I can be a completely Isaac Scott. This is Motley Fool Money. Welcome to Motley Fool Money, the podcast at Locker Market. Has that in November with a bang?
I'm Scott Phillips and with you. As always, Dr. Anya Baimahati. How are you, Doc?
I'm fantastic. Fantastic. I'm correct. Wonderful, mate.
That's exciting. Is it because of Blues One last night? I know. I don't care who I am.
Come on. It's those I'm only the 12th of November, as we always record, or usually we record, or those days. And the Blues did win last night, scoring up the side of Origin series, and frankly that's that makes it pretty good. We got a question a little bit lighter.
We got the Blues. Exactly. I would like the greens to it. Not the Blues.
Better place that in Origin. I'm a green fan, not a blue fan. I'm in the controversial mood to this. We'll see how we go.
Just wrap yourselves in for us. We got a big one. Quick apology from me for last week's podcasting out late. By the way, I'm miscommunication with the guys at Triple M completely my fault, but we're not having the podcast out late.
So thank you to those who contacted us. We did realise by Saturday, but I did the right thing. I think the right thing. I have the Triple M guy that I didn't give any grief.
We fixed it on Monday morning. So thank you for being patient. But we're back. Hopefully.
I won't say we're back to schedule because if I mess it up again then this is going to be a good day again. I'll look like a deal. But hopefully this will go out on schedule. I'll start off by saying I had nothing to do with that.
So I bear no response from it. That's a problem. That's why I don't do that. Maybe it's okay.
So really it's your fault. It's not. All right. Let's get on with that.
We got a big, big Docker, big macro, a particular site, but some company news as well. Speaking of going green, we got a little bit of green coming up later in the podcast. Let's kick it off. Let's not go to TensorFlow.
We've probably already missed that boat. This has been an astonishing start to the month of December. It seems that... December?
Yes. November. You're not trying traveling ahead. It's a good start to November.
It seems that those who like to try and apply recently in hindsight, the old Monday morning quarterback saying it's the US election. It seems that most of the work, the ASX has 7.5% in November alone. My usual refrain is that's about 75% of the average year on the ASX. That is a phenomenal return in a week and a half on the market.
Of course it's been anything but an awful year. I think we can take anything to the bank. We're getting close though to that ASX high of February. We know US markets are already on top of that number.
This market seems to have thrown a caution to the wind. It doesn't have any other way to describe it. It's got the Biden presidency, the vaccine users will talk about it in a little bit. Those things have come out during the process.
What's going on? Is this the market finally giving up on pessimism? Is it the case of trying to find some good news? Is the good news good enough to really see the market up 7.5% in a week?
Okay. So, you know, I said I'm in a good portion of the world, right? I did some homework for a change. I'm trying to follow up now a little.
I'll just correct you on that. I'll just correct you on that. I'll say no. I have done some work on it.
Yes, for example, I look at the 10-year returns of the ASX as defined by the ASX 300 ETF. The reason I did that is you can't invest in the all-ordinates because there's no such instrument to it. And the ASX 300 ETF, the Vanguard one. As close as you can get.
That has returned over the last 10 years. 7.4% in other words, we got the full-year return in one week. That's phenomenal. There you go.
That's fantastic. The bad news then is the rest of the year we're going to get nothing. You know, you'd be tempted to think that this year has been all over the place. January to February 19 was a great month and a half.
February 19 March 23 was the worst, quickest bear market in history. The recovery is also the quickest recovery of bear market in history. And now I'm up for the end of the year. We're up 7.5% in a week.
I don't know. I necessarily want to think that between here and December 31, the market result is zero. So you make the bet. I'm taking two steps forward.
One step back. One step back. I'm going forward. I'm fine.
I think that contextualization is good, right? The entire US returned that you've historically got the last decade. You know, you've got done a week. So maybe the market is mad.
Maybe the market is not mad. I don't know. But something goes hell of a thing. Yeah, it's a nice research too.
It's a nice expectation that we're going to just see clear. They probably won't be the research on the X-Wing. Is that right? Or you're going to just do it once in a year?
You go. Congratulations, George. You've been listening to the podcast because this is the research podcast. It is.
I mean, 2020 will be one of those years. I think we'll look back on for a long time and kind of Marvel. Just kind of what did go on over that space of 12 months. You said two steps forward one step back.
Let me ask you the US market up 15, about its all time high. Yeah. So again, the US market has defined by the S&P 500. Yeah, it's up something like that.
So you know, the ASX is close and has kind of like a long, long way. The S&P is up and hitting all time highs in the midst. I mean, that's still going to be 100,000 case a day, right? So this is not, you know, I think in Australia, we can be tempted to believe we're kind of at the back end of the crisis.
And frankly, we get to the back end of the crisis. But maybe we are almost by virtue of the fact that maybe there is a back end. So that does not happen. So that's a lot of the time.
So I think the US market is going to be a long way. So we can be tempted to believe we're kind of at the back end of the crisis. And frankly, we get to the back end of the second, but maybe we are almost by virtue of the fact that maybe there is a back end. So that does to some degree here all the beginning of the end of the beginning.
But even still, the market was not far from that pre November 1. Is this this is reasonable rational behavior? It seems like I was a huge, huge, huge bull in March, right? So I was trying to keep investing, keep investing, keep investing.
This will come back things will turn around. It'll be fine. I had a question on Twitter during the week to the extent that, okay, fine. Scott, we got that.
Agreed. More than that, almost as much in Australia. And yet still be in the midst of economic and health uncertainty. Okay.
Well, this is a more opportunity to be controversial here. Okay. So I did some research as I said yesterday. More research.
Right. Yeah. So the S&P 500 over the last decade has returned about 12.4%. That's a full 5% of the head of the SX.
