to own Mo Salah and how football teams actually make money.

5 stocks reaching new 52 week highs

    • Bed Bath and Beyond (BBBY) +10.9% this week
    • Maxar Technologies (MAXR) +10.8%
    • Digital Turbines (APPS) +11.9%
    • JinkoSolar (JKS) +31.2%
    • Roku (ROKU)  +16.5%

Faux

It doesn’t take a super sleuth to know that counterfeiting is a big industry. A walk through a market in most global cities will make it pretty clear. Put a number to it though and you will likely greatly underestimate just how many Faux LV bags are being sold each year.

Well, counterfeiting generates ONE POINT SEVEN TRILLION dollars every year, a number that is continuing to grow. For reference, the FAANG stocks brought in just over US$500b in revenue last year. Australia’s GDP was US$1.4t in 2019. Around 5% of global trade is in counterfeit goods.

That may sound like a lot of wallets and belts but some far more alarming products are fraudulently produced including drugs (both legal and illegal) and food products.

The world’s biggest producer of luxury goods is actually traded in Europe. LVMH Moët Hennessy Louis Vuitton is a US$250b company with names like Dior, Tag Heuer, Hublot under its umbrella.

LVMH did US$64b in revenue last year. In total, luxury brands lose out on around US$323b annually through counterfeiting- those who can afford genuine goods but choose fake options. Given 58% of counterfeited goods comprise footwear, clothing, leather goods and watches, you can see why it is so damaging to these companies.

Stateside, few listed companies are as high end as their European counterparts but stocks like Ralph Lauren (RL), Steve Madden (SHOO) and Lululemon (LULU) suffer. Heck, even Apple is subject to counterfeiting. In 2016 a scam was revealed where 2 students sent fake iPhones in for repair which were replaced with real iPhones by repairers and then on-sold for profit once returned. Apple completed almost 1500 replacements, costing Apple almost a million dollars before the perpetrators were found out.

For those of you with Amazon Prime Video, this episode of ‘This Giant Beast that is the Global Economy’ covers the topic in deep detail.

Watch this SPACe

Kopites rejoice. In the coming months, the chance to own Liverpool FC may become very real. Although that chance is currently very low.

You may remember Billy Beane as Brad Pitt in the movie Moneyball. Beane just resigned from a 30-year stint at the Oakland A’s for a chance to chair RedBall Acquisition Co; a SPAC finalising a raise north of a billion dollars to make a play at a major sporting franchise.

Fenway Sports Group is the current target. Owners of Liverpool FC and the Boston Red Sox. Such a franchise would be worth around US$8b. RedBall raised US$575m in August. There’s obviously a mismatch between wants and means but the board is trying to raise another billion in an effort to bid for 25% of FSG.

On that note, how exactly do sports teams make money? Let’s take a look at Manchester United (MANU). A US$2.4b company, revenue comes from 4 main sources: sponsorships (40%), retail (20%), broadcasting (20%) and matchday revenue (20%).

*Read more about SPACs here under Spacman.

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Trade Teaser

Three playing cards are placed, face down, on a table. A jack is to the left of a queen. To the left of a spade is a diamond. A king is left of a heart. A spade is right of a king. What order are they in?

What We’re Following | @GetBenchmarkCo

For those new to fundamental analysis, the team at Benchmark give you a good taste of how to do it well. They publish regular articles on their favourite “high growth and under-hyped” stocks.

What caught my attention was the way they analysed recent IPO’d stock Snowflake ($SNOW). The way they break down what the company does, how they make money, competitors and growth opportunities is a great intro to the sort of analysis needed to make sound choices. See it here.

You can subscribe to their substack newsletter for free as well here. They provide similar analysis delivered to your inbox.

Of course, this may be too basic for more advanced analysts but it’s a good insight into how to approach research for those new to the field.

Best Buy | PRPL

Known as the “stealth housing” stock, the maker of mattresses and other sleep products Purple Innovation shot up last Wednesday after attracting some prominent analyst attention. It hasn’t been a cushy mattress ride up, but it was great to see this Stake trader pick their moment to get into bed with Purple.