After Hours Summary: META +18.7% shocks investors with strong earnings, online ad peers higher in sympathy; ALGN +15.6%, ELF +13.3% also higher on earnings; CHX -8.6%, MXL -7.5%, QRVO -4.4% lower on earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: META +18.7% (also authorizes new $40 bln share repurchase program), ALGN +15.6%, ELF +13.3%, AFG +3.8% (also declares $4 special dividend), ALGT +3.1%, MCK +3%, KRC +2.3%, HOLX +2.1%, PTC +1.4%, LFUS +0.6%, AVT +0.5%, MTH +0.4%, THG +0.2%, RRX +0.1%, SLM +0.1%
Companies trading higher in after hours in reaction to news: PINS +4% (in sympathy with strong META earnings), TTD +3.6% (in sympathy with strong META earnings), GOOG +3.5% (in sympathy with strong META earnings), FLEX +3% (Nextracker unit announces IPO launch), MGNI +2.9% (in sympathy with strong META earnings), APPS +2.7% (in sympathy with strong META earnings), PUBM +2% (in sympathy with strong META earnings), PLTR +1.2% (announces $50 mln expansion with SOMPO Holdings), CRK +1.2% (reports oil & gas reserves), COST +1.2% (reports Jan comps), ROKU +1.2% (in sympathy with strong META earnings), STNE +0.9% (sells stake in Banco Inter), NFLX +0.3% (in sympathy with strong META earnings), MRK +0.1% (COVID-19 pill linked to new virus mutations, but MRK disputes this, according to Bloomberg), WFC +0.1% (files for $93 bln mixed securities shelf offering)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: CHX -8.6%, MOD -7.9%, MXL -7.5%, CTVA -5.5%, BHE -4.6%, GL -4.5%, QRVO -4.4%, ALL -2.9%, SITM -2.5%, CHRW -2.1%, AFL -2%, MTG -2%, NTGR -1.8%, MET -1.3%, TTEK -1.3%, DXC -1.2%, KLIC -0.3%, CCS -0.2%, EGHT -0.2%, CLB -0.1%, ENVA -0.1%, MUSA -0.1%, UGI -0.1%
Companies trading lower in after hours in reaction to news: VERA -9.1% (commences $75 mln public offering), ROIV -5.3% (commences $150 mln public offering), ANET -2.7% (META to lower cap-ex spend), SNDR -0.1% (increases dividend and authorizes $150 mln stock buyback plan), HWKN -0.1% (increases dividend, also reports earnings), ALEX -0.1% (promotes COO to be new CEO)
Closing Stock Market SummaryToday's trade looked a lot different at the open compared to where things ended up. The main indices moved mostly sideways, pinned below their flat lines, for the majority of the session as investors anxiously awaited the FOMC policy decision at 2:00 p.m. ET and Fed Chair Powell's press conference at 2:30 p.m. ET.
The market saw some whipsaw action immediately following the FOMC's unanimous decision to raise the target range for the fed funds rate by 25 basis points to 4.50-4.75%, as expected. The general tone shifted markedly, however, when Fed Chair Powell started speaking at 2:30 p.m. ET.
Mr. Powell acknowledged that the "Full effects of rapid tightening so far have yet to be felt and we have more work to do." He indicated that core services inflation is still running too high, which creates a basis for ongoing rate hikes. Overall, though, Mr. Powell was generally encouraging about the emerging signs of disinflation.
Importantly for market participants, he did not go out of his way to shoot down the recent rally effort by condemning loosening financial conditions and maintained that he thinks there is a path to getting inflation back down to 2.0% without a really significant economic decline or significant increase in unemployment.
The stock market surged to session highs during the press conference before ultimately pulling back and settling below those levels. The main indices all closed in positive territory, led by the Nasdaq with a 2.0% gain. The S&P 500 for its part closed above the 4,100 level.
Just about everything came along for the steep rise, but mega cap leadership was integral to index level gains. The Vanguard Mega Cap Growth ETF (MGK) closed with a 1.9% gain versus a 1.0% gain in the Invesco S&P 500 Equal Weight ETF (RSP) and a 1.1% gain in the S&P 500.
Semiconductors were another pocket of strength in the market today following a better-than-expected earnings report and better-than-feared outlook from Advanced Micro Devices (AMD 84.64, +9.49, +12.6%). The PHLX Semiconductor Index rose 5.2% by the close.
