Zapping up
In reaction to earnings/guidance:
- FDX +2.4%
Other news:
- BALY +6% (announces modified "Dutch auction" tender offer to purchase shares at $19.25-$22)
- FERG +3.4% (enters entered into a non-discretionary arrangement with its brokers J.P. Morgan Securities in continuation of its $2 billion share repurchase program)
- BHC +3.3% (chairman resigns)
- SNY +3.2% (Sanofi-GSK first to report a successful efficacy study against Omicron with COVID-19 Beta-containing vaccine)
- NRDS +3.2% (to acquire On The Barrelhead for $120 mln)
- EBS +3.1% (receives FDA Acceptance of BLA for AV7909 Anthrax vaccine candidate)
- NTLA +2.4% (Intellia Therapeutics and Regeneron Pharmaceuticals (REGN) announce additional "positive" interim data from an ongoing Phase 1 study of their lead investigational in vivo genome editing candidate NTLA-2001)
- BMRN +2.3% (confirms that the Committee for Medicinal Products for Human Use has adopted a positive opinion recommending conditional marketing authorization for its investigational gene therapy valoctocogene roxaparvovec for adults with severe hemophilia A)
- CSTL +2.2% (announces study findings that evaluated DecisionDx-UM)
- BCS +2.2% (acquires Kensington Mortgage Company)
- TAK +1.9% (to succeed to the rights and obligations relating to Plasma-Derived Therapies and all other businesses of Nihon through an absorption-type company split)
- NVS +1.8% (receives positive CHMP opinion for Scemblix a novel treatment for adult patients with chronic myeloid leukemia)
- RKLB +1.7% (prepares to launch CAPSTONE to the Moon)
- DDOG +1.6% (launches Datadog Audit Trail)
- PRIM +1.6% (receives $260 mln solar project award)
- GSK +1.1% (Sanofi-GSK first to report a successful efficacy study against Omicron with COVID-19 Beta-containing vaccine)
- PBR +1.1% (approved the sale of its total stake in the maritime concessions groups named Golfinho Cluster and Camarupim Cluster)
Analyst comments:
- ACB +4.2% (upgraded to Overweight from Neutral at Cantor Fitzgerald)
- BDX +1.2% (upgraded to Overweight from Equal Weight at Wells Fargo)
Early premarket gappers
- Gapping up:
- PRIM +5.5%, FERG +5%, SWBI +4.5%, SWBI +4.5%, SNY +2.9%, FDX +2.7%, CSTL +2.2%, BHC +1.9%, TAK +1.9%, RKLB +1.5%, DDOG +1.3%, BCS +1.3%, GSK +1.3%, PBR +1.3%, NRDS +1.2%, AZZ +0.7%
- Gapping down:
- CAMP -16.4%, TREE -9.8%, REV -6.7%, SRPT -3.9%, BB -0.9%, NVAX -0.6%
>>> Up
* Air France-KLM Raised to Hold at Deutsche Bank; PT 1.50 euros
* Altria Raised to Equal-Weight at Morgan Stanley; PT $43
* Capita Raised to Buy at Peel Hunt; PT 48 pence
* Danske Bank Raised to Overweight at Morgan Stanley
* Heineken Raised to Buy at Deutsche Bank; PT 106 euros
* Immofinanz Raised to Hold at Wood & Company; PT 15.80 euros (+)
* Pernod Ricard Raised to Buy at SocGen; PT 204 euros
>>> Down
* Pernod Ricard Raised to Buy at SocGen; PT 204 euros
>>> Down
* Akzo Nobel Cut to Neutral at Oddo BHF; PT 74 euros
* Cadeler Raised to Buy at Pareto Securities; PT 42 kroner (+)
* Covestro PT Cut to 32 euros from 38 euros at Citi
* Epiroc Cut to Neutral at Citi; PT 165 kronor
* Epiroc Cut to Neutral at Citi; PT 165 kronor
* Indra Cut to Hold at Mirabaud Securities; PT 11.48 euros (+)
* Swedbank Cut to Underweight at Morgan Stanley; PT 157 kronor
>>> Initiation
>>> Initiation
* Made.com Rated New Buy at Investec; PT 121 pence (+)
* Siemens Healthineers Rated New Buy at Bankhaus Metzler (+)
* Var Energi Rated New Hold at SEB Equities; PT 40 kroner
* Vinci Rated New Buy at Berenberg; PT 105 euros
>>> Call
* Vinci Rated New Buy at Berenberg; PT 105 euros
>>> Call
* Capita ‘Becoming More Investable,’ Peel Hunt Upgrades to Buy
* Citi Sees Growth for European Capital Goods Amid Recession Fears (+)
* Epiroc Cut to Neutral at Citi on ‘Imminent’ Stalling of Growth
* Epiroc Cut to Neutral at Citi on ‘Imminent’ Stalling of Growth
* Heineken Upgraded at Deutsche Bank on Defensive Qualities (+)
* Nordic Banks Exposed to Housing Correction, MS Cuts Swedbank
* Siemens Healthineers a Buy at Metzler on Robust Device Portfolio (+)
* Vinci New Buy at Berenberg, Resilient in Inflationary Scenario
What, if anything, comes after 60/40?
