Stocks

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

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.
Stocks

Working Capital & Covid

  • This is a chart of the working capital of Electrolux since 2003.
  • It shows that the total cash collection cycle has fallen from 63 days in 2003 (a peak of 87) to zero today.
  • This was almost entirely achieved by payable days doubling from 60 to 120.
  • In short the company is squeezing suppliers.
  • What happens after Covid? This excellent blog post addresses this and other impacts.
Stocks

Netflix Accounting

  • A good article on accounting at Netflix.
  • In short, it analyses content amortisation accounting and shows that this line item is being understated, boosting earnings.
  • A staggering stat is that Netflix content spend went from $2bn in 2011 to nearly $14bn last year.
  • This might not be relevant for the share price for now but is still worth knowing about.