Insights on the metaverse and modelling a stock-picking philosophy on the California gold rush, from TEAM Jersey Chairman and Fund Manager Mark Clubb.
The word “metaverse” has started to appear in our language. So much so, that Mark Zuckerberg has changed the name of his company from Facebook to Meta.
The TEAM International Equity Fund currently owns no Meta (formerly Facebook) shares. But fear not, we have plenty of exposure.
Prior to the name change, Facebook and Zuckerberg had already made significant investments in virtual reality, including the 2014 acquisition of Oculus. Meta (Facebook) envisions a virtual world where digital avatars connect through work, travel or entertainment using VR headsets. Zuckerberg has been bullish on the metaverse, believing it could replace the internet as we know it. “The next platform and medium will be even more immersive, an embodied internet where you’re in the experience, not just looking at it. And we call this the metaverse,” said Zuckerberg last month after revealing the company’s rebranding.
What is the “metaverse”?
The metaverse is a hypothesised iteration of the internet supporting persistent online 3D virtual environments through conventional personal computing, as well as virtual and augmented reality headsets. Current metaverse ambitions are centred on addressing technological limitations with modern virtual and augmented reality devices, as well as expanding the use of metaverse spaces to business, education, and retail applications. Numerous entertainment and social media companies have invested in metaverse-related research and development.
At TEAM, our International Equity Fund investments with exposure to the metaverse are:
- Amazon: the globally dominant online shopping platform that will seek to establish some version of an “Amazon mall” in the metaverse in which shoppers can interact and buy digital products. Innovations such as virtual try-on, virtual pop-up stores and a virtual avatar economy will likely change the retail landscape. Amazon Web Services (AWS) plays a major role in building and maintaining metaverse infrastructure.
- Apple: with its dominant iPhone, App Store, Apple Watch and realistic graphics and unparalleled user interfaces, Apple will continue to be a dominant player in the metaverse space.
- Microsoft: Microsoft sees the metaverse as completely revolutionising the way professionals meet, collaborate, and interact online using avatars or even hologram. Microsoft’s HoloLens, which are mixed reality smart glasses, and Xbox gaming consoles, play important roles in the Metaverse user interface. Microsoft owns Minecraft. Microsoft’s Azure cloud plays a major role in building and maintaining metaverse infrastructure.
- Google: the metaverse will have more data and perhaps greater returns on it than today’s web, a space where Google has been a pioneer in developing new and sustainable monetisation opportunities. Google is the market leader in indexing both the digital and physical world, and operates the most-used operating system on earth (Android). Google offerings such as Google Glass, Google Assistant (digitising our home), its Nest suite of products, FitBit, Google Street View, edge computing on Stadia, and Project Fi all play important roles in metaverse. Google Cloud Platform (GCP) plays a major role in building and maintaining metaverse infrastructure.
- Nvidia: Nvidia produces the graphics and video processing chips used in high-end computing servers, supercomputers, artificial intelligence and virtual reality applications. Nvidia chips will play a crucial role in supplying the massive amount of processing power the metaverse will require. Nvidia is also creating its own metaverse platform, called Nvidia Omniverse. Nvidia Omniverse is a platform used for connecting 3D worlds into an integrated virtual universe, which can be used for a wide range of enterprise applications, such as design collaboration, simulation of real-world architecture or as a useful tool for training robots.
- Qualcomm makes chips for mobile devices, including smart glasses. Qualcomm recently reported fantastic 43% year-on-year increase in revenue to $9.26 billion for the fourth quarter. Wall Street analysts’ consensus regestimates were $8.86 billion. From those revenues’ profits came in at $2.9 billion. Qualcomm is also one of the pre-eminent beneficiaries from the forthcoming explosion in the roll out of 5G. 5G is key to the metaverse infrastructure build-out.