A year ago, with core inflation (excluding food and energy) at a mere 4 per cent, we showed you this chart from UBS, comparing rolling 36-month core inflation against 36-month stock/bond correlations:
When core inflation rises above 2.5 per cent and stays there, stock and bond returns correlate. When that happens, the core premise of the 60/40 portfolio — when your stocks falter, your bonds will rise — looks shaky. And so it has turned out. With 36-month core inflation now at 3.1 per cent, the 60/40 portfolio has done historically badly.
This is old news. But it comes at an interesting moment. There is a plausible case that inflation will eventually moderate — and another plausible case that inflation is now structurally higher. If the latter proves true, the 60/40 portfolio can no longer be the default — what you might call the “dumb portfolio” for people who hate thinking about investing, but want to get it broadly right (we mean “dumb” as a compliment here).
If we have entered an era of higher inflation, what comes after 60/40? It’s a huge question.
The standard suggestion is to add in “alts”: something besides stocks, bonds or cash, with performance uncorrelated to one or the other. Commodities are an obvious candidate. They look good as a diversifier, jumping during times of stress, but are less appealing for capital appreciation. Even after the recent commodity surge, the broad trend since the 1970s has been sideways:
There’s also real estate, which we can separate into home ownership and real estate investment trusts. Outside of severe recessions, house prices have only gone up, though at a snail’s pace compared to stocks:
The caveat here is that this is a price comparison. It ignores the rental yield from real estate, if you don’t live in it. Then again, you never call the plumber to fix your stock portfolio, either.
Reits — or rather some Reits — can act as an inflation hedge. Leases that reset annually, as is common for multifamily units, let rents rise with prices. Mark Hackett at Nationwide’s Investment Management Group tells us he likes Reits’ combination of reasonably low volatility and yield generation. One difficulty, though, lies in how diverse Reits are. You have to look at the underlying assets and structure.
Then there is private markets. Even if these were easy for average investors to access — they are not, except indirectly through large pension funds — their procyclicality and high fees cut against their inclusion in the dumb portfolio. Returns from private capital were strong 10 years ago. Now they are crashing to earth. And, as we have argued here several times, just because they are not marked to market does not mean they are truly uncorrelated to public markets.
There are more exotic alts like art or infrastructure available. Write in if you think we’ve missed an important option. It is a high bar to be both accessible to a wide investor base and offer exposure not already captured by stocks and bonds. There isn’t some “well, duh” alternative waiting in the wings. (Wu & Armstrong)
Zendesk Close to Striking Buyout Deal, Sources Say
Deal would come after prior sale attempt fell apar
Zendesk Inc. is close to a deal with a group of buyout firms, according to people familiar with the matter, resurrecting a failed attempt to sell itself in what would be one of the biggest private-equity takeovers of the year.
A deal with a group that includes Hellman & Friedman LLC and Permira could be struck in the coming days assuming the talks don’t fall apart, the people said. The price couldn’t be learned.
