TheChek News Flow

Jonathan Gray is guiding shift at investment firm that made its name buying into undervalued companies

Blackstone Group Inc. BX -0.77% became an investing powerhouse by making successful bets on undervalued companies. For the next leg of its expansion, the firm is focused on companies with big growth prospects, even if it has to pay up for them.

Since Jonathan Gray became Blackstone’s day-to-day leader in 2018, he has encouraged the heads of its businesses, who collectively manage $619 billion of assets, to develop big-picture convictions and invest in companies or assets that stand to benefit from those trends.

The new approach has led the New York firm to plow billions into faster-growing companies—including in the technology sector—to which it previously paid less attention.

It has taken Blackstone out of its traditional comfort zone of turning underperforming companies around through cost cuts and efficiency improvements—and juicing returns by employing ample helpings of borrowed money.

The growth bug has bitten nearly every corner of the sprawling firm, including its real-estate, credit and hedge-fund businesses. Among the assets in its main buyout fund is a big stake in Bumble Inc., BMBL 2.98% which Blackstone acquired in 2019 in a deal that valued the owner of the dating app at $3 billion. The stake has nearly quintupled in value as the company’s market capitalization shot to about $14 billion following its February initial public offering.

Mr. Gray’s thematic approach and the growth orientation it has spawned show how the 51-year-old heir-apparent to Chief Executive Stephen Schwarzman is making his mark on the firm as it barrels toward a goal of managing $1 trillion in assets by 2026.

“Investing is about looking forward, but the future is now coming faster,” he said in an interview. “You want to be exposed to businesses that benefit from this change.”

A big goal of his is for employees in the firm’s disparate businesses to all think about the same themes and discuss them with each other.

Blackstone has long been interested in identifying growing industries, but under Mr. Gray has become more clear about what it won’t buy, said Joseph Baratta, global head of private equity at the firm. In addition to brick-and-mortar retailers, that list includes established media-and-telecommunications providers and companies reliant on single-use plastics.

“There are certain types of companies that we’re just not going to invest in, no matter how cheap they are,” Mr. Baratta said.

The strategy isn’t without risk. The assets the firm is collecting could be among the first to get hit if, for example, the recent increase in interest rates continues as the economy emerges from the pandemic-induced lockdown.

Rivals such as Apollo Global Management Inc. have largely resisted the allure of the growth strategy, preferring instead to put money into hard-hit areas like gaming and physical retail. But even the historically value-focused Apollo has done more technology-related deals in its most recent buyout funds. The firm also raised two blank-check companies targeting growth-oriented deals.

Among the themes that have guided recent Blackstone investments are the ongoing shift to e-commerce and the technology-fueled advancement of the life-sciences industry.

The firm has launched a new business dedicated to investing in life sciences—including by backing new drugs in the late stages of development, the last thing a traditional leveraged buyout would target. It hired Jon Korngold, a veteran of growth-investing pioneer General Atlantic, to build a new business taking minority stakes in growing companies.

Blackstone, which previously had virtually no West Coast presence, has opened a San Francisco office and hired executives and advisers from technology companies such as Amazon.com Inc. and Snowflake Inc. SNOW 1.90%

And in November, it hired Jennifer Morgan, former co-chief executive of business-software giant SAP SE, to lead a team helping the firm’s 200-plus portfolio companies “drive growth through digital transformation.”

Blackstone isn’t alone. An increasing number of its rivals and stock investors have embraced growth as a decadelong bull market pushes up the price of all manner of assets and leaves fewer and fewer pockets of value. The two-year rolling average of purchase-price multiples for U.S. buyouts reached a record 12.8 times earnings before interest, taxes, depreciation and amortization in 2020, according to an analysis by McKinsey & Co. That’s up from 11.9 times in 2019 and 10.2 times in 2015.

Mr. Gray’s thematic push was born from personal experience. He led Blackstone’s $26 billion deal to buy Hilton Hotels Corp. HLT -0.99% on the eve of the financial crisis. As the hotel chain’s business suffered during the ensuing economic downturn, outsiders would often label the deal a failure. Instead, Hilton became one of the most successful private-equity investments of all time, ultimately reaping more than $14 billion in profits, or more than three times Blackstone’s initial investment.

Mr. Gray said the experience taught him that the efforts of Blackstone and Hilton’s management may not have been enough if the company weren’t the beneficiary of a long-term growth trend in global travel, the thesis that underpinned the investment.

“In the fullness of time, what mattered was you picked the right neighborhood, not the right house,” Mr. Gray said.

(Mr. Gray’s fondness for hotels abides, witness Blackstone and Starwood Capital Group’s agreement this month to acquire Extended Stay America Inc. STAY 0.26% in a bet that a rare bright spot for the lodging industry during Covid-19 will continue to thrive.)

