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Equities | Satellite: Online life

Investment outlooks / Q2 2020


The global economy and various aspects of our daily lives have increasingly shifted online and become more digital over the recent years. We refer to this trend as ‘online life’ and published our first research note on this thematic idea in May 2019. This transformative trend has been creating opportunities in e-commerce, electronic payments, online advertising, cybersecurity and many other segments of the digital economy which we expect to continue in the weeks and months to come.

Impact of Covid-19

As people remain at home around the world, online spending is inevitably increasing as shown by a recent UBS consumer survey on people’s purchase plans. Among the respondents, 27 per cent of US consumers indicated they intend to buy more apparel and footwear online and 35 per cent indicated to buy more food, home and personal care products. As a natural outcome of higher online spending, the use of card payments is set to increase as well. The same survey highlighted that 41 per cent of respondents are now using debit/credit cards more during the lockdown due to ordering more online or considering cash as less safe/appropriate. However, what is more interesting is that 63 per cent are planning to continue using cards more even after the lockdowns are over. And finally, another insight from the survey demonstrated that this trend is skewed towards high-income ($100k+) consumers.

Click chart to expand. Source: UBS April 2020.

Click chart to expand. Source: UBS April 2020.

The rise in online consumer spending has led to companies spending more on online advertising. This segment has outpaced the total advertising market for the past 20 years in the US, with only exceptions being 2001 and 2002 in the aftermath of the dot-com bubble crash. During the global financial crisis, online ads proved more resilient against the total market with year-on-year growth of 11 per cent vs. -6 per cent in 2008 and -3 per cent vs. -16 per cent in 2009. The rebound in online was fast with 15 per cent growth in 2010 and 24 per cent in 2011, while the total advertising market lagged with only 5 per cent and 3 per cent in the same years.

This time again, the online universe seems to be resilient to economic woes. According to Morgan Stanley research, online advertising is set to decrease by only 2 per cent in 2020 vs. a contraction of 8 per cent for the total advertising market as a whole. With regards to offline channels, print is expected to be hit the hardest (-29 per cent) followed by radio (-18 per cent) and national TV (-13 per cent). A rebound in 2021 is expected to reach 10 per cent and 3 per cent for online and total advertising respectively. The primary reason for online advertising’s resiliency is higher efficiency with better targeting capabilities and higher returns on investments. This has allowed it to consistently gain market share with a further 8.5 per cent expected to shift between 2018 and 2022.

Within the space, advertisers continue to spend more on Google services. According to Morgan Stanley’s March 2020 survey, 44 per cent of respondents expect to spend more on Google Search, 42 per cent – on YouTube and 31 per cent on Google Maps. Facebook comes as a close second with 41 per cent on its main social network platform, 37 per cent on Instagram and 35 per cent on Facebook messenger. These two giants as a result, continue to dominate the online advertising market.

Click chart to expand. Source: Morgan Stanley March 2020.

Click chart to expand. Source: Morgan Stanley March 2020.

A more recent ‘online life’ trend we have seen flourish and perhaps experienced ourselves first-hand, is online food delivery. In the current environment of lockdowns and the halting of dining out options, it becomes ever more prevalent. A growing number of restaurants have joined online food delivery platforms as for most, it has become the only way stay in operation. In the UK, 3000 new restaurants joined Deliveroo in March, while 2000 restaurants joined in the third week of March alone. Demand signals are strong and if the last downturn is to be of any lesson, online food delivery should prove to be resilient in the current environment too. Domino’s sales declined less than 3 per cent both in 2008 and 2009, while Papa John’s sales stayed positive in 2008 and contracted by less than 3 per cent in 2009. Domino’s UK sales grew in excess of 10 per cent in 2008 and 2009.

Our “online life” equity holdings

To materialise our convictions in the digital transformation of the economy, we initiated the following positions as part of our ‘online life’ theme just over a month ago. We purchased Mastercard and Alphabet on 18 March and Amazon the following day. On April 1, we doubled holdings in Amazon and bought the following day. The latter jumped on 9 April after a reaffirming Q1 trading update.

Overall, our ‘online life’ equity holdings have demonstrated solid performance since inception and also form part of the coronavirus resilient basket of our redeployment strategy.

Click chart to expand.


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Past performance is not a reliable indicator of future returns. Forecasts are not a reliable indicator of future returns. If the information is not listed in your base currency, then the result may increase or decrease due to currency fluctuations.

If not otherwise indicated, all graphs are sourced from Dolfin research, April 2020.

For more information please read our disclaimer.

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