FT : Tinder struggles to attract younger users as Gen Z singles look to new apps

Tinder struggles to attract younger users as Gen Z singles look to new apps
World’s dominant dating app seeks new ways to achieve growth as rivals such as Bumble and Thursday thrive

Tinder is struggling to attract younger users who are starting to abandon the world’s dominant dating app, as Generation Z singles prefer hotter new services in the search for love after lockdowns.

The well-known app quickly became the dating service of choice for millennials since launching in 2012, as consumers switching from desktops to mobiles left older platforms such as eharmony and Match.com.

The latest generation of young people, who are returning to the dating scene after the pandemic, also appear to be shifting to alternatives to Tinder in the hunt for romance.

Downloads of Tinder, which allows users to accept or reject potential partners with the swipe of a smartphone screen, dropped 5 per cent in 2021 to 70.7mn. Rivals such as Bumble and new start-up Thursday have enjoyed consistent growth, according to new figures from app market researchers data.ai.

That trend has led Tinder to make changes in an effort to achieve new growth, from restructuring its leadership to betting on the so-called metaverse as the future method by which people will meet online.

“Sign-ups have not returned back to pre-pandemic levels,” Gary Swidler, chief operating officer and chief financial officer of Tinder parent company Match Group, told the Financial Times.

“New users remain a challenge and that’s where product innovation comes in. We need to give people a new reason to come into the [dating app] category, they haven’t had something new and exciting in a while.”


His comments come just weeks after Match said Tinder was failing to meet revenue growth expectations in its second-quarter results, ousting the company’s chief executive Renate Nyborg after less than a year in the role.

Match, which owns a host of dating sites including established brands such as Plenty of Fish and OKCupid, needs Tinder to retain its dominant market position. The app generated $1.65bn in revenue last year, more than half of Match Group’s total revenue.

The group’s share price has dropped more than 50 per cent this year, with its heritage platforms, such as Match.com, suffering declining revenues and paying users.

“It is on us to figure out what is the next great thing [in dating],” said Swidler. “It tends to come with technological evolution or revolution.”

One of Tinder’s big bets is the metaverse, where enthusiasts believe people will increasingly interact in virtual environments. Tinder is doing this through further gamification of the app, hiring executives from games companies Zynga, Electronic Arts, Glu and King in recent years to bolster its offering.

The platform is finding it tricky to execute this vision, rolling back its virtual coins feature this month, used for in-app spending, having only launched in November, after seeing mixed results.

The company is still figuring out how these features can effectively contribute to Tinder’s revenue and is currently reassessing the model. It plans to relaunch coins and introduce virtual goods on Tinder in the second half of 2023.

“A lot of older people are using Tinder now,” Swidler said. “If you’re looking for somebody who is a teenager and you’re thinking what are they going to use in a year or two when they are dating app eligible? That’s the audience we have to be looking at, the Gen Z audience.”

Reaching that audience is a challenge. More than 90 per cent of that generation feel frustrated with dating apps, according to Gen Z research agency YouthSight. They also feel less inclined to be in a relationship, with 40 per cent of respondents saying they were “happily single”.

Millie Shields, a 24-year-old influencer who creates TikTok videos about dating, said Tinder has a negative reputation, known for hookups rather than long-term dating.

“[Young people] tend to want to meet someone organically rather than have it forced on a dating app,” she said, adding that many people just use Tinder for entertainment.

Swidler said this stereotype was “hard to shake” but that the platform had now evolved and it was focused on making it a safe and positive space, including through the launch of a female-oriented subscription later this year.

“The key thing is the user experience being up to standard, making sure you actually are tackling those issues that younger people are very upfront about [like] abuse, harassment and unpleasant experiences,” said Rebecca McGrath, a senior technology analyst at market research provider Mintel.

“Tinder has tried getting into these other areas like currency and talking about the metaverse and . . . that’s not necessarily where they need to be putting their focus.”

Match does not share demographic figures of age or gender for Tinder, but estimates from data company App Ape suggest that 76 per cent of US Tinder users are male. Rival app Bumble’s design means women must initiate conversations on the platform — only they can send the first message to potential suitors.

Bumble increased downloads by 20 per cent last year to 21.1mn, according to data.ai, while fledgling app Thursday, which encourages in-person meetings, increased from under 1,000 downloads in 2020 to more than 200,000 last year and a further 100,000 in the first quarter of this year.

The introduction of gaming-inspired features and new subscriptions is aimed at boosting revenue as Tinder’s model relies on users paying for subscriptions or one-off spending.

In the second quarter of this year, Tinder had 10.9mn paying users — up 14 per cent year on year — amounting to more than 60 per cent of the Match Group’s total paying users who spend a monthly average of $15.86 per person.

In comparison Bumble has more than 1.9mn paying users, spending an average of just under $30 per month.

Both Tinder and Bumble declined to provide figures for total users, including those using the app for free.

However, as the cost of living increases, consumers are cutting down on discretionary spending such as digital subscriptions, which the company anticipates will impact revenue.

“Paying even a small amount for online dating is probably for many people a fairly easy cut if they can have a fairly equivalent free experience,” McGrath added.

Swidler remains confident about Tinder’s outlook. “Tinder is still the largest dating business in the world,” he said. “And that has a significant advantage because if you want to meet people, the best place to go is where there’s a lot of people.”

FT : Manchester United’s descent revives ownership question

Manchester United’s descent revives ownership question
Plus, the Tokyo Olympics corruption probe, Disney’s sports empire, and much more

This summer’s transfer window has baffled the world of football. Todd Boehly and Clearlake Capital are spending freely at Chelsea, defying fears that American investors would tighten the purse strings. FC Barcelona have shaken off the financial straitjacket long enough to register some (not all) of the club’s many new signings. And newly promoted Nottingham Forest have taken an unorthodox “buy an entirely new squad” approach to this season, spending £130mn so far on 15 arrivals.

Over at Manchester United, a much bigger trade is rumoured to be in play: the Glazer family could, perhaps, just possibly, be willing to sell England’s most famous club. It’s worth noting that headlines about United being for sale have been around for more than a decade.