He also led the firm’s first foray into industrial warehouses in 2010, betting on the ascendance of e-commerce around the world. Blackstone is now the largest owner of warehouses used for e-commerce, with a roughly $100 billion portfolio consisting of 880 million square feet of such properties around the world.

The two highly successful real-estate bets helped propel Mr. Gray’s rise at the private-equity giant.

One example of how his growth-related themes are being applied across the firm is Blackstone’s April 2020 investment in biotech company Alnylam Pharmaceuticals Inc. ALNY 2.94% The $2 billion deal consisted of a $1 billion investment led by Blackstone Life Sciences in a portion of the future total royalties of a cholesterol drug.

Its credit arm also provided Alnylam with a term loan of up to $750 million, and Blackstone bought $100 million of the company’s stock. The firm’s real-estate business also owns Alnylam’s landlord, BioMed Realty, which consists of 91 life-science properties. Blackstone last year agreed to sell the company from one of its funds to another in a deal that valued BioMed at $14.6 billion.

UK’s second-largest fund supermarket is only big platform not to be listed

Interactive Investor, the UK’s second-largest fund supermarket, is exploring an initial public offering in London this year on the back of a boom in the retail investing.

The group has been driving consolidation in the wealth management sector with a series of acquisitions, most recently this month buying a direct-to-consumer investment platform from rival Equiniti for £48.5m.

Interactive Investor now accounts for about a fifth of the retail investment platform market, but is the only big competitor not to be listed. Larger rival Hargreaves Lansdown is valued at about £7.4bn. AJ Bell, which floated in 2018, also has a substantial retail investment business.

Richard Wilson, chief executive of Interactive Investor, told the Financial Times that the company was now “looking at the various options”, adding that a “natural outcome for a firm like us, as a kind of a consumer-facing retail firm, would be [an] IPO”.

He added that this was not the only option and that it was “about timing, but that’s certainly something that we will be looking at”. 

The company, which has grown from £3.5bn in assets under management in 2016 to £50bn this month, is majority owned by funds advised by JC Flowers, a private equity firm.

Wilson said the company was in its fourth year in the JC Flowers fund, which was usually when the firm would seek an exit from its investment. JC Flowers declined to comment.

Wilson said he also had “incoming” calls from Nasdaq-listed special acquisition companies with the offer of a US listing, but that as a UK-focused business it would “not make much sense”.

There has been a surge in trading activity among younger retail investors in the UK, a rapidly growing market with more than £200bn under management by retail brokerages. Like the US, trading volumes in the UK were boosted by the number of people stuck at home during the pandemic.

Pension reforms and reduced social spending have also meant that more people have cash to invest in the market. Hargreaves Lansdown became the latest investment platform to raise profit expectations last week, reporting “elevated” volumes of share dealing since the start of the year.

Interactive Investor has benefited from heightened interest in the wake of the GameStop day trading frenzy in the US. The number of people signing up for accounts jumped almost 370 per cent in the final two weeks of January, compared with the same period the year before, with demand from 18- to 25-year-olds rising more than 1,200 per cent.

The company’s chief said an IPO would include a substantial offer to retail investors. The firm has been lobbying the government in recent weeks over loosening rules to allow greater retail investor participation in listings.

Wilson, along with his counterparts at Hargreaves Lansdown and AJ Bell, sent a letter to John Glen, City minister, calling on the government to encourage companies to include retail offers in new flotations.

Wilson said: “If we list, we should set a good example about not just how we do it, but what we do and where we do it. Because our purpose is to support the UK retail investor and make them more confident in their long-term financial future.”

He added that the business had sought to make itself ready for a potential flotation by selling a bank that had been acquired as part of a wider deal for Alliance Trust Savings in 2019. 

“An IPO or other event when you’re technically a bank [that is not substantial] is a bit tricky. So there’s been some factors we’ve worked on to make sure that we’re ready for the next phase of our development. And most of those have been achieved.”

He said market consolidation was over. “There’s no one left. So we’re now working up the next plan. We’ve obviously gone through a process of very substantial growth over a short period through the various acquisitions, and, to be fair, also organically.”

He added that the business was growing about 13 per cent a year in terms of assets without acquisitions.

“Our model has got traction: simple, open, transparent, unconflicted service where we charge you a straightforward no-nonsense fee.”

Regulator forces ConocoPhillips and Occidental to hold shareholder votes on emissions targets

The US Securities and Exchange Commission has directed two of America’s biggest oil companies to hold shareholder votes on far-reaching new emissions targets, as the regulator adopts a tougher approach to climate under the Biden administration.

The SEC denied requests from both ConocoPhillips and Occidental Petroleum to throw out shareholder motions that would force them to lay out detailed plans for cutting their so-called “Scope 3” emissions — those from the burning of their products by customers.

