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Gene Munster says Apple looks like a consumer-staple company

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You likely don’t think of Apple as being in the same category of companies as Coca-Cola, Procter & Gamble, and Philip Morris, but Gene Munster thinks it has more in common with them than many people realize.

Better yet — in Munster’s book, Apple’s stock could soon start trading like those consumer staples.

Like those companies, “Apple has a more predictable business than it may have historically been and was thought of,” Munster, a longtime Apple analyst who is now a managing partner at venture capital firm Loup Ventures, told Business Insider in an interview

He continued, “Over the next few years, it could see a multiple like a consumer staple.”

Indeed, Munster thinks Apple next year will outperform its big-tech peers in the group of FAANGs — Facebook, Apple, Amazon, Netflix, and Google owner Alphabet.

Read this:Longtime Apple analyst Gene Munster thinks the iPhone maker will reclaim its crown as the best tech stock in 2019. Here’s why. That may seem like an insult. After all, Apple is a tech company, and such businesses often trade at several dozen times their expected earnings. By contrast, consumer staples are often thought of as stodgy companies that aren’t accorded such high premiums by investors.

Consumer-staple companies trade at a premium to Apple

But Munster, who doesn’t own Apple shares, thinks it would be a positive for Apple’s stock if it started being placed in the latter category. On average, the consumer-staple companies in the S&P 500 trade at about 16 times their forecasted earnings for next year and top-tier companies in the sector, such as Coke and P&G, are accorded a multiple of 20 or more.

Apple looks like a consumer-staple company, said Gene Munster, a managing partner with Loup Ventures.
Brian Ach/Getty Images for LocationWorld

While there are high fliers in the tech sector, such as Amazon, which is valued at more than 50 times its predicted 2019 profits, the tech companies in the S&P 500 trade at less than 14 times their expected earnings. And Apple itself now has a multiple of about 11.

So, if investors start thinking of Apple as a consumer staple, its stock price should appreciate markedly. If Apple were trading at the average consumer-staple multiple, its stock would be at around $214 a share, instead of $156.

And Munster is convinced that’s going to happen. Apple’s stock has been weighed down by its iPhone business. The overall smartphone market has started to decline, in terms of units shipped, and Apple in particular has faced concerns about soft demand for its latest iPhones.

But the company is in the process of redirecting investors’ attention from the number of smartphones it sells to its overall revenue, Munster said. When investors realize that number is continuing to grow — regardless of what’s happening with the number of iPhones it sells — they’ll start to feel more comfortable with its stock and valuation, he said.

“Over the course of 2019, investors will take away that this is a reliable business, and this deserves a higher multiple than the smartphone business,” he said.

Apple wants investors to pay attention to its services business

Apple announced last month that it would no longer disclose the number of iPhones, iPads, and other devices it sells, instead disclosing just its revenue from selling such products.

The company and many of its backers on Wall Street have been arguing that the number of devices it sells is becoming less important as the prices of those devices has gone up and as it has started to bring in significant revenue from other parts of its business, particularly its services offerings. Those include subscription products such as Apple Music and iCloud storage, as well as the commissions it gets on sales of apps through its App Store.

Munster thinks there are good reasons to be optimistic about Apple’s services business. Its customers are paying more for apps, which means Apple is making more money off such sales, he said. And it’s poised to launch a subscription streaming video offering next year, which should bring in additional revenue.

But that business alone isn’t why investors will give Apple’s stock a higher multiple. Instead, Munster thinks investors will come around to the idea of Apple’s business as a whole being akin to a subscription service offering, one with steady, reliable, and recurring revenue.

But its iPhone business is an important part of the story

Apple’s iPhone business accounts for more than 60% of its total revenue. Munster thinks that business will remain stable.

The company created some concern among investors and analysts in its last earnings call when it announced that it would no longer release its iPhone unit sales, and offered disappointing guidance for the holiday quarter. Many on Wall Street interpreted that as a sign that its iPhone sales would decline, and worried that the company was on the wrong side of peak demand for the product. Other electronics companies have seen their sales plunge after their products hit peak demand.

But Munster doesn’t think that will happen to Apple.

Companies such as BlackBerry and Nokia saw their sales fall because something better or cheaper came along that undermined the market for their key products, he said. But that doesn’t seem to be the case with Apple, at least not right now. Smart glasses or other wearable products that could steal sales away from smartphones still seem years off, he said. And cheaper phones, such as those from Huawei and Xiaomi, don’t seem like they’re really attracting iPhone customers, he said.

The iPhone plus services is a compelling story for investors

Instead, what seems to be happening with Apple is that its customers are starting to wait longer to trade in their iPhones for new ones, Munster said. But they are and will continue upgrading their devices on a regular basis, he said. And that business could become even more service-like if Apple builds on its iPhone trade-in program to offer iPhones on a subscription basis, he said.

“I think Apple pretty well has their base locked up,” he said. At least for the next year, he continued, “There doesn’t seem to be anything out there that will shake that base.”

On top of that steady iPhone revenue stream, Apple has its fast-growing services business and it has the potential for a “wild card” that could significantly boost its sales in the form of either existing products such as the Apple Watch or others that it has in development, Munster said.

