Below are VERY informal notes from Philippe Laffont, founder and chief investment officer of Coatue, speaking at Columbia University’s 25th Annual Graham & Dodd Breakfast, which took place on Oct. 9.
Philippe Laffont
Laffont Raised 2mm from family and friends. Realized family didn't have money and friends didn't trust him. Raised about 50m, a lot from Chattanooga.
Had a good pitch but no substance. What was your pitch? Universe of reasonably liquid stocks for us is 3,000 stocks. 10-12% go away each year, as in down 70%, and never recover 7-10% crush the market.
Ppl who started in 1982 enjoyed bull market for 18 years. I started with Julian whose been around a long time. He could see through bull****.
[drizzle]Was up 20% in first month and thought this is easy. Then Nasdaq went from 5000 to 1000.
Once every ten years, you will have a period of extreme underperformance. Have to think about downside beta. Having shorts that also go down protects longs and allows you to add when it goes down
Have to think about long term.
Netflix
Have to think in 10 years, could it have 300-400mm subs? Could they price it at $15 per sub? At 15 and 400, $6B per month, $72B in revenues, assume 50% margin for simplicity, $36B of EBIT. I'm buying it for 1.5x EBIT today. Does 40% margins in U.S. Investing profits to grow internationally
Cable
The reason the govt tries to prevent horizontal mergers is because they're really good for the companies. Some companies, in 10 years, could buy back every outstanding share. If they could do that, what would be the price of that final share?
My rules of thumb
Always invest with American management or those with American-style philosophy/focus (on shareholder returns). 99% of good ideas in technology will be in the U.S. or China, very few in Western Europe.
Macro is hard
Even Druckenmiller says, "I've predicted 7 of the last 3 recessions" 1999- 00 tech bubble 2007-08 leverage. Now, what's going to happen when rates normalize?
Opportunities today
Marc Andreesen says software is going to eat the world. Very large internet companies already $2T of $60T global market. Could internet represent more than 3% of world market cap? Absolutely. Would bet 130 out of 150 unicorns will be down 70% or more, but others will be incredible
Smartphone growth coming to an end. Maybe some growth in India or Africa but those will be $50 phones, not $650 phones, seeing that as investors are not as excited about Apple. But cars are becoming interesting In 10 years, largest car companies will be Google, Apple, Uber, maybe 1 Japanese and 1 European. Will be manufactured by robots in China. Engine will be 1/3rd the size of the engine today with a big touch screen
Cloud computing
Amazon and even Microsoft succeeding. Some companies that help companies do things the old way will be caught
Sony hack
Sony probably had 5-6 ppl in IT protecting all of this data, probably not best paid. Had they outsourced to cloud with, e.g. Microsoft, would have best in the world managing their emails etc.
Q&A Bill Ackman: how can cable and Netflix both do well?
Isn't cable just a commodity and broadband prices will decrease in asymptotic curve?
Good question Bill, we'll settle it on the tennis court. Only players that can provide bandwidth. Incremental cost is 0. Video margin will go away but you cannot watch Netflix without cable. Was SD, now HD, soon will go to 4K. 10x increase in bits. Think video will get smaller and broadband bigger % of cable bill
Industrials analsys: thoughts on Amazon v. Grainger.
Already have distribution Why not distribute more SKUs over existing infrastructure? Don't know Grainger though.
Batteries
Getting 5-7% better annually, not 30%. There's a lot of capital going into that field, however, will happen, just a matter of over how long.
Healthcare
Dipping our toe in it. Very nascent area for us.
Alibaba
Incredible company with bright future. Some puzzling investments like Alibaba Pictures.
Shorting
Need more shorts than longs. 13,000 stocks in Russell 2000 in last 25 years.
Tencent
First bought Tencent for $5, sold around $10. Today it's $142, at least 3 splits, actually closer to $500. Doing very innovative things, some even more innovative than Western software companies like Facebook. Need some moonshots in your portfolio. Can create incredible performance, just like what Google is doing
TWX
Great business, but conglomerate structure leads to less optimal decisions. If you want HBO, you must get TNT. HBO gets first look at Warner movies. Do you still get that with a spin? What happens to TNT?
Amazon
Is creating the entire software stack on top of cloud. They're building their own Oracle and SAP on top of that. Won't be good for those who are reliant on old ways of doing things
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