Still, we spent the week ringing up the sort of investors who’d love to buy in . . . but they’re sceptical. Further, we have a special dispatch from the FT’s Asia business editor Leo Lewis on corruption arrests related to last year’s Tokyo Olympics. Do read on — Samuel Agini, sports business reporter

Manchester United head into this weekend in an unfamiliar position: sitting bottom of the Premier League. The team’s dire performance has led to demands for “radical change” from the supporters’ trust, and helped fuel speculation that the Glazer family’s hold over the club might be up for discussion. Billionaire fan Jim Ratcliffe even pitched himself as a heroic white (or red?) knight should the “for sale” sign go up.

Critics accuse the club’s American owners of hoovering cash out since they bought it in a leveraged buyout in 2005. More than £1bn has gone on interest payments, debts and dividends under their ownership. All that money has come from the club’s own coffers, while rivals Manchester City and Chelsea have had the support of wealthy benefactors.

But United’s on-pitch troubles cannot be blamed on being frugal. The club has spent £1.35bn on players in the past 10 years, according to Transfermarkt, the fifth biggest spender in Europe and third highest in the Premier League. In that time the club has recorded a negative balance of £971mn in the transfer market, easily the worst in Europe. Waste, not want, has been the issue.

As recently as 2018, United sat at the top of Deloitte’s financial league table of European football in terms of revenue. Now it languishes in fifth.

The Glazers have long resisted vitriol from supporters. Despite the club’s poor start to the new season, longtime Glazer watchers are sceptical about the prospect of a change of control. After all, the family has sold shares before, notably in the club’s 2012 initial public offering in New York, without giving up their hold on the voting rights.

And if all that’s up for grabs is a minority stake, why bother? The Glazers, loathed by fans and struggling to build a side that can win, would still call the shots.

“Nobody in their right mind would take a minority interest in the club if the Glazer children continued to play any part in its affairs,” said a financier and United supporter watching the situation closely. The club has not commented this week on reports of a possible stake sale.

Others do see the logic. Sports bankers say United have no shortage of suitors. The club is a bigger brand and business than Chelsea, which fetched £2.5bn from US financier Todd Boehly and private equity firm Clearlake Capital in May.

Shares currently trade at about $14, well off the high of more than $20 last year. With an equity value of $2bn, getting in now could be attractive for an investor convinced of either better days ahead or a future buyout offer big enough to start a conversation. And in a scenario where the Glazers felt compelled to sell, a chunky stake should guarantee a seat at the negotiating table.

Barrons : China Stocks Are No Longer a Sure Thing. Where to Invest Now.

China Stocks Are No Longer a Sure Thing. Where to Invest Now.

For decades, China has been synonymous with fast growth. Multinational companies invested billions in supply chains and production hubs, and catered to the millions of Chinese who climbed out of poverty into a growing middle class. Investors reaped robust returns.

No longer.

This powerful engine of global growth is sputtering, and the economic cooperation that underpinned the U.S.-China relationship is at risk. China’s slump threatens the near-term profits of companies such as Tesla TSLA –2.05% (ticker: TSLA) and Apple AAPL –1.51% (AAPL), along with mining and other firms that count China as one of their biggest customers. Instead of lifting the global economy, China’s malaise adds to the risk of a global recession.

“For anyone investing in China on the notion this is the growth engine of the world, it’s not so clear-cut,” says Justin Leverenz, manager of the Invesco Developing Markets fund.

Beijing’s bid to create a more level playing field, to focus on data security, and to promote economic equality over profits upended business models of education companies, financial-technology upstarts like Ant Group, and internet behemoths such as Alibaba Group BABA –1.22% (BABA) and Tencent Holdings (700.Hong Kong).

Adding to the pressure is increasing U.S. bipartisan support for a tougher stance against China, plus the Securities and Exchange Commission’s plans to delist Chinese companies that don’t fully open up their books. Five state-owned companies, including PetroChina (PTR) and China Petroleum & Chemical (SNP), decided to voluntarily delist on Aug. 12, sending their shares lower.

Amid the turmoil, the MSCI China index has fallen 50% from its February 2021 high, with many investors reducing stakes in the internet stocks that dominated the index. Bridgewater Associates, the world’s largest hedge fund and a longtime investor in China, sold roughly $1 billion worth of Alibaba, Bilibili (BILI), JD.com (JD), NetEase (NTES), and DiDi Global DIDIY –4.08% (DIDI), according to a recent filing.

At 10 times 2023 earnings, Chinese stocks are now one of the cheapest pockets of the market—selling at a 40% discount to the S&P 500 indexSPX –1.29% and 20% discount to battered European stocks. For some, extreme pessimism means a bottom could be near. But for other money managers, there is too much uncertainty to plunge in now.

“Owning Chinese assets is not something that we’re comfortable with in an aggressive way,” says Jitania Kandhari, head of macro and thematic research for Morgan Stanley Investment Management’s emerging markets equities team.
While Kandhari’s team has long underweighted its China exposure compared with its index benchmark, it has pulled back further amid geopolitical risks and worries about increasing government interference in the private sector.

The risk ratcheted up after China fired ballistic missiles over Taiwan, and stepped up military exercises around the island in response to visits by U.S. congressional delegations this month. China sees Taiwan as part of China and has vowed to take it over, by force if necessary.

Analysts see few signs of an imminent military invasion, in part because China relies on Taiwan for semiconductor chips and needs access to critical technology from the West. But the risk of an incident that spurs a conflict looms. Meanwhile, China’s military drills showcased its ability to implement a blockade of Taiwan that could disrupt a semiconductor hub critical for the global economy.

The conflict is leading to a reassessment of basic assumptions held by investors and multinational companies, says Jude Blanchette, the Freeman Chair in China Studies at the Center for Strategic and International Studies. “If this was a competition, now it’s very much a rivalry. The echoes of the Cold War are becoming louder, and discussions in Beijing and Washington, D.C., are now about crisis management,” he adds.

China’s flagging economy is also spooking investors. The Communist Party’s power is built on improving living conditions, with rising income and spreading wealth. Now, a generation that grew up with strong growth, rising property prices, and ample opportunity faces an unfamiliar slowdown. Household employment and income expectations have sunk to decade lows, according to the People’s Bank of China urban depositor survey.

China’s strict Covid policies in the early days of the outbreak in 2020 was a source of pride, as China’s economy was one of the few to grow that year. But its zero-Covid approach has turned into a source of economic distress and growing frustration this year as the more transmissible Omicron variant forced cities like Shanghai into a two-month lockdown.

