- Yesterday we showed how the concentration of the top five stocks in the S&P 500 index is back to highs.
- This chart looks at the valuation of the top five today compared to March 2000 (the last record).
- Suggests that the multiples are a lot more acceptable.
Stocks
Interesting, and often contrarian, Snippets on individual companies and the stock market.
Index Concentration
- The top 5 stocks of the S&P 500 make up a record 17.3% of the index.
Spotify
- Great article on Spotify.
- “The rise of AirPods, smart speakers, and other wearable devices may not signal the onset of a true platform shift, but it undoubtedly represents a transformational evolution in the way we will consume media — and this emerging paradigm of distributed, “eyes up” device interaction directly benefits audio more than other content categories.“
- Nice table comparing the music services as well.
Artificial Intelligence (cont)
- This chart shows number of times AI is mentioned on an earnings call for US companies.
- Financial companies are leading the charge.
- Source.
- Table showing Google’s pre-IPO financials h/t themarketear.
- Today Alphabet has a $155bn top line and $36bn of profit.
Airlines
- For those wondering what the impact on airlines is of viral epidemics.
- This is the impact on North American and Asian Airlines of SARS.
- RPK is Revenue Passenger Kilometers.
- Together some $7bn of revenue was lost.
Defensive vs. Cyclical
- This is a chart of defensive sectors (think e.g. utilities) vs. cyclical sectors (think industrials).
- Interesting to see how for the majority of the recovery defensive sectors actually outperformed. This stopped only after 2016.
- The most recent rally has been mostly led by defensives as well.
Artificial Intelligence (cont)
- The level of investment going into AI is ballooning.
- The chart only covers private investment.
- Source.
Tech Performance
- Tech is starting to decouple from earnings.
- This chart shows that the relative share price performance of tech is outpacing the relative EPS performance.
Artificial Intelligence
- Fantastic resource for anyone interested in AI.
- Especially worth checking out AI Index which has an absolute treasure trove of data (and makes it available via Google drive) on all aspects of AI.
- The improvement in capabilities (see analysis and charts in the report) are exponential.
- AI really has exploded on the scene – the chart shows attendance at big AI conferences. Notice the cyclicality though …
Executive Compensation
- Interesting chart showing, over time, what metrics are used for executive compensation – both long term (LTIP) and short term (STIP).
- You can see clearly the rise of TSR (Total Shareholder Return) but also how ESG is starting to be used for short term compensation.
- Data from Goldman Sachs.
Private Equity
- Prevalence of very leveraged private equity deals (those >6 or >7x leverage) are back to pre-crisis levels.
- Multiples paid are also near highs around 11x EV/EBITDA
- Good report from Bain on the state of PE with the latest data.
Electric Cars
- Interesting piece from FTAlphaville on the carbon impact of electric vehicles.
- First a staggering chart from VW – because battery production is so energy intensive it takes their new e-Golf 120,000 km of driving to breakeven in terms of carbon emissions vs. a diesel Golf.
- This does depend on where the electricity used to charge comes from (VW address this) and ignores other gas emissions.
- Some analysts suggest that because battery technology is yet to improve the best impact on CO2 emissions is to drive a hybrid.
- Food for thought.
Biotech
- Biotech investors take note – Eli Lilly are out for deals.
- “Eli Lilly and Co aims to announce roughly one $1 billion to $5 billion deal every quarter in 2020, its chief financial officer told Reuters, as the U.S. drugmaker looks to build up its pipeline of future products.“
- “It will focus largely on earlier stage opportunities across key therapeutic areas including oncology, pain, immunology, and neurology“
US Shale
- Schlumberger’s Chairman, who sees everything in the oil patch, is predicting more deals in the US shale space as growth slows.
- “What is likely to happen over the next 5 to 10 years is that some of the smaller companies will get consolidated… get gobbled up by the majors,” Papa said.
Drug Pricing
- Pharma companies are starting to really come into their own with introducing innovative ways of pricing.
- Alnylam only charges the $575k price for givosiran if the effect seen is on par with clinical trials.
- Novartis now collects the $2.1m price tag for Zolgensma over 5 years.
- Sanofi are offering $99/month subscriptions for insulin.
- Pricing is a big issue for US Pharmaceuticals. There are start-ups looking at this issue as well – Generics 2.0.
Stock Market Bulls
- A few hedge fund managers, worth listening to, continue to be bullish.
- David Tepper is one. “I love riding a horse that’s running” and continue to do so to a point”
- Stanley Druckenmiller is another:
- “I revealed a very bullish posture intermediate-term since October when Powell guaranteed he would not rescind the insurance [rate] cuts unless inflation was persistently above target,” Druckenmiller recalled. “Since then, both have worked out, and the Fed is still whining about inflation being below target.”
- Trump “election prospects have increased with two trade agreements and big win in Iran, which the Democrats have responded poorly to,” Druckenmiller added. “So I am still ‘riding the horse’ and bullish immediate term,”
- Disclaimer: Make sure you do your own work and use common sense when investing!
TV Series
- Original scripted series hit a new record in 2019 of 532.
- Growth was 7% this year, up from 1.6% in 2018 which was a previous record of 495 shows.
- The charts is from 2018 – showing massive growth in online – FX have stopped producing the split.
Concentration of ETFs
- Table showing weight of top two holdings of sector ETFs.
- Amazingly 3 ETFs have two holdings account for ca. 40% of the assets.
Oil Discoveries
- Oil discoveries in 2019 were at a four-year high (Rystad Energy).
- There were 26 discoveries of more than 100 million barrels of oil equivalent (boe).
- Exxon (XOM) was explorer of the year for a second year adding 1bn boe driven by discoveries in Guyana.