The US dollar is just a cloud. Well, actually that's probably 100% sure. But let's say this is normalized because, well, it actually should be in AUD because I compared both and then you're going to get normalized results. Yeah.
So there's a sort of one of the... Yeah, but that's in AUD, right? That's more relevant than anything else, right? Yeah.
So, you know, 5% points ahead or 4.5% points ahead. That's a significant difference over a decade. So nice. Now, so there's a tendency, this is a human tendency for us to think about the pandemic.
Yes. Then think about...so we think about many different things and then I think we conflate them. So let me try to help people out. This is how I think about them.
We would think more cases is bad. Well, they are bad for humanity. Yes. Maybe we can agree on that a little bit.
We can agree on health laws. Yes. Right. Then we might look at things like, oh, our GDP is growing and we can be very happy.
Oh, we are a recession. I would probably question mark on that. Right. Is that is relevant again from a happiness quotient point of view has got nothing in my view to do investing.
Right. Right. Or very little to do this. Okay.
Let me explain that. First of all, the economy as measured by GDP is like this is the most, you know, what I call the fake number, right? So the government can throw stimulus. Any government can throw stimulus numbers.
The government is an our government. Any government. All government. All government.
All government. Yes. All government. All government.
All government. All government. All government. All government.
All government. They better. But it's not horrible. Right.
That's one part of it. The second part. The implement numbers, you have to think of where the employment eight is coming from. There's little businesses and not businesses listed anyway.
At third point, you consider are think about what you are investing in. So if you invest 500 and you make a bet on banks and miners, right? I can almost write it down it however, there's not yet, I'd anger on top. I Dedecid.
Nor will that, too, by the way. But I'm not just as a asset, but I mean, you know, why would I give any guarantee for anything? This is a free podcast. If you're investing in banks, banks as an example, and economy that is tight, or companies that are tied to the banks or the banking economy as such, then how do you expect it to get growth?
Right? Mostly by asset price and question, right? You know, Australia is not gonna grow at like 20% per year to give the banks a growth of 20% per year. In fact, almost by definition, you should seek contraction as things normalize, right?
Because that spending dollars that have been spent here is gonna be spent elsewhere. So I think it's a, there is a difference between case counts and GDP numbers and everything else versus investing, right? Because you could invest in companies. Now, at the same time, it's also worth pointing out that we will talk more about this as a third point.
This is again, a larger thing to think about. People should think about, well, you know, we had World War II, huge big event, dislocated event. It resulted in balance of powers changing. It resulted in a lot of innovation that came out of World War and those have flown through over time, right?
I like to say that I say this to the team, and in my mind, 2020 has seen some of the most and the biggest innovations of our time. Okay, that's a big call. Well, but that's a big call, right? But you have to invest according to that big call, right?
So for example, number one, think about it this way. Because of the pandemic, it was part of the fact that there are millions of cases in the US, right? And in Europe, what has taken hold is digital economy. Digitization has taken speed.
Well, that digitization is not gonna benefit from the bank or their users of digitization, it's gonna help them with their costs, but they are not denovative of digitization, right? And therefore, that benefit flows elsewhere. Find those digital companies that are enabling that, right? So this huge push towards digitization which is going at a certain rate is now gonna expand at a different rate.
That's number one. Now, what do you think about? You're gonna have a strategy and I think about how space travel was happening. There's also a year where space travel is essentially human space travel is back.
So travel is going to space, right? Not to mark yet, but the idea of getting back in space. What I'm talking about is if you think about the step changes, if you abstract out everything and just think about the step changes and innovation, and you'd see that in a well, the Americans were not going, there was no Western aircraft that was, or. Spacecraft.
There was taking people to the International Space Station and all that has been realized this year. Now, of course, it's a combination of effort for many years, but it happened this year, right? This is also a year where electric vehicles sales have been growing compared to gas vehicles sales, right? So there's a sustainable transport revolution that's happening.
There's digitization, of course, if you've talked about that online penetration has gone up. Yes, usually. Usually. So it's a year where a lot of disruptions happen to the common person, yet some businesses have performed like nothing has happened and in fact are speeding up.
And therefore, as investors, you need to watch for that. Think about that. Can I, not actually just give some extra context. I mentioned, was it, you guys, the core camera, I'm talking someone in the same.
During the last year, don't you see businesses like Apple kept growing because it was simply growing adoption in people on its products. And the hand we had businesses like Automotive Holdings, like the Cardiology, the Flexi Group, the debt provider, that grew because they were small and just sort of growing into bigger markets. I was taking share, even if the market themselves were declining. That's one version of growth.
And then there's another version of growth that is to some degree, either, taking advantage of the pandemic, growing despite the pandemic or something else. The business you're talking about now, which bracket do they fit in? Well, I'm talking about secular long-term growth. What I'm saying is that we are at a phase where, you know, you might see online sales, for example, drop post, you know, opening off the economy.
You think you might shoot you in one. They won't shoot you in one. But the trend of uptake is going to continue. Then we can ask the question, well, where is that, you know, who's going to win and who's going to get benefit from that, right?
Anybody can open an online store. So therefore, you think marginal competition would mean, well, every retailer is going to fight over online sales. They shouldn't really, their penetration of online increases at the cost of their offline sales, but they're all going to be fighting on the marginal dollars, right? There's not much gain then, in some sense, to be made there, if you think about it in that fashion.
Then you can go down the protocol stack. A bit of gain for you to retell the cost, but not from the online retell. So, or enablers of those platforms. So this is how I think about my investing is, I want to think about those things that are driving, and I don't want to think about what's happening.
The GDP number went up, down, Corona case count is this. Those things are almost immaterial. Just like hundreds of thousands of people died in it. And it's not sensitive.
