Stocks

• Last week shares in private equity firm EQT saw a 25% pop on the first day of trading.
• Interesting to see private equity listing again – something that marked the top of the last cycle (except Carlyle/Oaktree both listing in 2012).
• EQT raised 5.3bn SEK of new money and 13.5bn of sales by shareholders – a telling sign.
• In the meantime over the last year the existing listed players have also started to convert their shares from limited partnerships to common stock – widening investor bases.

• June was a milestone.
• For the first time, since the advent of the modern search engine, more than 50% of Google searches resulted in zero-clicks.
• In other words, people searched on google and didn’t click on an ad or an organic search result.
• This trend has been steadily building and has profound implications for businesses around the world.

• A fascinating article on Boeing and where it all went wrong.
• In 1997 Boeing was pushed to merge with MacDonnell Douglass.
• This turned into a reverse take-over – “McDonnell Douglas bought Boeing with Boeing’s money” – corrupting the engineering-first culture.
• The results of this are only now being felt.
• It is important to always look at the long-term history of a company.
• There is an even longer read on the topic over at The New Republic.

• Despite the gold price at a six year high, miners are showing restraint at the latest industry conference, preferring mergers instead.
• “A general theme of this conference has been the need to maintain discipline” CEO of Agnico Eagle Mines.
• This should be taken as a positive (looking past the fact that gold isn’t actually ever consumed).
• Read about it here.

• “…we still see consumer spending really strong ….the consumer continues to be strong so the caution that we see is really on the commercial side…So the consumer, despite the headlines we all get up and read every day, looks pretty good.” American Express CFO.
• “…you are starting to see some places where the slowing is beginning to hit and I mentioned Germany as an example for Europe. But the channel slowness that we have seen in a few places does definitely continue… I think, as we look out, I think there’s going to be continued cloud for some time.” Honeywell CFO.
• Interesting contrast between these two companies, suggesting consumers are doing well while there is clearly slowing in the industrial economy.
• h/t The Transcript

• Turns out Iger considered buying Twitter but decided against it.
• “The troubles were greater than I wanted to take on, greater than I thought it was responsible for us to take on. There were Disney brand issues, the whole impact of technology on society. The nastiness is extraordinary.”
• Full Interview in the NYT coinciding with the release of his memoire.

• We have recently discovered this site.
• They have a big store of the latest investment letters from all the hedge funds.
• Naturally stay tuned for interesting snippets as we trawl through these.
• However, if you can’t wait we thought we would share it for our readers to dig themselves.
• Common sense disclaimer. Just because a big 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. 

• Great piece on Netflix from Benedict Evans.
• Argues that Netflix is not a tech company but an old fashioned TV company using tech as a “crowbar”.
• This chart from the Guardian is an eye-opener.

• Elliott have gone activist on AT&T.
• They have set up this website – https://activatingatt.com/
• “Elliott made the investment in AT&T – among  its largest ever – because it exhibits a unique combination of historical underperformance, a  depressed  valuation, well-positioned  assets and  a clear path forward to generate extraordinary value  for shareholders and other stakeholders.”
• h/t Market Folly

• 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.