Mobile Internet as the Next Big Investment Opportunity: Internet Trends Presentation ~ market folly

Thursday, April 15, 2010

Mobile Internet as the Next Big Investment Opportunity: Internet Trends Presentation

Morgan Stanley recently issued a technology presentation focused on internet trends that we found intriguing from an investment standpoint. In the past, we've covered how many hedge funds have made large wagers on technology and in particular the mobile internet. They've placed these bets via:

- smartphones
- wireless transmission of data
- spectrum
- cloud computing
...and more

Morgan Stanley takes a look at internet trends in-depth and confirms (if it wasn't already obvious enough) that yes, mobile internet is the next big thing. In short, MS thinks that the mobile internet will eclipse the desktop internet in five years time. What's interesting is that they also highlight that social networking users surpassed email users back in mid 2009. So instead of telling people to email us, maybe we should instead solely tell people to follow us on Twitter and to become our fan on Facebook. Mobile internet has certainly helped facilitate this trend as people can access their information from almost anywhere, anytime.

MS notes that we are just in the early innings of the mobile internet cycle, in what they deem the "5th cycle of the last half century." Mainframe computing was big in the 1960s, mini computing in the 70s, personal computing in the 80s, desktop internet in the 90s and now mobile computing in the 2000s. And of course they highlight that Apple (AAPL) is leading in mobile innovation (at least for now). Thus it should come as no surprise that AAPL is one of the most popular stocks among hedge funds. Morgan Stanley believes that pricing, application ecosystem, and user experience will be the big drivers for success in the mobile devices arena.

They then touch on infrastructure and how 3G is key to the success of mobile internet. Well, hedge funds are already hot on that trail as the wireless transmission of data has been a big theme in portfolios. Hell, Phil Falcone's hedge fund Harbinger Capital even announced their own plans for a 4G wireless network. The takeaway here is that mobile phone usage is increasingly focused on data usage, not voice usage. We've touched on how hedgies are playing this theme via wireless tower stocks as mobile service providers scurry to increase speeds and meet rising demand.

The other big keyword these days is the 'cloud,' as in cloud computing. MS identifies (CRM) as the company to look towards if you want to play the trend there. Central storage of information that is accessible from anywhere will be a key focus going forward. MS also notes that (AMZN) could benefit from this having already revolutionized commerce. Not to mention, we recently saw that David Stemerman's hedge fund Conatus Capital is bullish on cloud computing as well. In addition to those aforementioned stocks, it's clear that the likes of Apple (AAPL) and Google (GOOG) will benefit from the emergence of mobile internet. After all, that's why they are some of the top stocks owned by hedge funds.

Below is Morgan Stanley's recent presentation on internet trends:

You can directly download a .pdf here.

If you're looking to connect the dots between trends and investment opportunities, we highly recommend you check out hedge fund Coatue Management's technology trends presentation. Philippe Laffont started this technology focused hedge fund in 1999 and you can view Coatue's portfolio here. Some of their recent position activity includes doubling down on their stake of STEC (STEC), a producer of solid-state storage drives. They are definitely one of the go-to hedge funds if you're looking for technology related investment ideas.

Data seems to be the common link in the latest technological trends as the world is increasingly focused on: the storage of data, the wireless transmission of data, and the ability to access that data from anywhere. While data may be a focal point, mobile internet is certainly the trend.

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