Hundreds of thousands of people died in World War. Well, yes, but if I'm just thinking, because I'm not a policy maker, right, I'm not going to make policy decisions. I'm not an economist, and I'm not the queen to make people feel good, right? Or the king.
We're all happy about that for the crazy business. So, you know, it's definitely about different roles. My role is to just find investments. And from an investment part of you, focusing on the big picture of the big winning things, right, everything else then becomes a side joke.
As this might sound like, you know, it's a very cold, blooded, you know, mercenary-style approach to investing. But it is like, you know. I would say that, no. Yeah, well, but the mercenary-style is focusing on the underlying on the pinnings.
I just, as individual investor, you know, we can actually have both of you at the same time. We can have a policy on economic view or macro view. Absolutely. And we can also choose what we do with that money.
And those things. We never confuse the, your economic view, your social view, your economic view, your political view has nothing to do with your investing. And it's very important to keep in mind, because people, I think, conflate these two. And I think, oh, you know, this is great, and that is great.
And you know, this is awesome. And therefore, I'm gonna invest in CBA. Yes. Well, you know, you're not really helping yourself.
You're doing that. You wanna help yourself. Yeah. So I think, you know, I think to me, actually, it looks like, you just build a market.
I was gonna do a lot of things in the short term, as I said, you know, 7% up, down. But I think that a lot of opportunities, you know, if I have to leave it on an optimistic note, I think that a lot of opportunities, if you want to think about what has started, what was ongoing already, and where the value would be accreting, right? And you wanna think about value accretion. And most of that value accretion is actually in technology and new age things.
I'm not in old age things, right? So I think that's what I'm gonna leave the top of it. I like that. I think, yeah, I like this separation.
I think there's, we have a lot of people, particularly people who want better things in the world who confused the two. And I think there's, you know, I've, bang on, many, many times that ethical investing. You had one more, at least no major, or tweet me during the week, about ethical investing. It's that same idea, right?
You can hope that people take action on ethical investing. You can hope that people change the world, but they're not going to it then it's no point investing. Conversely, anything investing itself, while you kind of hoped it, you could do something investing wise to make a difference, the change actually can, is still remote. So wishing it was so, doesn't make it the right way to invest.
As you say, whichever direction you take this thinking, whether it's, you know, as you say, what do you hope your economy doesn't do, whatever the economy actually doesn't do, they add different things from how you invest your money, for maximum benefit. And I think that's a really important point. I was at for what I thought was, I think there's still different ways of making money in the same context. And this is really a question of, as you said, how you put that money to work in a way that makes just maximum sense in your portfolio.
I think if you are an ETF investor, then the market doesn't matter. I hell of a lot. If you own the banks, then you really should care about what the economy is doing, not necessarily because, not what the economy should do, if your own businesses are exposed to the economy, you want to be really clear that you have a very strong thesis for it. And again, as we talked about before, commodities in particular.
And again, my tech commodities, I mean, broader sense, airline seats, oil, gold, whatever, whatever you're doing, you need to understand the impacts or the areas of influence that will change your businesses' fortunes. And as doctors, whether they are big, long term, you know, kind of technical changes, whether they are short term economic impacts, whatever those things are, you really have to know what you're buying. You have to know how those businesses are impacted by, that the individual, the things that do impact those businesses are really, really well, because that makes a huge difference. And that's where, during the GFC, the bank struggle, with the same industry, same business, doing it, but effectively selling the credit provision business, but if you're ready for part of the market.
So really, really understanding what your company does, how it makes money, and what's likely to impact it. Super, super important when it comes to trying to make sure, you know what you're investing and what's the return to respecting. Any more on that, man? No, that's a good conversation.
I have one more point on my thing. We didn't even get close to that. I mean, miles further, which was awesome. So let's try and track ourselves this way back to that.
I'm gonna ask you as a macro, despite your comment, you made you simply ignore it, but let's do it anyway. Consumer and business confidence was out during the week. Both numbers are up. I think it was, I'm gonna be a confused.
Now I think it's business confidence. It's actually up higher than the survey average, higher than where it was, 18 months ago, even, but, I don't know, choosing, I'm choosing. Number 2018, higher than it was pre-pandemic. And it's time to look at that.
We had a question, I'm gonna have a moment of question for Sundae on exactly this topic or at least the impact of it. It seems to me, and as you say, it is to some degree the entire intent of any stimulus package is to kickstart, almost to crank turn the motor, to use the old school car, I'm telling all you probably I appreciate that thing. And if they go, whatever the electronic versions of that kind of, you know, extra bit of boost, just some moving forward. Those numbers.
I'm questionable, you would have had a bad PowerPoint in that, not for half. Yeah, so, so the way I look at this is, like suppose, you know, I'm a business owner, I look at the numbers and feel good about it, because it means that my business can continue, and I can make more money. From an investment point of view, I actually do not care about that at all, really, largely because again, as I've said before, you know, they're not reflecting any normal. First of all, and the second thing is that, you know, most of this is a reflection of stimulus spend that's going into the small and medium scale enterprises.
That is not really where you're investing in the stock market, right? I mean, the stock market has, you're not investing, yes, in your business, yes, but if you're your investor, it doesn't actually really matter, right? And in the long run, it's a bit like, you know, where you're spending money. So if you, you know, if you put the money into the economy that resulted, you know, if you give businesses, you know, tax breaks, they bought a huge or a car or something else, well, it's one time spent.
It's really not, it's not in many ways, it is cycling the money, I get it. And, but it is not doing anything fundamentally different. It's not really creating the next wave of whatever, right? So it's a bit like, I don't know, maybe this analogy doesn't hold, but you know, it's a bit like, well, there's no climate emergency right now.
So why bother? Right? And life is good right now. So why bother?
