AllBirds crashes against a window | NZX d-day approaches
Chart of the day…hedge fund energy sector exposure is very low…
Hi, Upper East-Siders, it’s been a minute — I spent the last three days with a remarkable group of investors and thinkers. Highlights include Vera Krukziener, who remains as sharp as a tack as ever (our very own Rose Blumkin, Buffett’s “Mrs. B”) — she escaped the holocaust and has now built a property empire — she has seen more market cycles than most and is a font of wit and wisdom. Anyway — back into it —
NZX
Nice to see some traction on this thing ($1.10 after languishing down in the dumps for a while). We are advising holders of NZX stock to vote against proposition four, which is an egregious +38% pay bump to the director’s fee pool. We feel this is ridiculous given the company’s sustained underperformance since 2016. While we think there is value inherent in the NZX we think it is prudent to reward directors when they create tangible value for a company and not just because “it’s what other people are doing”. Note the charts below — NZX has underperformed the majority of its peers while headcount has continued to balloon. I will be at next week’s ASM (see you there!), and I am looking forward to questioning management and directors on the pool increase as well as their underperformance.
Being AI to the moon
I’ll remind you that Being AI owns i) a schoool on the North Shore, ii) an online school, iii) a filing storage company, iv) a physical mailing company v) some AI things that don’t make money.
This does not matter, because Being AI has a market capitalisation (as of writing) of $198 million. I wrote a while about the rise in sentiment based trading — think GameStop, memecoins, etc — it doesn’t matter what the fundamentals are, as long as the sentiment is right. Dogecoin has no actual source of cashflows but currently has a market cap of $28bn. I mean, I am not calling a bubble here — but I am asking you to consider that back in the day the accounts of the South Sea Company weren’t easily accessible, and it still went to the moon — it was a sentiment based stock!
I mean — OK, the South Sea Company had cash flows but ultimately not many people could access these accounts — it was the 1700s, boo. Anyway, the other classic part of backdoor listings like BAI (previously ACE) is that people get out. Here’s a SPH disclosure from yesterday.
Anyway; some people bought the stock and some people sold and somehow it is worth $198mn. OK. (Stop press — $205mn as of writing…!)
Speaking of Crypto … party like its 1999
Get a load of this — global supply of equities has shrunk since the most since 1999. Already companies have spent a whopping $120bn buying back their own stock. It’s pretty remarkable — a long time ago buybacks were considered out of the ordinary (as chronicled in The Outsiders, a book everyone should read). Now they are normal. They’re an efficient way to return capital back to shareholders (dividends get taxed) and an efficient use of a company’s cash flows, however the consolidation is quite something. I used this other chart the other day that I’ll repost here — buybacks are what fuels the US stock market by some margin.
Consolidation is the word of the day. Reading Grant’s the other day I was struck by this and the suggestion that cryptocurrencies may do the same thing — i.e DodgeShibaCoin, etc (I don’t know how this works technically!) — could they be right? Time will tell…M&A comes for everyone in the end (like the grim reaper).
AllBirds
Back when I was a small child I wrote another newsletter and when AllBirds listed in 2021 I wrote how bad it is as a stock (great shoes though — I wore mine to death). Here’s the link. It’s since lost 99% of its value, and is now worth $97mn or so. They did a lot of things wrong — they made a lot of average activewear in a crowded market, they diverged from their core product, they opened up a tonne of stores and had to pay for the associated costs and so on. The shoe game is hard. Even Nike is hurting. And Nike is a fabulous company! Anyway — Nasdaq, which the shares are listed, just issued a warning to the AllBirds for having a stock price below $1.00 (unlike the NZ market, stocks under $1 are a hard no). It trades in the 60-70c range. They need to have the stock price sit over a dollar for ten days in a row. Otherwise it’s goodnight Vienna. I don’t have much more to say there except hey, this looked pretty obvious (much like the decline in My Food Bag — another stock I rubbished). Great shoes, not a great stock.
Speaking of Nike…
Our analyst Lachlan did some work on Nike, and he reckons it’s a buy. Note the discount to historical P/E — sitting “down and dirty” and we like that. We also like that the brand hasn’t been sullied by UK PM Rishi Sunkak (see below)…it’s a bad day to be a Samba.
Rishi Sunak apologises for wearing Adidas Sambas - The Guardian.