- Big profit warning from Nokia last week.
- They are seeing margin pressure from competition, and are having to make bigger investments into next generation mobile networks (5G).
- As a result they are also cutting the dividend.
- This competitor driven intensity ahead of a new investment cycle (5G) is very typical of the telecoms equipment industry.
- Their customers merging is not helping as they likely standardise on one supplier. They are also delaying 5G roll outs as a result.
Stocks
Interesting, and often contrarian, Snippets on individual companies and the stock market.
Biogen (cont.)
Cigarette Filters
- The press are making another push to ban cigarette filters on the grounds they are toxic for the environment and aren’t safer.
- Essentra (ESNT.L) is a leading independent provider of these filters.
- This scientific review article makes sober reading.
- Evidence is presented that, not only are discarded filters not biodegradable, toxic chemicals actually leak from them such as arsenic, nicotine, PAHs, and heavy metals such as cadmium and lead.
- They are not safer for smokers either – The National Cancer Institute’s comprehensive review of light and low-tar cigarettes concluded that “Epidemiological and other scientific evidence, including patterns of mortality from smoking-caused diseases, does not indicate a benefit to public health from changes in cigarette design and manufacturing over the last 50 years.”
- “The yellow discolouration was an innovation deliberately created to reassure smokers that the filter was working, and comes from a change in pH rather than an accumulation of tar.”
Health Insurance
- Say what you like about Obama but this is an achievement.
- 6% or 18m people now have health insurance that didn’t before.
- Source: Deutsche Bank Research via Isabelnet.
Quantum Supremacy (cont)
Sohn San Fran Notes
- Market Folly is a great site.
- They often have insightful investment conference write ups.
- At these conferences leading managers around the world pitch their ideas. Be critical though – they are obviously talking their own book.
- Here and here are the latest from Ira Sohn San Fransisco.
- Common sense disclaimer. Just because a hedge fund is buying a stock doesn’t mean you should. One never knows what offsetting hedges or positions they hold. Be smart, do your own work, use common sense and invest responsibly.
Anti-Portfolio
- Mistakes are only useful if you remember and learn from them.
- This is a great example of learning from one’s mistakes.
- Bessemer have put together their anti-portfolio.
- It is a list of all the missed opportunities they had as VC Investors.
- A gem – “David Cownan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine.” Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage?”
Biogen
- Biogen have just announced they will be going ahead and filing Aducanumab (their treatment for Alzheimer’s Disease).
- Shares are +40% as a result.
- This is extremely odd considering just in March the studies were discontinued due to futility (i.e. they didn’t show an effect).
- The company is saying new analysis of a larger dataset has led to, in communication with the FDA, the filing decision (NB. approval is uncertain still).
- There is a huge unmet need [100% of drugs have failed, the disease affects 5.8m people in America (50m worldwide) and costs $290bn per year in direct and care costs] so perhaps there was pressure for a win.
VC Customer Subsidy
- So many start-ups offer big consumer subsidies to attract users.
- This article argues this is all unsustainable and presents some even crazier examples in the US.
- We agree the beginning of the end has started, in fact VC funding peaked last year (see chart), but with rates so low will it end soon?
Market Timing
- Many investors are on the sidelines right now.
- It brings to mind this market timing game.
- Try see if you can beat the market by buying and selling (once each) in any given randomly selected 10-year period from 1978.
- A more sophisticated version, but with worse UI, covering 1950-2018 is found here. You can buy/sell several times and decide to use history or a random selection of daily historic returns (Monte-Carlo).
Uber (cont.)
- More problems for Uber.
- First, if Uber is deemed a Transport provider in the UK it might owe 20% VAT on gross bookings (ca. £1bn historically) and going forward.
- This could also apply in the EU as well.
- Second, it seems one of Uber’s insurer panel has quit – not a great sign and likely will lead to rising costs.
Bezos
- Great long read about Jeff Bezos and his plan.
- Worth reading – after all this is the man in charge of nearly 40% of US eCommerce as well as AWS (Amazon Web Services) – the infrastructure most start-ups run on.
- A gem – Bezos has given $42m of funding for a clock – The Clock of the Long Now – on his ranch that will tell time accurately for 10,000 years.
Next Generation Meat
- Big ramp seen in investment (capital invested and deal flow) in the next generation of meat.
- Cell-grown meat is also starting to see a sharp acceleration.
- h/t Jefferies Research
Goldman Sachs Accelerate
- GS have done something interesting.
- They have run an internal start-up competition – allowing winners to take a 2 year step away from their job to develop their ideas.
- Employees at the bank are likely being tempted by the start-up world so it is smart of GS to keep their talents in house.
Netflix
- “The upcoming arrival of services like Disney+, Apple TV+, HBO Max, and Peacock is increased competition, but they are still small compared to linear TV … In our view, the likely outcome from the launch of these new services will be to accelerate the shift from linear TV to on demand consumption of entertainment. Just like the evolution from broadcast TV to cable, these once-in-a-generation changes are very large and open up big, new opportunities for many players.”
- NFLX Q3 Letter
- Can’t help but feel this is a bit of hubris … time will tell.
- This is really interesting from the New York Public library using Instagram Stories to effectively publish books.
- Very creative and 300,000 people are now reading books this way.
- We would bet a decent proportion are new readers.
- We can think of several other information resources that should try this approach to drum up readership.
WeWork (cont.)
- This is a funny article about the WeWork S-1.
- “An S-1 is meant to be a bland financial document, but WeWork’s took a different direction. With Adam’s encouragement, Rebekah became unusually involved in the artistic presentation of the document. “The traditional approach to producing an S-1 is bankers and lawyers hashing this out, but the process was continually usurped by Rebekah’s involvement,” one executive said, echoing a sentiment expressed by multiple people who worked on the project. “She treated it like it was the September issue of Vogue.” “
Apple bundle
- Apple is bundling everything.
- FT reports that Apple is looking to bundle newspapers, TV, music and gaming.
- This would have very interesting implications for the industry.
- So far the music labels are, rightly, resisting.
E-cigarettes (cont.)
- We previously pointed out that it was looking bad for these products.
- Now work at New York University has established the first link between cancer and vaping nicotine in mice.
- The usual provisos hold – results in humans might be different – but …
- “Out of 40 mice exposed to e-cigarette vapor with nicotine over 54 weeks, 22.5% developed lung cancer and 57.5% developed precancerous lesions on the bladder. …
- … None of the 20 mice exposed to e-cigarette smoke without nicotine developed cancer over the four years they studied the mice, researchers said.“
Active vs. Passive
- US Equity Index Funds now manage more money than actively managed equity funds.