Though China eked out 0.4% growth in the second quarter—far from the 5.5% annual target it set earlier this year—policy makers haven’t meaningfully softened their stance, in part because their healthcare system is ill-equipped to deal with a major outbreak, their vaccine hasn’t been as effective as other versions, and older Chinese have been slow to get vaccinated. The threat of getting stranded because of a Covid outbreak, as 80,000 tourists did on the island of Hainan this month, or locked in a mall for days, has curtailed economic activity.

China’s crackdown on technology sectors created its own strain, with companies like Alibaba, Tencent, and JD.com laying off as much as 15% of their workers, according to Rhodium Group. Roughly one in five 16- to 24-year-olds were out of a job in July, with unemployment nearing 20%.

“The job market is brutal. The start-up scene is not as optimistic as two to three years ago, as funding has stalled. People are taking gig jobs and cutting back on going out,” says Zak Dychtwald, CEO of Young China Group, a research and consulting firm. Dychtwald says the situation is the worst since he started tracking China’s roughly 700 million people under the age of 40 a dozen years ago. That’s reflected in a reduced appetite to borrow money, even as China makes it easier to do so.

The continued slump in the property market also weighs on the economy. Policy makers engineered a slump by cracking down on excess borrowing by property developers to curtail the speculation that had put real estate out of the reach of many in the middle class.

The crackdown turned into a bust. Property prices have fallen for 11 consecutive months, damaging one of the biggest stores of household wealth and a sector that supports roughly 30% of gross domestic product. Developers are defaulting while others suspend construction as financing dries up, triggering mortgage boycotts from homeowners who prepaid for unfinished properties.

In the past, China responded to economic pain with massive stimulus. But its largess following the global financial crisis left it with a debt hangover. While it has taken steps to stabilize the economy, including its move this past week to cut interest rates, few expect a major stimulus.

That feeds concerns around the current slump. “The longer China is grappling with anemic economic activity, the higher the risk of a destabilizing shock,” says Rory Green, head of China and Asia Research at TS Lombard.

The stakes are especially high for this fall’s 20th Party Congress, the once-in-five-year leadership transition for the Communist Party, which analysts describe as the most consequential conclave of 40 years.

President Xi Jinping, who scrapped term limits in 2018, is still widely expected to secure a norm-busting third term. Robert Daly, director of the Wilson Center’s Kissinger Institute on China and the United States, expects Xi to consolidate power and double down on insularity rather than pivot toward opening the economy.

For some investors, China’s authoritarian turn, including its crackdown on dissents in Hong Kong and human-rights abuses in Xinjiang, makes Chinese stocks off limits. But for other investors, access to China is still of interest, albeit in a more targeted way, as the government bolsters its technological capabilities, and tries to become more self-sufficient.

Chinese stocks now appear attractive compared with the U.S. or Europe. China is stimulating its economy, while much of the rest of the world is raising interest rates and trying to tame inflation. Any steps by Beijing to relax its Covid restrictions after the Party Congress would also lift the market.

But stocks to own for the next phase of China’s evolution are different from those of the last. Matthews Asia Chief Investment Officer Robert Horrocks expects emphasis on what Beijing calls common prosperity after the Party Congress, as the government increases middle-class access to education, property, and financial services.

“We view the line between private and public companies as increasingly blurred and have adjusted our risk and valuation analysis accordingly,” says Howie Schwab, co-manager of the Driehaus Emerging Markets Growth (DREGX) fund, which has 22% allocated in China, compared with roughly 30% last year. Schwab is also trying to steer clear of companies at a higher risk of sanctions or geopolitical brinkmanship—which includes technology and some biotech names.

Others, like value-oriented James Donald, a co-manager on the Lazard Emerging Markets Equity Portfolio (LZOEX), are bypassing internet behemoths such as Alibaba and Tencent. In August, both companies reported their first quarter of year-over-year revenue declines since going public. “Everyone says they are a bargain, but these companies’ profitability has come down from 35% to 10%. It’s the reason we aren’t buying,” he says.

Rajiv Jain, manager of the GQG Partners Emerging Markets Equity (GQGPX) fund, is also rethinking companies with dominant leading positions because it puts them in the crosshairs of Beijing’s antimonopoly drive. Being a strong second- or third- tier player might be a better option.

“Ultimately, it’s not a level playing field. We have a new love for state-owned enterprises,” says Jain, who is gravitating toward companies whose growth is slower but dependable, and are priced accordingly. That includes China Merchants Bank (60036.China) and China Construction Bank (601939.China).

Matthews’ Horrocks is focusing on the domestic champions that China is trying to build in healthcare, financials, and consumer-oriented sectors. One holding in the Matthews Asian Growth & Income (MACSX) fund, where he is the lead manager, is AIA Group (1299.Hong Kong), a leading life insurer in Asia with a high-caliber distribution force.

Another area of focus for Horrocks: companies in areas that require elevated levels of research and development, like high-end biomedical and pharmaceutical products. Government intervention, such as price controls, could be counterproductive in those areas, since it could curtail innovation.

Others are gravitating to semiconductor, hardware, and industrial companies that stand to benefit as China tries to reduce its reliance on foreign companies and invests to maintain a leading position in clean technologies. Driehaus’ Schwab has been buying more companies like Suzhou Maxwell Technologies (300751.China), which makes equipment for the solar industry.

Philip Wool, who manages the Rayliant Quantamental China Equity exchange-traded fund (RAYC), has been looking for cheaper ways to benefit from the focus on renewables, including YongXing Special Materials Technology (002756.China), a steel maker that also has a fast-growing lithium carbonate business, which used in electric-vehicle batteries.

Many of the companies that stand to benefit from China’s next phase of growth are domestically-oriented, says Matthews’ Horrocks. And the sectors that excite investors now account for roughly just a quarter of the MSCI China index, according to Morgan Stanley’s Kandhari.

One thing is clear. “Investors need to tread more carefully than in the past,” says Leverenz, the Invesco fund manager.

Barrons : Tech’s Rally Is Too Good to Be True. Why the Nasdaq Looks Due for Anot

Tech’s Rally Is Too Good to Be True. Why the Nasdaq Looks Due for Another Fall.

