Market Talk, August 15th 2021
August 15th, Edition 19
Market Talk is where I round up some of the data from public markets over the past week in a bitesize format.
Each Sunday I will share:
• The best pieces of company-related insights I have consumed over the week
• The greatest articles I have read during the week
• One stellar podcast or interview
If you wish to read this as a webpage, and not an email, then follow this link.
📈 Market Action 📉
Here are your quick updates from the past week for various asset classes.
The S&P 500
Sectoral ETFs for the US
🌎 Global Indices 🌎
Europe & UK
Africa & Middle-East
10Y Government Notes %
🛢️ Commodities 🛢️
💷 Major Currencies 💷
FX rates are correct as of the time of publishing.
🔇 US Market Sentiment 🔇
Fear & Greed Index
The CNN Greed and Fear Index measures market sentiment based on seven factors; momentum, price strength, price breadth, put/call ratios, junk bond demand, volatility, and safe-haven demand.
The current reading stands at 43, up from 36 last week.
The CBOE VIX stands at 15.45, down from 16.15 the week before.
Major Earnings for the Coming Week
Some of the major earnings for the upcoming week, compiled by Earnings Whispers.
Source: (Earnings Whispers)
🕵️ Company Insights 🕵️
Here, I will share a handful of interesting, company or industry-specific, pieces that I have read over the last week.
Admittedly, this week I was hard-wired on focussing on the Lululemon piece I was writing (finished article here), thus only read a couple of interesting pieces for company insights this week.
1) PSTH: How Millennial Investors Lost Millions on Bill Ackman’s SPAC
Source: (Institutional Investor, Yet Another Value Blog)
This was an interesting piece that took a behind the scenes view of how retail investors had interacted with Bill Ackman and Square Tontine’s SPAC (PSTH).
Quite personal in nature, this is a great reminder of ensuring that speculative plays should be handled appropriately with correct risk exposure across your portfolio.
For greater insights into SPACs, and more specifically this very SPAC in question, I highly recommend checking out Andrew Walker, and his substack (Yet Another Value Blog) where he has written at great length about this particular deal.
2) Apple’s Mistake
Who better to report about Apple than Ben Thompson?
After a recent controversial update on Apple’s end, which would see them begin to scan encrypted cloud photo albums for nefarious images, caused a lot of commotion, Ben breaks down his thoughts in this eloquent piece.
“Apple’s choices in this case, though, go in the opposite direction: instead of adding CSAM-scanning to iCloud Photos in the cloud that they own and operate, Apple is compromising the phone that you and I own and operate, without any of us having a say in the matter. Yes, you can turn off iCloud Photos to disable Apple’s scanning, but that is a policy decision; the capability to reach into a user’s phone now exists, and there is nothing an iPhone user can do to get rid of it.”
📰 Brain Food 📰
Here is a shortlist of a few interesting pieces that I have read over the course of the week, to feed your mind.
Note, these articles are not numerically listed in order of perceived value.
To access the suggested article, click the purple link after the source subheading.
1) Everything Is a DCF Model
Length: Moderate Read
Source: (Counterpoint Global)
Another great piece by Michael Mauboussin and Dan Callahan was released a week or so back, and I got round to reading it this week. As always, it didn’t disappoint.
Given that the value of almost every business is the present value of the cash they can distribute to their owners, the authors feel that the classic DCF model has been cast aside as irrelevant to certain market actors today. Valuation assumptions using multiples appear to be far more prominent today amongst professionals.
If one believes in the time value of money, the most rudimentary of beginner finance concepts, then one must believe in the DCF model too, by virtue.
In typical Mauboussin style, this piece is a masterclass on why the DCF model still matters, and why one would be foolish to ignore it.