Add it all up, and you’ve got a business with a highly predictable revenue base and the room for notable — if not super-rapid — growth. That’s pretty much the profile of a consumer-staple company, he said. Investors give those companies healthy multiples not because of their standout growth, but because of the combination of their steady growth and predictability, he said.

Munster thinks it will take Apple much of this next year to steer investors to this new way of thinking about its business. But each quarter it can show the steadiness of its business and results will help reinforce that message, he said. And once investors buy in, Apple’s stock will benefit.

“I think it’s going to have a positive impact,” he said.

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Trudeau Government Should Turn to Sustainable Floor Heating In Its New Deal

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A consortium has been chosen by Public Services and Procurement Canada (PSPC) to manage the $1.1-billion overhaul of five heating and cooling plants in the National Capital Region. However, this decision has been met with a lot of disapproval by the country’s largest federal public service union.

Early June, the department announced that Innovate Energy has been awarded the 30-year contract “to design, retrofit, maintain and operate the plants,”winning the bid over a rival group that included SNC-Lavalin.

Minister of Environment, Catherine McKenna, said the federal government was “leading by example” in its bid to drastically reduce the amount of greenhouse gas emissions across the country. McKenna noted that by supporting this project, they’re utilizing heating and cooling infrastructure to promote a more environmentally friendly option.

“We’re very proud that our government is working with partners like Innovate Energy to modernize this critical infrastructure,” she said during the announcement at one of the facilities that will be upgraded, the Cliff Heating and Cooling Plant in downtown Ottawa.

The plants would be known as the district energy system and would heat 80 buildings in the area with steam. It is also expected to cool 67 of these buildings with chilled water through more than 14 kilometres of underground pipes.

Under the Energy Services Acquisition Program, PSPC will be tasked with modernizing the outdated technology in the plants to lower emissions and supportgrowth in the eco-friendly technology sector.

During the first stage of the overhaul, the system would be converted from steam to low temperature hot water and then switched from steam to electric chillers—with the estimated completion date being 2025. PSPC notes that the project will reduce current emissions by 63 per cent, the equivalent of removing 14,000 non-eco-friendly cars off the road.

Afterwards, the natural gas powering the plant will then be replaced by carbon-neutral fuel sources, which according to estimated will reduce emissions by a further 28 per cent. The renovation project is bound to save the government an estimated fee of more than $750 million in heating and cooling costs in the next 40 years.

Furthermore, the implementation of radiant floor heating in Ottawa by the federal government would be an additional step in driving its agenda for a more eco-friendly state.

According to the U.S. Department of Energy’s Energy Savers website, radiant floor heating has a lot of benefits and advantages over alternate heat systems and can cut heating costs by 25 to 50 per cent.

“It is more efficient than baseboard heating and usually more efficient than forced-air heating because no energy is lost through ducts,” the website states.

Radiant floor heating provides an equal amount of heat throughout a building, including areas that are difficult to heat, such as rooms with vaulted ceilings, garages or bathrooms. Consideringit warms people and objects directly—controlling the direct heat loss of the occupant—radiant floor heating provides comfort at lower thermostat settings.

“Radiators and other forms of ‘point’ heating circulate heat inefficiently and hence need to run for longer periods to obtain comfort levels,” reports the Residential Energy Services Network (RESNet).

Radiant heating is a clean and healthy option—a perfect choice for those with severe allergies—as it doesn’t rely on circulating air, meaning there are no potentially irritating particles blowing around the room. Additionally, it is more energy efficient, aesthetically pleasing with wall radiators or floor registers and virtually noiseless when in operation.

“They draw cold air across the floor and send warm air up to the ceiling, where it then falls, heating the room from the top down, creating drafts and circulating dust and allergens.”

It is important for the leadership in Ottawa to equally drive the adoption of radiant floor heating as doing this would lead to increased usage in residential buildings—and even government-owned buildings.

However, in October, the Public Service Alliance of Canada (PSAC), a representative body of employees of the plants,began a campaign target at the government against their decision to use a public-private partnership (P3) for the retrofitting project, citing concerns about costs and safety.

According to the union, outside employees won’t be bound to the same health and safety standards of government workers and that typically P3 projects cost a lot more than traditional public financing deals.

The union demands that the government scraps the proposed project and meet PSAC members and experts to brainstorm on a new way forward that would ensure federal employees continue to operate and maintain the plants.

However, parliamentary secretary to public services and procurement minister, Steve MacKinnon said that the union officials have consulted him but that after conducting an analysis, the P3 option was still the best for the job.

“We didn’t have (to) sacrifice on safety or health — we didn’t have to sacrifice on job security,” he said.

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Steps to becoming a Data Scientist

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Data science has become one of the most in-demand career paths in this century, according to Business Insider. With the amount of information being circulated online, it has created a huge demand for storing, interpreting and implementing big data for different purposes—hence the need for a data scientist.

Today, there too much information flying around for regular people to process efficiently and use. Therefore, it has become the responsibility of data scientists to collect, organize and analyze this data. Doing this helps various people, organizations, enterprise businesses and governments to manage, store and interpret this data for different purposes.

