Stocks

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

Stocks

CAPE

  • Interesting take on Shiller’s cyclically adjusted price earnings ratio (CAPE).
  • The analysis argues that one should be using today’s tax rate and adjusting for buybacks.
  • This leads to a CAPE 2.0 of 28x – far below the current CAPE of 38x and nowhere near the Dotcom peak.
  • This is the “basic” version and for those interested there is a more advanced (and more controversial) version that results in “the last 20 years go from being an expensive aberration to a typical investment period“.
Stocks

Technology Transformation

  • Company IT systems are vital but understudied by investors (e.g. here).
  • This is a great post on how Fox went about setting up its technology capabilities after the deal between 21st Century Fox and Disney.
  • To whet your appetite – “we left almost all of our systems and infrastructure behind and embarked on a two-year journey and radical transformation“
  • What follows is a set of principles that is fascinating to read for investors and corporate insiders alike.

Stocks

SVOD Content Hours

  • Nice chart from Ofcom report tracking hours of content by various streaming services in the UK.
  • Interesting to see Amazon in the lead but trimming its library recently.
  • Disney+ is seeing the biggest growth (addition of the Star channel).
  • NOW set to get a big boost in H2 from addition of 7,000 hours from parent NBCUniversal’s Peacock.
Stocks

UK M&A

  • Mergers and acquisitions (M&A) activity has spiked to 12% of market cap in the UK, double the global average.
  • This is driven by cheapness of UK listed firms, stabilisation post Brexit, and record private equity dry powder.
  • Interestingly this spike is driven by a larger number of deals (25) when compared to the previous spike in 2015 (where mega deals for SAB Miller and BG Group dominated).
  • Source: Man Group.
Stocks

SPAC Returns

  • JPM analysed 98 SPAC deals that closed or liquidated from Jan 2019 to March 2021.
  • It isn’t a pretty picture – “while SPAC sponsors and “SPAC Arbitrage” investors are still making money, it’s an unsightly picture for everyone else in the SPAC ecosystem“.
  • Things didn’t get any better for the 85 SPAC mergers since March 2021 – the same patterns hold.
  • This was a great post looking at the crazy things going on recently in the SPAC world.
Stocks

Pixar

  • George Lucas was forced to sell Pixar to fund his divorce.
  • Venture capitalists, 35 of them, refused to back the firm as did eight strategic partners, but Steve Jobs agreed.
  • “If we’d had any other investor than Steve, we would have been dead in the water.“
  • He forced the firm to succeed “He’d berate those of us in management, then write another check”
  • Pixar was eventually sold for $7bn to Disney “This is astounding considering they could have had us for free in the 1970s when we approached them on bended knee.” 
  • The real story of Pixar – a fascinating read.
Stocks

Dell

  • “Splitting a good black jack hand” is a great way to describe how Michael Dell pulled off perhaps the most daring deal of the last decade.
  • “Before the LBO, he owned 15.6% of his company, shares worth less than $4 billion. Thanks to the miracles of his financial engineering, he will own 52% of Dell and a 42% stake in VMware. The total value of his Dell holdings is $40 billion.“
  • A really great article from Forbes.
Stocks

Music Streaming Market

  • There are 487m music streaming subscribers globally at Q1 2021.
  • Emerging markets are now central to this market accounting for 60% of all 2020 subscriber growth.
  • Spotify is still the leader with 32% but has lost two points of market share since Q1 2020.
  • Google’s Youtube Music has been the standout story – “The early signs are that YouTube Music is becoming to Gen Z what Spotify was to Millennials half a decade ago.“
  • Source.
Stocks

Grocery Delivery Sales

  • Grocery delivery did extremely well during the pandemic.
  • Walmart dominated pre-pandemic but the first few months of lockdowns its market share was eclipsed by Instacart.
  • As of June 2021 it is back in the lead with 48% share while Instacart has 45%.
  • Overall online grocery sales peaked in January 2021 and volumes are down 24% to June 2021 (which is -3% YoY).
  • NB Amazon is excluded.
  • Source.
Stocks

EV Maintenance Costs

  • The US government estimate of fleet maintenance costs found that battery-electric vehicles (BEV) have about 40% lower cost when compared to internal combustion engine vehicles (ICEV).
  • Hybrids (HEV) and plug-in hybrids (PHEV) also save money.
  • NB this 4c per mile difference across the nearly 2 billion miles federal government vehicles covered in 2019 equates to $78 million a year in savings, and that doesn’t account for fuel costs.
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