TheChek News Flow

This week simply reinforced arguably the two greatest influences on Formula One today: the Gulf and the United States.

First, General Motors made a huge breakthrough in talks to enter the sport with Cadillac, bringing iconic American branding to the pinnacle of motorsport.

Days later, Qatar’s sovereign wealth fund agreed to buy a chunky minority stake in the soon-to-be Audi F1 racing team that is currently known as Sauber.

These developments underscore twin drivers of F1’s growth under US group Liberty Media, which acquired F1 in an $8bn deal in 2017.

F1 no longer struggles for relevance in the US. Liberty Media has added Miami and Las Vegas to the calendar, setting new standards for glamorous destinations. Viewership and attendance has multiplied in the US. American investors such as Arctos Partners and RedBird Capital have bought into teams. Blue-chip US brands sponsor the sport.

At the same time, F1 has added lucrative races in Saudi Arabia and Qatar. The relevant sponsors have joined the travelling circus. Saudi state oil company Aramco and Qatar Airways are major sponsors.

This growth is the envy of many sports around the world. Despite its European origins, F1 has been able to pursue a global vision that remains awkward for football. Just look at the furore caused by the European Super League or any suggestion that the Premier League should host regular season matches in the US.

F1 also benefits from a model that is more in keeping with US sporting traditions. There’s no promotion or relegation, meaning that teams are guaranteed a spot on the grid. And the introduction of a cost cap, limiting how much teams can spend on developing cars, has fundamentally improved the economics for investors.

OK, General Motors isn’t the first American team on the grid. Haas has been racing in F1 since 2016, but the North Carolina-headquartered team has never won a race and relies on Ferrari to provide engines. Eventually, GM wants to produce its own engines, a major sign of confidence in the sport.

Adding Cadillac to the grid could help boost fandom in the US, but do American fans want to support a loser? It will be difficult to become competitive quickly.

Logan Sargeant’s recent experience reinforces the point that it isn’t enough simply to be American. Williams replaced the Florida-born driver earlier this season due to performance struggles.

It’s a similar story for the QIA. Sure, it underscores Qatar’s commitment to F1. But Sauber is bottom of the constructors’ championship this year, with zero points scored. It will take a major effort to improve.

A combination would redraw the UK insurance market

Two of the biggest names in British insurance are locked in a takeover tussle that has the potential to redraw the UK market.

Aviva, the £13bn UK insurance behemoth whose roots can be traced back to the late 17th century, is pursuing the younger, smaller Direct Line Group: a household name best known for motor cover and its marketing mascot — a red phone on wheels.

However, a £3.3bn approach by Aviva for Direct Line was firmly rebuffed by the latter’s board earlier this week, prompting Aviva to appeal directly to its smaller rival’s shareholders.  

Where might Aviva go next in its pursuit of Direct Line and what are the implications for the UK insurance market?

Aviva believes a tie-up with Direct Line would boost its exposure in the personal insurance market and deliver “material” cost and capital synergies. Aviva also reckons the deal would help the group, which has a substantial life insurance book, pivot towards capital-light business. 

Dame Amanda Blanc, Aviva’s chief executive since 2020, is keen to accelerate the group’s performance, in part through acquisitions. She has overhauled the group, selling a series of overseas operations early in her tenure and returning billions of pounds to shareholders.

The approach by the FTSE 100 group comes as Direct Line, formed in 1985 and whose brands include Churchill, Green Flag and Darwin, is in the early stages of a recovery plan. 

“It’s no secret that Direct Line has struggled over the past few years to deal with a challenging motor insurance market, and operational mis-steps have been a drag on performance,” said Matt Britzman, senior equity analyst with Hargreaves Lansdown.

Fresh management, including chief executive Adam Winslow — Aviva’s head of general insurance in the UK and Ireland until the beginning of this year, when he moved to its smaller rival — were put in place this year, to help turn around the lossmaking business, and recent results are more promising. 

Winslow, the son of the founder of price comparison website Compare the Market, also hired Direct Line’s chief financial officer and chief risk officer from Aviva as part of the planned turnaround.

But weakness in Direct Line’s share price has left the group vulnerable to a takeover.

Aviva made a tentative offer on November 19 that valued the Direct Line business at 250p per share, or about £3.3bn.

The proposal comprised 112.5p in cash plus 0.282 new Aviva shares for every Direct Line share.

