Hidden Value In Data

valueinvesting
investing

#1

Proper old school Ben Graham value investing meant weighing up a company’s balance sheet, adding up the assets on the balance sheet and finding stocks trading below book value…

Flash forward to today and the methodology still produces results, even if it’s widely used…

But I’m wondering whether there are other assts on a modern tech companies balance sheet that aren’t being priced in…

One of them is data.

We are entering the golden era of data capitalism. After reading a book on ai and ml this summer, I read that enterprises of the future are going to need lots of data to compete.

The chain of production would look like this:

• Companies collect data on their customers - huge bodies of data

• Data is mined using ai/ml-driven algorithms

• Companies then uses algorithms to assist in certain processes - marketing automation, logistics, customer support - whatever it is

So, in the modern age, the data will be the soil which companies need to plough the fields.

The interesting thing is that only certain companies are in a position to gather data - specifically companies with a platform…

Obviously the big guys like Amazon and Facebook have, but would old-school FTSE 100 blue-chips have the access to data?

I’m not so sure.

Lets take Cadburys. They own part of the supply chain. But they don’t have control the areas in which the product is sold to consumers - supermarkets and new agents.

This means they don’t have the infrastructure to interact with their customers and this puts them at a huge disadvantage…

A modern brand like Quake however would likely have an online e-commerce set-up and use email marketing. This means they can gather data on their customers and stay closer to them!!!

What Is The Enterprise Value Of Data?
So my question is…

Could it be possible that companies that are in a position to collect data points on their customers, companies with platforms…

Could it be possible that their ability to collect the oil of the digital age gives them an enormous edge over competitors and that this data is undervalued?

I’m not sure…but I certainly think it’s possible…

Apple
On the other hand, a company which could be under-valued by virtue of its data sources is Apple.

Apple:
• Is producing an interface for self-driving cars

• Is entering the smart home/smart speaker market with Homepod

• It collects data from games and apps on the app store platform

• It collects data through Siri

I think it has plans to generate health data as well in the future…

Apple is sitting on troves of data. While the economic value of data can be fully comprehended, I am willing to bet this asset has not been prices into Apple whatsoever…

For a company that is only priced