I think the fundamental problem for, to be really clean. You're not saying that's the case. I'm just listening, Dr. not saying we shouldn't care about what you're saying.
What I'm saying is that it appears that the air we breathe right now in Australia is very clean, but we shouldn't worry about it. But if we don't worry, then eventually in five, 10, 15, 20, 30 years, the air becomes polluted. The same thing is true for the way things are happening in the economy, right? This is why I'm not a proponent of, you know, the rate cuts, and I'm not a proponent of the way, certain things, you know, I'm a proponent of, of helping immediately, which I've said, you know, I'm a proponent of, you know, immediate stimulus, but not ongoing stimulus.
You know, as I was a proponent of immediate lockdown, not an ongoing lockdown, because I think you need to adapt with time and change your behavior, because what you want to focus on is not the short term win, but you want to focus on the long term win, right? You want to focus on what's going to be good, not for us today, not just for our children, you know, in the next 20, 30 years, but for their children's children, right? This is really hard to do. And it is, you know, symptomatic of our desire and symptomatic also of, you know, what sort of innovation ecosystem you've got, right?
So bang on innovation for a reason is, you know, if you think about the world as a physical system and the physical system has got chaos in it, you can find a local optimum, or you can find a global optimum. By definition, the global optimum is always better than the local optimum, but it's much easier to solve for the local optimum. And therefore we all have to solve, and have a tendency to solve for the local optimum, right? Is it, is it, I'll go on a system think, or not a TIT computer science PhD.
Is there an element of kind of just the important in the urgent, you know, that kind of acronym of, you know, there's the important in the urgent and we all work on the urgent cause urgent and we can't forget the important, cause we can't want to get to that after the urgent sound of the way. Is there any knowledge there? Well, I mean, it's true. I said that in a huge supporter of immediate action, when you need to prevent a huge catastrophe, right?
But then you can't continue on that, that sort of footpath, because it's like, you know, you took a turn to the left because you had no other choice because every road was blocked. That is the long winded road to nowhere. You just don't want to, you're traveling on that part. That's the analogy.
So like, you want to get back on the mine road. Yeah, yeah. You want to get back to the mine road. You want to find the high road to win over the long term.
This is very investable for the long term. So, you know, again, you know, you could use apply the sort of filter to businesses and apply the sort of filter to, you know, to collections of people over time. So, you know, what appears on the surface is bad. It may not be as bad.
What appears on the surface is good, may not be as good. Because again, there is a short term, a long term and local optimum, and sort of thing, right? So, some of the things to think about, I try to invest with, you know, and I encourage you to do with a multi-decade sort of horizon. And in the meantime, I'm willing to take the volatility that comes with it.
But part of the thinking behind a multi-decade investing horizon is the global, optimizing for global, you know, trying to find the global optimum is going to result in, you know, basically people, whatever people want, they want faster, better cheaper, right? Who always want to deliver that? People just take that. Right?
So, faster, better cheaper. As long as I can give you a better product, you're not going to care where it came from. You just want to take it. So, I think that's the other thing, you know, find the best product services and, you know, things that are delighting people and things are changing the work.
And then you'll be fine. Very good. I like it. Motley Fool Money.
Financial advice for real people, not trust fund EPs. Sign up for the newsletter at fool.com.au forward slash triple M. Let's go come to some company specific stuff, because we have some really big numbers out today. And some of those numbers will potentially even be examples of the sort of discussion we've just been having.
So, some numbers have the point zero. The online cloud accounting software business sells up 21% year on year. Bunnings, excluding Victoria, which is kind of one of those things, except bad stuff, but working for a second. Excluding Victoria, Bunnings, sales, you sell up 29%.
Now, we used to 20% growth for software companies. So, zero sales, 20% that's really impressive. That's big. It's a whole lot of growth already.
If you still got that sort of right, you're doing pretty well. When you get a hardware retailer, growing effectively $1 in three that did last year, it's adding other dollar to that. And, yeah, that doesn't happen, right? We saw Woolies in Coles, we talked about that a couple of years.
Up 10 and 12%, respectively. Okay, another round. Coles, Woolies up 10 and 12%, respectively. Bunnings up 20 and up 21, less up to 0, less up to 0.
This is a business, so they had net acquisitions were still up, but up by less. So, this business is either slowing growth or losing more customers. I don't know if they were clear about which of those it is, but some of the other guys, average revenue per user down 4%. So, a really good option, I think, to talk about, we talked about, putting in a business of software as a service business.
Zero was probably the first one that Australians really cocked onto, to really kind of start to learn about software as a service, recurring revenue businesses. These things, paying up for, frankly, for future growth, zero was the first couple of the rankings on the ICs, playing overseas, but zero was the first one we kind of all started to take notice of. I'm impressed that growth is still at 21%. That's a stunningly large number, considering how big this business already is.
You're all right, you're doing something right. On the other hand, some of the metrics that kind of matter, the number of customers that's adding is slowing. Again, maybe there's one of business values, but average revenue per user down 4%. That's the one I thought, hang on, if you wanted to kind of pick some metrics and work out which ones you want to be focusing on, customer additions make sense, and then how much those customers are paying in a year and a year also make sense.
So, how do you pass the zero results? Good top line, okay, customer additions, bad. I think it's just, of course, we're gonna be bad, average revenue per user falling. You never want to say that.
Is this the last kind of, you know, I don't get a growth of zero before it comes to my true business? Is this pandemic related? I'm not sure, but just give us your initial thoughts on the zero result. Yeah, so, for understanding, like, can I figure out if we can just try our terms here, if we were used to the sort of business, what's it churn, what about the number of the number of customers it keeps year on year?