Zendesk, which has a market value of about $7 billion, had been expected to strike a settlement agreement with activist investor Jana Partners LLC days after the company ended a bid to sell itself in a private-equity auction, The Wall Street Journal reported last week.
Zendesk and Jana were discussing a truce that could involve Mikkel Svane stepping down as the software company’s chief executive, as well as changes to the board including the removal of director Carl Bass.
It isn’t clear where Zendesk’s discussions with Jana stand in light of the expected buyout deal.
Zendesk earlier this month said it would stay independent after holding talks with potential buyers as choppiness in financing markets makes it harder to finance deals.
The company said in February it had rejected a roughly $17 billion takeover proposal from a group of private-equity firms it didn’t name.
The Journal reported at the time that the group included Hellman & Friedman, Advent International Corp. and Permira.
Zendesk’s shareholders subsequently voted down its planned acquisition of SurveyMonkey -parent Momentive Global Inc., forcing the company to abandon what would’ve been a roughly $4.1 billion deal.
Zendesk specializes in helping companies with customer communications and said on its website it had over 160,000 paid accounts and roughly 5,450 employees. It was founded in 2007 and is based in San Francisco.
Private-equity firms are armed with mountains of cash to put to work but have had trouble completing deals in recent weeks as debt has become increasingly expensive. Before the slowdown, software had been a particularly hot area thanks to its steady cash flows.
In March, Thoma Bravo LP struck a $10.7 billion deal to buy Anaplan Inc. that was later recut. Vista Equity Partners and the private-equity arm of Elliott Management Corp. teamed up on a $13.6 billion deal for Citrix Systems Inc. in January.
Permira and Advent in November teamed up to buy security-software maker McAfee Corp. for around $12 billion.
With offices in San Francisco, New York and London, Hellman & Friedman manages about $90 billion.
Permira manages more than €60 billion, equivalent to about $63 billion, according to its website.
Kellogg Breakup Puts Focus on Packaged-Food Conglomerates
Campbell’s, General Mills and Mars have grown through acquisitions, but some of their legacy brands have stalled
Kellogg Co.’s K 2.06%▲ plan to spin off its cereal and plant-based foods businesses is renewing focus on corporate breakups in the U.S. food industry.
Campbell Soup Co., CPB 0.92%▲ General Mills Inc. GIS 1.59%▲ and other food makers for years have built out their baskets of brands, acquiring newer, trend-aligned products and pushing into other supermarket segments, such as pet food. Those acquisitions have brought new growth to food companies, while the stalwart brands that built the companies have in some cases stagnated or shrunk, dragging on the overall business, analysts said.
Before the Covid-19 pandemic, sales of longtime consumer staples such as soup and cereal floundered as consumers shifted toward fresher, more convenient or healthier-seeming options. While stay-at-home orders and remote-work policies drew consumers back to nostalgic pantry staples, U.S. consumers have now returned to prepandemic lifestyles, challenging food companies to find ways to sustain growth.
As food makers battle rising costs and economic uncertainty, some could benefit by following Kellogg in breaking apart their businesses, said stock analysts and deal consultants.
“It’s hard to pivot a behemoth,” said Aaron Sorensen, head of business transformation at Axiom Consulting Partners, a strategic advisory firm based in Chicago that advises companies on deals.
For nearly a century, the strategy for U.S. food makers has been to grow through deals that gave legacy brands power from scale. Since 2010, the U.S. food-and-beverage industry has done nearly 3,000 acquisitions, totaling $535 billion in deal value, according to Dealogic.
Consumer-products company Unilever SA, UL 0.45%▲ which makes Dove soap, Ben & Jerry’s ice cream and more, is already under pressure to re-evaluate its operations, with analysts saying its wide-ranging business mix is a reason why the company underperformed through the pandemic. Unilever has said it began an overhaul of its operations earlier this year.
In July, activist investor Nelson Peltz is set to join Unilever’s board of directors, a move that analysts expect will accelerate change at the company. The Wall Street Journal reported that Unilever won’t pursue major acquisitions or sales soon.
