• Hendrik Leber

Unicorns have fable ratings.

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"There is a lot of hope in the Tech-Unicorns' courses", Hendrik Leber of Acatis analyses. However, hope is usually a bad advisor when it comes to investing. Investors should therefore keep their hands off it.

Virtual business models dominate our world. Companies that don't own a car are worth more than all the car rental companies in the world put together. Companies that do not own a single hotel are worth more than large hotel chains.

Can that be reasonable? In fact, these modern virtual companies bring customers together with product vendors in a very efficient way. This means that there is no longer any "emptiness" in production, capacities are used more efficiently and the customer is better satisfied.

However, this does not mean that I would invest there at any price. Already in the New Economy era, I was disturbed by the very high ratings of future or hope titles. In fact, these were often only confirmed ten years later by economic reality. And there were many second- or third-class freeloaders among the stock market candidates who no longer exist today, be it EM.TV or Intershop. The winner takes it all - only a few have survived.

Investors should also note two other things: On the one hand, every IPO means that the previous owner wants to cash in and not remain invested. But if it's not good enough for the previous owner, why should it be good enough for me?

On the other hand, some of the currently highly traded stock market candidates are making high losses. However, one of the most profitable stock exchange rules is to invest only in companies that make profits. So why should I give money to a loss-making company and hope that everything turns out for the better? Hope is a bad advisor for investing. "Show me the numbers," is one of my mottos. I want the companies I invest in to make money. I miss some great opportunities if losses turn into income. But honestly - if this great turnaround becomes visible, I can still get in - a little too late maybe, but with much less risk.

Every investor should ask himself two questions: Firstly, will the company, which is now going public, be able to expand and defend its dominant market position in the coming decades? The lifespan of business models is constantly shortening, as numerous examples show. Remember Yahoo!, Lycos, AltaVista, Bing or AOL? Competition in these markets is murderous. Even small weaknesses in the business model or minimal improvements among competitors can push market leaders to the side. If I don't know if Uber or Lyft wins, Pinterest or Instagram, Twitter or WhatsApp, then I've already lost.

The second question is: will the company earn so much money with its business model that it justifies today's share price? I'm skeptical about that. The current stock exchange candidates live from the fact that they buy customers by submitting their offer below the fair market price. Who offers 100 Euro equivalent for 95 Euro, can not save himself from demand of course.

For me Booking.com is a good benchmark. The company has a market capitalization of about 80 billion dollars, an operating profit after tax of about four to five billion dollars per year and is growing at about 15 percent per year. The price/earnings ratio is just under 20, so why should I value the unprofitable Uber at nearly $80 billion when I can get the highly profitable Booking.com at the same value?

Only if you can clearly answer both of the above questions with Yes should you invest today. Everything else is hope-based investment - hope that the hype will continue to intensify, hope that a stupid one will buy the shares later at even higher prices, hope that a buyer wants to take over this company.

Today there are excellent future-oriented and fast growing companies with high cash flow. These include companies such as Alphabet, Facebook, Alibaba and Booking.com. I am therefore happy to dispense with the new loss-makers coming onto the market. You better keep your hands off that, too. ®

Photo: Tom Keineberg

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