market folly

We're posting up notes from the Capitalize For Kids Sohn Canada conference that just took place.  Next up is Maverick Capital's Lee Ainslie who pitched Qihoo 360 Technology (QIHU) long.


Lee Ainslie's Sohn Canada Presentation

He pitched Long Qihoo 360 Technology, a Chinese internet company.  China has penetration rates about half of the US (47% vs. 81%). It took Qihoo only 4 years to reach 6% of e-commerce penetration, great feat given Alibaba’s presence. This was helped by the growth of online advertising in China, now 36% of all advertising.

Revenue segments are: PC/Tablet Gaming (30%), Navigation page (AOL) 25%, App Store (23%), Search (22%). Believes management team is best in-class. Compared the CEO/Founder to Bezos, in a sense that he is looking to dominant difference domains and not his business acumen.

Insiders own ~22% of the company – a true rarity for Chinese based companies. Firstly, they have not monetized search, with traditional search based ads like Google or Bing. Secondly, both the “app store” and navigation/gaming have grown per user over the last 5 year quite well. Believes they have an opportunity in Search (since Google left), mobile app store (once Google left, the Android apps went away), Security (Government of China is looking for a domestic security company to to provide enterprise security, traditional have used US based companies on occasion. At the moment, they do not charge for their security feature.

China has recently passed a law to try and create a standard of enterprise security, in which it selected 5 different companies with Qihoo being one of them. Believes this change can lead to new business in 2015, could do as much as $60m in 2015 for security (admitted it could be way higher, but not sure). Opportunity is present following the selloff last 4-6 weeks.

Be sure to check out the rest of the presentations from Capitalize For Kids Sohn Canada here.