- The last decade has been fruitful for equity investors generating 13% annualized returns. Why?
- Starting valuations were attractive and investors could buy the S&P 500 at a CAPE of around 20x.
- History dictates that today’s starting valuations will lead to near-zero forward returns.
Stocks
Interesting, and often contrarian, Snippets on individual companies and the stock market.
Biotech Year In Review – 2024
- From obesity to new modalities, Atlas Venture’s year end presentation is a must-listen for biotech investors.
- You can find the slides inside Stifel’s weekly.
Breaking Up is Good
- Elliott are after Honeywell with a $5bn stake and a letter arguing for a break-up.
- This chart from their letter shows how splitting up has led to improved performance – which so far the stock market has rewarded handsomely (e.g. CARR is worth more now than UTX was pre-spins).
Durable Growth is Hard
- A tiny subset of companies can keep growth and high margins going for long periods.
- Source.
TSMC in America
- The semiconductor manufacturing company’s $65bn foray into the Arizona desert is a meeting of cultures, technologies, education, politics, and geopolitics.
- Through interviews with dozens of employees, this article addresses the still open question – will it succeed?
Airlines Quietly Quitting China
- Foreign airlines are cutting capacity for a whole host of reasons (Russian airspace, economy etc), and Chinese airlines are stepping in.
- Full article here.
FTC and Pharma Mergers
- In 2023 the FTC substantially changed guidelines for antitrust enforcement.
- This has had far and wide ramifications for the pharmaceutical industry.
Decline of LA Film and TV Production
- Remarkable.
- Source: Hollywood reporter.
Problem for Media Companies
- If you have ever tried to cancel a subscription you know how hard it can sometimes be.
- After 16,000 public comments, the FTC is acting.
- This could be a problem for media companies.
Sector Returns from here?
- During previous instances of soft landing (if there is one) + rate cuts sector returns looked like this.
- Source: Apollo.
Lean against Concentration
- It has historically paid to deviate from the market as concentration rises.
- Source: Schroders.
Seeing like a CEO
- What really happened at Boeing?
Bull and Bear Markets
- This chart is a good visual of how long bull markets last compared to bear markets.
Executive Departure
- Interesting use of LLM to parse 8-Ks for unplanned executive departures.
- “Executive departure stocks are those that experienced an unplanned departure of a senior executive over the previous month. The line shows the returns of these stocks relative to those of the investment universe, which consists of the top 1,000 U.S. stocks by market capitalization. The portfolios are rebalanced monthly and exclude transaction and financing costs. See important backtest disclosure below. From 12/31/2003 to 6/30/2024.“
- Other AI-based analysis use cases in the source.
NVDA Peak?
- Revenue as a share of market-wide capital spending – getting close to what historic bubbles looked like.
- Paired nicely with this report from JPMAM.
A Peek Inside Google
- Anti-trust cases are interesting because they allow a peek inside the inner workings of a company.
- Here for example are all the exhibits from the DOJ case against Google.
Price Fixing
Is AI hype or Does it Work?
- A few links/stats on the topic.
- Github co-pilot in this study led to substantial savings (30-50% time saved or reduced in some tasks).
- Bloomberg Odd Lots podcast episode with the CIO of Goldman Sachs on the use of AI.
- Good overview of current revenue run rate for gen AI products (chart).
- A rather bullish tour of AI and semiconductors by Gavin Baker.
Index Concentration Crisis
- We all know indices are concentrated right now, more than ever. Just how bad is it?
- “The startling conclusion is that, despite the Russell 1000 nominally providing exposure to its namesake number of stocks, the index affords an effective diversification of only 59 stocks.“
- “Not only does market-cap weighting induce substantial single-stock risk, but the diversification provided by this foundational asset class has evaporated by 70% over the past decade.“
- Equal weight, as the article argues, is not the solution here, as it “suffers from significant operational costs, underperformance, questionable assumptions, and skewed risk bets.“
Top Stocks Rarely Stay on Top
- Source: Bridgewater.
