Today’s News

The Big Picture

• RBA has raised rates to 4.1% in a split decision. The Reserve Bank of Australia increased interest rates by 25 basis points, citing persistent inflation above its 2–3% target as the main reason. The vote was tight with 5 for vs 4 against. (AFR)
  
  

• US embassy in Baghdad attacked. Multiple drones and rockets struck the compound in what's being called the most intense assault since the war began. Separately, the UK Maritime Trade Operations Centre confirmed a tanker was struck by an unknown projectile near the Strait of Hormuz as the Middle East war continues. (ABC)
  
  

• ACCC calls Australia's biggest fuel suppliers in for a please explain. The consumer watchdog held an emergency meeting with Viva Energy, BP, ExxonMobil, Chevron and 7-Eleven over recent fuel price spikes. Treasurer Jim Chalmers has urged the ACCC to "throw the book" at any supplier using the Middle East conflict as cover to unreasonably hike prices. (AFR)
  
  

• Only 1 in 4 fund managers beat the ASX last year. S&P's SPIVA research found just one in four Australian active equity fund managers outperformed the ASX 200. The average active fund returned 7.5% including dividends. Over 15 years, 87% have underperformed the market. (AFR)
  
  

• Sri Lanka declares every Wednesday a public holiday to conserve fuel. State institutions, schools and universities will close each Wednesday as the island nation tries to manage its fuel shortage, another casualty of the disruption caused by the Middle East conflict. (BBC)
  
  

• Cuba has gone dark. The Caribbean island's national electricity grid has collapsed, leaving 10 million people without power. The country is struggling with chronic fuel shortages, compounded by a long-running US blockade. (BBC)
  

Companies in the news

• Nvidia sees AI chips as a US$1 trillion opportunity. CEO Jensen Huang made the prediction at the company's annual conference in San Jose, pointing to surging demand its Blackwell and Rubin chips through to the end of 2027. Shares closed up 1.6% on the news. (Reuters)
  
  

• Atlassian engineer fired for mocking the CEO on an all-staff call. A recently released transcript shows the engineer impersonating Mike Cannon-Brookes during an "ask me anything" session, after the CEO called out staff complaining about a restructure. The quip: "Just dialling in from my NBA team's headquarters to yell at people whose careers I've just pummelled." The engineer was let go a few days later. (AFR)
  
  

• New weight loss pill is giving Novo Nordisk and Eli Lilly something to worry about. Structure Therapeutics released trial results showing its daily oral pill helped patients lose up to 16.3% of their body weight over 44 weeks. Analysts are calling it best-in-class among oral weight loss drugs. Shares jumped 5.4% on the news. (Reuters)
  
  

• New Hope has posted an 84% drop in half-year profit. Not every resources company is shooting the lights out right now as the thermal coal miner blamed unfavourable weather and lower coal prices for the slide. Shares fell 6.4% by end of trade. (Capital Brief)
  

What the…?

Whilst conflict in the Middle East rages on, there's been an unlikely beneficiary… Russia. The country is raking in an estimated US$150m a day from inflated oil prices, with an estimated US$1.3bn–US$1.9bn in extra revenue already earned through taxes on its oil exports, driven largely by demand from China and India.

Some analysts forecast the Russian government could receive a further US$3.3bn–US$4.9bn by the end of the month, if oil prices remain where they are. Even the US has eased its sanctions on Russian oil, a consequence of the closure of the Strait of Hormuz. (FT)

A message from Centuria

Don't chase property trends, Pursue value

At Centuria, we stay ahead of the curve by proactively scanning the market to spot opportunities others may miss. With a disciplined investment process, deep market knowledge and a clear focus on starting with the end in mind, Centuria offers investors a distinct edge: one built on expertise, insight and agility.

Centuria’s property expertise spans a broad range of traditional and alternative property sectors including office, industrial, retail, healthcare, agriculture, data centres and real estate debt.

Today’s Insight

The Duolingo thesis from Mr. Beat Up

This was taken from our recent Equity Mates Investing episode titled ‘We’re panic buying & the most bullish Mr. Beat Up yet’ (Spotify | Apple | YouTube)

Ren: Now for people not familiar with Duo Lingo, it's the world's most popular language learning app. They've really gamified the experience. They offer over a hundred courses in 40 different languages. And if I can say personally, I'm on a 42-day learning streak on it. I am a user. I might be able to add some colour as we go.

Simon: Very nice, what's the feedback so far?

Ren: The feedback is it's very sticky. They gamify it in a very good way. I really don't want to lose my streak. Shout out to Ash in our office, she's at like 1500 day streak. So I studied Indonesia at uni, forgot it all. And so I'm doing Indonesian again and it's good. I feel like I'm building some knowledge. So it's probably made me more convicted about the stock than I was just looking at the financial.

Simon: That's good. Well, we'll talk a bit about that stickiness when we get onto the moat and if it's sustainable. So let's start by framing it up. Last May, the stock was $544. Today it's $98. An 80% fall! It actually dropped 22% on February 26th after they did their most recent Q4 earnings report, which we'll get to in a second. But there's been two main things really that has caused it, the AI narrative and then this recent strategic shift. So a year ago, Duolingo probably was price for perfection. The narrative was they're going to start capturing the whole of the education market, but then the narrative-

Ren: Sorry, just before you go on, the narrative was also that they would be a big AI winner. They were up 200% in a year because everyone thought that AI would massively bring their costs down, that they would be able to create huge amounts of language modules. And then yeah, as you're about to say, sentiment on AI shifted

Simon: It shifted completely to now we've seen across the software sector that these tools are going to replace or make it so much more competitive in these software spaces. So the growth story isn't there anymore. And then end of last month, the CEO and founder, Lewis Von Arn, he came out pretty bold move, but basically said they're intentionally trading off this year's financial metrics for “a much larger thing in the long term”. What he meant by that is they're now prioritising user acquisition over making more money out of current users. And so how that plays out is they're actually foregoing $50 million in revenue by removing paywalls to improve the free user experience. The aim is they're going to double their daily active users to a hundred million people by 2028. But because of that change, they reduced their revenue guidance. They've been doing about 40% a year the last few years. Now it's down to 15% to 18% revenue growth. So that kind of spooked investors further, caused another big drop.

Today in Equity Mates