For years, tech investors seemed to outrun every bit of trouble, like the Road Runner in the old Looney Tunes cartoon. But this summer, tech buyers have changed roles. Suddenly, they look more like Wile E. Coyote, the Road Runner’s flailing pursuer. Wile would always make headway running off a cliff through the air, but after a certain point he would look down and realize his poor predicament. Gravity would take hold, and Wile would suffer a painful fall.

Since a June low, technology stocks have soared, with the Nasdaq Composite index up 20%. But the classic Looney Tunes cartoon offers a lesson to investors. Reality eventually matters.

The sustainability of any rally led by triple-digit percentage gains from money-losing firms like Coinbase Globa l (ticker: COIN) and FuboTV (FUBO) is suspect. More important, the latest developments show business trends in the technology sector could be getting worse, not better, suggesting a rough ride ahead for shareholders.

The weakness in consumer-oriented end markets including PCs, electronics, smartphones, and digital internet advertising has been well chronicled. We’ve seen big warnings from major suppliers, and the pricing for computers, processors, memory chips, and graphics cards continues to drop every day. There is no sign of a quick turnaround in these markets.

But the bigger problem now is that the slowdown seems to be spreading to the one place that has held up relatively well: enterprise technology spending. That’s important. If tech demand from business falls apart—an annual market worth more than $4 trillion, according to Gartner—it will drive another leg down in the tech industry’s earnings forecasts, likely leading to a multiquarter downturn.

This earnings season has been full of clues about the weakness, as much as some investors have tried to ignore them. The initial indication came in late July from Intel ’s (INTC) disastrous earnings, which showed much softer demand from its corporate data-center customers. Days later, Advanced Micro Devices (AMD) posted good results overall but admitted it had started to see “mixed” trends from its enterprise customers, with some deals taking longer to close.

Then this past week, there was further evidence that the attitude from corporate technology buyers seems to be shifting. Like AMD, chip maker Analog Devices (ADI) reported solid earnings but said uncertainty about the economy had begun to hit business in recent weeks, with order cancellations rising slightly. Thus far, Analog Devices’ business has been more resilient than other semiconductor companies because of its exposure to the automotive and industrial segments, where demand has stayed strong. But the company’s newly cautious commentary is sparking fears that the weakness will soon cascade elsewhere.

There are other cracks that have begun to appear in some of the hottest growth areas, according to surveys Wall Street has conducted with purchasers of enterprise software. On Monday, UBS analyst Karl Keirstead said his latest conversations showed roughly half of his contacts saw “some likely pressure” for their data-analytics software budgets, adding it was negative feedback they weren’t getting in the past. A report from Morgan Stanley said the firm was hearing incremental weakness when talking to buyers of cloud marketing software.

To be sure, it wasn’t all bad news this past week. Earnings from Cisco Systems (CSCO) proved to be an outlier. On Thursday, Cisco shares jumped 6% after the networking and security products maker posted better-than-expected earnings.

In an interview with Barron’s, Chief Financial Officer Scott Herren said Cisco’s business may be more insulated and less correlated to other sectors than it has been in the past, adding that corporations have realized they can’t afford to delay upgrading their networking infrastructure in the modern economy. Cisco could prove to be the exception.

The market has looked past the broader deterioration over the past few weeks. Why? Because we might just be in the middle of a bear-market bounce in which fundamentals have been temporarily cast aside.

During a summer presentation to its clients, Coatue—a large technology hedge fund that has been able to avoid the massive losses suffered by some of its major peers—warned that declining markets are often punctuated by several sharp rallies. In one slide, the firm noted that the Nasdaq’s 70% decline from early 2000 to late 2001 had three rallies of roughly 30% or more.

My view is that the turnaround hasn’t yet arrived, given the recent data points on enterprise spending. It takes time for IT budgets to adjust to new business realities. We’ve heard plenty about hiring slowdowns. In the coming quarters, it’s likely we’ll see similar slowdowns in spending, as well.

Meanwhile, Coatue has told its clients to be patient in a perilous environment. The firm suggests buying long-term winners, while being disciplined on entry prices.

My list of winners starts with Microsoft (MSFT), AMD, Alphabet (GOOGL), and Taiwan Semiconductor Manufacturing (TSM). The stocks are well off their highs despite continued robust growth and strong market positions. They’re the Road Runners in today’s tech landscape.

Barrons : Buy This New Health Stock. It Offers Steady Growth and a Planned Divid

Buy This New Health Stock. It Offers Steady Growth and a Planned Dividend.

In January, the United Kingdom pharmaceutical firm GSK turned down Unilever ’s offer of 50 billion pounds sterling, or about $60 billion, to buy its consumer healthcare division, saying the price was too low.

Six months later, the former division is a stand-alone public company called Haleon (ticker: HLN), with a market value of £24 billion, or $29 billion—about half of what Unilever (UL) was willing to pay. That gives investors in the GSK (GSK) spinoff a chance to get in at a bargain price—just over $6 for each American depositary receipt, or ADR.

The company is valued at 13.5 times the FactSet consensus estimate for 2023 earnings. That’s a lower multiple than that of other companies selling consumer healthcare products, including Unilever, which trades at over 17 times its estimated 2023 earnings, and Procter & Gamble (PG), which trades at 24 times projected earnings.

While Unilever sells ice cream and Procter & Gamble sells toilet paper—among many other products—Haleon is a large-cap, pure-play consumer healthcare firm. Other public pure-play consumer healthcare companies, notably Perrigo (PRGO) and Prestige Consumer Healthcare (PBH), operate at a far smaller scale, with market values of less than $6 billion.

That lack of a peer group, and Haleon’s skimpy track record as a stand-alone company, make it more speculative than other consumer products companies. More clarity will come after a few quarters of earnings reports, plus Johnson & Johnson ’s (JNJ) planned spinoff of its consumer health division next year. Haleon and the J&J spinoff will make up a new category—newly public consumer health companies that spent decades under Big Pharma’s umbrella.

Haleon, which started trading as a separate company in July, sells oral health products like Sensodyne and Aquafresh; over-the-counter drugs, including Advil and Theraflu, and vitamins and supplements, including the multivitamin brand Centrum.

The consumer health sector has attractive attributes. Demand tends to hold up in recessions, and some of its categories have high barriers to entry. In a note in mid-July, UBS analyst Guillaume Delmas estimated that the underlying growth for Haleon’s businesses will be 3.3% a year from 2023 through 2026.

Haleon is set to be a dominant player. Its 2021 sales while still part of GSK were £9.5 billion, or $11.5 billion. That’s less than J&J’s consumer health division, which sold $14.6 billion worth of goods that year, but more than Procter & Gamble’s health division, which sold $10 billion.

A stand-alone consumer health sector is likely to bring more investor attention, and higher valuations for investors seeking steady, though not spectacular, growth as they earn steady income from dividends.

Haleon says that it plans a payout starting in the first half of next year “at the lower end” of 30% to 50% of its earnings. Analysts estimate an annual dividend of six pence a share in 2023 and seven pence in 2024, according to FactSet. Based on Haleon’s recent price of 258 pence, that indicates a dividend yield of 2.3% in 2023.

Some investors have been wary of Haleon in its early days of trading. GSK launched the spinoff with a hefty net debt of £10.3 billion, or $12.4 billion, or four times earnings before interest, taxes, depreciation, and amortization. The company’s goal is to trim that to three times Ebitda by the end of 2024.

That’s not reassuring to Celine Pannuti, an analyst at J.P. Morgan Cazenove with an Underweight rating on Haleon. “For the same multiple, you can buy a company that is not levered,” she says. The high debt could keep the company from making more acquisitions in the short term, according to Pannuti.

Haleon’s chief financial officer, Tobias Hestler, says the company has “very, very strong cash conversion.” He says that Haleon can still do one smaller deal a year, for a brand with annual revenue of $30 million to $100 million, and still meet its debt target. But he says there’s not much large-scale consolidation left to do after the creation of his own company, which pieced together parts of Pfizer (PFE), GSK, and Novartis (NVS).

The company has set revenue growth projections of 4% to 6% a year, and Hestler says those rely on Haleon growing only slightly ahead of the sector. “We’ve done that historically, consistently, in our oral health business, where we’ve outgrown the category two to three [times],” he says.

Other potential headwinds are the plans of GSK and Pfizer, which together own roughly 45% of the company’s shares, to sell their stakes. The lockup period lasts until Nov. 10.

Pfizer CEO Albert Bourla says that Pfizer won’t sell recklessly. “We aren’t going to destroy value by doing stupid things,” he tells Barron’s. “It’s not strategic for us, but what is clear is we are going to maximize value.”

GSK said in a statement in June that it would monetize its Haleon shares “in a disciplined manner.”

In early August, a new worry emerged as investors focused on lawsuits over the heartburn drug Zantac. GSK and Pfizer sold over-the-counter Zantac at different times, and Haleon might be required to indemnify the companies if they are found to be liable in the litigation. It’s too early to say whether Haleon will end up having to pay anything, but its shares fell 12.5% over two days when an analyst raised the issue in early August.

More clarity on potential liability will come as trials begin next year. Meanwhile, the uncertainty gives investors a chance to snag a bargain. Haleon is a good bet on an emerging—and recession-resistant—category.

Barrons : War and the Economy: History’s Surprising Lessons

War and the Economy: History’s Surprising Lessons

Out of the horrors of war can come change that makes the world a better place.

World War I was a four-year bloodbath fought in nearly every corner of the globe that left 40 million dead or wounded and much of Europe in ruins. The “Carthaginian peace” forced upon Germany after its defeat helped plant the seeds for the hyperinflation of the 1920s, the rise of the Nazis, and the even more destructive and deadly World War II.

Yet, to instead envision World War I as the first stage in a 75-year-long struggle, as some scholars do, the perspective changes.

“If you look to 1989 from 1914,” said the historian and archaeologist Ian Morris, “then, in the big picture, there seems like a very productive outcome. The creation of the first truly global system, rates of violent death lower than ever before, wealth higher than ever before. It very much depends where you stand and what point in time you look at it from.”

Few investors have a 75-year horizon. But war—humanity’s most destructive practice—can produce positive outcomes in time, Morris concluded in his 2014 book, War! What Is It Good For? Conflict and the Progress of Civilization From Primates to Robots.

Of course, no one can bring back the dead or restore health to the wounded of a war. But the physical structures of life—roads, factories, cities—can be rebuilt, even improved.

And, in pursuit of peace, people postwar tend to support “governments that can enforce larger and larger systems of integration,” Morris said, things like treaties, trade agreements, and entities like the European Union and the North Atlantic Treaty Organization.

Today, the global system that developed after the fall of the Iron Curtain in 1989 is threatened both by another European war—as Russia’s invasion of Ukraine approaches its sixth-month mark—and a growing cold war between the U.S. and China. Wealth is under attack by the economic whirlwind that so often accompanies war—high inflation—and there are warnings of an impending global recession.

What can we expect going forward? A look back at some of America’s past conflicts might help.

The Civil War, the last fought on American soil, was a fratricidal calamity in which hyperinflation played a deadly and decisive role.

In 1860, 90% of America’s industrial output came from the Northern states, according to William C. Davis in The Cause Lost: Myths and Realities of the Confederacy. So, as the war dragged on, the South printed Confederate dollars to buy the arms, clothes, and even food it couldn’t produce.

By 1863, inflation soared past 300%, Davis wrote, and the “graybacks” were worthless. The Rebel army was overwhelmed by the North’s superior manufacturing capacity.

In the end, the war caused at least 620,000 military deaths—almost as many as all other U.S. wars combined—and left much of the South a smoldering wreck.

Yet rather than tear the Union apart, the war brought forth a stronger central government that reinforced the ties between the states. And rebuilding the South helped create America’s Gilded Age, where robber barons like Cornelius Vanderbilt and J.P. Morgan made kingly riches in the rough-and-tumble world of early capitalism.

The transcontinental railroad, completed in 1869, spread commerce across the land and gave Americans newfound mobility, knitting disparate regions into a cohesive nation. The American Industrial Revolution is generally dated from 1870 to 1914, the eve of the World War I.

Though the U.S. was spared battle on its own territory, more than 100,000 Americans died in the Great War. The nation experienced double-digit inflation from 1917 to 1920, and a depression in 1920-21.