Aviva described its proposal, which represented a 57.5 per cent premium to Direct Line’s closing share price on November 27, as “highly compelling”.

But Direct Line’s board, which is led by chair Danuta Gray, did not agree. It described the proposal as “highly opportunistic” and “substantially” undervaluing the company.

Aviva said the FTSE 250 group had declined to engage further after rejecting its proposal.  

Subsequently, Aviva has begun to contact Direct Line shareholders in an effort to encourage the Direct Line board to come to the table, the Financial Times previously reported. That could pave the way for a possible hostile takeover.

A source close to Direct Line said: “The ball is in Aviva’s court.”

Aviva has until 5pm on December 25 to either make a firm offer or walk away. That will make for a busy Christmas for the insurer and its bankers at Goldman Sachs, who originally advised Direct Line on its rejection of Belgian insurer Ageas earlier in the year. Clifford Chance is also advising Aviva.

For its part, Direct Line has turned to Morgan Stanley, Robey Warshaw, Slaughter and May, and Brunswick among other advisers.

The initial shareholder reaction was positive with shares in Direct Line surging 41 per cent.

The two insurers both have some large shareholders in common — including Schroders, Fidelity, Redwheel and M&G. 

One top-20 shareholder of Direct Line said that Aviva’s bid was not a surprise, given the amount of excess cash the insurer is sitting on and the opportunity to merge the motor businesses to boost scale and extract costs.

“The reason Direct Line has described this as opportunistic, though, is that they’ve been going through a turnaround. They have highly qualified executives who have all come from Aviva,” the investor said. 

Although he believes the offer of 250p a share undervalues Direct Line, he forecast that most investors would back an offer of 300p.

Another significant Direct Line shareholder confirmed that Aviva had contacted his institution directly. “The bid came out of the blue. We will make a decision by early next week. Could a private equity buyer come along? This might be a reason to hold out.”

Analysts reckon Aviva will need to dig deeper in its pockets to win over its target. 

“Direct Line’s undemanding (but perhaps fair on a standalone basis) valuation, combined with . . . synergies, would make the deal financially accretive,” said analysts at Jefferies. “With this in mind, we would not be surprised if Aviva makes an additional offer and thus we reiterate our view that an offer of at least 270p might be acceptable.”

Analysts at KBW reckon the deal would become “borderline” for Aviva at around 300p per share.

Deal buzz around Direct Line could also bring old suitors out of the woodwork such as Ageas, which made two unsuccessful bids for Direct Line this year.

“The old Ageas offer is currently worth about 260p for comparison,” said MKP Advisors. “Ageas stock has been strong since the Direct Line overtures ended.”

William Hawkins, an analyst with KBW, said an Aviva-Direct Line combination was “the most logical one to add value for investors”. 

However, he added: “Looking at the wider picture, we think the emergence of a counter-bidder that can offer a higher cash component in a bid and a commitment to support growth in DLG should not be ruled out.”

Ageas declined to comment.

A combination of Aviva and Direct Line could lead to competition concerns in certain sectors due to the dominance of both groups in the motor and home insurance markets.

Figures from comparison site Confused.com show that Direct Line has 10.8 per cent of the motor insurance sector, making it the second-largest player, while Aviva is close behind with 10.5 per cent. A deal would lead to an enlarged group dominating more than a fifth of the market.

The UK’s Competition and Markets Authority is likely to review any deal that pushes market share in a product area above 25 per cent.

Aviva also dominates the home insurance market, with a share of 8.7 per cent while Direct Line has 6.2 per cent, according to Confused.com.

Barrie Cornes, an analyst at Panmure Liberum, said the CMA “will have a view on the combined group but we assume that Aviva have considered this and have discounted it as being an issue”.

Any merger would need the consent of not just the CMA but also the Bank of England’s Prudential Regulation Authority, in what would be the first big test of its competition mandate as the supervisor of insurers.

Continuing a year of executive changes, Richemont has promoted Laurent Perves to CEO of Vacheron Constantin, while Jérôme Lambert returns to Jaeger-LeCoultre.

PARIS – Capping the ongoing executive shuffle at its watch and jewelry brands, Richemont has revealed another series of rapid-fire appointments on Friday.

Laurent Perves had been named chief executive officer of Vacheron Constantin, while Jérôme Lambert becomes CEO of Jaeger-LeCoultre once again.