Ten of the 11 S&P 500 sectors closed with a gain, led by information technology (+2.3%), consumer discretionary (+1.9%), and communication services (+1.3%). The energy sector (-1.9%) was the lone holdout in negative territory as oil prices continued to retreat today. WTI crude oil futures fell 2.7% to $76.82/bbl.
Treasuries rallied following the FOMC decision and subsequent press conference. The 2-yr note yield, which is most sensitive to changes in the fed funds rate, fell ten basis points to 4.11%. The 10-yr note yield fell 13 basis points to 3.40%. The U.S. Dollar Index fell 0.9% to 101.18.
- Nasdaq Composite: +12.9% YTD
- Russell 2000: +11.3% YTD
- S&P Midcap 400: +10.9% YTD
- S&P 500: +7.3% YTD
- Dow Jones Industrial Average: +2.9% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index -9.0%; Prior 7.0%
- January ADP Employment Change 106K (consensus 170K); Prior was revised to 253K from 235K
- January IHS Markit Manufacturing PMI - Final 46.9; Prior 46.8
- December Construction Spending -0.4% (consensus 0.0%); Prior was revised to 0.5% from 0.2%
- The key takeaway from the report is that new single family construction continued to decline, clipped by higher interest rates that are making construction projects more expensive to finance at a time when broader economic activity is slowing due in part to the higher interest rates.
- January ISM Manufacturing Index 47.4% (consensus 48.0%); Prior 48.4%
- The key takeaway from the report is that manufacturing activity contracted in January for the third straight month, demonstrating that the cumulative effect of rate hikes around the globe is adversely impacting demand, evidenced by the fifth straight contraction in the new orders index.
- December JOLTS - Job Openings 11.012 mln; Prior was revised to 10.440 mln from 10.458 mln
Market participants will receive the following economic data tomorrow:
- 8:30 ET: Weekly Initial Claims (consensus 201,000; prior 186,000), Continuing Claims (prior 1.675 mln), preliminary Q4 Productivity (consensus 2.5%; prior 0.8%), and preliminary Q4 Unit Labor Costs (consensus 1.5%; prior 2.4%)
- 10:00 ET: December Factory Orders (consensus 2.2%; prior 1.0%)
- 10:30 ET: Weekly natural gas inventories (prior -91 bcf)
Cardinal Health (CAH), ConocoPhillips (COP), Merck (MRK), Bristol-Myers (BMY), Honeywell (HON), Eli Lilly (LLY), and Estee Lauder (EL) are among the more notable names reporting earnings ahead of tomorrow's open.
Bill Gates loves trash
A big $28bn bet on a dirty future
Well, not Bill Gates per se, but his family office, Cascade. And not trash in the metaphorical sense of very speculative assets but actual, honest-to-God trash. Or trash management at least.
Oxford University’s Martin Schmaltz has drawn our attention to the somewhat weird allocations of Gates’s private investment firm, which, depending on your source, seems to manage either $70bn, $120bn or $170bn.
Here’s what Refinitiv lists as Cascade’s 10 biggest position in dollar terms.
The combined $16bn holdings of Republic Services and Waste Management — the two biggest waste disposal companies in the US — make up almost half of Cascade’s disclosed equity portfolio.
If you include water purification and pest control giant Ecolab as kinda in the same business (getting rid of unwanted stuff, whether germs, garbage or bedbugs) then the sector accounts for 52.5 per cent of Cascade’s public book, or $21.1bn in total.
That’s not all! The actual Bill & Melinda Gates Foundation — which owns Gates’s remaining Microsoft shares — owns another $5.6bn stake in Waste Management, $703mn in Ecolab and $290mn in Waste Connections, a different trash disposal company. So that’s $27.69bn in total for the sector.
Some caveats are in order. All these holdings are mostly from filings made in 2021-22, so there may be some changes (but neither Cascade nor the Foundation are high turnover investors). There will be other stuff that doesn’t need to be disclosed, so this will never be more than a partial snapshot. Cascade also owns most of the Four Seasons Hotels and Resorts, for example.
Still, it’s an interesting portfolio. It basically looks like a massive near-$28bn bet on a grimy future where sanitation will be the in-demand service. Mad Max, but with even more garbage.