Both companies had argued that the proposals, to be presented at their annual meetings, sought to micromanage their operations — grounds under which the regulator had allowed companies to reject similar proposals under the Trump administration. But the SEC said it was “unable to concur” with this argument in both instances.

“In our view, the proposal does not seek to micromanage the company to such a degree that exclusion of the proposal would be appropriate,” the regulator wrote to Conoco in a letter seen by the Financial Times.

The decisions mark the first time that the SEC has denied requests by oil and gas companies to exclude votes on Scope 3 emissions, according to activists. They suggest the regulator is pushing ahead with a more interventionist approach under the new administration, even before the confirmation of its new chair.

“They are wasting no time,” said Mark van Baal, founder of Follow This, a Dutch shareholder group that filed the motion against Conoco. “I think it’s really impressive that less than two months after the inauguration there is a completely new spirit at the SEC.”

Under the Trump administration, campaigners said the SEC made it easier for companies to throw out shareholder proposals on spurious grounds rather than put them to investor votes, following a broadening of the definition of micromanagement.

Companies were allowed to reject about 15 per cent of environmental and social proposals in 2018, compared with 9 per cent in 2016, according to Institutional Shareholder Services, an independent investor advisory group.

Joe Biden has promised to put efforts to tackle climate change at the heart of his presidency. Although a narrow majority in Congress limits his ability to use legislation as a tool, analysts said the SEC decisions made it clear he would use every avenue available to achieve his ambitions.

“This is no doubt just the beginning of Biden appointees requiring far greater financial disclosure by fossil interests, similar to those mandated in Europe in recent years,” said Paul Bledsoe, a former White House climate adviser under Bill Clinton.

“Biden’s team intends to leave no climate stone unturned, very much including shareholders rights and the financial sector more broadly.”

While US oil and gas companies have begun to set some emissions targets, these have generally been less ambitious than those set by their European counterparts.

ConocoPhillips has committed to cutting emissions from its operations and those of its suppliers to zero, but has drawn the line at setting targets on Scope 3 emissions, created by its customers. Occidental has said it will cut Scope 3 emissions to zero by 2050 but has yet to lay out interim targets on how it will get there.

Occidental declined to comment. Conoco and the SEC did not respond to requests for comment.

Worries have increased over scale of challenge to integrate business

Stock markets offer a blunt measure of buyer's remorse. None more so than London Stock Exchange Group, whose shares have sunk more than 25 per cent from a record high in February.

A month earlier LSE completed the $27bn purchase of Refinitiv, a deal that was sold to investors as transformational. It was a pitch familiar to all finance professionals — that automation and big data were burrowing their ways into all levels of decision making.

Combining Refinitiv's 150,000 data sources with the essential market plumbing owned by LSE would create a data-driven finance incumbent, breaking the link between trading volumes and revenues. Data and analytics made up about three-quarters of its pro forma group revenue for 2020, with capital markets and post-trade services providing the remainder.

But by the time of LSE's full-year results in March it was obvious that to fulfil its promise, Refinitiv needed major surgery. Shareholders balked at LSE's higher than expected £1bn budget to integrate Refinitiv in the first year.

It did not help that LSE's own data and analytics operations had been slowing, most dramatically at the FTSE Russell index compiler. Then last week came a sale by Thomson Reuters and Refinitiv management of nearly 2 per cent of LSE stock, apparently to settle tax liabilities. Reasons became plentiful to feel unease about what exactly LSE had bought.

Initial deal hype and bullish analyst forecasts had boosted LSE’s market value past £55bn in February, putting it among the FTSE 100’s top 10 most valuable companies. Worries have since multiplied that LSE lacks the boardroom experience needed to take on a complex, flawed and top-heavy business that by revenue is twice its size.

As Warren Buffett said: “When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.” Refinitiv's poor economics had repelled potential suitors for at least five years before LSE took the plunge. And though LSE bosses have shown ambition, their brilliance awaits evidence.

David Schwimmer, chief executive, and Don Robert, the chair, have little experience of merger integration. Moreover, Refinitiv's longstanding problems have no easy fix. Trading screens, by revenue its biggest data market, are also its toughest. Refinitiv's Eikon platform is a distant second behind Bloomberg's ubiquitous terminal, which has been taking share in a shrinking market. Cash has been sunk into modernising and improving Eikon since the Blackstone-led acquisition of Refinitiv in 2018. However, its share continues to be squeezed both by Bloomberg's all-you-can-eat premium product and pick-and-mix options companies such as FactSet and Capital IQ.

LSE's solution is to retire the Eikon brand, which analysts have interpreted as a tacit surrender of traders' desktop space to Bloomberg. Its replacement, Workspace, is built around open source software that apes the modular flexibility of smaller competitors.

The hope is to make trading platforms more like Enterprise, Refinitiv's second-biggest data division. Enterprise applies an open-access approach to the huge data collection and distribution network that is a backbone for Refinitiv's many services. Foreign exchange and fixed income products will probably adopt the same modular model, inviting subscribers to shop in a data supermarket rather than buying access to the buffet.

