Stocks

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

Stocks

Food delivery and competition

  • Brilliant article on the monopolistic power of food delivery businesses especially as they begin to vertically integrate and merge around the world.
  • “Losing money to acquire market power, or to steal from investors, is a form of counterfeiting, because it drives honest competitors that have to generate a profit out of the market“.
Stocks

Rapid Covid Testing

  • There was a lot of excitement about the FDA approving a rapid (15 minute, $5) SARS-CoV-2 test.
  • This is an interesting analysis of when such a test would be useful and when not?
  • In short – if the true infection rate of the population you are testing is very low (<1%) it won’t be useful.
  • Which means using such a test on cruise ships, as some have suggested, won’t work.

Stocks

The story of ICE

  • A great post about the history of Intercontinental Exchange and its founder Jeffery Sprecher. Its success was based on a few factors.
  • (1) “Sprecher gave away 80% of the company to his customers as an incentive for them to trade at his venue.” 
  • (2) “the company had a lucky break when Enron went bust.”
  • (3) Lots of deals meant diversification especially into oil trading and clearing. 20 deals in the past 15 years. Three criteria drove these – enhance network, new content, turnarounds.
  • It also comes down to three insights – analogue to digital, using regulation as an opportunity and the power of data.
Stocks

Pinduoduo

  • A great presentation and separate post about a huge eCommerce business you probably haven’t heard of, founded only in 2015.
  • Its success is down to a team buying feature, social integration, gamification and live streaming.
  • These features have led to a daily active user (DAU) to monthly active user (MAU) ratio, a measure of engagement, of almost 50% – the highest, by some margin, among peers.
  • h/t Benedict Evans.
Stocks

Scientific Publishing

  • A brilliant article on the business of scientific publishing from the early roots and the story of Robert Maxwell to the rise of the internet and the present day.
  • “Scientists are not as price-conscious as other professionals, mainly because they are not spending their own money,” he [Robert Maxwell] told his publication Global Business in a 1988 interview. And since there was no way to swap one journal for another, cheaper one, the result was, Maxwell continued, “a perpetual financing machine”. Librarians were locked into a series of thousands of tiny monopolies. There were now more than a million scientific articles being published a year, and they had to buy all of them at whatever price the publishers wanted.
  • In response to the internet Elsevier bundled – Elsevier created a switch that fused Maxwell’s thousands of tiny monopolies into one so large that, like a basic resource – say water, or power – it was impossible for universities to do without.“
Stocks

JPM Q2 Results – Activity

  • Nice slide from JPM Q2 2020 Results showing activity measures across their lines of business.
  • “We saw record levels of debt and equity issuance in the quarter as clients bought to pay down the majority of the revolver draws“
  • “as markets rebounded to pre-COVID levels, May and June together were our two busiest months for equity issuance ever“
  • “More recently, we’ve seen the improvement in overall sales growth across the country flatten out, notably in both states with increasing cases and states with decreasing cases.”
  • “In Auto, April saw the lowest level of loan and lease originations since the financial crisis. But activity rebounded sharply in May and June. And in fact, June ended up the best month for auto originations in our history.“
  • “And in home lending, retail purchase applications, after reaching a low in April, recovered to well above pre-COVID levels in June due to a strong and broad market recovery.”
Stocks

Comovement of S&P 500

  • Interesting chart from Logica.
  • Comovement represents the absolute number of stocks in the S&P 500 which move on the same direction on any day (either up or down). 
  • If half the stocks move up and half move down, comovement would equal zero.  If 100% of the stocks move up, comovement would slightly exceed 500 (there are currently 505 stocks in the S&P 500).
  • Holding volatility relatively constant the rise of index funds has led to a marked increase in the comovement of stocks since the 1990s.
  • This along with volatility selling and illiquidity creates a market structure that has serious implications for investing.
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