So, I don't know if it was last year, but it's got something less than that this year, and that loss rate, the percentage losses is referred to as the interest churn. Yeah, so, the number of people that are leaving, the customer base. And that's not surprising. Churn, like as defined, as I just got, defined as is for the type of businesses, zero is squarely focused on small to medium scale businesses, right, a huge big deal here in Australia and New Zealand, both places had severe lockdowns, stringent lockdowns, which basically means that the web business has actually went out of business, and therefore they might have discontinued their zero.
So, I think again, and then nothing to realize, there's SMBs, any ways of higher failure rate, then larger companies, right? And this is zero is breading, right? That's all medium scale. Yeah, right, and this is zero is breading, but again, nothing surprising there, because again, you'd expect that you know, out of 10 cafes, I started some large world of fail, it's just the definition of that type of business, right?
It's just hard. So, I think that's fine. The, the output number, I think, is actually, I just got to find it. I, so not surprising, but those customers make a lot of sense.
Are we as investors sometimes guilty of looking at the good times of lack of churn, and then excusing the times when they fall? And you're not using that zero, but just, if I think about that, I think, you know, I'll be like, I said, that's funny, right? I'm getting to the second, but you know, it starts right, except in bubble where it sucked. And sometimes we can't say, well, we had to continue great use of growth, which in which time there was no economic challenges, and so of course, I'm gonna get growth.
And then we say, well, of course, that's customer, because I was a pandemic, and you expect that. Are we sometimes guilty of excusing business on both sides, we don't, we don't kinda handicap that growth. I will include banks in the same conversation, by the way. Banks never take bad debt, allows us in advance where they should be taking them, and then it happens, we go, oh, who knew that could be a recession?
And the answer should be, of course, we all should have expected it. Do we sometimes over-egg the success of businesses in the good times? And then try and explain it the bad times, maybe we should be a little more circumspect, when things are obviously good and so it's easy to sign up new customers? Yeah, so I think that's a fair point.
Like the only thing I'll say in defense of business, like zero, is this, right? So the main competition really is legacy software, right? So the people who are using spreadsheets at home to their accounting, they're probably dumping the files from their banks into a spreadsheet and then trying to do it. So it's a bit like, it's a bit like what we'd say is the Warren Cash, right?
The Warren Cash, if you think about electronic payments, it's not the competition with other payment providers exist, but the real competition is with cash. Yeah, the real competition is with existing systems. So there's a runway for growth where, I mean, you could potentially get 15, 20% growth for a long time because the share that you're trying to get from, you're trying to win from is just plenty. And you're not just talking about new business creation, there's a lot of new business creation there.
So that's the differentiating aspect for business at this time. Which is not the same for like a back with business like Bunnings or a business like ZBA. Those are basically at the mature end of their life. So it's not that they can grow at 20% for ever, right?
Whereas, I mean, nobody can grow for a time. But if you have punished the market, the question is relatively small, you can grow at 15%, for a long time. And as you grow, your delta cost for growing, the delta cost for running the software is really does not grow that rate, right? So you become more and more profitable.
Yeah, so it's a good leverage there in the business where you start seeing more cash come to the shareholders. So putting that aside, I think the only other thing I'll say is the output down. Yes. Again, I'm just making this up.
So one possibility is that they might have got lots of people asking for deferral payments. Or they might have softened their payment terms, or they might have given longer a trial period which is all gonna affect your output. Yeah, right, makes sense. So again, it's not, is it great?
No, but I mean, the top line is still growing, which is good. And from the other important thing to realize with these type of businesses is that once they are in, it's hard to check out if the business, if you're a business is surviving, that's number one. Number two is it's very recurring in that sense. Number two is that once they in the bigger promise really is, and if it materializes, is what else can they do, given that they're already embedded in your life.
So what else, what other service can they provide? That's where other growth opportunities come from. Most technology companies have that element of, I'm gonna get in this way, I'm gonna find a little door, then I'm gonna get in, then I'm gonna grow, and then just take over your life. It's usually analogy, mate, because the times we're living in right now, as you explain that I'm thinking, it's kind of like a virus, it's kind of like a system, they kind of mutate from there, which is not a perfect, it has a negative connotation, but that's not miles away.
You've been referred up before as land and expand. The other is you arrive somewhere, and then you find new ways of helping that customer with other service either that you already have, you might acquire someone, you may add modules to your software in-house, and you're trying to basically look at this relationship, we're in your system as you say already. Hey, let me make this easy for you. Why don't I add a module X?
It's part of your business process, I'll add a nice little bit of what you're already using. I mean, it's a really nice model, and it's for a customer perspective, you're like, you know what, that really would make my life easier. Yeah, I'll pay you a bit more for this thing you're adding to my life. Yeah, like, so for example, start by making it accounting easy, right?
But if you've got employees, then you wanna pay them, if you can integrate payments for your employees, well, that makes it easier. But nobody wants to use 10 different disparities systems, right? And then suppose you've got time sheets that you want to have your employees clock. Well, do you really wanna use another time sheet that is, you know, you could potentially, that's part of the ecosystem, but if it is built into zero, it's just easier.
It's like those sort of things, right? It's just like, as I said, it's all about, it doesn't matter where it comes from, it's easier, better, and cheaper. People will use it. And it's plugged in, which is the other thing, how many more systems you wanna have to log into, it makes life easier.
I like that a lot. When it comes to zero, it's kind of core business. We know that it's been, actually it's got a lot of business from there. And I'm curious as to your thoughts, this is a random tangent, I'm quite sure that noticed.
You talk a lot about total addressable market, the ability for business to grow. And you also talk about zero about, you know, it's kind of disrupted in a very large market. I'm curious as to how you think, maybe they're just too quickly, so I don't even know that there's no overlap. But I think about a business that is creating a market for itself.
