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H.E.R.O.’s Journey in Tech (Weekend Reads 11-12 August 2018) – For Reliance Industries, consumer data is the ‘new oil’: Indian conglomerate’s transformation centers on telecom business + You See Less Than You Think: Our seemingly detailed view of the world is more of an ever-changing sketch than a rich portrait-our minds fill in the blanks

H.E.R.O.’s Journey in Tech (Weekend Reads 11-12 August 2018) – For Reliance Industries, consumer data is the ‘new oil’: Indian conglomerate’s transformation centers on telecom business + You See Less Than You Think: Our seemingly detailed view of the world is more of an ever-changing sketch than a rich portrait-our minds fill in the blanks

Companies

  • Tencent-backed news aggregation app Qu Toutiao (趣头条), or “Fun Headlines,” is said to list in September in the US (Technode)
  • Behind the fakes: Pinduoduo is leading the way for low-income consumption (Technode)
  • The liquidators tasked with unravelling the massive fraud behind the bankruptcy of China Medical Technologies Inc. are suing the company’s former senior vice-president of operations, Zhu Feng (Charles), seeking to freeze assets including a $2.9 million home. They claim Zhu was part of the management team at China Medical that perpetrated a US$521.8 million fraud against the company through sham purchases of technologies from a company called Supreme Well Investments Ltd. The company bought “fluorescent in situ hybridization technology” or “FISH technology” for $176.8 million in 2007 and “surface plasmon resonance technology” (SPR) for $345 million in 2008. “Former management touted the merits of the acquisitions and represented that Supreme Well was an arm’s-length company,” the claim states. “However, in reality, the FISH technology and SPR technology were of no, or no significant, value and Supreme Well was secretly controlled by former management. Zhu in particular touted the merits of the acquisitions to the board.” China Medical’s financial adviser, Credit Suisse, “made numerous unsuccessful requests for information about the shareholder and beneficial owners of Supreme Well, the operations of its board and shareholder, the chain of title of its shareholding and the FISH technology for the purposes of due diligence.” “Zhu was directly involved in the due diligence process,” the claim states. “Shortly after the acquisitions, Zhu received US$1.68 million directly and indirectly from Supreme Well for his role in facilitating the fraudulent transactions.” With China Medical now insolvent, creditors have claims of more than $400 million against the company and its assets “have only a nominal value.” (Richmond)
  • Mechanical motion control component and industrial robot maker Hiwin Technologies has reported strong profits for 1H18 (Digitimes)
  • PCB firm Zhen Ding July revenues hit 6-month high (Digitimes)
  • Which Stocks Will Benefit from Samsung’s 180 Trillion Won Investment? Wonik Holdings and LOT Vacuum are among the stocks that can expect to receive orders soon. Display equipment and material producers that can benefit from the resumption of investment are SFA, AP system, ICD, Wonik Tera Semicon, and Duksan Neolux (BK)
  • Investors sold off shares of Netmarble Games — Korea’s leading mobile game maker — after disappointing second quarter earnings combined with a rather glum outlook. (Investor)
  • For Reliance Industries, consumer data is the ‘new oil’: Indian conglomerate’s transformation centers on telecom business (Nikkei)

BATTSS – Baidu, Alibaba, Tencent, TSMC, Softbank, Samsung

  • Alibaba tweaks a controversial legal structure: Jack Ma’s role in the firm’s “variable interest entities” will be reduced (Economist)
  • Samsung’s new $1,000 power-user phone reflects slowdown in hardware innovation (Japan Times)
  • SoftBank’s Son says WeWork is his ‘next Alibaba’; Entrepreneur bets $1bn more on office sharer’s network-building vision (Nikkei)

FAANNMG – Facebook, Amazon, Apple, Nvidia, Netflix, Microsoft, Google

  • ‘Stories’ was Instagram’s smartest move yet: Can it become Facebook’s next big business? (Recode)
  • Microsoft’s AI can convert images into Chinese poetry (TNW)

Asia Tech & Innovation Trends

  • This edtech startup is using AI to help students with their entrance tests (TIA)
  • Singapore image recognition solutions firm Trax leverages new retail in China (KRA)

Global Tech & Innovation Trends

  • Jack Dorsey Is a Double-Duty CEO for Twitter and Square. Here’s How He Revived Them Both. (Barron’s); How Some CEOs Successfully Run More Than One Company (Barron’s)
  • Rising Dividends From Data-Center Giant Equinix. Founded in 1998, Equinix originally specialized in connecting various networks to one another to deliver email messages, for example. But the technology world has evolved exponentially since then, with massive amounts of data and software routinely exchanged around the clock. That has intensified the need for more speed, security, and high-quality data network connections, whether for a bank’s trading desk or a retailer tracking its inventory in real time. (Barron’s)
  • Dead robots raise questions on how far home technology has come Failed designs and undeveloped markets claim many projects before they switch on (FT)
  • Climbing The Wall Of Worry: Disruptive Innovation Could Add Fuel To This Bull Market (SA)
  • Stitch Fix: A Bull Says Digital Dresser Can ‘Continue to Outgrow Expectations’ (Barron’s)
  • RPA Provides a Lightweight, Agile Approach to Automation; It allows companies to automate processes at a fraction of the cost and time of classic software development (WSJ)
  • What MoviePass Can Teach Us About the Future of Subscription Businesses (HBR); Maybe MoviePass shouldn’t compare itself to uber (Wired)

Life

  • You See Less Than You Think: Our seemingly detailed view of the world is more of an ever-changing sketch than a rich portrait-our minds fill in the blanks (WSJ)
  • Eren Ozmen and her husband spent the last quarter of a century carefully building Sierra Nevada from a tiny, 20-person defence firm into a multibillion-dollar aerospace concern. Now she’s betting their fortunes on the billionaire space race (Forbes)
  • Earnings surprises are bigger, thanks to growing use of non-GAAP metrics; More S&P 500 companies are using non-standard numbers to report bigger earnings beats and boost share prices (MW, PDF)

Evidence of a Positive Trend in Positive Quarterly Earnings Surprise over the Past Two Decades

ABSTRACT

This paper confirms our prediction of a sustained positive trend in positive quarterly earnings surprise (ES) over the past two decades for reported and forecasted quarterly “Street” earnings. The timeseries distribution of Street ES has not shifted symmetrically to the right, however. Specifically, the shift is the result of fewer small ES in the bins at or just below zero and more and larger positive ES in the bins further away from zero. This descriptive evidence supports two explanations: of (i) increasingly upwardly biased Street earnings and/or increasingly downwardly biased forecasts of Street earnings and (ii) of greater use by analysts of adjustments to bias Street earnings to exceed GAAP earnings, especially in the fourth quarter. An analysis of ES based on the difference between GAAP earnings and time-series forecasts of GAAP earnings (GAAP ES) does not show the same trends, however, implying that the positive trend in Street ES would more likely stem from analysts’ efforts to bias ES rather than firms’ actions to manage GAAP earnings to achieve the same result. We also document that, whereas forecast accuracy improves for shorter forecast horizons, analysts’ Street ES bias increases for shorter forecast horizons. These results are robust to firm size and the earnings surprise shocks of the Sarbanes Oxley legislation and the 2007–2008 global financial crisis.

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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