🕐 Snippet Finance
- The Goldman Sachs Financial Conditions Index hit an all time low.
- NB it does incorporate equity values, as part of a broad measure of financial conditions.
Two interesting Snippets on thinking about the impact of Covid on firms courtesy of Selcouth Capital Management. The first is bearish and the second is bullish.
Bearish for beneficiaries of Covid lockdowns:
Bearish for beneficiaries of Covid lockdowns:
- Although the events of 2020 are in many ways unprecedented one can look at the 2002 SARS outbreak in Asia as a possible analogy, after all it involved a lot of people in China staying at home.
- Netease, a gaming company, was one of the few publicly listed stocks that reported financials at the time.
- This table shows what happened to quarterly financials at Netease at the time.
- Netease saw a huge boost to revenue and a re-rating. Yet, eventually revenue slowed against tough comps and the stock deflated.
- Will the same happen to the current crop of beneficiaries?
Bullish for beneficiaries of Covid lockdowns:
- One interesting approach to understanding if things will change is to look at scientific research.
- In this paper – How are habits formed: modelling habit formation in the real world – researchers measured how long it took to form a habit.
- They found that the median time was 66 days ranging from 15 – 254 days.
- Exercise habits took longer to form.
- The longer it took to form the stronger the habit was.
- With lockdowns now lasting longer than 66 days real habit change is likely.
- A fascinating and thought provoking read on why it is the category leading brick and mortar retailers who will be the real winners in the post Covid era.
- The key argument is the success of omni-channel as the winning format, once these retailers woke up to realise the potential of ecommerce to complement existing business.
- Why were they so late - "In some ways, the bursting of the bubble in 2000 was the best thing that ever happened to Amazon. The bursting of the bubble, the collapse in Amazon’s stock price and the aggressive way Amazon ran their business convinced most retail executives that e-commerce was unprofitable."
- Today things look very different - “Wal-Mart’s digital revenue in Q2 was an annualized $42 billion, growing 94% — faster than Amazon … Perhaps the simplest way to express what has happened during Covid is to note that Amazon has actually lost share in e-commerce during Covid.”
- “Nothing accelerates change like success“ - a nice quote.
- Great set of slides on the transformation at New York Times since 2011.
- The company just crossed a milestone where digital overtook print.
- This is also a fascinating read about what happened inside the NYT newsroom during the Trump years and whether this boost was partly responsible for its growing business success.
- The Long Term Stock Exchange (LTSE) is a really interesting new stock exchange concept approved by regulators (SEC).
- The idea is to move away from short-term behaviour among investors and management.
- Will be interesting to watch if it takes off. There are signs some companies are jumping on board (e.g. Airbnb) and they have a long list of fund manager partners.
- They have also started publishing a blog where they discuss all issues related to long-term shareholders and companies.
- The latest piece covers grading fund managers on how long term they are – LT Score.
- “This shows that the companies with the highest LT Scores trade at volatility levels that are as much as 30% lower than those with the lowest LT Scores when looking at average 100-day and 250-day historical volatility levels. This is a striking difference.“
- Spotify is transitioning and not just via their podcast investments.
- They are starting to enter the world of advertising and arming artists with tools to reach audiences, at a price.
- First via Marquee mode – mobile app pop ups to advertise new releases. These see 20% conversion rates, 2.2x lift on saved/playlisted tracks which itself leads to increased playing by 250%.
- Second via a new Discovery mode – where an artist can boost a track in Spotify’s algorithm in return for a lower take.
- Interesting post covers the logic behind this as well as price increases.
- Earlier this year Snippet covered Biogen’s decision to file Aducanumab (their experimental treatment for Alzheimer’s Disease) here and here.
- This saga reignited this past week with the publication of FDA adcom documents which on the surface looked positive sending the shares soaring only to be voted down (8-1) at the meeting on Friday sending them crashing down.
- This really good blog post discusses these events and why it is always important to read all the details.
- The final FDA outcome is yet to be determined (Adcom decisions aren’t binding) and as previously highlighted could be political.
In the Spirit of reading details here is a Snippet on the situation with Danish Mink and Covid:
- Last week Denmark sounded the alarm on potentially dangerous developments related to SARS-CoV-2 virus.
- The two worrying elements are (1) a mutation in the spike protein which could render the upcoming vaccines and antibody immunity of those already infected useless. (2) a jump from animal (mink) to human.
- This is a good summary and the press release from the Danish Serum Institute (use Google Translate) is also worth reading.
- STAT news have a more sanguine take – arguing that there is nothing to suggest the mutated virus could have higher transmission rates or risks for humans and single mutations rarely are cause for alarm.