So I think about, I don't know if I can't think of a great example right now. E-commerce probably Amazon in the old days is probably, you know, creating a market for itself in some ways, but a genuine, I find that example, right? So there was a thing used to carry out as a handset made phone calls. Apple created the, you know, ultra personal computer, the ultra portable computer, literally the phone in the pocket, right?
Which was a smart computer that happened to make phone calls. It created a market and it kind of grew that market. Someone like a zero is kind of saying, well, the market already there. And yes, they've grown the market a little bit by saying that people look, you were never gonna go and buy a piece of software off the shelf.
You got a shoe box or a seat to give you account in one to three months, use this instead. So they are growing the market some ways. Do you have a preference as to, I'm thinking, gee, if you knew there was a zero type business out there, that was disrupting existing market. There was already having success.
It feels like a lower risk strategy because you're not relying on, hey, the market could be exercised. You're like, no, I know how big the market is. It's this size. And zero is taking share.
For me, that's a lower up, potentially a low up in the market is, but maybe it's a lower up side. So it feels like a lower risk way to take advantage of disruptive growth. When you kind of got this, just the virus again, kind of just slowly taking over the segment, the category of the industry. That to me feels like a less risky way to invest than saying, hey, this business over here is creating a brand new market we didn't have before.
I'm never gonna stream you maybe on the run. I can, we had a lot of other entertainment. So it's hard to, you know, everybody's always replacing it on something. So I think it's completely new.
Do you have a thought as to how you'd prefer to invest there? How do you think about those two types? Or are they even different at all? Well, in my mind, they're not really that different because like, I mean, every business you rightly said, is replacing something and then it replaces something.
You can't replace something with exactly the same thing, right? You replace something that's smaller, faster, cheaper, better and then that better becomes more of itself over time. So the market sort of expands. You know, it's the, so I think, yeah.
So like, and most companies would define their markets based on a market opportunity based on what they see currently. So most software companies would define their, you know, if they're cloud based, for example, modern software companies, they would define their opportunity in terms of, well, the legacy systems, the banks use, Cobol with on premise architectures. I can replace that. That market, just for maintenance is that, what if I had to replace this, like what, half a trillion dollars, well, that's my target market.
Or if I want to target a small thing off that market, then it's that much, right? And it's tangible. You know, in some industries, it's harder to take time. In some industries, it's easier to take share.
There are industry dynamics involved, lots of different things to think about. Yeah. Makes sense. Very good.
Thank you Matt. Wes, how much do you think about banning in particular? You mentioned the fact that's kind of a one off thing. There's obviously very different stories and part of it the beauty of software, right?
The zero gets a customer. That's 20% growth in sales is largely because more customers pay the more money or this gets a little bit less money. But generally speaking, more customers pay more money every month. Every new customer you sign up, you're probably giving for a x number of years.
I mean, look, I've always seen more time in banning, so I should. My strategy's almost recurring revenue by definition. But for most people, you go to banning's every year and again when you want to, but I just get to sign me up for $10 a month for the next 15 years. You know, maybe I may be a diabetic, I may be a competitor, maybe I'll stop, you know.
I've got my chicken coop with Dan, I'm going to go on my more wooden middle of second or third chicken coop. But since I was 29%, one of, I think, I don't know if you're great. Actually, I feel that this is the single best retailer in the country, at least based on it's otherwise the metrics that are already tested pre-pandemic returns on equity of 50 plus percent. I just phenomenal.
This is an absolute juggernaut. Does 29% growth at least get you slightly interested in buying shares in retail? No. Tell me why not.
Well, as I said, right? I mean, how, you know, buying some growth next year, this time, I want to see how much it grew and I'm almost going to predict it's going to be down 5 to 10 percent easily, maybe more, right, in terms of, so I mean, that's, you know, my thing with investing, you know, I keep trying to keep my investing simple. I want to find things that are in what I call secular growth. I want to find things that have long tailwinds, long, long journey that they can make.
And I want companies that can transform themselves over time. I am not interested in banks, retailers, traditional retailers, supermarkets, because they're not that thing. And the beauty of investing in self growth is that most people do not think things can grow forever or for a long time, right? And that's huge.
It's basically the easiest way, you know, I'm making it sound too simple, which is not really good, but it's the easiest way to make money is to make, you know, every one should invest in things that they can see. It's harder investing things that you can't see. It's harder to actually even think that something can grow at 25 plus percent for 15, 20 years, right? Nobody thinks like that.
So, I say, no, we're very few. That's an opportunity in my mind, right? So what appears to be overvalued today is actually really cheap, right? And with that sort of window and that sort of runway, you just need to be right some number of times and you're set, right?
It's a much easier, it's an easier way to invest instead of trying to go in and out, like, you know, you need to buy a well established retailer at a good price and sell it at a good price, then come back again. It's just too hard. And I just don't have that energy or the capacity or the ability to make those in and out decisions, right? So, I just say, pass.
Makes sense. Let's go back to Maxine. So, we're getting back right here, but also, I want to talk about what the market's been doing over the last couple of days. We saw the vaccine news released by Pfizer.
They're claiming a large sample size, large, large test group, 90% efficacy, which is phenomenally large, bigger than the seasonal flu, in terms of its ability to hopefully touch wood, solve this particular pandemic, and frankly, find us a vaccine. Maybe others do as well into that mix, but at least for now, there's a reason to believe, hopefully, Pfizer has a solution. Now, there's still some debate on certainly around the scientific community about, you know, some of the detail and it's been done by pressureless rather than rather, you know, published scientific research and a whole lot of stuff. So, we don't want to over-egg this one, particularly this investors, because frankly, the responses to this were all over the place.
So, we saw the market, the future actually jumped pretty big. The US future also jumped pretty big, three and a half percent, that way, before the market traded by closed. The US market closed up, I'll say only, but only 1.4% or 6%. The Australian market actually closed up less than 1% on the day the users announced.