- Shopify: Shopify enables small business owners to launch websites, conduct business online and aspires to empower business owners to continue this foray into metaverse commerce. Shopify acquired AR app Primer, which allows its users to see firsthand the effects of a purchase or project in their space. For the metaverse, it gives Shopify a powerful tool that subscribers can use to build-out potential stores or shopping experiences in the digital world. In addition, Shopify launched a new NFT platform that will allow digital creators to sell art and other content directly to consumers. The Chicago Bulls were the first to test the offering, launching limited NFTs of the basketball team’s 1991 championship rings. The two efforts set up Shopify quite nicely to plug into the metaverse and give it a foothold into the potential commerce aspirations of this virtual world.
- Disney: nn Sep 30, 2021, Disney unveiled two new technological achievements designed to carry its theme park and resort guests’ imaginations into the future, the MagicBand+ wearable and the “Hey Disney!” voice assistant. These innovations continue to build upon the Disney “theme park metaverse,” where technology is part of the magic, seamlessly integrating the physical, digital and virtual worlds to help guests navigate Disney properties and platforms. Here, guests immerse themselves in Disney stories, connect with characters they love and share unforgettable experiences with the world, creating new magic in ways only dreamed of before. Marvel Entertainment, a wholly-owned subsidiary of The Walt Disney Company, is mainly known for its comic books by Marvel Comics. Some of the comic book characters owned by the company are Spider-Man, Iron Man, Captain America and Wolverine. In June 2021, Marvel Entertainment partnered with VeVe platform to offer NFT collectibles.
One of the common strands of DNA permeating TEAM’s stock-picking philosophy is the concept of buying ‘shops that sell the picks and shovels’, a strategy named after the California Gold Rush of the 1840s and 1850s. Prospectors needed to buy a pick and a shovel to be able to mine for gold. While there was no guarantee that a prospector would find gold, the companies that sold picks and shovels were earning revenue and thus were good investments.
Rather than attempt to look around corners, our preference is to focus our energies on bottom-up selection. In this regard, the fund owns a stable of strong, globally established businesses across different touch points and technologies that that are all positioned to capitalise on the trends unfolding from the move to the metaverse.
Chairman and Fund Manager
Disclaimer This document is issued by Theta Enhanced Asset Management Limited and does not constitute or form part of any offer or invitation to buy or sell shares. It should be read in conjunction with the Fund’s Prospectus, key investor information document (“KIID”) or offering memorandum. Theta Enhanced Asset Management Limited is authorised and regulated by the Jersey Financial Services Commission, registration number 80836. The Company’s registered office is 10 Hill Street, St Helier, Jersey JE2 4UA. The price of shares and income from them can go down as well as up and past performance is not a guide to future performance. Investors may not get back the full amount originally invested. A comprehensive list of risk factors is detailed in the Prospectus and KIID and an investment should not be contemplated until the risks are fully considered. The Prospectus and KIID can be viewed at www.team.je and at www.geminicapital.ie The contents of this document are based upon sources of information believed to be reliable. Theta Enhanced Asset Management Limited has taken reasonable care to ensure the information stated is accurate. However, Theta Enhanced Asset Management Limited make no representation, guarantee or warranty that it is wholly accurate and complete. The TEAM International Equity Fund is a sub- fund of GemCap Investment Funds (Ireland) plc, an umbrella type open-ended investment company with variable capital, incorporated on 1 June 2010 with limited liability under the laws of Ireland with segregated liability between sub-funds. GemCap Investment Funds (Ireland) plc is authorised in Ireland by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (S.I. No. 352 of 2011) (the “UCITS Regulations”), as amended. Gemini Capital Management (Ireland) Limited, trading as GemCap, is a limited liability company registered under the registered number 579677 under Irish law pursuant to the Companies Act 2014 which is regulated by the Central Bank of Ireland. Its principal office is at 118 Rock Road, Booterstown, Co Dublin A94 V0Y7 and its registered office is at 1 WML, Windmill Lane, Dublin 2, D02 F206. GemCap acts as both management company and global distributor to GemCap Investment Funds (Ireland) plc. GemCap UK Limited Ltd provides distribution oversight services to GemCap acting as global distributor and is responsible for the oversight of all distribution arrangements for the sub-fund.