Stocks

Cosmetics vs. Skincare

  • Trends in the US are suggesting heavy cosmetics are going out of fashion while skin care is accelerating.
  • “All the successful products now enhance and don’t cover.”
  • The article puts this down to the #nomakeup trend.
  • “We believe recent declines in color cosmetics in the US are due to several factors. Trends change and a more natural appearance is now involved, which requires fewer products that went contouring and other looks were popular … In addition, Gen Z consumers are discovering the benefits of skin care, spurred by more social media activity in that category.” Estee Lauder Conference call.
  • Or L’Oreal in the latest sales release on North America “In a difficult market context, the Consumer Products Division is still very much impacted by its wide exposure to the makeup market currently flat, but is posting good growth in skincare“
Stocks

Private Equity

  • “This column uses data on thousands of buyouts in the US to examine the effects on employment, job reallocation, productivity, and worker compensation.”
  • They find some interesting results. As usual it all depends on the cycle.
  • “… an overarching result: Buyout effects differ greatly by type of buyout, with credit conditions at the time of buyout, and with the post-buyout evolution of credit conditions and the macroeconomy.“
  • They find for example that net employment fell 4.4% after buyouts, yet for private-to-private buyouts it actually rose 13% and for large public buyouts it fell 16%.
Stocks

Goldman and Deserve

  • Extending credit is difficult.
  • One needs to do it over multiple business cycles to build the experience of doing it profitably.
  • GS have announced they are leading $50m investment in Deserve.
  • “Deserve offers credit cards directly to nontraditional consumers using machine learning and alternative data to deem creditworthiness”
  • There are so many things wrong with this statement.
  • “Nontraditional consumers” usually means those of poorer credit quality – which is risky.
  • Yet Deserve knows how to price this risk (despite having no experience) using “machine learning and alternative data”.
  • We will see how this turns out in the next recession.
Stocks

Coffee in China

  • “… the coffee consumption in China … now sits at less than four cups per year, per person, compared to 300 in the US, this is a huge opportunity“ Starbucks President on the latest Earnings Call.
  • No wonder Starbucks has 4,000 stores in China already with 1,000 more planned for 2020.
  • The word China was mentioned 52 times on the call …
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.
WordPress Cookie Notice by Real Cookie Banner