Both executives will take up their positions on Jan. 1.

Perves, who is currently chief commercial officer of Vacheron Constantin, takes over from Louis Ferla, who was named CEO of Cartier in July’s raft of executive moves. Meanwhile, Lambert, currently Richemont’s chief operating officer, takes over at Jaeger-LeCoultre, succeeding Catherine Rénier, who stepped up to become CEO of Van Cleef & Arpels.

Their appointments complete a year of change, part of the succession planning in top management by chairman and founder Johann Rupert. In May, Richemont revealed that Nicolas Bos, formerly head of Van Cleef, would take over as CEO of Richemont.

Perves, a French and Swiss national, has been at Vacheron Constantin for eight years, joining in December 2016 as chief marketing officer and becoming chief commercial officer in 2021. He is credited with playing an important part in the brand’s positioning as a leader in high watchmaking and its commercial success.

He began his career at LVMH Moët Hennessy Louis Vuitton as change manager in its perfume and cosmetics division. After that, he spent a decade at Procter & Gamble in various roles in consumer intelligence, marketing and business development, culminating as global brand manager of Gucci Parfums.

After that, Perves served for over two years as head of brand communications at Audemars Piguet before joining Richemont.

A graduate of Paris-based ESSCA management school, Perves holds a masters degree in economics and marketing as well as masters in processes engineering and project management from Polytech Angers engineering school, and a masters in strategy and organization from Paris Dauphine university

Also a French and Swiss national, Lambert is back at the helm of Jaeger-LeCoultre, a position he previously held for over a decade.

A graduate of the ESG Management School in Paris and the Swiss Graduate School of Public Administration, the 55-year-old joined Jaeger-LeCoultre in 1996 as financial controller after holding financial roles in Switzerland’s public postal and telecommunications service.

He became the watchmaker’s chief financial officer in 1999 and was its CEO from 2002 to 2013. He became CEO of Montblanc in 2013. In parallel, he also served as chairman of A. Lange & Söhne from 2009 and was the company’s CEO for two years.

In 2017, Lambert was first named the group’s head of operations, then group operations officer, before serving as the group CEO from September 2018 until Bos’ nomination in May. Lambert then took up his former position as chief operating officer in June.

Both executives are stepping in at a rocky time for luxury and watches in particular. Richemont’s specialist watchmakers underperformed in the first half, with results down 17 percent in the category as demand was dented by the slowdown in China.

At the time, the group said the decline in demand for watches “highlights the need for discipline and caution regarding overproduction, and underscores the importance of adapting to changing market conditions,” which will ultimately preserve the watch brands’ “desirability.”

Can Europe build its first trillion-dollar start-up?

The continent has yet to create a tech company to rival Alphabet, Amazon or Apple. Ian Hogarth explains why this matters — and how to set it right

In 2024, artificial intelligence is consistently front-page news. From Nvidia hitting a trillion-dollar market cap to the growing energy usage of data centres, it is the most discussed technology of our time. And it is a technology that the US dominates, with three of the most valuable AI start-ups, Anthropic, OpenAI and xAI, based there.

But here’s the confounding thing — the global race to build artificial general intelligence was initiated by a London-based start-up, DeepMind, founded in 2010 — well before Anthropic or OpenAI existed.

How did Europe lose its lead? And how can it stop that from happening again?

It’s a question that sits within a broader trend of the US becoming more globally dominant in technology, despite the EU having a larger population. There are only seven examples of trillion-dollar tech companies in the world — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. All are American. None are European. Going a level down, Europe has four $100bn-plus tech companies compared with the US’s 33, and from Mario Draghi to Emmanuel Macron there is increasing recognition from European leaders that something has stalled.

I share this view and, after 17 years spent founding and investing in start-ups, I believe that the growth of the technology industry in Europe is core to creating a more prosperous and resilient society. You only need to look at the UK’s economic stagnation since 2008 to see why.

When you’re drifting sideways in fog it can be hard to get your bearings, but if the total economic effect of 14 years of sluggish growth — a 28 per cent drop in GDP vs trend — had occurred in one single drop overnight it would be a historical economic shock on the scale of a pandemic or war in the life of the average Briton. It would splash every front page for months, not just fade into the background.

