Every time Jeff Gundlach does a presentation he has a segment where he talks about the “bloodless verdict of the market” on recent price action moves of various instruments and sectors.
Since I focus on the consumer technology sector, I’d be amiss to not document the significant rotation from tech growth names to tech value names in this month of March. It has been a stunning move. I’m not really sure what was the catalyst behind the timing of this rotation, but we shouldn’t ignore it. If you have a good theory or thesis on why this is happening now, let me know by emailing news(at)firstadopter(dot)com. Here are some of the examples on my screens:
Value Technology Companies (Lower Earnings Multiples)
Growth Technology Companies (Higher Multiples)
-Google announces massive new cloud price cuts from a 32% price cut across the board, a 68% price cut on storage, and a 85% price cut on queries Link
Why is it bad news for Rackspace?
-Large price cuts by cloud competitors significantly pressure Rackspace cloud business margins
-New York Times: “Prices would continue to fall roughly in line with Moore’s Law, Mr. Hölzle said” Link
This quote above means Google intends to keep pricing very low going forward
Lone Pine’s Stephen Mandel is widely regarded as one of the best bottoms-up fundamental portfolio managers out there. He also has a great reputation for managing his employees well, which is rare in the hedge-fund industry.
One of the keys to Mandel’s success is he gives check-list guidelines for his analysts to follow in what he wants for longs and shorts. Given Lone Pine’s success over the years, I would say the guidelines are working.
For long ideas Mandel wants:
-sold return on capital
-good cash flow
-prudent balance sheet
-competitive barriers (aka moat)
-strong management team
Mandel focuses on the long-term opportunity market size. He wants to see a long runway for growth where a company can reinvest capital at a high rate of return. That’s why he loves retail roll-out stories because if a retailer is successful in one region it is likely to be successful nation-wide.
For short ideas Mandel wants:
-avoid private equity targets (companies with good cash flow etc.)
-competitively challenged (aka no moat)
-fads, 1 product companies
-falling knives (results will be much worse than consensus)
For his price targets on solid growth companies, Mandel’s analysts model earnings 2 years out and are willing to put a 25Xs earnings multiple on that forecast. The game-plan is one year later the company will be valued at 25Xs forward earnings with the stock hitting the analyst’s price target as consensus catches up to Mandel’s analyst earnings estimate.
AT&T cut prices for the second time this year. Single-line 2GB plan will now be $15 cheaper to $65/month. The company is also offering a new line $100 bill credit promotion for the month of March for new and existing customers. Source: AT&T
The major changes are doubling the 4G LTE data allotment from 500MB to 1GB in the low-end $50/month Simple Choice plan, adding a new 5GB plan for $70/month, and raising the unlimited 4G LTE data plan by $10 to $80/month.
T-Mobile’s chief marketing officer told the Wall Street Journal raising prices for unlimited customers “partly reflects the cost of providing such plans.” Data use is “soaring” with customers using 50% more data year-over-year. Source: T-Mobile
The February jobs number beat expectations as the impact of weather was lower than expected. After an initial rally, the market closed around flat (+0.05%). Most pundits now fully expect the Fed to continue the $10B/month taper on the modest employment numbers.
first two months of this year, 42 companies went public..raising $8.3 billion..tying 2007 for busiest start to a year for initial public offerings since 2000
investors are bidding aggressively for newly minted shares this year..paying median 14.5 times annual sales compared with six times in 2007..at the height of the Internet frenzy in early 2000, they paid a whopping 30 times – Wall Street Journal
So the median IPO this year is going for 14.5Xs sales vs. 6Xs in 2007 and 30Xs in 2000. This could be bullish if we’re going to 1999-2000 type heights or bearish if we’re extended beyond the 2007 top.
DirecTV is in talks with Walt Disney Co to license the rights to offer Disney’s broadcast and cable channels as part of an Internet-based product, DirecTV said on Wednesday.
The deal would mirror a first-of-its kind agreement that Disney and satellite rival Dish Network Corp announced earlier this week.
The agreement between Dish and Disney marked the first time that a U.S. pay TV operator has been given the flexibility to offer its content over the Web through smartphones, tablets and computers outside of a pay TV subscription.
In that agreement, Disney allows for Dish to stream linear and on-demand content from ABC broadcast stations as well as cable channels, ABC Family, Disney Channel, ESPN and ESPN2. Dish has not revealed plans for its streaming service. – Reuters
For the first time a major content provider is offering the ability for a pay TV operator to sell their channels through video streaming and on-demand over the internet. It remains to be seen whether this may lead to smaller bundles, which would drive more cord-cutting. This could be is a big step away from the traditional cable TV model.
If DISH and DirectTV push an internet offering hard, it may force Comcast, Verzion, and AT&T to add more stringent bandwidth caps to their internet data subscribers as they lose more TV video subscribers.
Mr. Jones delivered gains of 125.9 percent after fees in his main hedge fund in 1987 by betting on a big downturn in the United States stock market, then 87.4 percent in 1990 as the market plunged in Japan. As late as 2001-02, he gained 48.1 percent over two years during the sell-off in technology stocks
Mr. Jones can still claim long-term annual returns of close to 19.5 percent in his $10.3 billion flagship fund, Tudor BVI Global, it has been 11 years since he last hit that level
2010 to 2012, he had his worst three-year stretch ever, averaging just 5 percent annually. Last year, gains hit 14.3 percent, investors say, helped by winning bets on Japan’s stock market and against its currency.
“He is a superb risk taker and a genius risk manager. He is really plugged into decision-makers around the world, from finance ministers to central bank officials to think tanks,” said J. Tomilson Hill, head of alternative investing at the Blackstone Group, the world’s largest hedge-fund investor.
Mr. Jones is a so-called macro trader who aims to ride moves in interest rates and currencies based on changes in different nations’ economies. Mr. Jones accounting for only 20 percent of the positions in Tudor BVI, investors say
Tudor lists 35 portfolio managers for four Tudor funds totaling $13.6 billion.  reported a 4.9 percent loss, its only down year.
Heightened competition as the hedge fund universe has expanded to $2.5 trillion from $460 billion in 2000..The new shares cut the management fee to 2.75 percent from 4 percent while increasing the firm’s share of profits to 27 percent from 23 percent. – New York Times
Tudor’s return profile has lagged in recent years probably due to size, more competition, and the opportunity set in a lower volatility low rate environment. However the most interesting thing in the article the admission that he talks to finance ministers and central bankers around the world. Can you imagine what kind of edge that gives a macro fund manager over the years to be able to do that?
Even if the central bankers he talks to never give him any inclination on what they are going to do next, I’m sure Tudor over the years has figured out “how they think” and “how they would react” to certain developments.
Just comes to show you especially in macro land, Tudor and Soros have access most investors simply don’t have.
According to the Wall Street Journal Jeff Bezos was part of another investment round into Business Insider of $12 million. The business news site plans to hire more journalists and launch in the U.K.
In January Business Insider was the 4th largest finance site with 25.4 million uniques, which beat both AOL Money and Bloomberg. The company had sales of little less than $20 million in 2013, +80% y/y. It was profitable in Q4, but won’t be profitable this year due to growth investments.
This round brings total funding to $30 million. The site is 7 years old. Employee count is up 40% in the past year to 140 with about 70 journalists.