Stocks

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

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
Stocks

Alcoholic Fizzy Water?

  • There is a fast growing market in the US for alcoholic or hard seltzer (i.e. fizzy water). Biggest brands are White Claw and Truly.
  • It is on trend for a health conscious younger demographic that has shunned beer.
  • So far this has been largely a US phenomenon but is likely to spread to the rest of the world.
  • The big brewers are waking up and bringing in their own brands.
  • Google search trends do suggest it was a summer phenomenon.
Stocks

Asset Management

  • “Just over 20 years have passed since the publication of Mark Carhart’s landmark 1997 study on mutual funds.
  • Its conclusion—that the data did “not support the existence of skilled or informed mutual fund portfolio managers”—was the capstone of an academic literature, which began with Michael Jensen in 1968, that formed the conventional wisdom that active management does not create value for investors.
  • We review the literature on active mutual fund management since the publication of Carhart’s work to assess the extent to which current research still supports the conventional wisdom.
  • Our review of the most recent literature suggests that the conventional wisdom is too negative on the value of active management.“
  • Full paper here.
  • Although fully disclosed this paper was supported by IIA Active Managers Council and hence might be biased.
Stocks

US online takeaway

  • We have posted Snippets about GrubHub before here and here.
  • This is another interesting and long article on how online takeout is turning out to be bad for restaurants as well.
  • The article is rather sensational (and we aren’t convinced the Online Travel analogy is apt).
  • Regardless it is full of interesting stats and analysis.
Stocks

Texas Instruments is the World

  • Texas Instruments, the semiconductor company, is very diverse (largest product is just 0.8% of revenue).
  • Their sales growth therefore largely follows global PMIs.
  • It makes them a great barometer of what is going on.
  • They have now experienced four quarters of revenue decline and are guiding for a fifth (typical semi-cycle is 4-5 quarters).
  • From their recent conference call:
  • “Revenue decreased 11% from a year ago and came in below the midpoint of our guidance as we saw most end markets continue to weaken further …  the weakness we’ve seen in the third quarter was broad-based across all markets and most sectors … We saw weakness across all major customers, regions and technologies … our sense is that customers are just far more cautious than they were certainly a year ago, but even 90 days ago.”
Stocks

Grubhub

  • Grub Investor Letter after their recent profit warning (and -43% fall in the shares) is worth a read.
  • We have previously pointed out how alternative data was suggesting competitors were beating Grub.
  • The letter points out how the online takeout market is getting a lot more competitive.
  • “Furthermore, we believe online diners are becoming more promiscuous … our newer diners are increasingly coming to us already having ordered on a competing online platform, and our existing diners are increasingly ordering from multiple platforms … the easy wins in the market are disappearing a little more quickly than we thought.”
  • Well done Chanos on shorting the stock.
Stocks

Vodafone Idea in India

  • Indian supreme court, after 10 years deliberation, hands a real shocker for Vodafone’s merged entity in the country (Vodafone Idea).
  • Essentially the court is forcing all companies to pay levies for spectrum on total revenue (not just telecoms revenue).
  • Vodafone Idea are forced to pay $4bn.
  • This is likely to put Vodafone Idea under (It has net debt of $14bn or 20x Net Debt/EBITDA).
  • Hard to see in the share price chart but that last drop was 35%.
  • Upstart Jio, which has been waging the mother of all price wars (it gave services away for free!), is unscathed by this ruling.
Stocks

Third Point

  • Latest Investment Letter for Q3 from Third Point is out.
  • It contains their view on activism and their edge in this strategy.
  • They review of the successful Sotheby’s (BID) investment (acquired recently at a 61% premium).
  • It also has an analysis of their new big holding in EssilorLuxottica (EL) and why they like it (mostly the merger synergies).
Stocks

Spotify

  • SPOT have reported Q3 and there are lots of interesting points.
  • The latest initiative, Podcasts, is seeing exponential growth (+39% Q/Q)
  • They are also launching paid recommendations.
  • On competition – “We continue to feel very good about our competitive position in the market. Relative to Apple, the publicly available data shows that we are adding roughly twice as many subscribers per month as they are. Additionally, we believe that our monthly engagement is roughly 2x as high and our churn is at half the rate. Elsewhere, our estimates imply that we continue to add more users on an absolute basis than Amazon. Our data also suggests that Amazon’s user base skews significantly more to ‘Ad-Supported’ than ‘Premium’, and that average engagement on our platform is approximately 3x.“
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