NEW ORIENTAL EDUCATION AND                        TECHNOLOGY GROUP INC.                                                                                              

 Genus: Consumer Discretionary    Scientific Name: Lophiiformes   Species: Education Services

Imagine a small fish thriving in an enormous pond with no one to compete for food. Such a fish has abundant  opportunity to grow and dominate. But, our friend Stephen Stocker finds it difficult to catch this “Angler Fish”, which is found once in a blue moon. Stephen Stocker expects to find this ‘deep water glowing fish’ in an enormous Chinese pond. The world’s most populous nation, boasting its 40 million millennial population, has a growing demand for after school tutoring, foreign language training, and test preparation across all subjects. In China, students attend their state-run school, and then participate in supplemental educational programming at a local tutoring centre.  Asian families spend as much as 15% of their income on educational services, compared to 2% that American families spend. And it’s not just something wealthy families prioritise. The country’s 5-year plan explicitly encourages entrepreneurship and innovation.

And our friend, Stephen Stocker has finally caught the ‘Angler fish’ that he was looking for, in the form of an Ed.Tech company, New Oriental Education And Technology Group Inc. This fish is the largest provider of private educational services in China. Since 1993, over 44.8 million students have enrolled in one of its courses, including 8.4 million in fiscal 2019 alone. Its network spans 83 cities in China. Nationwide, over 33900 teachers provide instruction via 1,233 learning centres, including 95 schools, with more opening each year. EDU extends its reach to consumers through 15 bookstores and 160 third party distributors. It’s easy to see why EDU is one of China’s most recognised and trusted educational brands. EDU also provides vocational training solutions to business professionals cutting across marketing, accounting, HR which has become all the more important in the scenario of tech replacing humans. Hence, this fish thrives well on all parameters of SWOT analysis.

Just as a bulb glows on the head of an angler fish, the bulb which makes this company glow is its great financials. Over the past 2 years, the company’s annual revenue rose from $1.48 billion in 2016 to $3.096 billion in 2018 with a CAGR of 44%. It has an ROE of 14% with a minimal debt to equity of 0.04 and a PEG Ratio of 1.15% . Its EPS Growth is expected to be 32%. Stephen Stocker is overwhelmed by this ‘proteincious’ opportunity. 

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       ADOBE INC. 

                         

GENUS: TECHNOLOGY            SPECIES: COMPUTER SOFTWARE        SCIENTIFIC NAME: (Sphyrnidae)
 

Our friend, Stephen Stocker goes on a trip to the temperate waters of Los Altos,California. He finds a suitable location to catch a hammerhead shark, which is a long shot but is not impossible. In this sea of creative software technology, he intends to find what is known as an aggressive hunter, feeding on other smaller fishes. In an industry with an expected total addressable market of $128 billion, this fish stand as a monopolistic player. This hammerhead shark is none other than Adobe Inc. Adobe is a software company with strong position in creative, business and mobile software and services. The company sells a suite of software products that almost every creative professional uses, including Photoshop, Illustrator, and InDesign. Adobe takes its value proposition to the next level by bundling all these products together in a package and offering them for a relatively affordable monthly subscription fee. The company has pricing power with customer retention of over 90%, and very high margins. It has a data driven operating model with a potential market opportunity of 10 million students in creative majors and 35 million creative pros. With a belief that customer experience management is a significant growth opportunity, Adobe remains an undisputed leader in this growing sea. An interesting feature of Hammerhead Shark is its ‘Ampullae of Lorenzini’  which is a sensory organ that helps it to find its favourite meal. Adobe has its Ampullae in the form of high cash flows per share of $7.68 and an attractive ROE of 28.20% driven by its merger and acquisition with a low debt to equity of 0.2724. One can assess the applicability of Adobe by the fact that it was even used by ‘Stock me if you can’ for variety of purposes.

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