Archive

Reuters blog archive

from Counterparties:

MORNING BID – Google, IBM cloud market rebound

The markets have remained interesting this week as earnings season has ramped up, but the most interesting index remains the Nasdaq Composite.

The Nazz continues its upward swing following Tuesday’s volatile, deep plunge; it has now gained more than three percent in the brief period between the lows it hit Tuesday and the Wednesday close. That's a pretty short period of time to see such a dramatic move in the index but doesn’t necessarily point to better tidings ahead. Bespoke Investment Group pointed out that when swings like this are usually seen – there have been 18 such occurrences since 2000 – it doesn’t bode well for the tech-heavy index.

On average, the decline following all of these types of days like Tuesday – where the market opens at least 0.1 percent higher, drops as much as 1.5 percent and then finishes in positive territory – is 2.84 percent in the week that followed. That’s not encouraging, but that’s kind of the way things go when the market sees bouts of volatility like this.

Notably, most of these volatile sessions are clustered around bad market environments – it happened several times in 2000 and 2001 before abating, only to return in 2008; so rough markets are generally when this kind of thing occurs. What’s undetermined now is how well the markets overall will do in a rebound attempt and whether it’s a Sisyphean pursuit at a time when many stocks are doomed for more pain.

from Counterparties:

MORNING BID – Big Mo, Oh No

The question of whether the market is going into a longer, broader correction is one with a lot of wrinkles.

Whether these high-flying stocks are going to come back is the easier question to answer. Why? Because unlike stocks where most of the embedded value is in existing earnings and existing growth - things a person can cling to, like the utilities or telecom - these stocks ride based on their expected growth for years down the line.

from Breakingviews:

Trendy new buyout clubs may let down eager patrons

Photo

By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Trendy new buyout clubs may disappoint their eager would-be patrons. Blackstone Group is enlisting some of its fund investors to help buy auto-parts maker Gates for $5.4 billion. Such collectives are increasingly displacing teams of private equity firms in bigger deals. Returns from so-called co-investing, though, could make it a passing fad.

from Counterparties:

MORNING BID – Momentum stocks: A primer

Lots of stocks have been getting killed in the last several weeks and the declines don’t seem really like they’re set to abate headed into a week where news is again at a premium (sure, earnings, but it’s just a few names, and they’re mostly decidedly not in this category of the momentum names that fueled the rally in 2013). So the likes of Facebook, Tesla Motors, Netflix, Alexion Pharmaceuticals, and a bunch of others have seen their fortunes turn in the market. But at this time we thought it would be a good way to get into this topic again by trying to lay out just what the hell a momentum stock is in the first place, because they exhibit a number of characteristics beyond just “a stock that’s going up very high.” So here goes:

Growing Industries: Internet retail, internet security, solar, cloud computing, companies that use the cloud for providing services (think Salesforce.com), biotechnology, and anything else where the prospects for growth are big and related to a growing sector of the economy. Utilities don’t really qualify here, naturally. The reasons are two-fold: for one, in order to jump onto a rising growth story, you’d want to be in a place where the expected future returns outpace the returns you’re getting now, something you won’t get from the telephone company, someone who sells toothpaste, or the guys hooking up the electricity.

from Breakingviews:

Official attention will make or break bitcoin

Photo

By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Official attention will make or break bitcoin. Scrutiny from tax authorities like the U.S. Internal Revenue Service and financial regulators around the world may deter off-the-grid types from using the digital money. Yet interest from investors and even creators of derivatives could start drawing bitcoin into the mainstream.

from Breakingviews:

Activists crash dealmaker party

Photo

By Reynolds Holding
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Activists are crashing the dealmaker party. Shareholder lawsuits, cross-border mergers and defender-in-chief Marty Lipton will play supporting roles at the annual New Orleans confab for M&A attorneys and bankers. Aggressive investors shaking dozy boards are this year’s headliners. Their increasing presence at the gathering reinforces a growing power.

from Breakingviews:

Pricey Nets LBO gives banks big payment to process

Photo

By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Private equity has prospered investing in essential modern infrastructure like cable networks. The $3 billion-plus sale of Nets in Denmark shows buyout firms are just as keen to buy into the world’s financial plumbing. Advent International and Bain Capital already own WorldPay, a big payments processor which Royal Bank of Scotland sold as penance for receiving state aid. Now the duo have partnered with Danish pension giant ATP to buy Nets, WorldPay’s Nordic equivalent.

from Counterparties:

MORNING BID – Puerto Rico in the spotlight

The market remains in a bit of a vacuum, with interesting activity focused on a few speculative investments that don't necessarily suggest anything about the larger environment - though one could extrapolate from the interest in these myriad issues that the market is getting frothy, one way or another.

The island of Puerto Rico will sell about $3 billion in bonds to a varying group of investors on Tuesday, many of whom are likely not to be traditional municipal bond buyers. What's interesting to see, as our muni team pointed out late Monday, is that the bonds appear set to sell at an 8-percent coupon, with yields somewhere in the mid-8s or high-8s. That's nowhere near the 10-percent yield that some had expected. (Full Story)

from Breakingviews:

Ken Moelis engineers the deal of his lifetime

Photo

By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Ken Moelis has engineered the transaction of his lifetime. The veteran investment banker is taking his eponymous seven-year-old advisory firm public. Revenue and net income have grown at a fast enough clip to potentially justify a valuation of $2 billion or more. But investors will be granting the founder an exceptional degree of control for the opportunity to ride his coattails.

from Breakingviews:

Inverses Buffett and Icahn correlate many ways too

Photo

By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Warren Buffett and Carl Icahn are inverse investors who correlate in more ways than one. In just-released letters to shareholders, the two billionaires tout their returns and approaches to deploying capital. While their styles couldn’t be more different, both beat the market by betting on America, playing hardball and trading on personal brands. Yet their greatest common bond is that neither can be easily replicated.

  •