Stocks

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

Stocks

Value

  • Value has had a very tough time.
  • This chart shows drawdowns of value vs. growth since 1926.
  • This drawdown is currently at a record -52%. (h/t 361 Capital)
  • In fact the ratio of growth to value has just hit the same level as in 2000 Tech bubble peak (h/t Redburn).
  • Investors are coming out defending the style even after adjusting for the valuation metric issues discussed before.
Stocks

Travel Green Shoots?

  • “I am pleased to say, but I would not get overly excited about it, that we have seen nice growth coming into May. And essentially, what we have seen is both growing out green shoots in the areas you would expect, places where movement has become possible, where people can now start to think about their summer holidays, et cetera. We see that very quickly when that happens and cancellations have settled down. They are still at elevated levels, but they have stabilized.” Expedia Q1 2020.
  • “what we are seeing clearly is what you have been hearing that local, regional, domestic is certainly coming back stronger sooner.” Expedia Q1 2020.
  • “we are seeing a significant number of hits in searches over the weekend, particularly I think from families looking at going on the two weeks summer holiday from Northern Europe to places in Italy, Spain, Portugal, et cetera.” Ryanair Q4 2020 Results.
Stocks

Sony

  • Really great article on Sony and their current CEO – Kenichiro Yoshida.
  • This was a nice quote about the CEO – Yoshida’s humility is expressed through curiosity. “He came to me and said, ‘Let’s talk about medical things,’ and we met for dinner,” said Toru Katsumoto, who heads Sony’s medical business and research and development, of their first meeting. “I spoke about medical imaging and tried to explain the technology as simply as possible, but he had read a lot before we met. I was surprised and impressed. Once or twice a month, we have a face-to-face meeting and we exchange ideas freely.”
  • The big thing about Sony today is the analogy with Microsoft – “A lot of what Nadella did was capitulate and say, ‘This is where we are now and this is what we are going to do,’ rather than chasing the glories of the past.”
Stocks

Behind the Scenes

  • In investing one mostly hears from the CEO, CFO, and investor relations. It is important to dig deeper.
  • One vital function is the Chief Technology Office (CTO).
  • Here for example is an excellent post from the outgoing CTO of New York Times.
  • The legal department is also interesting. Here is a fascinating podcast featuring the general counsel of Netflix.
  • Incidentally also the first lawyer hired by the company when they were still sending DVDs and who now heads up a team of 650 people.
Stocks

Value Investing

  • Interesting chart that suggests that the underperformance of value investing since 2006 is down to valuation.
  • The reason is that the valuation metric to look at is free cash flow yield to enterprise yield and not P/B or P/E.
  • On this metric the Russel Value Index has been expensive since 2007.
  • This is partly because in 1985 68% of the market value of the S&P 500 was tangible assets, today that number is 16%.