But that's kind of the proverbial dark that seems calm on top of the water. And it's got to like, mad underneath with like kicking and carrying on, because we saw businesses like Westfield or Unibae Redamco, Westfield as these days, share about 40%, the market was almost flat. We saw shares in corporate travel management, own shares, web yet, own shares, and flights, and I don't know, share those, up 15% each. We also saw Cogan at 18%, Temple and Web today on 20%, Redbubble, I can't remember, 20% plus from memory.
Again, oil was up 8%, the oil sector was up 8%, IT was down 6%, these are phenomenal. You know, individually you go, wow, the market must be moved massively. And it didn't. I hate to use the phrase of all the word rotation, because it's one of those horrible cliches that we all hate.
But it was hard to see that and think that there were a whole lot of people kind of flicking a switch in their portfolios and going, right, now we can get back into the stocks that we couldn't own previously. And we're getting out of the stuff, we didn't really want to own because we had to own it, because there was nowhere else to be. I went up a little bit with your mouth. How do you think about that sort of stuff?
Are they reasonable? Are they overreactions, other opportunities? Are there risks? When the market goes nowhere but sectors literally fly to other ends of the spectrum, this is one of the biggest, one of the strangest days on the market.
I think it's a commentary because the total market was not much, but it was a really, really strange day. No, I have one for that, I love it. I think it's fantastic. It's exactly, so it's this myopia of the market, right?
And short-sightedness of the market is really something that investors can leverage, right? I love it because here's something, I mean, on the surface, some of these movements make sense. Like you can justify it. You can try to justify it, right?
So one of the justify it would be say, well, okay, all this spent, that was, I'm going to use Kogan as an example, saying all this spent is going to Kogan now, people are going to be less scared, there's going to be everybody's going to be vaccinated, and everybody's going to go back to wherever they were shopping, and therefore that shopping is going to disappear from Kogan. Yes, that is obvious. That's probably what's going to happen. That does not however change the trajectory for Kogan the business over the next 10 years.
Again, there's no guarantees in this thing, but there is a trajectory for online sales, there's a trajectory for Kogan's efficiencies to, for example, improve as more and more people use it. It can leverage its distribution centers, it's going to leverage its buying power, and it can leverage its brand and the white label of things that it sells to a larger population, right? So none of those things have changed. Yes, stuff might have temporarily changed, or in the short term, it maybe is not as attractive.
I don't know, I'm not making that, I'm just saying that, yes, there's justification. But it misses that long-term picture, right? And if it misses that long-term picture, that's the opportunity in my mind. The short-term reaction that people did is exactly what I talked about, right?
That people want to make this, I'll use value for the lake a bit, what I mean, this value call, right? That this is not a value in the short term, and we're getting to this, that's going to then give me the opportunity to, you know, I'm going to write this recovery wave, and then we'll get out at some point. Why? If everybody did that, but not the arbitrage that you had disappeared, right?
You just, you know, Westfield, whatever is now called, it just went up 40%, I don't know, like I'm the person who bought it 40%, plus, how much arbitrage is left out for them, right? So that's the problem. On the other hand, this thing that people dumbed 20%, maybe arbitrage is on that end, right? Because it's not 20%, so that's the way I like to think about this, I don't worry about it at all.
It doesn't matter to me. So that, I think it's the pricing action behavior, right? The, I don't know, what else you were talking about, the vaccine? Is that the other thing that you were talking about?
Well, just moving the market, we'll talk about that in a second. But yeah, just the sense, look, I have to say, I find that moves stupid quite frankly. In the sense that it's not like there was some unknown outcome that all of a sudden, if an alien landed an alien stocks went up, you go, okay, well, who knew that was going to happen. To some degree, to, for the market to have had Westfield 40% cheaper, yesterday and 40% higher today on the use of a vaccine, you had to have almost believed, if that move is right, if yesterday's price was worth right, the only option I can draw is people honestly thought we'd never get out of the house again.
Well, okay, can I challenge you on that? So there is a little bit of, I think, validity to the move, not the degree, I guess, but a little bit of validity, right? Because if, for example, there was no vaccine news, and let's say we're going to be locked up, if we're not going to go to the mall for the next one year or two years, maybe there isn't something, I don't know how much data, for example, Westfield had, maybe we can actually go to business, right? So there's that risk, that risk became less, and in some future customers, now all of a sudden become visible, and it's a 20%, it's not definitely not 40%.
No, no, that's my true, it's not, if they've been, three percent move by the way, but that seems really, I should say, maybe Westfield opens in January rather than June, and the profit, it, and the stock goes up 5%. Yeah, I'll say the trouble kind of the same with Cogan, right? That both moves in both directions, simple websites are the same thing. It's not like people thought, oh yeah, well, always buy from Cogan or we'll never go to JB high-five again.
Yes, it might have been three or five months earlier, yes, that might be worth a few percentage points on some sort of getting cash flow basis, just bizarre to me, you can find away, say this is a 40% difference or 20% difference on the basis. In Australia in particular, where we're pretty much most of us are back to normal-ish life, Victoria getting back to normal-ish life, slow on the rest of us, but effectively, I don't know, just writing that as bizarre as sheer size of the movement, not the direction, I can believe you're going, the size was just phenomenal. Yeah, I agree with that. So let's go to the back to him, only because this is a investing podcast, we did 10 to 10 to have a broad remit.
We're going to go in broad and normal here, because you've been sharing some some really kind of, you've been pretty energetic about this, and it is the impressiveness of the potential vaccine, and the technology behind it. Now, neither of us are medical doctors, and neither of us are biological scientists. You're having to be a computer scientist, you have a PhD, so you're a mild-headed me, but in any case, we're not going to try and cover this for a pure health perspective, and I don't know how closely or otherwise we'll go to the specifics of the science. But the very idea of the technology behind this is huge, and you've talked about that.