Growing through deals has enabled food companies to strengthen relationships with retailers, and increase purchasing power, helping reduce expenses and creating opportunities for expansion, executives have said. Food makers have leaned on the cash generated by established but slower-growing brands to reinvest in acquisitions or faster-growing parts of the business.
General Mills, best known for its Cheerios cereal, also sells Progresso soup and is in the pet-food business. Pet food a few years ago became the biggest division for Mars Inc., the maker of M&Ms, candy bars and chewing gum, and Mars said this week that the head of its pet-care business would become the company’s next chief executive. Campbell now gets about half of its revenue from snacks.
In 2018, Campbell transformed itself through the purchase of Snyder’s-Lance pretzels and chips, which it combined with its Pepperidge Farm cookie and Goldfish cracker businesses. Activist investment firm Third Point LLC pushed Campbell to break up its business, arguing that more focused operations would be more attractive to investors. Campbell sold off its smaller international and fresh-foods businesses, but executives resisted a bigger split, warning such a move would be costly and risky.
Analysts since then have asked whether Campbell should further break off businesses or brands that are holding it back.
“The goal here is not ‘shrink our way further to greatness,’ ” Campbell Chief Executive Mark Clouse said at the company’s investor day in December, responding to an analyst’s question about potential divestitures. Mr. Clouse has maintained that Campbell’s snack brands can improve profitability and that its soup business is gaining traction among a younger crowd.
Campbell’s U.S. soup sales fell in eight of the nine fiscal years leading up to the pandemic. But the domestic soup business began showing signs of improvement in the fall of 2019 after increased investment.
Campbell said industrywide U.S. soup consumption rose 14% in the 13 weeks ended May 1 from three years ago.
Axiom’s Mr. Sorensen said Mars, a privately held company with $45 billion in annual sales, could be a good candidate for a split. Mars’s legacy gum business, acquired through a $23 billion deal with Wrigley in 2008, has struggled for years.
Meanwhile, Mars has turned its attention to the household-pet category, with deals in pet treats and veterinary companies. In January, Mars bought pet-food seller NomNomNow Inc.
Mars didn’t immediately comment.
For other food companies, such as General Mills and Campbell Soup, Mr. Sorensen said a split could erode profitability by losing the benefits of large-scale purchasing power, shared software systems and other functions.
General Mills, which sells products as varied as cereal, soup, cookie dough and dog food, has changed how it generates over 15% of its sales compared with four years ago. It started with an $8 billion deal to buy Blue Buffalo dog food in 2018, and the company has also sold off some older brands such as Hamburger Helper.
Sam Dawes, a partner at the West Monroe consulting firm and a consumer-product-company adviser, said General Mills and other food makers will be watching Kellogg’s split and should consider similar moves. “It’s shortsighted not to,” he said. “Specialization and focus pay off.”
General Mills didn’t immediately comment.
Kellogg CEO Steve Cahillane said this week that the conglomerate model can still work in the food industry. Scale brings benefits, he said, but for Kellogg, splitting up will make its businesses more agile and allow them to aim for financial targets that fit their distinct markets.
“We’ve shifted resources into growth businesses, notably snacks and emerging markets,” Mr. Cahillane said. If cereal and plant-based foods were independent companies, they wouldn’t have to compete with Kellogg’s faster-growing brands such as Cheez-Its for marketing and innovation dollars, he said.
J.P. Morgan Securities analysts said profit margins for Kellogg’s planned snack company could decline from losing the shared services and scale the business has under the company’s current structure, plus the cash it will spend on the separations.
“We are generally skeptical of breakup transactions like these,” said J.P. Morgan Securities analyst Ken Goldman.
- Deutsche Bank (DBK TH) +2.4%
- European Banks May Be Active After Lenders Ace Fed Stress Tests
- Siemens Healthineers (SHL TH) +2%
- Siemens Healthineers Rated New Buy at Bankhaus Metzler
- Adevinta (AD5B TH) +1.7%
- Thyssenkrupp (TKA TH) +1.7%
- The Widest and Tightest Outlier Credits in European Bond Markets
- Rheinmetall (RHM TH) +1.6%
- DSM (DSM2 TH) +1.4%
- Deutsche Post (DPW TH) +1.4%
- Solvay (SOL TH) +1.4%
- TUI (TUI1 TH) +1.3%
- BMW (BMW TH) +1.3%
- Glencore (8GC TH) -0.7%
- Shell (R6C0 TH) -0.8%
- Green Hydrogen Is No Near-Term Growth Panacea for EU Utilities
- Imperial Brands (ITB TH) -1%
- HelloFresh (HFG TH) -1.1%
- Delivery Hero (DHER TH) -1.7%
- Equinor (DNQ TH) -2%
- Green Hydrogen Is No Near-Term Growth Panacea for EU Utilities
- UCB (UNC TH) -7%
- UCB Cuts FY Adjusted Ebitda Margin Forecast
- Zalando (ZAL TH) -13%
- Zalando Profit Warning Even Worse Than Expected: Street Wrap
DAX:
- Deutsche Bank (DBK TH) +2.9%
- Deutsche Bank Managers Take Pay Cut as WhatsApp Fallout Widens
- BMW (BMW TH) +1.6%
- BMW, BASF Eye Gas Consumption Moves as Government Activates Plan
- Siemens Healthineers (SHL TH) +1.5%
- Siemens Healthineers Rated New Buy at Bankhaus Metzler
- Deutsche Post (DPW TH) +1.4%
- Covestro (1COV TH) +1.4%
- Covestro PT Cut to 32 euros from 38 euros at Citi
- HelloFresh (HFG TH) -0.7%
- Goldman Sachs Group, Inc. Cut HelloFresh Voting Rights to 5.27%
- Zalando (ZAL TH) -11%
- Zalando Profit Warning Even Worse Than Expected: Street Wrap
MDAX:
- Thyssenkrupp (TKA TH) +2.2%
- Stroeer (SAX TH) +1.7%
- Commerzbank (CBK TH) +1%
- Siemens Energy (ENR TH) +1%
- Aixtron (AIXA TH) +0.7%
- Delivery Hero (DHER TH) -1%
SDAX:
- Deutz (DEZ TH) +1.8%
- VERBIO Vereinigte (VBK TH) +1.1%
- Deutsche PBB (PBB TH) +0.8%
- Adler Group (ADJ TH) +0.7%
- Adler Group Begins Squeeze Out Process for Adler Real Estate
- Salzgitter (SZG TH) +0.7%
- PNE AG (PNE3 TH) -0.9%
- Suedzucker (SZU TH) -1.2%
- About You (YOU TH) -5%
The technology sector spurred a climb in stocksFriday and bonds held a rally as investors evaluated economic threats and scaled back expectations for inflation and interest-rate hikes.
An Asian equity index rose for a second day, aided by Chinese tech shares, while S&P 500 and European futures pushed higher. US shares closed near session highs Thursday, adding more than 3% in three days. Oil held at around $104 a barrel. A gauge of commodities has retreated to its lowest level since February in a sign of economic angst. US data and Federal Reserve commentary added to those concerns. Jobless claims hovered near a five-week high and manufacturing and services cooled. Fed Chair Jerome Powell in testimony to lawmakers reiterated that his commitment to bringing down price increases is “unconditional.” Fed Governor Michelle Bowman said she supports raising interest rates by 75 basis points again in July, followed by a few more half-point hikes. Investors are grappling with the question of what comes next if an economic downturn takes hold. One scenario comprises cooling price pressures and hence scope for central banks to ease up on the pace of interest-rate hikes. Traders are starting to price out any Fed action on rates beyond the December meeting, scaling back the additional tightening they expect and flirting with the possibility of cuts by in 2023. One of the keys to that shift is the slide in prices for raw materials, which has contributed to a moderation in market-based measures of inflation expectations. There’s a heated debate on whether the trend will continue. Bitcoin scaled $21,000, extending a bout of relative stability. US After Hours FDX +1.5% higher on earnings; TREE -12.7% falls on lowered guidance; CAMP -16.3% down on earnings
Nikkei +1,29% Hang Seng +1,88% CSI +0,89% Shanghai +0,76% Shenzen +1,08%
Eur$ 1,0540 CNH 6,6902 CNY 6,6954 JPY 134,81 GBP 1,2276 CHF 0,9611 RUB 54,5750 TRY 17;3618 WTI$ 104,77 Gold 1,825,28 +1,2% BTC 21,050 +1% ETH 1,150 +1%
S&P +0,74% Nasdaq +0,95% EuroStoxx +1,05% FTSE +0,72% Dax +0,69% SMI +0,67%
Macro :
- European Banks May Be Active After Lenders Ace Fed Stress Tests
- S&P 500 May Be 24% From Nadir, 150 Years of Market History Shows
Keep an eye on :
- S&P 500 May Be 24% From Nadir, 150 Years of Market History Shows
Keep an eye on :
- ADJ GY : Adler Group Begins Squeeze Out Process for Adler Real Estate
- BAS GY : BASF May Cut Production as Gas Prices Surge on Emergency Plan
- BATS LN : BAT Likely a Major Beneficiary Now FDA Has Withdrawn Juul: React
- BAS GY : BASF May Cut Production as Gas Prices Surge on Emergency Plan
- BATS LN : BAT Likely a Major Beneficiary Now FDA Has Withdrawn Juul: React
- BAVA DC : *CDC AIMING FOR CHILDREN'S ACCESS TO BAVARIAN'S MONKEYPOX SHOT
- BELL SW : Coop Plans to Raise Bell Food Group Stake; No Takeover Plans
- BPOST BB : Fanatics in Talks to Buy Sports Gambling Company Tipico: CNBC
- BT/ LN : BT CEO Faces Furious Staff in Town Hall, Says He Can’t Boost Pay
- CPINV BB : Care Property to Buy Assisted Living Site for EU13.9M in Stock
- CCL LN : Carnival Analyst Sees Risk to Fiscal 2023 Estimates: Preview (1)
- CYAD BB : Celyad CEO Petti Resigns; Lussier Takes Charge for Interim
- DIC GY : DIC Asset Extends CEO Waerntges’s Contract Until 2027
- ENI IM : Eni Postpones IPO of Plenitude Due to Market Conditions
- ENI IM : Eni Postpones IPO of Plenitude Due to Market Conditions
- ENOG LN : Growthy Holdings to Sell About 5m Shares in Energean: Terms
- EZE SM : *SPAIN HOLDING CO. SEPI MULLS DENYING EZENTIS' RESCUE: EL CONFI
- FGP LN : FirstGroup Extends I Squared’s PUSU Deadline to July 21
- HOMI BB : Home Invest Belgium Offering Prices at EU21.16/Share
- IDR SM : Indra Sistemas Shareholders Vote to Remove Five Directors
- LHA GY : Lufthansa to Cancel Additional 2,200 Flights This Summer: Bild
- LHA GY : ITA Airways Final Binding Bid Deadline Set for July 5: Corriere
- MAERSKB DC : Maersk Has Sexual Harassment Issues at Sea, CEO Tells Borsen
- ONCO SS : Oncopeptides Says CHMP Recommends Full Approval of Pepaxti in EU
- RKET GY : Sifted: Global Founders Capital, Rocket Internet's VC arm, is understood to be laying off as much as 80% of support staff.
- RWE GY : FT Energy: Russian gas crisis will test EU solidarity, warns German utility RWE https://t.co/ZGS8VWA591
- SAN FP : Sanofi, GSK’s Covid-19 Vaccine Shows Efficacy Against Omicron
- SAS SS : SAS’s Brand Suffers as Airline Faces Restructuring, Strike
- SHLF NO : Shelf Drilling Offering of About $130m Shares Prices
- STLA IM : Stellantis Invests in Lithium Startup Vulcan Energy: FT
- UCB BB : UCB Cuts FY Adjusted Ebitda Margin Forecast Volkswagen to Drop Russian Coal at Its German Power Plants
- VOW GY :
- ZAL GY : Zalando FY Adjusted Ebit Forecast Misses Estimates