Sean D. Emory
SPEND TO DISRUPT, SPEND TO PROTECT...
It's Friday, so it is time for the Avory Chart of the Week!
Companies get disrupted all the time. Lately, companies have been fearful of what Amazon may do next. Their ability to take on any company in any industry is not by accident. Enjoy!
It's hard to compete with talent, money, and execution. The chart above is a critical aspect to one of our central themes of large technology players moving horizontally. 4 of the top 5 spenders in research and development and capital expenditures in the US are Amazon, Google, Apple, and Microsoft. That isn't by accident either as those 4 have a blended total cash position of $527B (Apple 50% of it). The majority of their total cash outlay is going towards R&D as opposed to CAPEX which we view as a positive indicator for the sector as a whole. Another way to view how technology, in general, is eating other industries is the level of CAPEX + R&D spend from 2007 to today. In 2007 the consumer discretionary sector and technology sector both spent $100B in CAPEX + R&D. Today, technology is spending $280B (growing 18%Y/Y), while consumer discretionary is spending $102B (declining 22% Y/Y). Therefore, while the large players are already competitively advantaged, they are continuing to spend capital to seize share in additional industries.
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Sean D. Emory
Avory & Co. Founder & Chief Investment Officer
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