Stocks

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

Stocks

Google

  • Some of the best analysis on Google, their ad business and anti-trust that we have read.
  • “There is a strong argument to be made that Google is an unstoppable juggernaut. That said, the regulatory risks to the business are real, and there are several scenarios that investors must game out to illuminate the risks and opportunities the company has in front of it.”
  • h/t FT Alphaville
Stocks

Global Supply Chains

  • This was fascinating from Samsonite (h/t The Transcript).
  • Shows the plasticity of global supply chains.
  • In a year they have taken sourcing for their US business from 90% China to 67% by Q3 and aiming for 50% next year.
  • “…we’re very rapidly accelerating the shifting of sourcing from China for our U.S. business … I’m happy to say that for Q3, we’re already at 67%. And as we look to next year, we start to feel like we can get very close to 50% source from China, which for just the core U.S. business was close to 90% just at the start of this year. So, it’s a pretty dramatic shift” – Samsonite CEO
Stocks

Cisco

  • Cisco, the networking equipment maker, is a good economic bell-weather. Some telling comments from the Q3 call (h/t The Transcript).
  • “So, you heard Chairman Powell yesterday talking about his concern over business investment. And I think that’s the issue that we’re facing. The consumer in the U.S., as you see from Walmart and from others, has remained very strong.“
  • “What we see, when we see our customers pause, there are a few things that are just – that are usually signatures of that. First of all, our close rate on our funnel or our pipeline goes down, which we saw. We see deals getting pushed down, and we see some deals that start out bigger and then get smaller. And we saw all of those things occur. And it’s just a classic signal that we’ve seen historically. I have been doing this a long time. And I mean, it looks exactly like what we’ve seen in the past. Now the thing that I would point out is, some of these large customers that, you know, when they start saying, ‘I need one more signature. Let’s add another step into the procurement process,’ they’re just expressing caution that they’re concerned about what’s going on in the macroenvironment.“ CEO Cisco
Stocks

Cosmetics vs. Skincare

  • Trends in the US are suggesting heavy cosmetics are going out of fashion while skin care is accelerating.
  • “All the successful products now enhance and don’t cover.”
  • The article puts this down to the #nomakeup trend.
  • “We believe recent declines in color cosmetics in the US are due to several factors. Trends change and a more natural appearance is now involved, which requires fewer products that went contouring and other looks were popular … In addition, Gen Z consumers are discovering the benefits of skin care, spurred by more social media activity in that category.” Estee Lauder Conference call.
  • Or L’Oreal in the latest sales release on North America “In a difficult market context, the Consumer Products Division is still very much impacted by its wide exposure to the makeup market currently flat, but is posting good growth in skincare“
Stocks

Private Equity

  • “This column uses data on thousands of buyouts in the US to examine the effects on employment, job reallocation, productivity, and worker compensation.”
  • They find some interesting results. As usual it all depends on the cycle.
  • “… an overarching result: Buyout effects differ greatly by type of buyout, with credit conditions at the time of buyout, and with the post-buyout evolution of credit conditions and the macroeconomy.“
  • They find for example that net employment fell 4.4% after buyouts, yet for private-to-private buyouts it actually rose 13% and for large public buyouts it fell 16%.
Stocks

Goldman and Deserve

  • Extending credit is difficult.
  • One needs to do it over multiple business cycles to build the experience of doing it profitably.
  • GS have announced they are leading $50m investment in Deserve.
  • “Deserve offers credit cards directly to nontraditional consumers using machine learning and alternative data to deem creditworthiness”
  • There are so many things wrong with this statement.
  • “Nontraditional consumers” usually means those of poorer credit quality – which is risky.
  • Yet Deserve knows how to price this risk (despite having no experience) using “machine learning and alternative data”.
  • We will see how this turns out in the next recession.
Stocks

Coffee in China

  • “… the coffee consumption in China … now sits at less than four cups per year, per person, compared to 300 in the US, this is a huge opportunity“ Starbucks President on the latest Earnings Call.
  • No wonder Starbucks has 4,000 stores in China already with 1,000 more planned for 2020.
  • The word China was mentioned 52 times on the call …
Stocks

Be careful with Indices

  • This is a great article which shows the danger of looking at the index level when arguing about valuation.
  • At index level Emerging Markets (EM) trade at 12x P/E vs. the US at 17x = attractive right?
  • If you dissect by sector the valuation difference is entirely in domestic focussed sectors (e.g. Financials) and mining/oil & gas.
  • Global facing sectors have very similar valuations.
  • So an investor in emerging markets is basically taking a bet that the former valuations will close … a very different proposition.
  • i.e. you need China Construction Bank to re-rate vs. Bank of America.
Stocks

WeWork in London

  • WeWork impact is interesting.
  • Morgan Stanley (via FT Alphaville) point out a Savills report (here and here) – if WeWork walked away from every commitment they have in London Offices it would raise the months of supply from 12 to 18.5 (City) and 15 (West End).
  • This is below the 20 months considered over supply.
Stocks

Short Positions (redux)

  • We previously told you about short positions disclosure.
  • You can actually find daily updated spreadsheets here for the UK.
  • In the file below we use pivot tables to look at short positions by:
  • Stock (Sheet: Pivot Table Company)
  • Fund manager (Sheet: Pivot Table Position Holder)
  • The latter could be helpful for interviews?
  • The table below shows top 10 shorts in September vs. now.
  • Only three names are the same.
UK Stocks Short PositionsDownload
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