Nestle Targeted by Dan Loeb in Activist’s Biggest-Ever Bet (BBG)
Dan Loeb has amassed a $3.5 billion stake in Nestle SA, targeting Europe’s largest company in the biggest bet of his two-decade career as an activist investor. Third Point, Loeb’s hedge fund, owns about 40 million shares in the Vevey, Switzerland-based company, according to an investor letter released Sunday after Bloomberg first reported the position. The fund encouraged Nestle to sell its stake in cosmetics maker L’Oreal SA, increase leverage for share buybacks and adopt a formal profitability target, among other suggestions. “It is rare to find a business of Nestle’s quality with so many avenues for improvement,” wrote Third Point, which holds a 1.3 percent stake.
Why Apple and J.P. Morgan Are Chasing Venmo (WSJ)
Venmo was an afterthought for PayPal when it acquired the service as part of a roughly $800 million deal for Braintree Payments Solutions LLC in 2013. Braintree’s primary business was enabling tech companies like Uber Technologies Inc. and Airbnb Inc. to accept online and mobile payments. Braintree had paid around $26 million for Venmo in 2012.
Fed’s stress tests raise concern over financial safety standard (FT)
Brian Kleinhanzl, analyst at KBW, said Goldman’s relatively low SLR score meant the bank may get the green light from the Fed only for lower capital returns than he had expected. Richard Ramsden, analyst at Goldman, said the new standard had also become the “binding constraint” for JPMorgan Chase as it calculated its capital returns to shareholders. Meanwhile, analysts at Evercore ISI said State Street’s stress test performance under the SLR, as well as the related tier 1 leverage ratio, was “too close for comfort”.
Quants Rule Alpha's Hedge Fund 100 List (II)
Need more proof that the geeks are ruling the world these days? Look no further than the 2017 Hedge Fund 100, Institutional Investor Alpha's 16th-annual ranking of the world's 100-largest hedge funds by assets. Whil the total managed by these firms declined from the previous year, several quantitatively focused firms climbed several notches in the ranking and in some cases grew their assets by double-digit percentages.
This Is What A Bubble Looks Like: Japan 1989 Edition (The Fat Pitch)
In 1986, required reading for anyone in business was David Halberstam's best-seller, The Reckoning, detailing the story behind the seemingly unstoppable rise of Nissan and demise of Ford. In the same year, Ron Howard and Michael Keaton made a hit movie, Gung Ho, about a company foisting its Japanese management techniques on a US auto manufacturer. Yes, people went to the movies to see why Japan was so good at what they did.
The $1.5 Trillion Business Tax Change Flying Under the Radar (WSJ)
Republicans looking to rewrite the U.S. tax code are taking aim at one of the foundations of modern finance—the deduction that companies get for interest they pay on debt. That deduction affects everyone from titans of Wall Street who load up on junk bonds to pay for multibillion-dollar corporate takeovers to wheat farmers in the Midwest looking to make ends meet before harvest. Yet a House Republican proposal to eliminate the deduction has gotten relatively little sustained public attention or lobbying pressure.
Stock Picking Is Dying Because There Are No More Stocks to Pick (WSJ)
In less than two decades, more than half of all publicly traded companies have disappeared. There were 7,355 U.S. stocks in November 1997, according to the Center for Research in Security Prices at the University of Chicago’s Booth School of Business. Nowadays, there are fewer than 3,600. A close look at the data helps explain why stock pickers have been underperforming. And the shrinking number of companies should make all investors more skeptical about the market-beating claims of recently trendy strategies.
In Long Run, There’s No Such Thing as an Einstein Investor (NYT)
The problem is that the world is too complex for any method to work all of the time. The economist Alfred Marshall, then of Cambridge University, wrote in his 1890 textbook “Principles of Economics”: “Although scientific machinery should be as definite as possible, at the same time it should be flexible.” He added, “There is so much variety in economic problems, economic causes are intermingled with others in so many different ways, that exact scientific reasoning will seldom bring us all the way to the conclusion for which we are seeking.”
SI Swimsuit Is Apparently Phasing Out Those Inconvenient Swimsuits (Deadspin)
The swimsuit issue outsells the average SI issue by some vast amount, supporting the whole financially-fraught institution. (No one there likes admitting this. When we once referred to the annual issue as Boobs: The Great Subsidy, a number of SI people registered their discontent.) Yes, the models sign off on presumably ghostwritten essays about how they feel empowered by being naked on the beach—good for them!—but the point seems to largely be to give SI companymen and -women a nice talking point to defend their creep-o product. (When we get pissy, defensive letters from otherwise smart employees, they invariably bring up the empowerment.)