- “This risk is particularly noteworthy given that many companies with loans outstanding are carrying significant debt loads. The average debt-to-EBITDA ratio in new U.S. loan transactions hit a record-high 5.5x in 1Q2022, above the 4.9x recorded just before the Global Financial Crisis.“
- “Importantly, companies involved in these transactions were often more highly levered than they appeared on paper, as many used aggressive EBITDA adjustments (e.g., for synergies, cost cuts, etc.) when making these leverage calculations.”
- Source: Oaktree.
Stocks
Interesting, and often contrarian, Snippets on individual companies and the stock market.
Tracking Brand IG Posts
- BAML track Instagram posts to see how popular various alcohol brands are.
- Article on how they do this (including anecdote about not tracking Corona for obvious reasons).
Cloud Vendors
- Cloud Vendor market was $159bn annual run-rate market in Q2, still growing 37% (though slowing).
- This growth has actually come with pretty good economics. (From this Battery VC deck).
- One very interesting feature of these vendors is they also happen to run huge cloud based products (think Xbox for example) which means they are customers of their own infrastructure – utilising it and making it better.
Positioning Lows
- “GS PB long/short ratio stays at longer term relatively depressed levels. This is not to be used as an input for short term trading strategies, but worth having in the back of your head.“
- Source: themarketear
Container Fleet
- Like clockwork the capital cycle kicks in just as prices for containers have collapsed.
Corporate Insider Buying
- Insider Buy/Sell Ratio crossed above 0.14 for the first time in six weeks.
- This is rarely a good timing indicator but a bullish sign.
- Source.
ROIC Distribution
- Interesting chart from Mauboussin showing the distribution of ROIC of the Russell 3000 index.
- “The mode is an ROIC of 5 to 10 percent, and the distribution is shaped like a bell between the tails. But nearly 30 percent of the sample are at the extremes of an ROIC of -20 percent or less or 30 percent or more.“
Password Sharing
- “The average US consumer pays for 2.93 subscriptions and borrows 1.02 accounts.“
- Source: Bain.
Analyst Top Picks Work
- According to Birru et al. (2020) top stock picks by sell-side analysts tend to outperform (there are nuances of course).
- h/t Klement.
Health Data Liberation
- File this under – things that could radically change the US healthcare market that few are talking about.
- Federal rules, that took effect 6th of October 2022, mean for the first time patients get unrestricted access to their health data and can choose who else does.
- “To think that we actually have greater transparency about our personal finances than about our own health is quite an indictment,” said Isaac Kohane, a professor of biomedical informatics at Harvard Medical School. “This will go some distance toward reversing that.”
FedNow
- FedNow, a faster payments network designed by the Federal Reserve, is nearing launch in 2023 and this is a great explainer/history post.
- The US lags far behind the rest of the world in faster payments.
- FedNow could change that (or not) – it for one is cheaper than existing competitors.
- There is also this chart, showing adoption rates of faster payment systems around the world – those that launched recently had faster adoption (especially if helped along by regulators).
Brokerage Accounts
- People are stating to close brokerage accounts – which is counter the narrative.
Options Expiry
- More than 40% of SPX options volume in Q3 had <24 hours expiry.
- A sign of the shape of the market, where liquidity is drying up.
Net Cash
- Neat chart showing the percentage of companies that have net cash.
- Japan leads the way (as it has done since 2008).
- Interesting to see EM moving up.
- Source: Blackrock Outlook.
Passive Domination
- Chart shows the extent the biggest companies are owned by Blackrock and Vanguard.
- h/t Callum Thomas (do check out his excellent Chart Storm).
Flaring
- Flaring natural gas is a hot topic right now, and not just because Russia is using it as a political weapon.
- Interestingly Chevron has decided to link some incentive pay to a target to reduce flaring by 25-30% vs. 2016 levels.
- Flaring is really bad – not only because it creates CO2 but because it often doesn’t do a good job leading to methane escape (a greenhosue gas that is 80x worse than CO2). Though this appears to be getting better.
- In some ways gas is flared because it is a “trapped asset” and this latest piece from Byrne talks a lot about innovative solution for non-tradeable assets. In the case of gas building data centres next to them.
Buy Signals
- These charts can often be very useful in thinking where we are in the inevitably rhyming cycles.
- From Hartnett (Merrill Lynch Strategist) via themarketear.com.
- “His reasoning regarding the oversold entry level is basically buying some 20% below the 200 day moving average: currently at 3374. This has worked over the past century (except 1931/37/74 and 2008). He adds: “…monster undershoot requires monster credit event & recession”.”
Uses of Cash
- Buybacks have come to dominate how the average company uses its cash.
Preannouncements
- “41 SPX companies have issued positive EPS guidance for Q3 2022”
- This is higher than what we saw in for Q1 and Q2.
- Likely down to companies struggling to “model” inflationary environments.
- h/t The Market Ear.
The Coming Semiconductor Revolution
- “The future of semis will be designing ever more specific chips for ever more specific uses. This change will take many years to play out, but the transition has already begun. This is going to upend the semis industry to the same degree that consolidation over the past 20 years has.“
- A must read here.