Yet, just as the Gilded Age had followed the Civil War, so the Roaring ‘20s emerged from the ashes of World War I.


The U.S. had served as Europe’s breadbasket during the war; afterward, it was the world’s industrial powerhouse. Harnessing Henry Ford’s principles of mass production, American factories churned out such modern marvels as automobiles, airplanes, refrigerators, and radios.

Wall Street, which had financed the Allied cause, assumed its place as “the longest street in the world,” as Barron’s founder Clarence Barron called it. Many Americans shared in this growing prosperity, and some made great fortunes.

The Dow Jones Industrial Average tells the story, rising from 54.62 on Dec. 12, 1914 (the first day of trading after the New York Stock Exchange’s record four-month closure for war) to 103.73 five years later. It peaked at 381.17 on Sept. 3, 1929, a month before the Great Crash.

The Dow also tells the story of the Great Depression, tumbling to a low of 41.22 on July 8, 1932—below the 1914 reopening—and not regaining its 1929 high until 1954.


World War II reignited U.S. industrial might. The war was followed by several years of high inflation and the recession of 1949, but then the U.S. economy was off to the races. The Dow finished the 1950s at 679.36, for a 239.5% 10-year gain.

That decade brought Americans affordable air travel, interstate highways, fast food, TV, and suburbia. It also established the military-industrial complex that President Dwight Eisenhower warned against, and which has served as the world’s armory even since.

For Western Europe, this was part of “the magical postwar years referred to in France as ‘Trente Glorieuses,’ ” from 1945 to 1975, according to economist Thomas Piketty in his best-selling Capital in the Twenty-First Century.

The rebuilding process, financed by the U.S. Marshall Plan, produced average annual gross-domestic-product growth of 4% in Western Europe from 1950 to 1970—twice that in the U.S.—as the war-torn nations played “catch-up,” Piketty wrote. From 1990 to 2012, growth in both places leveled off to about 1.5%.

The postwar years also saw the creation of the United Nations, NATO, and the precursor to the EU. And the digital industrial revolution began as computers took an increasingly important role in human affairs.

“In a situation where aggregate demand is weak, say the start of World War II, then [war] can be good for the economy.”

— Ed Clissold, Ned Davis Research
By the late ’60s, near the end of Piketty’s 30 glorious years, war in Vietnam contributed to both social unrest and quickening inflation in the U.S.

War wasn’t the sole cause of the inflation of 1968 to 1983. But one thing that the hot-running economy of the ’60s didn’t need was increased defense spending.

“In a situation where aggregate demand is weak, say the start of World War II, then it can be good for the economy,” said Ed Clissold, chief U.S. strategist for Ned Davis Research, which has done extensive research on war and the markets.

“But, in cases where aggregate demand is already strong, it can lead to higher inflationary pressures,” he said. “Like in the Vietnam War, when [President Lyndon] Johnson had his ‘guns and butter’ approach, where he was trying to expand his Great Society and conduct a war.”

The Federal Reserve eventually contained the great inflation, causing the double-dip recession of 1980-’82. What followed was yet another golden age for America, at least for the stock market.

The Dow rose 228.2% in the 1980s, trailing only the gain of the ’50s, then soared a record 317.6% in the ’90s. The Nasdaq climbed even higher, as an internet-connected America kicked off the yet another industrial revolution.

The market fell after the Sept. 11, 2001, terrorist attacks. But the “forever wars” in Afghanistan and Iraq were mostly prosecuted during bull markets, slowed only by the subprime-mortgage crisis and the Covid-19 pandemic.

We’re still feeling the effects of the Fed’s unprecedented response to the pandemic lockdown, with inflation hovering near four-decade highs. Russia’s invasion of Ukraine has exacerbated the price spikes, creating energy and grain shortages and supply-line snarls.

What’s next, as war in Ukraine drags on?

To Morris, the historian, Putin’s invasion has so far “produced the exact opposite of what the Russian leader wants. NATO is considering an application by Ukraine,” something that was far-fetched before the war, while Sweden and Finland are likely to join the military alliance within months.

Morris suggests that a victory by the West might be another turning point toward a safer, more prosperous world. But other outcomes are possible.

“If it looks like Russia basically got what it wanted,” he said, “that would encourage more of this sort of behavior, and the risks of there being another great global war really go up.” Specifically, he said, it might embolden China’s Xi Jinping in his quest to take Taiwan.

However the war is decided, rebuilding Ukraine will be a monumental job. That presents an opportunity for another “Marshall Plan–type of aid package,” said Ned Davis Research’s Clissold.

Who will profit from this plan?

>>> Weekly Market Update

Weekly Market Update: Recent market speculation gets a reality check

Markets came into the week riding a wave of momentum spurred by a revival of animal spirits as evident by a gathering, resurgence in both ‘Meme’ stocks and cryptocurrency markets. Treasury yields remained subdued, capped in part by growth worries emanating out of China as well as an ongoing belief that after some recent constructive inflation data the Fed could ultimately be successful in orchestrating a “softish” landing without needing to raise rates as aggressively as once universally thought. By mid-week the S&P tested its key 200-day moving on several occasions, albeit in a very thin late summertime trading environment.

Wednesday saw the S&P 500 top out at 4325 in the moments following the release of what were generally viewed as dovish FOMC minutes, at least relative to expectations. From there the bears gained the upper hand. Valuation began to come under closer scrutiny because many acknowledged there was little to no room for error for an S&P 500 trading at 18x a likely over-generous 2023 earnings forecasts. Also quarterly retail earnings reports were offering a familiar refrain, namely corporate financial outlooks and margins that were coming under pressure due to macro headwinds faced by consumers and rising promotional activity by industry competitors. Persistent inflationary readings coming out of the EU and UK and surging natural gas prices resulted in growing consternation. Those invigorated inflation worries were married with Fed officials whose comments continued to tamp down expectations of any looming Fed pivot.

By Friday, the party in the Meme stocks left a nasty hangover for investors in Bed Bath and Beyond as shares plunged after RC Ventures’ Ryan Cohen confirmed he liquidated his entire 11% position just days after igniting a feeding frenzy through an updated 13D holdings filing at the SEC. As stocks lost favor, Treasury yields moved noticeably higher and by Friday the benchmark US 10-yield was pushing back towards 3% for the first time nearly a month. For the week, the S&P 500 lost 1.2%, the DJIA was off 0.2%, and the Nasdaq dropped 2.6%.