Meanwhile, over the same period in the US, GDP did not stagnate, substantially because of technology companies’ contribution to economic growth. Over a 13-year period, the combined market cap of Apple, Google, Amazon, Microsoft, Tesla, Nvidia and Meta has increased by 1,620 per cent. Put simply, the economic benefits, not to mention national security and geopolitical benefits, of these companies are extraordinary — they’re a wealth engine to pay for other things a country might want to do.

But there are reasons for Europeans to be hopeful. Technologies that could transform our world for the better are being built in the continent — be it in robotics, nuclear fusion or quantum computers — and today it stands a much better chance of commercialising its scientific excellence.

To avoid repeating past mistakes, and ensure that the next era of innovation can be built to deliver the continent’s first trillion-dollar company, one thing is crucial: Europe needs to celebrate and support experienced founders who are building and investing in the highest-risk, highest-reward ideas.

The value of repeat founders

The DeepMind story started when co-founders Demis Hassabis and Shane Legg met at the Gatsby Computational Neuroscience Unit at University College London — a unique academic institution where neuroscientists and machine learning researchers come together to collaborate.

Hassabis is many things — a Nobel-winning scientist, a visionary AI researcher — but I believe at least as importantly he was something else: an experienced founder. Twelve years prior to DeepMind, he founded Elixir Studios, a London-based games studio that shut down after seven years.

You can feel the heartache in Hassabis’s quote from a press release as the company wound down: “It seems that today’s games industry no longer has room for small independent developers wanting to work on innovative and original ideas . . . this was the sole purpose of setting up Elixir and something we could never compromise on.”

Technology start-ups are a relatively new area of the economy and there is still limited understanding of what exactly drives success. A common explanation for why Europe lags the US is excessive regulation, and it is certainly true that founders in Europe face more bureaucratic drag compared with their US peers.

As just one example, in Germany the notary process adds huge overhead for founders raising funding, in particular from angel investors, and in my opinion is clearly negative for the start-up ecosystem. Another obvious problem across Europe is the high equity stakes taken by some universities in the commercialisation of intellectual property, which can make it almost impossible for outside investors to come in.

But I believe it is the role of founders that has the biggest impact. When I think about the hardest-charging founders I know in Germany, such as Hélène Huby of The Exploration Company or Francesco Sciortino of Proxima Fusion, they blast through this bureaucracy and it is really not the core thing holding them back. In particular, repeat entrepreneurs such as Hassabis are a kind of critical keystone species that massively affect the overall health of a continent’s technology ecosystem.

The first and most obvious reason for this is that like any profession, being a tech start-up founder is a kind of craft — and the longer you do it, the more you refine the craft. So when it came time for Hassabis to raise his first round of funding for DeepMind in 2010, he knew better than to waste time on conservative European investors and headed straight to Silicon Valley where he was able to raise investment from experienced founders such as Peter Thiel and Elon Musk.

This is the second reason that experienced founders are so important — for their second or third company they will often tackle harder challenges. Musk is the quintessential example of this — his first company in 1995, Zip2, was an internet city guide, his second in 1999 was an online bank, and his third in 2002 was a space exploration company.

What explains this ramp in ambition? I suspect the deepest reason is that having founded a start-up, you know how hard it can be — so if you’re going to try again, you’re even more committed to tackling a mission that is inspiring enough to justify the lows that you know will inevitably come. There’s also a kind of natural selection at play — the harder the mission, the greater the skill level required and the less likely a first-time founder will make it.

As investors, experienced founders are also often a source of the most audacious capital, funding start-ups with a higher level of risk or a longer gestation period before they start to work and make money. The game Civilisation introduced the concept of the “tech tree” — the idea that progress in technology can be visualised as a tree in which new branches of technology sprout from the main trunk and then allow for a network of subsequent branches to grow. For example, semiconductors were needed to enable personal computers.

Experienced founders are often most likely to fund new branches of the tech tree. In Silicon Valley, more than 60 per cent of the partners at top venture capital funds were previously founders and chief executives; in Europe, by contrast, the figure stands at a dismal 8 per cent. 

Things are beginning to move in the right direction. My own fund, Plural, is run 100 per cent by experienced founders and chief executives. We are here for the next Hassabis, to try to meet their ambition.

This brings us back to the story of DeepMind, which in 2014 was acquired by Google for just £400mn only four years after launching. Hassabis now runs the entirety of Google’s AI efforts from London and has delivered breakthrough after breakthrough, from AlphaGo to AlphaFold. I first wrote about the cost to the UK of DeepMind being acquired back in 2018 in an essay “AI Nationalism”, but in 2024 this seems even more stark. 

