30 years ago, my University of Michigan Graduate Business School professor, C.K. Prahalad (along with Gary Hazel) outlined a management theory concept called, core competency. Prahalad described a core competencies as the resources and skills that distinguish a firm in the marketplace. Core competencies satisfy three criteria:
Provide potential access to a wide variety of markets.
Make a significant contribution to the customer benefits of the product or service.
Difficult to imitate by competitors
Companies with core competencies in rapidly growing industries also are lucrative potential investment candidates. Each of the taGMan companies have a core competency in software development, software integration, and software deployment. Tesla, Apple, Google, Microsoft, Amazon, Nvidia, General Motors are investments I believe will grow dramatically in a future world of electric vehicles, autonomous technology, and mobility solutions - a potential $9 trillion market opportunity.
On August 20, 2011, Marc Andreessen wrote an op-ed in the Wall Street Journal, “Why Software Is Eating The World.” Andreessen wrote:
“Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.”
In the ten years since that op-ed, its primary theme is even more relevant today, and is a major reason the business of automotive is in the middle of disruption. All of the taGMan companies have software capabilities driving their growth today as well as leadership in a rapidly changing automotive space tomorrow.
For Tesla owners, their electric vehicles are better today than when they originally purchased the vehicle because of Tesla’s usage of over-the-air software updates to the car - essentially wireless software changes to the vehicles that fix problems or add functionality. Tesla leads all automakers (legacy or new entrants) in the usage of software to create unique vehicle functionality, service the cars, create a unique retail experience, and execute seamless financing options for buyers.
Much of Apple’s revenues today are from a recurring revenue bundle of software-based services customers pay for on a monthly bases - iCloud, AppleTV+, Apple Music, etc. The company’s expertise in artificial intelligence will help Apple enter the autonomous vehicle category in the future which may become part of the company’s recurring revenue bundle offering.
Google Search, YouTube, GMail, Waymo, Android, etc. are all examples of software-based Alphabet products powering what is now a $1.9 trillion company. Waymo (the autonomous driving subsidiary) is one of the few entities operating a self-driving taxis service on a small, but growing scale today.
Microsoft has expanded from software powering PCs to software powering businesses. The company’s Intelligent Cloud business unit drove $19.5 billion of revenue just in just the 4th quarter of last year. Some Intelligent Cloud clients, like GM’s autonomous taxi-service Cruise subsidiary, are using it to commercialize their self-driving data solutions.
Amazon uses software to essentially sell everything. It pioneered the Amazon Web Services cloud business which allows its clients to operate without a need for owning mainframe computers. The company also owns a self-driving technology company, Zoox. Amazon owns 22% of the recently IPO’d electric vehicle automaker, Rivian as well.
Nvidia builds autonomous computers for legacy automakers like Mercedes, Toyota, Hyundai, VW, Xpeng, and others. Nvidia develops the data processing, mapping, and self-driving software for many automotive clients as well. Although Tesla now uses its own full self-driving computer, the company’s data center, which houses the training for its artificial intelligence, is still based on Nvidia.
General Motors is rapidly building a software-based core competence. It must! There is no choice if the company wants to thrive in the future. Of all legacy automakers, GM is further along the path to transforming its business. Cruise, a GM self-driving taxi service subsidiary since 2016, is a leader in autonomous mobility technology solutions, similar to Google’s Waymo. GM’s Super Cruise technology available today on select vehicles is capable of hands-free driving on 200,000 miles of divided highway (soon to operate on over 3 million miles of roads). None of this would be possible without tremendous software capability.
Of the taGMan portfolio companies, I’ve owned Apple the longest (since March 2015). I added Microsoft and Amazon in January 2020. Over time, I’ve reallocated positions in each taGMan stock without every entirely eliminating a position in any of them ever.
As of November 19, 2021, Tesla has driven the best total return and dollar weighted annual return in the taGMan porfolio, 1013% and 195% respectively.
Total return for Apple is 352%; dollar weighted annual return is 29%.
Google total return is 95%; dollar weighted annual return is 32%.
Total return for Microsoft is 59%; dollar weighted annual return is 70%.
Amazon total return is 16%; dollar weighted annual return is 18%.
Nvidia total return is 355%; dollar weighted annual return is 65%.
General Motors total return is 43%; dollar weighted annual return is 12%.
The combined taGMan portfolio total return is 121%; dollar weighted annual return is 46%.
What I’m Reading, Watching, and Hearing
Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur