Stocks

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

Stocks

Dying Wells

  • Interesting article about a company you probably haven’t heard of, but one that owns far more onshore oil and gas wells than Exxon.
  • The strategy is one of buying old “dying” wells to squeeze more life out of them.
  • The company isn’t short on controversy – the environmental cost of such wells is high (they leak gas) and once done they need to be plugged, which the company seems to do at a fraction of the cost of others.
  • Interesting contrast in a world of rising energy costs.
Stocks

Big Tech Acquisitions

  • Provocative chart from latest Bain technology report.
  • “When the facts are reviewed, most big tech M&A spending actually benefits consumers and doesn’t hamper competition. That’s according to Bain’s analysis of all $300 million-plus acquisitions, totaling more than $150 billion, from 2005 to 2020 by the five US hyperscalers: Alphabet, Amazon, Apple, Facebook, and Microsoft“
  • Overall they find that, excluding Linkedin, 72% of M&A spending created value for consumers, rising to 89% if we exclude Nokia/Motorola.
  • For those interested the methodology is in the appendix of the report.
Stocks

The Value of Simple Language

  • The type of language used in earnings calls has a significant impact on stock returns.
  • According to Nomura, simple language (as measured using Gunning Fog Index) leads to higher returns and a considerably better Sharpe ratio when compared to complex language.
  • This is distinct from earnings call length – which doesn’t correlate to complexity.
  • For those interested we previously posted further interesting stats on language in company publications.
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.
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