What happened? I would argue that there was simply not enough audacious capital available for Hassabis to pursue his mission and instead an experienced founder — in this case Larry Page with all the resources of Google — was able to provide the billions in long-term high-risk funding that he needed.

The same is true in self-driving cars or quantum computing, where Google has invested billions in technology that could take a decade before it makes money. Consider how different things could be today if someone in Europe had the audacity to be a true partner to Hassabis and funded him to stay independent.

Meanwhile in Silicon Valley, a group of experienced founders, most notably Sam Altman and Musk, were thinking hard about how important AI could be and how to compete with DeepMind as they founded OpenAI. In 2015 Altman emailed Musk saying: “Been thinking a lot about whether it’s possible to stop humanity from developing AI. I think the answer is almost definitely not. If it’s going to happen anyway, it seems like it would be good for someone other than Google to do it first”. 

Musk then became the largest donor to the new non-profit OpenAI. The goal was very explicitly to catch up with DeepMind. In emails released as part of a court case, Musk wrote to the co-founders in 2016: “DeepMind is causing me extreme mental stress.” And in 2018: “My probability assessment of OpenAI being relevant to DeepMind/Google without a dramatic change in execution and resources is 0 per cent. Not 1 per cent . . . I wish it were otherwise . . . Unfortunately, humanity’s future is in the hands of [name redacted by lawyers].”

Fast-forward today and OpenAI is now valued at more than $150bn, Anthropic, founded in 2021 by OpenAI alumni, is reportedly valued at $40bn and xAI, founded by Musk in 2023, is already valued at $50bn. A set of well-resourced founders — Page, Musk and Altman — tilted history and now Silicon Valley, not London, is the global centre of gravity for AI.

But, while Europe might have fallen behind in that story, AI is still young and much is yet to be written. And beyond AI, there are potentially world-changing technologies being built in Europe that urgently need bold capital to grow.

One example is nuclear fusion. Fusion could be the ultimate solution for zero-carbon, low-cost, baseload energy. For Europe it could be a source of energy security as well as an opportunity to build a huge new industry. A start-up that builds fusion reactors in the way that SpaceX builds rockets could be the next trillion-dollar company.

This should be an area where Europe is positioned to lead — it has invested more public funding in fusion research than the US and has a larger base of fusion scientists. European governments have led the way with the Joint European Torus, the tokamak with the record for fusion power in the UK, and the Wendelstein 7-X in Germany, the world’s most advanced stellarator. Europe should be poised to win.

However, when you look at private start-ups in fusion, four in the US have raised more than $500mn, compared with only one in China and zero in Europe. And again it comes back to audacious founder-led capital, with the best-funded US fusion start-ups raising their early rounds of funding from Altman, Vinod Khosla or Bill Gates. Experienced founders are the ones able to optimistically embrace these kinds of high-risk projects that define the next branch of the tech tree. 

We’re seeing glimpses of how this can work in Europe. In 2021, Spotify founder Daniel Ek invested €100mn in AI defence start-up Helsing when there was no alternative investor standing in the wings — he was the only person willing to take this level of risk. Helsing is an example of a truly innovative European company that has now secured a series of major government military contracts. That early investment substantially de-risked the business, allowing Helsing to raise more than $830mn from venture capitalists over the subsequent three years. It was a catalytic event of a kind that doesn’t happen enough in Europe.

Another reason I call experienced founders a keystone species is that, along with founding and investing in more ambitious start-ups, they also support the next generation of founders in more nuanced ways.

Experienced founders can lend their scar tissue to a new founder and help them avoid the mistakes they made. Consider how Sean Parker, co-founder of Napster, took the experience of being fired from his previous start-up and used it to help Mark Zuckerberg retain full-board control of Meta, something that became critical in July 2006 when Yahoo made Facebook an offer to acquire it for $1bn. With complete control of the board, Zuckerberg could choose to reject the offer, despite advice from board members to take the deal. Fast-forward to today and Meta is one of those trillion-dollar US companies.

Ek was a second-time founder when he started Spotify and, despite a reported billion-dollar offer to sell to Google in 2009, remained independent; the company now has a market cap of $95bn. The obvious point is that to eventually be worth $1tn, you need to not sell earlier for a number smaller than that.

This story illustrates the importance of a mission-focused founder, but not selling can also be due to sheer incompetence from an acquirer. In 1998, Google’s founders tried to sell their company to Yahoo for $1mn, Yahoo refused and they kept building. Later, in 2002, Yahoo realised the value of Google, offered $3bn, Google said they’d sell for $5bn, Yahoo balked again and 22 years later Alphabet is worth more than $2tn and owns DeepMind.

Dutch payments company Adyen didn’t sell and is now worth $46bn, Wise is now worth $11.4bn and Arm Holdings is the UK’s most valuable technology company, worth $143bn, but only because an attempted acquisition by Nvidia in 2020 was blocked. Can you even imagine the level of dominance Nvidia would have today if it owned Arm too?

Great companies take time. ASML, the Dutch chip equipment maker, is now worth over $275bn, but has been consistently tackling its mission since 1984. Nvidia is a $3.4tn company today, but in 2010, when it was 17 years old, it was valued at less than $10bn. If Europe wants a true tech giant, it will require steely determination from founders and investors to not sell and keep building.

While Europe is yet to produce its first trillion-dollar tech company, that’s not the first aim of the game. To give itself the best chance of creating one of those truly iconic companies, it must create as many $100bn companies such as Spotify as possible.

Things need to happen urgently as time is running out to stay in the race. Europe must now build these remarkable vehicles of scientific progress and economic growth — not only to grow the tech industry, but to power its nations to be more prosperous as a whole. If it does, we could soon be living in a world powered by European-built nuclear fusion power plants or solving some of science’s most complex problems with quantum computers that have been developed in London or Munich.

This isn’t just about growing the tech industry for those that work in it: it’s about creating a more prosperous and resilient society with more wealth to pay for Europe’s public services.

The next branches of the tech tree have the potential to truly benefit humanity and there is no reason they can’t be grown in Europe. Regulation isn’t the core problem — the key is to cherish the role of experienced founders, celebrate when they fund the riskiest and most important tech, stop selling the most precious companies to US acquirers and turn an already powerful innovation engine into a harder-edged ambition to keep scaling in Europe.

It’s time for Europe to stand up tall.

I’m not much of a runner, so completing the New York City Marathon in my 20s was a triumph. But my clearest memory of the day is being out-hustled at the finish line—never mind my time—by an 8-foot foam dinosaur on one side and a man with a homemade “80 years young” T-shirt on the other.

T-Rex and Four Score earned my respect that day. But in financial markets now, I’m seeing an oddball Olympics of recent price gains that threaten to undermine what would otherwise be a handful of inspiring performances.

Take Tesla and Bitcoin, up 35% and 39%, respectively, since the day before Election Day, versus a 5% gain for the S&P 500 index. There’s a tidy narrative to explain each.

President-elect Donald Trump is likely to scrap rebates and tax breaks for electric vehicles. Tesla, as the EV scale leader, might suffer less than its rivals—“a clear competitive advantage,” writes Wedbush Securities analyst Dan Ives. There’s more: “The golden goose for Tesla remains a fast-tracked autonomous strategy which we fully expect under Trump and we estimate is worth a $1 trillion of valuation alone to the Tesla story over the coming years.” Tesla’s recent market value is some $1.2 trillion.

For Bitcoin, Trump piqued appetites in September by using the currency to buy burgers for crypto bros at a Manhattan bar. “The market has demonstrated its belief that a Donald Trump presidency and likely Republican-controlled Congress provides significant support for regulatory clarity in the U.S. and, in turn, greater crypto activity and adoption,” wrote J.P. Morgan’s crypto team on Nov. 12.

I’m even seeing some Bitcoin benchmarking. One strategist writes that Bitcoin has outshone Ethereum to the point where the ratio of the two prices has hit “key levels of previous support.” I guess that makes Ethereum a value? If so, both must be bargains relative to Dogecoin, the parody crypto, which is up more than 300% this year.

Where does Peanut the Squirrel fit into this valuation analysis? The orphaned New York City critter was adopted by a man in 2017, then became Instagram famous, then was seized in a raid and euthanized by the state’s environmental department, then was turned by the political right into a symbol of government overreach. A Peanut cryptocoin, naturally, hit a market value of over $1 billion. I don’t like to get political, but if I thought squirrel videos could raise that kind of cash, I’d have become the John Jacob Astor of Central Park trapping.

