Our live Investing Matters Podcast Special which took place at the Master Investor Show discussing 'How undervalued is the UK stock market?', has just been released. Listen here.
This duality between prudence and risk-taking mirrors a lot of the other dualities we’ve seen in other major value-creators. Sergio Marchionne balanced short with long-term, finance and engineering, and luxury vs. mass market. David Cote wrote extensively about prioritizing both short and long-term goals in the interview we had with him a few years ago. Sir Martin Sorrell also discussed how he balances capital with culture in our first chat we had with him and our investors. Over the past year, Sir Martin has gone through one his most challenging years in his entire storied career, but we remain committed to his capital and culture effort to re-imagine the ad agency model. While he’s spent the last year on culture, we suspect the emphasis is now shifting to capital, as he has recently started S4 Capital’s first share repurchase program.
Very quiet on here over the last few months.. we are back at levels now which I personally though we would not see again..
115 NAV.. 9 % dividend... seems a very strange valuation... based on one years Dividend payment.. this means we are buying commercial property are a 45 % discount...
However, the other side of the ledger, where the poor performers reside, was dominated by our investment in S4 Capital (OTCPK:SCPPF), a digital advertising and media company. Our investment in S4 began in 2022 as a contrarian opportunity in a company with several self-inflicted, but resolvable, wounds. It has since evolved into an investment in a company facing the first significant digital advertising downturn since the company’s founding in 2018. The company, which remains in the process of restoring the fullness of its reputation with investors, while now simultaneously facing industry headwinds, has reached valuations we view as confusingly low. We do not view the company to be permanently impaired and, frankly speaking, the severity of cyclical headwinds facing the digital advertising industry today are actually quite mild, in comparison to many other cyclical industries in which we have experience. We are also generally pleased with management’s seriousness of purpose in remedying previous operational shortcomings. Our reaction has been to continue to add to our holdings of S4. We would also note that, as contrarian value investors, we are accustomed to investing in companies, industries, and countries with dark clouds hovering above them at the time of investment, only to see those clouds darken further before finally dissipating. In fact, that pattern describes a number of our most successful long-term investments. We remain optimistic that S4 may one day be described in such a way.
Martin Sorrell, executive chairman at S4 Capital, took the stage at Spikes Asia 2024 on Thursday to a packed house with a cagey audience that didn’t respond well to a show of hands as to whether they belonged to agency, brands or platforms. “Who are you then?” mused Sorrell, before launching into an interview with Haymarket Media managing director Atifa Silk where he expounded on his vision for the future of the marcomms industry, as touched on in his recent opinion piece for The Times. Today’s industry is full of blurred lines between folks in creative, media, PR, publishers and platforms, all of whom are excited and terrified at where new AI technologies will take them. Rapt audience in hand, Sorrell served his non-sugar-coated vision, portions of which have already been chronicled, on where the opportunities and pitfalls lie for agency groups as new technologies and relationships supplant existing ones. “Turkeys don’t vote for Christmas,” he quipped, noting that there will be significant attrition in areas like media planning and buying where the existing 200,000+ employees in the media planning environment will be culled in favour of algorithms. “The days when we rely on a 25-year-old media planner and buyer will be over,” he added. Also, whether agencies like it or not, the advantage of their closer relationships with clients will be ceded to platforms as new technologies like Google’s Performance Max and Meta’s Advantage+ become more proficient at directly explaining results to clients, with fewer agency people needed in the process. Ultimately, Sorrell said, we will get to a model where ideation teams will use technology like Sora or Lightricks where text or voice is instantly converted into video. That video will then be fashioned into a plan and a buy which an algorithm will be able to deploy. “Agencies will increasingly become validators,” Sorrell said, “because you’ll need an independent third party to validate what the platforms and algorithms are implementing in the right way. That's the way it’s going to go.” The techniques needed, he said, are still creative and marketing-based, but it will be critically important for agencies to employ people with deep technological capabilities for these roles. Five areas where Sorrell sees AI impacting advertising and media Visualisation and copy writing. What took three weeks can take two hours. More use of text to visuals. This is a double-edged sword for agencies selling their services on time. Hyper personalisation. Netflix has already taught us how to use data to create content at scale. AI can help build content factories at huge scale. The price of the assets will go down but the number of assets deployed will be greater so it will be a positive for agencies. Media planning and buying. This will be revolutionised as media planners and buyers are replaced with algorithms. Agency and client efficiency. Linear marketing plans that u
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