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Hi all, here is my first write up on LSE stock - WPP. This is a work in progress, so please bear with me.
Due to forum restrictions, preliminary write up will be on this thread, thereafter, I will put my investment thesis on Word format as attachment.
Background
"WPP plc is a British multinational advertising and public relations company with its main management office in London, England, and its executive office in Dublin, Ireland. It is the world's largest advertising company by revenues, and employs around 179,000 people in 3,000 offices across 111 countries. WPP has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. (...) It has a secondary listing on NASDAQ." (ref. Wikipedia)
What does WPP do?
"WPP is the world leader in communications services. It comprises leading companies in all these disciplines:
Advertising
Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity
Healthcare Communications
Direct, Digital, Promotion & Relationship Marketing
Specialist Communications
There are more than 155 companies within the Group – and each is a distinctive brand in its own right. Each has its own identity, commands its own loyalty, and is committed to its own specialist expertise. That is their individual strength. Clients seek their talent and their experience on a brand-by-brand basis." (ref. WPP AR 2014)
Strengths
- Run by CEO Martin Sorrell, who is hugely respected in the media industry
- Owns a number of famous companies, including GroupM, Ogilvy & Mather, JWT, Wunderman. These companies "work with over 355 of the Fortune Global 500, all 30 of Dow Jones 30 and 71 of the NASDAQ 100" (ref. WPP AR 2014)
- WPP has the biggest pie amongst the "Big four of agencies" (competitors are Interpublic Group of Companies, Publicis & Omnicom Group). *Note, the last 2 companies had attempted a failed merger before.*
- WPP is run as a holding company for agencies and support in terms of financal and administrative maters. These companies need only focus on what they do best - communication services.
- WPP encourages operating companies of different disciplines to work together for benefit of clients.
- A number of acquired companies are boutique firms - something that the likes of Google may find difficult to win against in terms of advertising due to such companies selling talent and unbounded creativity.
- WPP has geographic coverage of fast growing markets and span their business globally. The lassie-fair nature of the acquisitions allows for WPP to fit into cultural contexts in each region - something likely to be prized in the advertising industry.
- Some of the most famous ad campaigns (e.g. Share a Coke) are created by WPP companies.
- As a holding company to various smaller firms, WPP has room to grow or divest as situations require.
Weaknesses
- Martin Sorrell asked for too much money in 2012. Although context needs to be seen. (ref. Guardian article)
- Advertising budgets can be easily slashed in a downturn - WPP is still somewhat cyclical considering that a large portion of revenues come from advertising.
- Traditional agencies may not be able to compete against digital advertising (eg Facebook, Google); they will need to find ways to leverage and at times, even become a customer to such channels.
(to edit)
Why invest in WPP?
(to edit)
Due to forum restrictions, preliminary write up will be on this thread, thereafter, I will put my investment thesis on Word format as attachment.
Background
"WPP plc is a British multinational advertising and public relations company with its main management office in London, England, and its executive office in Dublin, Ireland. It is the world's largest advertising company by revenues, and employs around 179,000 people in 3,000 offices across 111 countries. WPP has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. (...) It has a secondary listing on NASDAQ." (ref. Wikipedia)
What does WPP do?
"WPP is the world leader in communications services. It comprises leading companies in all these disciplines:
Advertising
Media Investment Management
Data Investment Management
Public Relations & Public Affairs
Branding & Identity
Healthcare Communications
Direct, Digital, Promotion & Relationship Marketing
Specialist Communications
There are more than 155 companies within the Group – and each is a distinctive brand in its own right. Each has its own identity, commands its own loyalty, and is committed to its own specialist expertise. That is their individual strength. Clients seek their talent and their experience on a brand-by-brand basis." (ref. WPP AR 2014)
Strengths
- Run by CEO Martin Sorrell, who is hugely respected in the media industry
- Owns a number of famous companies, including GroupM, Ogilvy & Mather, JWT, Wunderman. These companies "work with over 355 of the Fortune Global 500, all 30 of Dow Jones 30 and 71 of the NASDAQ 100" (ref. WPP AR 2014)
- WPP has the biggest pie amongst the "Big four of agencies" (competitors are Interpublic Group of Companies, Publicis & Omnicom Group). *Note, the last 2 companies had attempted a failed merger before.*
- WPP is run as a holding company for agencies and support in terms of financal and administrative maters. These companies need only focus on what they do best - communication services.
- WPP encourages operating companies of different disciplines to work together for benefit of clients.
- A number of acquired companies are boutique firms - something that the likes of Google may find difficult to win against in terms of advertising due to such companies selling talent and unbounded creativity.
- WPP has geographic coverage of fast growing markets and span their business globally. The lassie-fair nature of the acquisitions allows for WPP to fit into cultural contexts in each region - something likely to be prized in the advertising industry.
- Some of the most famous ad campaigns (e.g. Share a Coke) are created by WPP companies.
- As a holding company to various smaller firms, WPP has room to grow or divest as situations require.
Weaknesses
- Martin Sorrell asked for too much money in 2012. Although context needs to be seen. (ref. Guardian article)
- Advertising budgets can be easily slashed in a downturn - WPP is still somewhat cyclical considering that a large portion of revenues come from advertising.
- Traditional agencies may not be able to compete against digital advertising (eg Facebook, Google); they will need to find ways to leverage and at times, even become a customer to such channels.
(to edit)
Why invest in WPP?
(to edit)