In the most recent issue of Forbes magazine one of the world’s most famous reality television stars and member of the Kardashian family, Kylie Jenner, was featured on the magazine’s front cover. What is quite remarkable is that she has managed to amass an estimated wealth of $900 million at the tender age of 20 years old. She is also on track to become the youngest billionaire ever, even surpassing Mark Zuckerberg from Facebook, who managed to become a billionaire by the age of 23.
Kylie managed to generate all this wealth through her company Kylie Cosmetics, which sells branded products. Kylie Cosmetics has just seven full time employees and outsources all manufacturing and packaging, online outlets, finance and PR, keeping overheads to a minimum. Her massive social media following (110 million Instagram followers on her account alone) allows her to have instant access to her target market and end consumer. Apparently, she updates her social media followers every hour with her latest products, keeping the purchase transactions flowing. The leveraging of her massive social media following has allowed her to do all of this in less than three years.
By implication, the close association between Kylie and Kylie Cosmetics poses significant risk to the business. Should she not be able to continue her active social media presence, sales of her products will likely decline, sharply. This fact, of course, wasn’t featured in the article.
Whilst she has done a remarkable job of building her brand and company, if she were to list her business, the underlying managers in the Fintax Funds would probably not be interested. The facts are that there is significant single person risk, the churn rate of who is popular when it comes to social media personalities is extremely high, and there are no sustainable barriers to entry when it comes to any of her limited range of products.
Rather, the underlying managers in the Fintax Funds invest in businesses which display quality characteristics such as; excellent management, sustainable earnings growth and significant competitive advantages, illustrated in the form of high returns on capital achieved through various market cycles, thereby creating long-term wealth for their shareholders.