Please don’t say that valuations have gone bananas. One of those duct-taped to a wall just sold at Sotheby’s for $6.2 million. Robert Teeter, chief investment strategist at Silvercrest Asset Management, suggests that Brillo might be instructive here. Andy Warhol, known for finding artistic inspiration in Campbell’s soup and Heinz ketchup, once sculpted boxes of the steel wool scrub pads. One purchased for $1,000 in 1969 ended up fetching more than $3 million at Christie’s in 2010. The gain works out to a compounded average of 21% a year, versus just under 10% for the S&P 500.

I’m not sure what that means for taped bananas, or even how to calculate compounded returns for an asset with a one-week shelf life. Teeter’s broader point, he writes, is that “timing today’s market top might be a slippery endeavor.”

One Tesla bear is pushing back on the political narrative, and calculating what the recent stock run-up says about future sales. If lost EV subsidies will be an advantage for Tesla, they will be a relative one, not an absolute one, at a time when the company is already discounting to spur demand, writes UBS analyst Joseph Spak. As for the new administration easing the ride for autonomous vehicles, “there really aren’t any onerous federal AV regulations to ‘relax,’” writes Spak. “Further, a change in regulation doesn’t immediately solve, nor change the timeline to solve, the technological challenge of unsupervised [full self driving].”

Pricing Tesla’s robo-taxi potential isn’t easy. Spak reckons it’s worth $100 billion, versus a recent $45 billion for Alphabet’s Waymo unit and a $157 billion market value for Uber Technologies. He calculates that today’s car business accounts for only 12% of the company’s value, and points to an analysis showing that when that figure has dropped below 17% in the past, the stock price has tended to fall.

If Tesla were to simply boost vehicle sales to grow into its valuation, Spak reckons that it would have to ship some 15.5 million units a year by 2030, versus a consensus estimate of 4.8 million. His price target for the stock is more than $100 below its recent price.

Who knows? Maybe robo-taxis will take off soon, or Tesla’s other ventures—like home solar and battery storage or Optimus humanoid robots—will surprise to the upside, or Elon Musk’s early and eager boarding of the Trump Train will be good for business in ways that aren’t clear yet.

Bitcoin, which was recently hanging around the $100,000 mark, is trickier to size up. I could point to the collective $3.5 trillion market value of crypto, and compare that with something that generates profit, like Apple, or all of the companies in the small-cap Russell 2000 index. But that doesn’t tell us where Bitcoin is headed next. I could cite price targets. Cathie Wood says $3.8 million by 2030. Warren Buffett says zero, ultimately. Put me down for something in between.

My only Bitcoin conviction is what I’ll call the Peter Pan principle. For the thing to keep rising like it is, I’m pretty sure it must never grow up. Mainstream financial utilities are predictable and boring. But rogue money has open-ended potential. “All the world is made of faith, and trust, and pixie dust,” as the Lost Boys leader said. Here’s wishing Bitcoin holders more promise of government support—but not too much delivery of it.

Donald Trump’s nomination of Robert F. Kennedy Jr. and other healthcare skeptics has caused investors to flee the sector—which means it’s time to pay close attention to the stocks.

The reaction to Trump’s election has been generally celebratory, with the S&P 500 up nearly 5% in November alone. Not healthcare stocks—the Health Care Select Sector SPDR exchange-traded fund (ticker: XLV) has fallen about 2% this month.

Those moves accurately affect where investors have been putting their money. According to BofA Securities’ latest fund flow data report released on Tuesday, its clients were net buyers of equities the previous week for the third week in a row, with inflows accelerating to their highest level since September. However, healthcare ETFs were the only sector ETFs that BofA’s clients were avoiding. Among individual companies, healthcare stocks saw their first outflows in five weeks, one of only two sectors, along with real estate, to experience net selling.

It’s easy to understand why investors are so jittery: The incoming Trump administration could make plenty of waves with changes in policy and various potential appointees, including Dave Weldon to lead the Centers for Disease Control and Prevention and the aforementioned RFK Jr. as secretary of Health and Human Services, could be wild cards given their rejection of some scientifically accepted facts. Their previously disclosed stances have investors worried about the near-term future of everything from vaccines to formerly highflying weight-loss drugs. And given Wall Street’s aversion to uncertainty, they may remain out of favor in the near term until there’s more clarity.

