by InteractiveAdvisors
by InteractiveAdvisors
Strategies

Digital video ad spending is growing 30% annually

by |Published

April and May have been challenging months for the  Twinleaf Small Cap Value portfolio. In our opinion, the selling seems indiscriminate and part of a cyclical rotation away from small caps that will eventually run its course.

The recent underperformance is particularly disappointing given that we aim to avoid the high-multiple, momentum-type names that are vulnerable in market conditions like this.

We are long-term value investors, not traders. Our investment decisions are based on business fundamentals, industry trends and merger and acquisition possibilities. We continue to believe that every one of our portfolio companies is undervalued, well-positioned in its business segment and a very plausible candidate to be consolidated, though we have not yet had a company taken out in 2014.

One of the core Twinleaf investment focuses is digital video. In our view, consumers are consuming video content in vastly different ways than just a few years ago due to a confluence of factors including unaffordable pay TV bills, enhanced bandwidth, mobile connectivity and the explosion of professionally produced online content.

Digital video consumption is rising at a rate in the 40% range and digital video ad spending is rising at a 30%-plus clip. Many estimates have digital advertising (online and mobile) surpassing television advertising’s $60 billion in annual outlays in the U.S. by 2015 or 2016. Our portfolio is positioned to benefit from these trends in our opinion.

Disclaimer:All investments involve risk and various investment strategies will not always be profitable. Past performance does not guarantee future results.

AUTHOR

Twinleaf Management
Twinleaf Management
Twinleaf Management LLC is a Connecticut-based Investment Adviser dedicated to constructing concentrated, separately managed client portfolios that consist of overlooked, out-of-favor, misunderstood or mispriced publicly traded US equities with under $2 billion of market capitalization. Our "sweet spot" is investing in sub-$1 billion companies. We consider our approach to resemble private equity investing in the public markets. Our primary investment research is in technology, media and telecom. We are especially focused on the digital revolution in media and technology that is creating investment opportunities in mobile and IP connectivity, SaaS platforms, data analytics, content creation, distribution and highly targeted advertising. We seek to invest in "disrupters" with the potential to become very valuable companies or acquired before they get there. Spencer Grimes has 17 years of private equity investing and investment analysis of public companies, primarily in the media and communications sector. He founded Twinleaf in January 2012. He began his career at Viacom, Inc. before moving to Wall Street. From 1996 to 2000 Spencer was an equity research analyst at Salomon Smith Barney covering the cable television industry. He was named an All-Star Analyst by The Wall Street Journal in 1999 with recognition for accuracy in earnings estimates and stock picking. In 2000, Spencer moved to Technology Media and Telecommunications sector-focused private equity and helped deliver a positive return for fund investors with the sale of a group of data centers for $100+ million in 2008. More recently, Spencer was a partner in Sequence LLC, a media software company that enabled content personalization and real-time ad insertion. It was sold to R.R. Donnelley (Nasdaq: RRD) in 2011. He also serves as an adjunct professor at the New School in New York, teaching a graduate-level Media Economics course. Spencer holds a BA from the University of Virginia and an MBA from Emory University's Gouizeta Business School.

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