Cascade has been managed by Michael Larson since 1994. He’s kept remarkably under the radar, with the exception of a 1999 article in Fortune, and a less flattering NYT piece in 2021 on the “culture of fear at the firm that manages Bill Gates’s fortune”.
The other top Cascade holdings are also a bit bizarre for a technology billionaire’s family office. Agricultural machinery company John Deere and Diageo make up the rest of the top five, while further down we find Canada’s national railway system; car seller AutoNation; Spanish construction company FCC; Otter Tail, a Minnesota utility, and Ginkgo Bioworks, a biotech SPAC.
Last one excepted it’s all very old-economy, which appears to be the long-term strategy. Gates’s biggest UK investments, for example, have been in retailer Carpetright, jet servicing group Signature Aviation and Bunzl, a distributor of disposable cutlery. Given the still-big chunk of Microsoft shares sitting in the Foundation’s books, perhaps low-tech is the point?
Vodafone/Elliott: activist seeks an opportunistic gain from tower sale
US activist’s gambit depends on German securities law protecting minorities from premature squeeze-outs
Nick Read riled shareholders with efforts to tame the multi-country hydra that is Vodafone. He was ousted. Interim replacement Margherita Della Valle says the UK-based mobile operator “can do better”. That is certainly Elliott Management’s view of the complex sale of the Vantage Towers subsidiary led by Read. The US activist has taken an exposure of more than 5 per cent to Vantage stock.
The unexpected intervention underlines the importance of scenario planning for other would-be dealmakers.
Vodafone split off and listed telecom tower group Vantage in Germany in 2021. Infrastructure with reliable incomes merited high valuations because rates were low. But after the market worth peaked at about €16.5bn last spring, Vantage stock dropped by a quarter as rates moved up.
The valuation returned to previous highs thanks to the partial sale plan. Vodafone would participate in a Vantage joint venture with investors including KKR, and General Infrastructure Partners. The deal requires the JV owners to buy out 18 per cent held by minority investors. They would receive €32 a share.
Elliott’s gambit depends on German securities law protecting minorities from premature squeeze-outs.
The JV controls about 89 per cent of Vantage, but not the required 95 per cent. If Elliott does not sell, Vodafone and its partners can still operate Vantage, under a “domination agreement”. But that would allow Elliott to bring German litigation requiring a revaluation of Vantage.
This legal process lasts at least five years. Under German law, Elliott would be likely to receive compensation in lieu of dividends set at 5 per cent a year above German short-term rates, currently slightly more than 1.6 per cent.
A court might or might not bump up the Vantage valuation. If Vodafone and its JV partners do not fancy waiting, they may have to pay Elliott and other minorities more for their shares, currently valued at about €800mn.
Read might have foreseen Elliott’s intervention, given that it did something similar at Kabel Deutschland. But foresight does not appear to have been his strong point.
The Strategy Behind Skims’ Viral White Lotus Campaign
The brand’s latest celebrity-fronted ad serves as another example of how it is wielding star power beyond its famous founder.
:quality(70):focal(617x464:627x474)/cloudfront-eu-central-1.images.arcpublishing.com/businessoffashion/6RF3NC4VGZAXBEJNOWMCQTLVYI.jpg)
Simona Tabasco and Beatrice Grannò star in Skims' Valentine's Day campaign (Courtesy Skims)
KEY INSIGHTS
- Skims' Valentine's Day campaign, starring 'White Lotus' actresses Simona Tabasco and Beatrice Grannò, went viral last week.
- The campaign is another example of Skims' evolving approach to celebrity marketing, which is centred around creating cultural moments.
- As the company, which crossed $475 million in revenue last year, grows, its marketing will continue to expand beyond Kim Kardashian herself.
Skims may have one of the world’s most recognisable faces as its founder, but lately it’s been leaning on celebrities with more subtle star power in its marketing.
For its Valentine’s Day campaign, which dropped on Jan. 23, the shapewear, intimates and loungewear label cast Simona Tabasco and Beatrice Grannò, two Italian actresses who have recently shot to the top of the cultural zeitgeist thanks to their roles as swindling sex workers in HBO’s hit series The White Lotus.
