Stocks

Interesting, and often contrarian, Snippets on individual companies and the stock market.

Stocks

CEOs Appearing on Podcasts

  • A new paper examines the question of why CEO’s allocate precious time to appearing on podcasts.
  • Between 2016 – 2020 over a quarter of all S&P 1500 CEOs appeared on at least one podcast.
  • This has grown from 6% in 2016 to 22% in 2020.
  • They find it tends to be CEO’s of firms more focussed on consumers and ESG.
  • It also tends to be CEOs who have strong reputation incentives (looking for a new job, have own twitter account, founders).
Stocks

ESG Ratings Divergence

  • ESG ratings from various providers just don’t agree and this is a nice chart to demonstrate this point.
  • The horizontal axis takes Sustainalytics ratings for 924 firms as a benchmark.
  • Ratings by other providers are then plotted on the vertical axis using different colours (see key).
  • For each rater the ratings are normalised to a Z score (zero mean, unit variance).
  • The results = for any level of benchmark rating there is a big range of values given by other ratings.
  • The divergence is so bad between firms “it is difficult to tell a [ESG] leader from an average performer”.
  • The paper then goes on to try to understand why this is.
Stocks

Private Equity Valuations Paid

  • Bain report on private equity industry is always worth a flick.
  • This was an interesting chart on valuations – showing that multiples started to drift up from 2015 onwards reaching highs last year.
  • Part of this was a mix shift towards growth and technology, where 2020/2021 saw ballooning multiples paid for software businesses (here, page 49).
Stocks

Financial Plumbing

  • The Global Financial crisis 14 years ago ushered in a new era of attempting to understand the pipes of the global financial system – especially incorporating the shadow banking world.
  • One big node point is pledged collateral and so called collateral velocity. The world expert on this is IMF senior economist Manmohan Singh.
  • This latest post on FT AV by Singh is absolutely worth a read to understand what is going on now.
  • These charts are one part of the picture – showing how pledge collateral has grown but also moved around.
  • “As you might expect, a lot has changed since 2007, with the disappearance of Lehman Brothers and Bear Stearns, the reshuffling of business models by UBS, Credit Suisse and Deutsche Bank, and the rise of JPMorgan and Barclays.“
Stocks

Refining Margins

  • Spectacular pop in refining margins.
  • “Permanent refinery closures since the start of 2019 reduced global capacity by around 4.7mn barrels per day, Barclays estimates, and new refinery capacity such as at Kuwait’s Al Zour can’t be brought quick enough. As a result, US and European refinery gross margins are least four times the long-run average“
Stocks

Tyre Pollution

  • Tyres are an order of magnitude worse source of particles pollution than exhausts.
  • “We came to a bewildering amount of material being released into the environment – 300,000 tonnes of tyre rubber in the UK and US, just from cars and vans every year.”
  • Whereas “Tailpipes are now so clean for pollutants that, if you were starting out afresh, you wouldn’t even bother regulating them.”
  • Listed tyre companies (GT, ML) are generally ranked low on ESG risk.
Stocks

Cure for High Prices

  • As the saying goes – the best cure for high prices is high prices.
  • According to GS this is now coming to battery metals (cobalt, lithium and nickel).
  • In other words, despite an exponential demand profile, the surge in prices is bringing on a huge supply response.
  • “We forecast all three metals to shift into sustained surplus over the next 1-2 years” (see chart).
  • “Lithium is the most prominent in this trend, where we expect supply growth to average just over 30% per year over 2022-25, reflecting the ramp-up of new projects in Australia, China and Chile in particular.” 
Stocks

Alpha = Pick the Right Stocks

  • According to new data analysis – the alpha generated by professional fund managers comes from one major source = research process.
  • Inalytics studied 752 portfolios, with at least three year performance data.
  • The average alpha was 308bps.
  • Stock research added on average 319bps while position sizing led to average alpha loss of 11bps.
  • Only 46% of participants delivered any positive alpha from sizing.
  • “Stock picking is the primary area in which managers demonstrate skill”
  • Source.
Stocks

Future of Music Biz

  • Great contrarian podcast about the future of music streaming with Economist Will Page.
  • “Page believes the music industry is transitioning from a “herbivore market” to a “carnivore” one. In other words, future growth will not come from brand-new customers — it’ll come from the streaming services eating into each other’s market share. Not only has subscriber counts possibly tapped out in Page’s opinion, but streaming services have also put a ceiling on revenues by charging only $9.99, a price that hasn’t budged in 20 years despite giant leaps in technology and music catalog size.” 
Stocks

Keep Score with Football Clubs

  • Nice write up ($) from The Diff on Football Clubs or as he calls them “Meme stocks for the 0.01%”
  • The collective value of the top 20 clubs in the Premier League has risen from £50m in 1992 to £16.11bn in 2021 (Sportico has a neat interactive tool for this). A stand out return.
  • Part of the reason is the huge audiences they attract. Spotify recently signed up to sponsor FC Barcelona citing their own data that the team has 700m unique viewers per year.
  • KPMG actually publish a very interesting report on the value of football clubs with detailed analysis – unsurprisingly showing a Covid-related drop in value/revenues.
WordPress Cookie Notice by Real Cookie Banner