- Interestingly dividend payout ratios have not recovered post covid.
- Source.
Stocks
Interesting, and often contrarian, Snippets on individual companies and the stock market.
Cyclicals vs Defensives and PMI
- PMI has been falling for well over a year now.
- In the first stage, this took down cyclical stocks (measured by the GS cyclical/defensive ratio).
- However, the latter has recently bounced and is near a 12m relative high.
- This is an interesting setup.
- Source: Redburn.
SEO
- Google’s search robots shape and dominate everything online.
- AI is now making it easier to hit everything required to lure these algorithms but at a cost.
FTSE 250 vs. FTSE 100
- FTSE 250 is seen as a gauge of domestic UK stocks while the FTSE 100 is full of international exposure (e.g. oil, mining etc).
- The relative looks like it is bouncing off the Brexit lows.
- Source: Redburn.
Trading Below Book
- U.K. is not far behind Japan in the percentage of companies trading below book value.
- Will the London Stock Exchange be writing letters soon?
Podcast Business and Spotify
- Podcast advertising leads to pretty good returns for brands.
- “After conducting a study with 250 advertisers and marketers, it says two-thirds (67%) of podcast ad buyers say that every $1 spent on podcasts returns between $4 and $6 for their brands.“
- Yet SPOT is struggling to capture this – why?
- This blog post covers a lot of reasons. For example:
- “[What’s] most misunderstood about Spotify is Spotify doesn’t get to monetize all the podcast content that they have. So in the most recent quarterly earnings report, they say that they had 5 million podcasts on their platform, but 99.9% of those podcasts, Spotify does not get to monetize.“
Mining Capex and Energy Transition
- Mining companies across metals aren’t spending nearly enough to get us where we need to go on the energy transition.
- Source.
Chinese Boycott Foreign Brands
- Since the reopening earlier this year the willingness of Chinese consumers, according to this survey, to boycott foreign brands has risen.
- Source.
The Capex Shift
- A remarkable change in who the giants of capex spending are.
Tesla Production System
- “Engineers at Tesla Inc. have developed a new process that they claim will reduce EV production costs by 50 percent, while reducing factory space by 40 percent.“
- The so-called “unboxed” system – “focuses on eliminating linear assembly lines and producing more subassemblies out of large castings“.
- That is a remarkable goal, and huge if achieved.
Stock Return Dispersion
- Looks like a step change – should be positive for active management.
- Source: Blackrock.
Concentration Risks
- This chart “shows the average annualized outperformance of stocks after they’ve become one of the largest top 10 in the S&P 500.”
- “As you can see, the top 10 largest companies underperform by an average of -1.5% over the subsequent 10 years.”
- Source.
Japanese Market
Tesla and Service
- Interesting analysis of Tesla’s purported business model compared to other automotive manufacturers – make cars that don’t break vs. the razor/razor blade (i.e. zero margin cars with high margin service and parts) typically adopted by others.
- “Tesla does not have an existing fleet and that the auto industry, the reason incumbents succeed and newcomers fail, the biggest reason is that the incumbents have a large fleet, and they’re able to sell new cars at close to 0 margin and then sell spare parts at a very high margin, sort of razors and blades type thing.“
- NB to access all the transcripts you can try Stream for free for two weeks.
Disintermediation of Credit
- The private equity giants, who have raised $bns in credit funds, are looking to work with regional banks to take assets off their balance sheets.
- “The banking system wants the client, but not the asset”
Third Point Letter
- In case you missed it – Loeb’s latest missive from Q1.
- His purchase of UBS is interesting – though CS will undoubtedly have more skeletons (see here) and lose more AuM (as clients diversify), the uplift to UBS book value (74% accretive, putting UBS post deal on 0.74x P/TBV), state loss guarantees (CHF 9bn post first 5bn), and liquidity provision (CHF 100bn) are all positives.
What explains US outperformance vs. EU
- Chart decomposing the outperformance of MSCI US vs. MSCI EU from 2010 until last year.
- Source.
European Equity Valuations vs. US
- After a recent rally, the discount is back to its post-2011 average.
UK Valuations
- A nice set of six charts showing how cheap the UK is.
- The UK trades at a near-record 40% forward P/E discount to the US and 20% vs the EU.
- Almost every industry, as seen in the chart, is cheaper than the US.
