- The most concentrated areas of the US equity market ranked.
- Source.
Stocks
Interesting, and often contrarian, Snippets on individual companies and the stock market.
US Electric Utilities
- Just four companies serve 90% of the technical testimony utilities use to calculate the rate of return in the US.
- “In 2019, two experts at Carnegie Mellon, Paul Fischbeck and David Rode, analyzed 1,600 rate cases over 40 years, and noted the “balance between utility companies and their customers has been shifting over time, in favor of the utilities.” What investors were being paid to take risk in putting money into a utility in 1980 was about 3%, today it is nearly 7%.”
- More on how US electric utilities work.
Electrification
- Electricity demand is starting to grow again. Forecasts are for 40-50% increase by 2040.
- This should create a very large electrification investment cycle.
Bourbon Distilleries
- Capital cycle, exacerbated by the fact that to be called bourbon inventory must age for two years.
- Source.
NIH Analysis
- National Institutes of Health (NIH) is currently facing chaotic cuts – this article does a decent job laying out how things like a capping indrect spending can only be done via Congress and generally the state of the NIH.
Stripe Annual Letter 2024
- Stripe did $1.4 trillion payments volume in 2024 – it is worth reading their annual letter.
- Topics include AI Economy (their data shows top 100 AI firms reach $5m ARR in 24 months vs. 37 months for their top SaaS firms in 2018), vertical SaaS, stablecoins, Europe.
Comparative Earnings Vol
- There are many reasons investors have, rightly or wrongly, rewarded the US stock market.
- One possibly right reason is lower earnings volatility.
Fragrances and AI
- “Consumers of all age groups are using around four different fragrances regularly, which is a significant change from a decade ago when they had one signature scent.“
- “Some people talk about the ‘Deep Seek Syndrome,’ saying, ‘You’re overspending, you’re spending $500 billion, you’re overspending! You can save so much more by spending less.’ But I think they are looking at it the wrong way. How much percent of GDP will be replaced by a billion-dollar smart system? I would say at least 5% within 10 years. That 5% is $9 trillion—or if it’s 10%, it’s $18 trillion. So, somewhere between 5% to 10% of today’s GDP will be replaced by this superintelligence. Well, if that’s the amount of return, you shouldn’t be scared of spending a few trillion dollars. If the return is $9 to $18 trillion per year, why should you save? Why should you try to be efficient? For what? I don’t get it. Just a little difference makes a huge return on your market share.” – Softbank CEO Masayoshi Son
- Source: A good smorgasbord of quotes from recent transcripts.
Pharma Patent Expiries
- The amount of revenue lost due to loss of exclusivity is going up in the next three years.
- Source.
Number of Patients on GLP-1
- Number of patients on GLP-1, whether for diabetes or obesity, has tripled in the last three years thanks to Novo Nordisk and Eli Lilly.
Zero Day Options
- Nice chart showing the evolution of options markets towards the zero-day to expiry dominating.
- Source.
Analyst Coverage
- Big stocks get all the coverage – another argument for the 493 other stocks?
UK IPOs
Streaming Churn
- Streaming churn keeps getting worse. A big problem for media companies.
- Source: Excellent slide deck on media.
Concentration Dichotomy
- Value has gotten less concentrated.
- Source.
US Electricity Demand
- Is starting to show growth (January data below).
- Feels like the electrification trend could have legs.
Time Spent on Media
- One of the big reasons media is so tough to invest in – time spent with media is flatlining.
- Source: Excellent slide deck on media.
2024 was Exceptional
- Once S&P 500 return is decomposed into factors 2024 really stands out.
- “… What is particularly interesting about 2024 is how much of the S&P 500 return came from non-systematic (i.e., idiosyncratic) returns, driven by the significant appreciation of the “Magnificent Seven” (Mag-7), which now account for 35% of the S&P 500. Idiosyncratic returns are company specific and by definition should be uncorrelated and random.“
- “In fact, idiosyncratic return has never contributed as significantly to the overall S&P 500 return as it has recently. Over the trailing 24 month period, idiosyncratic returns have accounted for 21% of the 51% return of the S&P 500.“
- Will it repeat?
- Source.
Mag7 Matter
- The top seven US stocks are very profitable, accounting for a high percentage of profits of the entire G7 market.
- Source: DB via themarketear.
Mag7 Earnings Growth Slowing?
- By 2026 Mag7 is forecast to grow at a rate only slightly above the rest of the market.
- Source: GS.