Though data scientists come from different educational backgrounds, a majority of them need to have a technical educational background. To pursue a career in data science, computer-related majors, graduations and post graduations in maths and statistics are quite useful.

Therefore, the steps to becoming a data scientist are quite straightforward.  After obtaining a bachelor’s degree in an IT related field—such as computer science, maths or physics—you can also further your education by obtaining a master’s degree in a data science or any other related field of study. With the necessary educational background, you can now search for a job and obtain the required experience in whichever filed you choose to invest your acquired skills.

Here are the necessary steps to be taken to become a data scientist.

Step 1: Obtain the necessary educational requirements

As earlier noted, different educational paths can still lead to a career in data science. However, it is impossible to begin a career in data science without obtaining a collegiate degree—as a four-year bachelor’s degree is really important. However, according to a report by Business Insider, over 73% of data scientist in existence today have a graduate degree and about 38% of them hold a Ph.D. Therefore, to rise above the crowd and get a high-end position in the field of data science, it is important to have a Master’s degree or a Ph.D.—and with various online data science masters program, obtaining one is quite easy.

Some institutions provide data science programs with courses that will equip students to analyze complex sets of data. These courses also involve a host of technical information about computers, statistics, data analysis techniques and many more. Completing these programs equips you with the necessary skills to function adequately as a data scientist.

Additionally, there are some technical—and computer-based degrees—that can aid you begin a career in data science. Some of them include studies in, Computer Science, Statistics, Social Science, Physics, Economics, Mathematics and Applied Math. These degrees will imbibe some important skills related to data science in you—namely, coding, experimenting, managing large amounts of data, solving quantitative problems and many others.

Step 2: Choose an area of specialization

There rarely exists an organization, agency or business today that doesn’t require the expertise of a data scientist. Hence, it is important that after acquiring the necessary education to start a career as a data scientist, you need to choose an area of specialization in the field you wish to work in.

Some of the specializations that exist in data science today include automotive, marketing, business, defence, sales, negotiation, insurance and many others.

Step 3: Kick start your career as a data scientist

After acquiring the necessary skills to become a data scientist, it is important to get a job in the filed and company of your choice where you can acquire some experience.

Many organizations offer valuable training to their data scientists and these pieces of training are typically centred around the specific internal systems and programs of an organization. Partaking in this training allows you learn some high-level analytical skills that were not taught during your various school programs—especially since data science is a constantly evolving field.

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Artificial intelligence pioneers win tech’s ‘Nobel Prize’

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Computers have become so smart during the past 20 years that people don’t think twice about chatting with digital assistants like Alexa and Siri or seeing their friends automatically tagged in Facebook pictures.

But making those quantum leaps from science fiction to reality required hard work from computer scientists like Yoshua Bengio, Geoffrey Hinton and Yann LeCun. The trio tapped into their own brainpower to make it possible for machines to learn like humans, a breakthrough now commonly known as “artificial intelligence,” or AI.

Their insights and persistence were rewarded Wednesday with the Turing Award, an honor that has become known as technology industry’s version of the Nobel Prize. It comes with a $1 million prize funded by Google, a company where AI has become part of its DNA.

The award marks the latest recognition of the instrumental role that artificial intelligence will likely play in redefining the relationship between humanity and technology in the decades ahead.

Artificial intelligence is now one of the fastest-growing areas in all of science and one of the most talked-about topics in society,” said Cherri Pancake, president of the Association for Computing Machinery, the group behind the Turing Award.

Although they have known each other for than 30 years, Bengio, Hinton and LeCun have mostly worked separately on technology known as neural networks. These are the electronic engines that power tasks such as facial and speech recognition, areas where computers have made enormous strides over the past decade. Such neural networks also are a critical component of robotic systems that are automating a wide range of other human activity, including driving.

Their belief in the power of neural networks was once mocked by their peers, Hinton said. No more. He now works at Google as a vice president and senior fellow while LeCun is chief AI scientist at Facebook. Bengio remains immersed in academia as a University of Montreal professor in addition to serving as scientific director at the Artificial Intelligence Institute in Quebec.

“For a long time, people thought what the three of us were doing was nonsense,” Hinton said in an interview with The Associated Press. “They thought we were very misguided and what we were doing was a very surprising thing for apparently intelligent people to waste their time on. My message to young researchers is, don’t be put off if everyone tells you what are doing is silly.” Now, some people are worried that the results of the researchers’ efforts might spiral out of control.

While the AI revolution is raising hopes that computers will make most people’s lives more convenient and enjoyable, it’s also stoking fears that humanity eventually will be living at the mercy of machines.

Bengio, Hinton and LeCun share some of those concerns especially the doomsday scenarios that envision AI technology developed into weapons systems that wipe out humanity.

But they are far more optimistic about the other prospects of AI empowering computers to deliver more accurate warnings about floods and earthquakes, for instance, or detecting health risks, such as cancer and heart attacks, far earlier than human doctors.

“One thing is very clear, the techniques that we developed can be used for an enormous amount of good affecting hundreds of millions of people,” Hinton said.

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