Corporate earnings season wound down early this week with a few last highlights. Kohl’s beat expectations but saw negative same store sales and slashed its guidance as it reported high inflation was dampening consumer spending. Walmart’s earnings report was more impressive, beating top and bottom line estimates as it strove to improve supply chain costs, work down inventories, and noted a solid start to the back-to-school season. Home Depot share built some momentum as it put together record Q2 results reflecting continued strength in demand for home improvement projects. GM heartened investors by reinstating its dividend with a 1% implied yield as well as boosting its buyback program as it affirmed plans to invest over $35B in growth through 2025. Occidental shares flowed higher on Friday as the FERC revealed that Berkshire Hathaway was granted approval to accumulate as much as 50% of the oil major (from its current 18.72% stake).


SUN 8/14
ARAMCO.SA Reports Q2 (SAR) Net 181.6B v 95.5B y/y, Rev 562.1B v 312.4B y/y; To pay $18.8B in dividends during Q3
(CN) Shanghai to reopen all schools including kindergartens, primary and middle schools on Sept 1st - press
(CN) China PLA Eastern Theater Command likely to conduct strong & powerful military operations in the waters & airspaces around the island of Taiwan as countermeasures to latest US lawmakers' visit to the island - Global Times
*(CN) CHINA PBOC CUTS 7-DAY REVERSE REPO RATE TO 2.00% FROM 2.10% [1st cut since Jan]
*(CN) CHINA JULY RETAIL SALES Y/Y: 2.7% V 4.9%E; YTD Y/Y: -0.2% V +0.1%E
MON 8/15
(IR) Iran Foreign Ministry: Nuclear talks progress does not fully meet our expectation, but some of our expectations have been met; Basis exists for signing JCPOA nuclear deal in very near future
(DE) Rhine river level at key German point Kaug (between Frankfurt and Dusseldorf) drops to 30cm v 40cm last week and ~150cm needed to carry fully loaded vessels
*(US) AUG EMPIRE MANUFACTURING: -31.3 V +5.0E (3rd negative reading in 4 months and lowest since May 2020)
*(US) AUG NAHB HOUSING MARKET INDEX: 49 V 55E
CAH Elliott reportedly has taken a 'large position' in Cardinal and nominated five directors to the board in early Aug - press
TUES 8/16
3690.HK Tencent said to plan sell all or bulk of its 17% stake in Meituan as early as this year; The stake said to be valued at ~$24B - press
NYR.BE Said to shut down major Buden zinc smelter in Nethelands amid energy costs from Sept 1st; To place Buden zinc smelter on care and maintenance - press
HD Reports Q2 $5.05 v $4.95e, Rev $43.8B v $43.3Be
(US) US military conducted a 'routine test' of unarmed Minuteman III intercontinental ballistic missile; Test showed readiness of US nuclear forces - Pentagon statement
WMT Reports Q2 $1.77 v $1.60e, Rev $152.9B v $151.4Be; Notes work is ongoing to improve costs in its supply chain
Redfin report: ~63K US home-purchase agreements fell through in July (16.1% of homes that went under contract that month, highest rate in more than two years)
*(US) JULY HOUSING STARTS: 1.446M V 1.527ME; BUILDING PERMITS: 1.674M V 1.640ME
*(CA) CANADA JULY CPI M/M: 0.1% V 0.1%E; Y/Y: 7.6% V 7.6%E (moves off recent cycle highs)
*(US) JULY INDUSTRIAL PRODUCTION M/M: 0.6% V 0.3%E; CAPACITY UTILIZATION: 80.3% V 80.2%E
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -2.9% v -5.0% prior
(US) US govt announces 2023 water cuts to states that rely on Colorado River; Lake Mead expected to be projected to shrink to 'dangerously low levels' - press
A Reports Q3 $1.34 v $1.20e, Rev $1.72B v $1.64Be; Raises FY outlook
WEDS 8/17
NHY.NO Slovalco will stop primary aluminium production
*(UK) JULY CPI M/M: 0.6% V 0.4%E; Y/Y: 10.1% V 9.8%E (12th month above target and highest annual pace since Feb 1982)
700.HK Reports Q2 (CNY) adj Net 28.1B v 34.0B y/y, Rev 134.0B v 138.3B y/y (first quarterly revenue drop since 2004 listing)
(EU) Daily 3-month Euribor Fixing: 0.351% v 0.333% prior (highest since 2012)
OPEC Sec Gen al-Ghais: Open for dialogue with US; Spare capacity about 2-3Mbpd is running on thin ice
ADI Reports Q3 $2.52 v $2.43e, Rev $3.11B v $3.06Be; Notes economic uncertainty beginning to impact bookings, demand continues to outpace supply
*(US) JULY ADVANCE RETAIL SALES M/M: 0.0% V 0.1%E; RETAIL SALES (EX-AUTO) M/M: +0.4% V -0.1%E
(US) Association of American Railroads weekly rail traffic report for week ending Aug 13th: 503K total units, -0.3% y/y
(US) Atlanta Fed GDPNow: Cuts Q3 GDP to 1.6% from 1.8% prior
(US) TREASURY $15B 20-YEAR BOND AUCTION DRAWS 3.380% v 3.290% prior, BID-TO-COVER 2.30 v 2.50 PRIOR AND 2.40 OVER LAST 4 AUCTIONS
(US) CDC Director Rochelle Walensky announces major modifications to CDC’s structure, including staffing changes and efforts to improve public messaging; CDC currently has a $12B annual budget
*(US) FOMC JULY MEETING MINUTES: OFFICIALS SAW ONGOING RATE HIKES AS APPROPRIATE; SAW RISK IF PUBLIC QUESTIONS FED'S INFLATION RESOLVE; 'at some point' it would be appropriate to slow pace of increases
*(AU) AUSTRALIA JULY EMPLOYMENT CHANGE: -40.9K V +25.0KE (First decrease since Oct 2021); UNEMPLOYMENT RATE: 3.4% V 3.5%E (Lowest since Aug 1974)
THURS 8/18
(DE) ECB's Schnabel (Germany): Favor another large interest rate increase in Sept even as recession risks harden; Inflation is going to increase further, outlook hasn't improved
(CN) China's banking regulator CBIRC said to be probing property sector loan portfolios of some local and foreign lenders to assess systemic risks - financial press
*(PH) PHILIPPINES CENTRAL BANK (BSP) RAISES OVERNIGHT BORROWING RATE BY 50BPS TO 3.75%; AS EXPECTED
(DE) Rhine river open one way after barge blocking it after engine failute has been towed away - press
(CN) China Ministry of Commerce (MOFCOM) official: Reiterates stance to take forceful measures to safeguard its legitimate rights when necessary - speaking on US CHIPS act
(UR) Russia reportedly changed its position on potential meeting between Pres Putin and Ukraine Pres Zelenskiy; Putin and Zelenskiy may meet before the negotiators finish a roadmap towards the potential peace deal - CNN Turk
(UK) Bank of England (BOE) sets out final operational details ahead of the start of programme of sales of corporate bonds held in the Asset Purchase Facility in the week beginning Sept 19th
(DE) German Chancellor Scholz: To temporarily cut VAT on gas from 19% to 7%; effective Oct 1st until end of March 2024
TPR Reports Q4 $0.78 v $0.78e, Rev $1.62B v $1.64Be; Raises Quarterly dividend 20% to $0.30 from $0.25 (indicated yield 2.69%)
KSS Reports Q2 $1.11 v $1.08e, Rev $4.09B v $4.07Be; Cuts sharply FY22 outlook, taking actions to reduce inventory; $500M accelerated share buyback and remains firmly committed to current dividend
*(US) INITIAL JOBLESS CLAIMS: 250K V 264KE; CONTINUING CLAIMS: 1.437M V 1.45ME
*(US) AUG PHILADELPHIA FED BUSINESS OUTLOOK: +6.2 V -5.0E (1st positive reading in 3 months)
*(US) JULY EXISTING HOME SALES: 4.81M V 4.87ME
*(US) JULY LEADING INDEX: -0.4% V -0.5%E
OPEC Sec Gen al-Ghais: Policymakers and lawmakers are to blame for high energy prices
(US) Fed’s Bullard (voter, hawk): Leaning towards supporting 75bps hike in Sept; Front-loading rate hikes this year gives Fed options in 2023; Fed can get inflation down over a roughly 18-month period
AMAT Reports Q3 $1.94 v $1.78e, Rev $6.52B v $6.26Be
BBBY RC Ventures (Ryan Cohen) confirms liquidated stake - 13D filing
(UK) Aug GfK Consumer Confidence: -44 v -42e (Record Low)
USD/CNY (CN) China PBOC sets Yuan reference rate: 6.8065 v 6.7802 prior (weakest fix since Sept 2020)
FRI 8/19
(UK) JULY RETAIL SALES (EX-AUTO/FUEL) M/M: +0.4% V -0.3%E; Y/Y: -3.0% V -3.1%E
(DE) Germany July PPI M/M: 5.3% v 0.7%e; Y/Y: 37.2% v 31.8%e (highest annual pace in 70-years and biggest monthly increase on record)
(DE) Rhine river water level forecast to hit 148cm at Kaub point on Aug 23rd v 40cm w/w and ~150cm needed to carry fully loaded vessels – press
DE Reports Q3 $6.16 v $6.62e, Rev (Equipment Ops) $13.0B v $12.9Be
(CN) China launches measures to secure house delivery as fund pressure remains; To support construction and delivery of unfinished residential projects through special loans schemes from policy banks - Chinese press
GM Reinstates quarterly dividend at $0.09/shr, 1% implied yield (suspended $0.38/shr in Apr 2020); Increases buybacks by $1.7B to $5.0B (8.8% of market cap); Affirms to invest more than $35B through 2025 to advance its growth plan
OXY FERC document shows Berkshire requested and was approved to accumulate up to 50% stake in OXY (from current 18.72% stake)

