Score one data point for the recovery bulls/monetary policy hawks, as U.S. consumer spending in May rose 0.9% over April -- the fastest rate since August 2009 (April's gain was revised upward, too). That doesn't appear to be impressing investors on Thursday, as stocks are little changed, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the broader S&P 500 (SNPINDEX:^GSPC) up 0.03% and 0.10%, respectively, at 12:35 p.m. EDT. The technology-heavy Nasdaq Composite was up 0.12%.
Speaking of data points, credit reporting agency TransUnion priced its stock at $22.50 per share in their initial public offering, for a $4 billion valuation. The stock began trading today (it is up over 9%), and business-focused investors should put it on their watchlist.
Why look at a company that Goldman Sachs is selling, I hear you ask. Advent International and Goldman's private equity division acquired TransUnion in 2012 from another private equity group, Madison Dearborn Partners. I'll admit I don't see a series of private equity owners as a positive attribute: While Goldman and Advent International remain the controlling stockholders following this share offering (which is a risk in itself), these are not long-term owners.
Given this heritage, it's no surprise to learn that TransUnion is heavily indebted, too, with $3 billion in debt at book value at the end of the first quarter.
Still, I'm interested in TransUnion because it has an asset that is difficult for would-be competitors to reproduce: its data. The company maintains files on over 1 billion consumers. All in, TransUnion has over 30 petabytes of data (1 petabyte is 10^15 bytes). To put that staggering figure in context, it is roughly 2% of the total amount of information carried on the Internet on a daily basis, according to an estimate cited by the National Security Agency in 2013. (Coincidentally, it's the same proportion of Internet data the NSA "touched" on a daily basis at that time.)
The reason I'm so focused on this data trove is that amassing a large proprietary database and providing other businesses with data and the tools to exploit it is at the heart of a number of superior (or even exceptional) businesses. In a sector that I'm familiar with, financial technology, I can point to Bloomberg (full disclosure: I used to work there), MSCI (NYSE:MSCI) or Markit Ltd. (NASDAQ: MRKT).
Even though TransUnion warned in its offering prospectus that "the market for our services is highly competitive," I note that it only cited between two and four competitors in each of its segments (the main ones being Experian and Equifax) and that it has a very high gross margin (62% -- roughly the same level as Google's (NASDAQ:GOOG).)
If there was any doubt concerning the opportunity in "Big Data," let me draw your attention to a news item from yesterday: Big Data start-up Palantir Technologies, which was co-founded by PayPal co-founder Peter Thiel, is closing a private financing round that values the company at $20 billion. That figure makes it the second most valuable private technology company behind Uber (at roughly $50 billion).