Stocks

• Lots of journalists have now poured over the S-1 of WeWork.
• In the meantime investors have continued to push down the valuation of the upcoming IPO.
• Reuters latest suggests just $10bn down from $47bn (when Softbank invested).
• Of the gems discovered in the S-1 (h/t FT, FTAlphaville), such as the fact that related party transactions are rife, the founder’s shares carry 20x the votes and his wife would have been involved in the succession planning, one particularly stood out:
• FT pointed out that the company paid $5.9m in stock to founder Adam Neumann in return for using the “we” trademark!
• (This has since been returned according to the updated filing today).

• A very well researched article from the Guardian on Aldi in the UK.
• Aldi and Lidl competition, along with a dose of hubris, over-spacing, and using back margin (profits from suppliers) was the downfall of the UK domestic supermarket share prices.
• They have since learned and adapted. Every crisis is an opportunity.

• In the last two years the US has started on a path to legalising online gambling.
• As is usual in the stock market there was initial euphoria, talk of a $300bn market, and bidding up of European gambling shares.
• The reality of course is more nuanced – yes the opportunity is big but there are substantial hurdles to overcome and strong competition from well funded US Casinos and Media companies.
• There is a good recent Freakonomics episode on US sports gambling.
• With European gambling company shares since languishing (partly due to other reasons like increased regulation in the UK) and US legalisation progressing – perhaps it is time to take another look?
• Hype cycles do eventually come good. A classic chart.

• Always interesting to read about investors making big returns.
• Here is an article from 2018 on one such fund – Perceptive Advisors.
• They invest in biotech, a notoriously difficult area of the stock market.
• They run a very concentrated portfolio for biotech – which explains the outsized returns if you can get things right.
• The edge seems to be understanding ‘perception’ of corporate events in biotech against reality.
• It will be interesting to see if their success continues now that the firm is managing >$4bn.

• Historically this has been a strong buying signal for stocks.

h/t 361 Capital

• Alphaville picked up a comprehensive article in the New York Times on the issue mentioned in our last post.

• The FDA announced about 2 years ago that it “plans to begin a public dialogue about lowering nicotine levels in combustible cigarettes to non-addictive levels” . This is still ongoing through the comprehensive plan.
• E-cigarettes (along with other alternatives) were meant to be a saviour of the industry.
• Unfortunately there have been a series of deaths reported in the US linked to E-cigarettes, with 3 more over the weekend.
• Center for Disease Control and Prevention (CDC) put out a statement advising the public to stop using these products while they investigate.
• The ability of tobacco firms to keep their existing profit pools, built on years of price rises, is looking even less likely.

• Altice are being very aggressive in the US mobile market.
• Their new plan prices at $20/month for life unlimited everything (incl roaming and calls to 35 countries) for their existing cable customers and $30 month otherwise (for those near their 21-state footprint).
• This is roughly half the cost of rivals.
• You bring your own phone or buy one with 36 month zero financing.
• US Mobile is very high margin for the incumbents AT&T and Verizon …

• Columbia Business School publishes an interesting newsletter interviewing various fund managers mainly pitching stocks
• The link the latest one is here
• This issue pitches long Dollarama, Align Technology, Carsales.com and Dean Food Bonds

• Dr. Micahel Burry of Big Short fame is long Gamestop.
• Nearly 60% of the stock is out on loan to shorts. Often this is a great set up for going long a stock if you believe things won’t be that bad.
• He has written a letter to the board advocating a buyback in the face of short sellers. You can find it on this Market Folly link. There is also an interesting interview in Barrons with the man himself on the thesis.
• NB Market Folly is a great site that tracks what big names in the US Hedge Fund world are up to.

• If you don’t already, IAC’s Quarterly Shareholder Letter is a must read.
• IAC is the holding company for Barry Diller.
• Since 1995 the company shares have outperformed the S&P by 1.6x; and 4x in the last 3 years.
• In that time they created and spun-off several public companies – Expedia, TripAdvisor, Match Group (owner of Tinder), ANGI Homeservices. The latter two IAC still holds >80% stakes in.
• They continue to build and invest in new business like Vimeo (Online Video), DotDash (online publishing), Blue Crew (online recruitment) and the latest Turo (car sharing). In other words at the tech forefront.
• The latest letter is here and each quarter you can find them here.