“Matt Levine is a very talented journalist who writes the Money Stuff opinion column for Bloomberg. A trained lawyer and former banker, Levine is smart, entertaining, and informative. He also likes to use a handful of themes to create context for his observations about business, law, and the markets. One of his favorites is “everything is securities fraud.” The basic idea is that whenever something bad happens to a company causing its stock to decline, someone will accuse the management of acting nefariously. In the same vein, we want to suggest the mantra “everything is a DCF model.” The point is that whenever investors value a stake in a cash-generating asset, they should recognize that they are using a discounted cash flow (DCF) model.”
2) Thirdpoint: Second Quarter 2021 Investor Letter
Length: Light Read
I think it’s always helpful to learn from those who are the best at their craft, and Dan Loeb, the founder of the NY-based hedge fund, Third Point, is no exception.
In this 11-page quarterly update, Dan provides us with his take on the current market environment, as well as discussing various positions that Third Point hold (Upstart, Disney, Cyrtop, and SentinelOne taking up considerable space in the memo).
“While valuation always matters, our analysis is more focused today on business quality, differentiation, innovation, disruption and market structure. This contrasts with our previous focus as an event-driven fund on using “events” (spinoffs, recaps, mergers, etc.) as opportunities to find “cheap” stocks. We have not abandoned this approach and have found that the broader lens helps us recognize more opportunities. For example, today, we see many high-quality companies “hiding out” behind the opaque curtain of corporate reorganizations, or smeared by the taint of having come public in an unorthodox manner and bearing the four scarlet letters “S-P-A-C.”
3) Founder-Led Companies Outperform the Rest - Here’s Why
Length: Light Read
Source: (Harvard Business Review)
This piece was composed in 2016 and takes a stab at ascertaining why founder-led companies are better equipped to maintain a sense of identity, as well as remain innovative. Whilst the data may be somewhat outdated today, the thesis underpinning the article is certainly not. An interesting read.
“We call these company practices “the founder’s mentality.” They are not vague cultural notions that are hard to pin down and take forever to change. Rather, they are grounded in concrete actions and an approach to business that can be studied and emulated with rapid results. And that is good news for all companies: most of the practices that produce this successful performance are observable, learnable, and useable by all leaders immediately.”
4) The Case for Optimism
Length: Moderate Read
Source: (Warp News)
Lastly, this piece by Kevin Kelly lays out the bull case for being an optimist in today’s world.
A really great “feel good” post I advise you all to spend some time on if you can. I thoroughly enjoyed it, and it resonated with me as I deem myself an eternal optimist for similar reasons.
“It is extremely difficult to create a desirable future without first envisioning it. To imagine is really the first step in creating anything. Therefore an essential chore for making a future we want to live in, is to imagine what it is like and how we get there. That plausible path is a form of optimism. Believing it is possible makes it more likely to happen. When hurdles and setbacks arise -- and they will -- the belief in its possibility serves as motivation.
History is filled with accounts of people who held an optimistic belief others thought unlikely, or even impossible. This optimistic previsualization is a necessary component of change. Since we can not be certain of the future, optimism is only a belief -- a stance that could be incorrect. On the surface, an optimistic belief might seem no more valid than the stance of pessimism. But the deep history of new ideas makes it very clear that the optimistic stance of believing something is possible is a requirement to make anything new real, and is thus more powerful than pessimism. In the long run, optimists shape the future.”
🍬 Ear Candy 🍬
There is a huge range of Podcasts to listen to, and the choice can feel quite saturated at times. Here, I will share one podcast I listened to during the week, that I feel is worth your time.
Conor MacNeil (Investment Talk) Interview
Vol to Valuation
Last week, I broke Chris and Austin’s guest cherry by being the first tertiary member of the Vol to Valuation podcast. This one stands more so as an introductory episode, but in the future, I hope to come back more regularly and discuss more time-sensitive or company-specific topic matters.
In this one, we mostly discuss my own investing style.
After meeting Chris last year we have become good friends, so this was a super comfortable discussion.
Thank you for reading Market Talk and have a great week,
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Lead Analyst at Occasio Capital Ltd
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