The campaign’s creative is fairly simple, as is standard in Skims’ marketing. The two actresses — who are also best friends in real life — are clad in coordinating pink bra-and-panty sets against a no-frills grey backdrop. Much as they often did on the show, they have their arms around each other as they whisper and giggle into each other’s ears. It ends with Tabasco saying “Tutti indossano Skims,” with Grannò repeating the phrase in English: “Everybody’s wearing Skims.” Accompanying images are much of the same: The two together, against a simple backdrop of grey or an over-sized red heart, in matching Skims sets.
Simple though it may be, the campaign was effective. Though it’s too early to determine EMV (earned media value) across social media, according to Tribe Dynamics, the firm that calculates the metric, the ensuing online chatter was quick and obvious. “Damn, I wish I’d thought of that,” one marketer wrote on Twitter. Consumer reception was positive, too: “Not me wanting to buy everything from Skims because they got the two women from White Lotus as a part of the campaign,” another Twitter user wrote.
“When the casting is this strong, this relevant and has such a nice tie to your brand story, you don’t really have to have too much more,” said Kylie Vandeven, associate creative director at ad agency VMLY&R, who did not work on the campaign. “The casting itself was the campaign.”
Employing clever casting as the bulk of the creative strategy has become Skims’ marketing calling card. In April 2022, it rolled out its “Fits Everybody” campaign, which starred former Victoria’s Secret angels Tyra Banks, Heidi Klum, Candice Swanepoel, and Alessandra Ambrosio in their first campaign together. (It did receive some backlash online, due to lack of body diversity.) When it launched bras in September 2022, it recruited a cast of 50 women representing various ages and body types, including model and actress Brooke Shields, singer Becky G, actress Juliette Lewis, comedian Chelsea Handler and musician Cassie. Skims’ holiday campaign in 2022 featured Snoop Dogg and his entire family in matching plaid pyjamas.
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/businessoffashion/BHHMZDKA5BBYFA2MZ2X3JJXIRY.jpg)
Former Victoria's Secret angels Heidi Klum, Tyra Banks, Alessandra Ambrosio and Candice Swanepoel all star in a 2022 campaign for Skims.
“We are a brand and a company that participates in popular culture, and we actively try to create [based on] what’s happening around us in that moment,” Jens Grede, the co-founder and CEO of Skims, told BoF.
Making Magic Happen
This time, Grede said that the campaign’s genesis was simple: Both he and Skims co-founder Kim Kardashian are fans of the show. The morning after the finale aired, Kardashian suggested casting the two as the stars of a Valentine’s Day campaign. They felt that the show’s momentum would continue throughout awards season and charged ahead with getting the campaign together. It ended up dropping just over six weeks after the finale — and just a few weeks after it picked up two trophies at the Golden Globes.
“The ability for them to be able to identify people who are, whether they’re emerging or they’re of the moment, are so in the thick of culture, and get that into a campaign in a very expedient way is their magic power,” said Eunice Shin, partner at brand strategy firm Prophet.
What also helps, Grede said, is letting the talent speak for themselves — in more ways than one. Skims’ campaigns usually take a minimalist approach that puts whoever is appearing in them centre stage, not competing for attention with a storyline or even an elaborate backdrop. But they also allow the talent to be partners in imagining what the campaign will look like, according to Grede.
“We don’t script anything,” said Grede. “It’s a modern approach, where you’re not micromanaging talent, but really starting from what the talent wants to say and to create. It’s really led by them rather than by us.”
He added that much of the brand’s marketing strategy is led by the idea of creating moments in culture, much as, he said, Kardashian’s own career has been. (He pointed to her wearing Marilyn Monroe’s gown to last year’s Met Gala as an example.) That could include hopping on current trends, like the Valentine’s Day campaign, or striking a nostalgic note. Shields’ appearance in Skims’ bra campaign, for example, was her first underwear shoot in three decades.
And though Kardashian remains Skims’ most important ambassador, as the company grows, it is increasingly looking beyond her when it comes to casting campaigns. The brand, which hit $475 million in revenue last year, hopes to follow a trajectory like that of the Jordan brand, which also began as a celebrity label but has evolved to be bigger than its famous founder.
“Kim is the Michael Jordan of the influencer generation,” said Grede. “We’ve been lucky to have this platform, but we want that platform to be broader than any one person and to be really combined in spirit rather than anything else.”