With the possibility the DOW now is in a downtrend and maybe going much lower over time...imo... this is when FA comes into its own.
Before launching into my own idiosyncratic approach ... I would highly recommend, for anybody wanting to learn how to judge the value of mid to large cap stocks, pay attention to anything Roger Montgomery has to say... he is good at what he does and is generous about sharing his knowledge [he has a website with a lot of free info to get into]. [personally I don't follow him but a few years ago I tracked his advice for about 2 years and discovered overall he returns about 20%... he very occasionally makes a bad call but in general it's quality analysis]
To amalgamate the 2 topics.. tech wreck and FA. .... FGO and FZO are likely survivors /thrivers ..imo.
Flamingo [FGO] and FamilyZone [FZO] both have a strong business case but they are very different Co's.
Similarities:- Competent management, address a real need in the market, have a recurring revenue model, scalable and both at the early stages of growth.
Differences:- FGO is selling a large ticket item, FZO is selling a small ticket item. FGO is a bit more transparent and therefore easier to understand. FZO is partially reliant on 3rd parties for its success, FGO has greater control over its fate. FZO has some in-house IP and licenses the rest, FGO owns all of its IP.
I am not much good at the nuts and bolts approach to analysis... I am definitely the touchy-feely type. My focus is on the narrative..i.e. the project, the people and the plan. Things I have learned are ... go for big projects... if it is mining? - big deposits, an idea? - a big idea. The people ... integrity matters [a lot]. The plan.. if a well defined path to commercialization is not mapped out the Co. is under-cooked and a high probability you will lose money on it.
Comparing and doing the FA on FZO and FGO.
The projects:-
FZO is about protecting kids from malicious online threats.
Strengths: Offers a comprehensive solution. The platform is well developed, transfers well across different cultures.
Weaknesses: Is a small ticket item... meaning thousands of transactions are required to make money. The Co has taken steps to offset this by bundling their offers to schools into a single transaction/contract but that aspect of the business is baked-in and will show itself as they do deals with telco's to adopt their product.
FZO relies on licensing of some 3rd party software for its business model... this might translate into higher costs as the business grows because of the probable need to continually renegotiate the fees for use.
FGO is offering an AI program for online sales and service.
Strengths: Demonstrating superior market performance. The Co owns its IP 100%... meaning they have complete control over further development and no hidden costs lurking down the track. Also, if the Co ever becomes a target for a TO then they have a fully differentiated item for sale.
Weaknesses: the Co is in direct competition against the likes of Google and Microsoft.... the window of opportunity for the Co to establish itself in the market is narrow before these monsters apply their brute force to the IT. Secondly the Googles of this World are able to bundle multiple products and even if the AI they offer is second best they get the sale because of the overall value in the packages they put together.
The people:-
FZO... the executive team have a telco/IT background. This means they understand the customers they will primarily deal with, understand how to do business with them and will have multiple industry contacts already established. A very strong management team. Also no skeletons in the closet ... the individuals in the team all have a history of success and have not been associated with dubious ventures.
FGO .. likewise. The key personnel all have established reputations for success in their respective skills. The CEO has been successful as an entrepreneur, the CTO has come from another successful business in which he filled the same role, the IT staff are high profile and previously successful and the head of sales is in the same category.
The Plan:-
FZO... the bread and butter income for FZO is signing schools onto its platform [this is also the basis for the Co's commercial credibility]. Plenty of growth opportunity just in OZ/NZ but already the Co is tentatively exploring opportunities in the US. FZO has complete control over this part of the business but it does require an initially large investment of time closing each contract... so the growth is always going to be linear for this side of the business. Once a school is signed on, the revenue is recurring and will probably run for several years in each case.
...the blue sky is signing deals with telco's. There the aspect of multiple small sales is transferred to the telco and the potential revenue stream for FZO is huge even though its only a few cents per customer.
FGO... the initial target for sales is in the insurance and banking sector. There are barriers for entry due to the need for a high quality security protocol... which FGO has attained. Establishing a dominance in that sector is the plan and that creates the reputation of the product to then expand to less difficult sectors. The software is a high priced item with an ongoing recurring fee [which might later transpose into a percentage of profit model]... this is a distinct marketing advantage because sales are based on a few converations/demonstrations... each contract with a large business is likely to be worth between $1M and $2M on a yearly recurring basis.
Personally ... I have traded FZO [not currently holding] and I presently have a position in FGO. My reason for going for FGO at this time is I believe the growth momentum for each Co is different and that FZO will take another year to demonstrate its value but FGO will do that this year. [after establishing my position in the last couple of weeks in FGO the holding initially was in profit but has moved into a small paper loss... it would have been nice if I had gotten the timing better but until I see a problem with my analysis that is my position and I will see how things go.]
@UmiTrader in his post above comments that it's the weaker tech offerings which list on the ASX. I think that is a truism in general. There are a lot of very wealthy people in OZ, they mostly know each other, they talk business amongst themselves and they don't need retail funds to get something happening. If a very good project comes their way they don't need to go public with the idea. The sorts of projects which list are either higher risk or the principals concerned are not well connected to big money.
Another aspect of FA is understanding the capital structure of a Co. In simple language ... how do the people running/starting the Co hope to get paid.... and is there anything really in it for the retail investor?
Mostly that question can be answered by determining the timeline for the profit point for the major holders. In a genuine business that profit point is well into the future. A genuine business lists because it requires capital to grow and expand.... the pay-off comes when profits are generated perhaps in several years' time.
When you see many cheap shares being issued in an IPO all going to a few hands, the brokers getting big fees [also many cheap or in some instances free shares] the profit point for the big holders is usually short term... i.e. very soon after the listing event. In the unlikely case it is a genuine business all of the risk is going to be transferred to the retail market... seldom do these sorts of Co's succeed.
On People:-
Integrity matters. A little insight from Warren Buffett ... when he does business with someone he looks for 3 qualities .... "Integrity, intelligence and energy ... if you don't have the first one the other two will kill you"
A little anecdote ... a few years ago I bought into LNC [Linc Energy]. The principal was Peter Bond [CEO and major shareholder with 40%]. It was LNC which sold the Carmichael coal deposit to Adani. After that deal LNC was debt free and $500M in the bank. 2 years later LNC had no money and was $500M in debt. Along the way Peter Bond lent out some of his shares to shorters... all perfectly legal but hardly shareholder friendly... he was happy to make money but didn't care about the impact it might have on everyone else.
Sovereign risk ....
It also matters... a lot. To use LNC as the example again. Its project was UCG [underground coal gasification] a very big idea with a lot of potential. The Co was located in Qld. Qld became the focus for CSG [coal seam gas] and has become the centre of the now enormous gas export industry. UCG and CSG are technically incompatible processes... CSG was backed by big, big money...UCG was an infant. The Qld Govt was decidedly in favour of CSG and actively obstructed the development of the UCG industry [to the point of crushing it to death]. What Gvt's do and decide matters.
(20min delay)