But sometimes the reward more than makes up for the risks, and healthcare stocks are trading cheaply enough to start looking interesting. The Health Care ETF trades at 17.8 times earnings, down from 19.9 times at the end of August and near its cheapest level of the year.

That valuation would be particularly appealing if regulatory actions proved less onerous than the recent concerns. Guggenheim analyst Debjit Chattopadhyay notes that his industry contacts have expressed some skepticism “on the scope of both broader agency and potential drug development changes given the relatively limited time frame ahead of midterm elections in 2026, the broader goals of the Trump agenda, and the uncertainty that remains around Trump and congressional support and mind share for sweeping changes.”

He also notes that changes around vaccines specifically could be an “uphill battle,” with the Health and Human Services chief still having to work within existing infrastructure “and state authority as guardrails against his actions.”

Nor is there anything wrong with the sector’s fundamentals. Revenue for healthcare stocks is expected to climb by 11% in the year ahead, according to Trivariate Research founder Adam Parker, the best performance of any sector save technology, while gross margins of 54% are in the historical 93rd percentile. That seems like a disconnect despite the ongoing uncertainty, especially as most other sectors are more expensive based on their historical averages.

Moreover, many investors are betting that merger and acquisition activity will pick up under the new administration. That’s caused shares of potential takeover candidates to rise, Parker explains, adding that about 5.5% of the 1,000 largest healthcare stocks by market cap typically receive a tender offer every year. “It is incongruous to bid up stocks levered to increased M&A as we have seen since the Red Sweep—and not conclude that the valuations of select healthcare stocks will also begin to expand,” he writes.

Ultimately, much of what healthcare policy will look like in 2025 and beyond is still debatable, but a growing sector that is trading cheaply shouldn’t be treated as DOA.

The largest U.S. public pension recently made major changes in some of its biggest stock investments.

California Public Employees’ Retirement System cut an investment in engine supplier GE Aerospace, halved its stake in shares of electric-vehicle maker Tesla, and bought more shares of telecom AT&T and retailer Costco Wholesale in the third quarter. Calpers, as the pension is known, disclosed the stock trades, among others, in a form it filed with the Securities and Exchange Commission.

In response to a request for comment on the investment changes, the pension said in an email, “Calpers’ global public equities are largely managed using quantitative and systematic investment approaches. Consequently, we generally do not comment on our individual holdings or trades.” The pension manages more than $520 billion of assets, more than any other public pension in the U.S.

GE Aerospace stock has been on a tear since being formed after GE Vernova spun from it in April. On a pro forma basis, the shares surged 85% in the first nine months of 2024, compared with a 21% rise in the S&P 500. So far in the fourth quarter GE Aerospace stock is down about 4%, while the index is up 3.6%.

GE Aerospace reported strong third-quarter earnings. With the election of Donald Trump for his second term as president, the company’s engine operations might not be affected by any potential tariff wars.

Calpers sold 718,713 GE Aerospace shares to cut its stake to 2 million shares at the end of the third quarter.

The pension sold 4.5 million Tesla shares in the third quarter to chop down its stake to 4.9 million shares.

Tesla stock eked out a 5.3% rise in the first nine months of 2024, and so far in the fourth quarter shares are up 34%.

Shares got a big boost with Trump’s election win, as Tesla CEO Elon Musk was a vocal champion of the former and future president, and his policies. Analysts expect Trump to end purchase tax credits for EVs, but it isn’t clear what effect this would have on Tesla’s sales.

Meanwhile, Trump has tapped Robert F. Kennedy Jr. to be his secretary of Health and Human Services, and RFK’s past attacks on both Wi-Fi and 5G don’t bode well for AT&T stock. The company’s third-quarter earnings topped expectations, but the top line came in light.

AT&T stock rose 31% in the first nine months of 2024, and so far in the fourth quarter shares are up 5.4%. Calpers bought 6.5 million more AT&T shares to end the third quarter with 29.5 million shares.

Costco stock rose 34% in the first three quarters of the year, and so far in the fourth shares are up 8.9%.

The retailer’s sales growth eased in October, reflecting tempered demand after a September surge fueled by a port strike on the East Coast, and people preparing for Hurricane Helene. Costco has catered to buyers of precious metals by recently adding platinum bars to its offerings of gold bars and silver coins.

Calpers bought 329,107 more Costco shares to end the third quarter with 1.6 million shares.