>>> US Close Dow -0,86% S&P -1,29% Nasdaq -2,01% Russell -2,17%

Closing Stock Market Summary

The market opened on a downbeat and never found its footing on this options expiration day. It was a risk-off trade following Germany's hot PPI data, which renewed inflationary concerns. Higher long-term rates acted as a headwind while price action in meme stocks, particularly Bed Bath & Beyond (BBBY 11.03, -7.52, -40.5%), offered a reality check for the market.

The S&P 500 was down 1.2% for the week; the Dow Jones Industrial Average was down 0.2% for the week; the Nasdaq Composite was down 2.6% for the week.

Bed Bath & Beyond fell sharply on news that Ryan Cohen's RC Ventures completed the sale of its stake in BBBY and a Bloomberg Law report that suggested the company hired Kirkland & Ellis to help address matters pertaining to the company's debt load.

Mega caps and growth stocks drove the market lower today. The Vanguard Mega Cap Growth ETF (MGK) fell 1.9% versus a 1.3% loss in the Invesco S&P 500 Equal Weight ETF (RSP). The Russell 3000 Growth Index (-1.7%) trailed the Russell 3000 Value Index (-1.2%). 

Semiconductors were especially weak after Applied Materials' (AMAT 104.63, -3.64, -3.4%) cautious commentary that accompanied its earnings report. The PHLX Semiconductor Index fell 2.8%. 

S&P 500 sector performance showed a risk-off trade. Countercyclical sectors, utilities (-0.1%), consumer staples (-0.4%), and health care (+0.3%), closed ahead of the broader market. Notably, utilities and consumer staples were two of only three sectors to close the week with gains, up 1.2% and 1.9%, respectively. The other week-to-date gainer was energy, up 1.0%.

The advance-decline line heavily favored decliners. Decliners led advancers by a nearly 6-to-1 margin at the NYSE and a 10-to-3 margin at the Nasdaq. 

Germany's hotter-than-expected PPI reading affected Treasury market action. The 2-yr note yield rose three basis points to 3.25% and was unchanged for the week. The 10-yr note yield, flirting with the 3.00% level, rose 11 basis points on the day and 14 basis points for the week to 2.99%.

There was no U.S. economic data of note today. 

Dow Jones Industrial Average: -7.4% YTD
S&P 400: -9.2% YTD
S&P 500: -11.3% YTD
Russell 2000: -12.8% YTD
Nasdaq Composite: -18.6% YTD