Stocks

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

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.
Stocks

CMA Report on Online Market

  • CMA have published an in-depth report on competition in online platforms and digital advertising in the UK.
  • The dominance of these platforms is clear – as the chart shows Google has market power in the entire vertical chain which takes 35p for every £1 of advertising spend.
  • Lots of interesting charts inside – some to come in future snippets.
Stocks

Activist Short Sellers

  • Insightful FT Alphaville post on short reports (“activist short selling”).
  • It builds on a recent paper where “two academics studied corporate responses to 351 short-reports published on US-listed companies between 1996 to 2018 in an attempt to discover if a company’s reaction is as important as the market’s when a report is released.”
  • It seems that companies that launch internal investigations as a response have the worst outcomes – 383% higher chance it is a fraud.
  • Some interesting charts attached.
Stocks

Equity Valuation and Interest Rates

  • A great historic (1881-2020) chart showing median cyclically adjusted P/E multiples (CAPE) during various interest rate regimes.
  • There is a balance – low interest rates mean future cash flows are worth more discounted but are associated with weaker growth.
  • The chart suggests a goldilocks principle – highest P/Es associated with real interest rates in the middle of the range.
Stocks

Understanding Value Investing

  • This series is one of the better when it comes to understanding what has gone wrong for value investors.
  • The first looks into whether value is actually cheap.
  • “The evidence brings us full circle to Arnott’s observation that the problem with the Value Factor has not been the absolute performance of Value stocks.  The problem has been shorting the Glamour stocks“. 
  • The second, propose something very intriguing – “that looking through the lens of optionality reveals that the source of excess returns to factors are not a function of the securities themselves, but rather the rules of portfolio construction and the embedded optionality these rules create“
  • The third article is yet to be published.
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