ACCC Targeting Tech Giants… Is This A Buying Opportunity?

You want to see the real China?

Look at Taiwan.

Just after the Chinese Civil War, the Republic of China (ROC) fled the country. Pushing them out was the Communist Party of China.

And to this day, these factions remain separate.

The communists in China and the real Chinese in Taiwan.

In a time when the Communist Party was still young, China was under imperial rule.

The Qing Dynasty was on its last leg. China was on the verge of civil war.

During and just after the war, the country was divided amongst military warlords.

It created a divide between the haves: warlords and military generals, and the have nots: everyone else.

It was the perfect situation for an idea seed like communism to grow.

Clearly the haves had taken too much. And that underserved wealth should be redistributed among the have nots.

After millions of bodies and multiple experiments, you’d think we’d learn by now. The collective should not rank above the individual.

Communism and socialism are incredibly bad ideas that lead to bloody outcomes.

Yet you still see places in Europe, China and Venezuela adopt various socialist ideologies.

Even our own Australian Competition and Consumer Commission (ACCC) is joining in.

Luckily, I doubt they’ll get far in their efforts.

And for all their trying it could create an opportunity for Aussie investors like yourself.

Let’s take a look how…

Free Report: Three ‘gold-mine’ investments set to reignite the ASX in 2018. Download now.

The ACCC hates seeing others succeed…

One thing I really dislike, but usually goes unnoticed, is tall poppy syndrome. Generally speaking, it’s more prevalent here in Australia than it is over in the US.

It’s the culture of cutting tall poppies (the successful and wealthy) down to size.

I know not all Aussies do this. Most people are generally happy for other’s successes. But I’ll bet you can think of a few people who hate seeing others get ahead or do well.

And the ACCC is one of them.

You may have heard about ACCC investigations into the two US tech giants, Alphabet, Inc. [NASDAQ:GOOG] and Facebook, Inc. [NASDAQ:FB].

These two ad platforms are too successful, according to the ACCC.

Head of the Commission Rod Sims had some young analysts take a closer look into both companies.

He wanted to see if their privacy rules matched what the ACCC requires under their compulsory disclosure rules. Sims told the press:

The data collected from consumers using these platforms extends significantly beyond the data that users actively provide when using the digital platform services.

Concerns over data collection are heightened by the length, complexity and ambiguity of online terms of services and privacy policies. This is an important point, there seems an understatement to consumers of the extent of data collection if you read the polices, and an overstatement to consumers of the level of control consumers have over their personal data use.

With this extra knowledge, the ACCC believes Aussie consumers might think twice about using either Google or Facebook…

Really?

According to the Australian Financial Review, Sims could drag both Google and Facebook into a world of pain.

He could force them both to come clean about how much data they actually collect and use.

Industry sources say that Google and Facebook have been at war for years over the role each plays in helping companies deliver advertising to the targeted audience.

Google likes to claim it controls the last mile and therefore deserves to be paid more than any other digital ad provider.

Facebook meanwhile has argued that it has been far more important in terms of the journey between thinking about buying something and actually arriving at a purchase decision.

In Facebook’s case, its competitive advantage is the amount of information it has about the web viewing habits of its users. This collection of data often occurs well ahead of any final Google search.

To me this is just another way to cut down the successful. Companies like Google and Facebook live and die by their user experience.

If users dislike the experience on either platform, they’ll use it less or stop all together.

Declining engagement leads to lower returns on advertising dollars. Advertisers then cut back on their ad spend and sales for Facebook and Google reduce.

This is why both companies constantly invest in their platforms. Their users have all the power. And they want to make sure they’re happy and keep coming back.

The ACCC doesn’t have to do anything to hurt Google or Facebook. If either company does something it shouldn’t be doing and the public finds out, they’ll end up hurting themselves.

It’s the beauty of capitalism.

So, how can you benefit from all this?

When do you want to buy stocks?

Better question: when should you buy stocks?

You should buy them when they’re cheap. And they’re generally only cheap when investors are pessimistic about the future.

Well, take a look at what’s happened to Facebook of late.

First there was the whole Cambridge Analytica scandal. Mark Zuckerberg had to go in front of congress as they badgered him about this and that.

Then we had the short-lived ‘Delete Facebook’ campaign.

Now we’ve got the ACCC trying to force Facebook to talk about their secret sauce and how much data they actually collect.

It’s no wonder the stock has fallen more than 35% from its high this year.


MoneyMorning 12-12-18

Source: google finance

[Click to open in a new window]

The question you should be asking is if the business’ earnings power is intact. That is, can they continue to generate a level of earnings that they’ve enjoyed in the recent past?

I’d be leaning more toward yes on that one.

And if you think the same, the next question should be, has the stock been oversold?

Maybe.

Take some time to look at the company and see for yourself.

Your friend,

Harje Ronngard,
Editor, Money Morning

PS: In this just released report, Matt Hibbard shows you his top five dividend picks for 2019. Click here to claim your copy today.


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Fat Tail Investment Research, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


Money Morning Australia