It does make some impact on the investment markets, because if this is the future, it is a step change, and it's like a right-angle turn, in terms of the way a lot of our future additional compounds, vaccinations, the whole lot of other stuff gets made. Yeah, so again, I don't know a whole lot of this. It's just, you know, and I don't invest based on what I have understood largely, because again, I might have missed something, right? So RNA, basically, is right-one-u-click assets.
Everybody has a DNA, an RNA, an RNA, an RNA, and a body, basically defines the genetics of our body. And what, okay, I'm going to backtrack a little bit. The traditional flu vaccine, for example, basically involves finding the strains that we think are going to be there and taking weak conversions. This is how vaccines are made.
We've been versions of the germs putting into your body. That results in the body now knowing what germs to look for. Its immune system has been, it just gets programmed to attack it. So to practice this, it's not 100% flu-proof, but it makes, you know, even if you get the flu, you just get a weak version of the flu as long as the correct variants or group of variants have been, a program.
Traditional vaccines have been done that way, right? Now, what this one does is basically saying, well, what you want to do is you want the body's immune system to respond. Why do we have to input germs into your body? We're going to input the synthetic compound, which is called the messenger, in this case, which is why it's called mRNA.
And the messenger is going to go to the RNA and go to create a response, and that response is then going to result in immunity. So basically, we're programming our body to deal with the coronavirus. This is a step change because actually, this, originally, this technology, as far as I understand again, with lots of caveats here of what I understand, was being developed largely for cancer, right? And at every high level, if you think about cancer, is cancer is basically body cells gone haywire.
In other words, the body is producing cells at a rapid rate. All you need to do, if you think about it, a very, very thick, you know, it's a key thousand video, all you want to do is tell your body to not produce those cells. And it's just that, you know, that extra process has got haywire, right? The process has gone mad.
So you should be able to tell our DNA on RNA, somehow to switch that process off, right? That is where this research started, and they have found that this actually really works well for coronavirus. Right. The other cool thing about this is viruses mutate over time, and every year we have to find the variant, then you have to make these things, put them in a vial.
Here, you just change the information, the messages you want to send. So this is a step change because maybe what we needed is we needed a pandemic to give this technology has been developing lots of scientific papers, lots of companies working on it for ages. Maybe we needed a pandemic to actually bring this technology for this is like, you know, could be a step change for all these bad diseases for which, you know, people go through chemotherapy and then eventually die. That actually, It's a cool future.
I have cancer and I go and have this particular therapy and it will stop the cancer. Right. I mean, that's it. That's it.
It is the pipe dream. But like you say, the fact we've got billions and billions and billions of dollars we spend on this particular virus helps that technology just proceed fast, know what otherwise. Exactly. And then the other thing, there's some cool, I'm not going to go into the cool story of, because this is, this is the, so we should clarify this.
We're talking about Pfizer here, where we shouldn't forget that the actual technology is was invented by BioNTech and Germany, by two husband, wife, they have a history of actually previously commercializing, which is I don't mind, I'm not going to just people, hundreds of people in Germany, and they basically have this deal with Pfizer because Pfizer has the other stuff that you need to actually do the, do the, run the trials, the distribution, there's some distribution challenges because of the cold, this needs to be at minus 50 degrees Celsius or something like that to be actually distributed. So there's a cold change that needs that you need, which raises a lot of interesting questions, right? So, you know, the Australian government can secure the cold chain to get the vaccine delivered here. What about developing countries where you know, you don't have cold freezer, right?
So there's that challenge. There's a lot of challenges involved with this technology because it's very early stage. The other good news with this one is that this is not only, and this is what the inventors or the BioNTech founders have said, they are likely not the only ones, right? The other one, Moderna, which is developing another mRNA vaccine, is likely going to be able to produce.
So I think I like the fact that it's just a step change. It's a huge technology, you know, step change, and it takes us forward. Super cool. Right, let's go really left field.
There's an article in all the B-Pipers that I obviously thought of using, don't worry with its press releases because all the B-Pipers have picked it up and again, we're doing this on Thursday 12. Twiggy and for the excuse, twiggy is an entry force to cause, going into renewable energy. And apparently, I saw a number of twiggy wants to, the project that he has planned, he's going to produce something like four or five times the amount of energy currently in the Australian National Energy Grid. So that seems large.
That is very, very, very large. Now, I'm a bit of a twiggy fan. People have issued me personally and for holiday from Social Reason, I don't want to get into it. But he has built Fortescue, given the size of the iron ore business, and given the fact that the giants win, BHP Rio Valle with a big three, for Twiggy to have created a business effectively from close off to scratch, and be among those big four, or now including Fortescue, he's just phenomenal.
I think when we talk about celebrating Australian success, Twiggy should be up there again with his flaws, but up there as one of the great success always the last 20 years. He's in a whole lot of things. He's in some social movements around, helping indigenous people get to work. He's been involved in some of the co-covery planning stuff.
This is different though. This is for profit. This is Fortescue itself saying we want to go and make money producing renewable energy. And I thought this was what we're talking about for a couple of reasons.
I'm occasionally just might know you like a little company called Tesla. Maybe this is having heard me, maybe I haven't mentioned it before, but maybe you have. Tesla, you've been talking about last week or two with us in the team about the fact that EV electric vehicles are now cheaper at a total cost of ownership basis than traditional cars. And that's a step changing itself.
That starts to say you don't have to like the environment, you don't have to like solve driving. You can literally just say, ask the bean counter, which car should I buy? And cut off and you have to shoot your Tesla. Just purely on cost of ownership based on the whole of stuff.