LSE brings some expertise to the project. The customer count for its real-time data services has been in steady decline since 2015. Yet because subscribers have added more feeds and bought broader licences, divisional revenue has grown.

Reasons for optimism can be found on the transaction side of LSE's business, including its majority stake in Tradeweb for rates and credit markets. Having been relatively slow to adopt electronification, these markets now deliver class-leading growth, and Tradeweb carries the kind of proprietary mission-critical content that is only occasionally found in Refinitiv's other silos.

The media industry provides a parallel. In a world already drowning in data, must-have content gets the highest valuations. Owning the delivery pipes has not been enough. LSE has yet to prove whether transformation will create a financial markets Netflix or a National Grid.

State-owned oil group ‘optimistic’ as vaccines are rolled out and demand rebounds

Saudi Aramco stuck by its $75bn dividend pledge despite a 44 per cent drop in 2020 profits after the pandemic triggered lockdowns and travel bans that slashed oil demand, caused crude prices to tumble and weakened margins in its refining and chemicals businesses.

Saudi Arabia’s state energy company on Sunday reported full-year earnings of $49bn, in what Amin Nasser, chief executive, said was an “unprecedented and difficult year”.

Profits were in line with an analyst net income estimate compiled by the company, but free cash flow slid nearly 40 per cent to $49bn, significantly lower than the level needed to cover the dividend.

Saudi Aramco, which made its stock market debut in December 2019, has been far more resilient than its international peers but has still suffered a massive hit to its finances, which are crucial for filling government coffers.

The company’s debt levels surged last year as the group committed to paying out its dividend, most of which will go to the Saudi state, its majority shareholder.

Gearing, which it defines as a measure of the degree to which operations are financed by debt, has surged from minus 4.9 per cent in the first quarter to 21.8 per cent in the third quarter as it spent $69bn for a majority stake in Sabic, the Saudi chemicals company.

Saudi Aramco said the level had increased “slightly” in the fourth quarter, without disclosing a figure, but the company plans to release more detailed financial data on Monday.

Saudi Arabia, the world’s largest oil exporter, joined forces with other Opec countries and producers outside of the cartel to curb output last year by 9.7m barrels a day. The intention was to bolster oil prices, which rose above $70 a barrel earlier this month.

Although the group has gradually released more barrels in recent months, uncertainty about the trajectory of the oil market’s recovery and the emergence of new coronavirus variants forced producers to hold back from unleashing more supply for April.

In order to conserve cash, the company cut capital expenditure sharply, spending $27bn in 2020, down from $32.8bn the previous year. It expects the figure for 2021 to be about $35bn, which the company said was “significantly lower” than the planned $40-$45bn.

Saudi Aramco also delayed projects, suspended drilling in some areas and stalled some deal activity. Yet, the company still plans to increase its maximum production capacity to 13m b/d.

Nasser said he was “optimistic” about the oil market outlook compared to 2020, as demand rebounds and vaccines are rolled out globally.

Demand is around 92-93m b/d — having recovered from around 80m b/d last year — and would reach close to 99m b/d by the end of the year as consumption in major markets in Asia accelerates. Next year will look “even better”, Nasser said.

Saudi Aramco infrastructure has been attacked repeatedly by drone and missile attacks over the past two years, most recently on Friday.

Nasser dismissed the threats that have largely been claimed by Iran-allied Houthi fighters in Yemen, adding: “We are capable under any scenario to put the facility back on stream . . . and ensure supply to our customer is met.”

Japanese company says shortages due to pandemic and Texas blackout could worsen for carmakers

Renesas Electronics, one of the world’s largest makers of chips for the automotive industry, has warned that a fire at one of its factories could have “a massive impact” on global semiconductor supplies and halt production for at least a month.

The timing of Friday’s fire at the advanced chip facility in Japan could not be worse for carmakers, which were already wrestling with widespread disruption to supply chains caused by the Covid-19 pandemic as well as the US cold snap that led to mass blackouts in Texas. 

“We are concerned that there will be a massive impact on chip supplies,” Hidetoshi Shibata, chief executive of Renesas, said at an online news conference on Sunday. “We will pursue every means possible to minimise the impact.” 

The fire broke out in one of the clean rooms at the company’s plant in Naka city, north of Tokyo, bringing to a halt the production of 300mm wafers and burning about 2 per cent of the facility’s manufacturing equipment.

About two-thirds of the affected production was automotive chips, according to Shibata. If the facility remains offline for a month, he added, Renesas will lose about ¥17bn ($156m) in revenue. The financial hit is not expected to have any impact on the group’s plan to buy Apple supplier Dialog for €4.9bn.

Both Renesas and its automotive clients, including Toyota and Nissan, have taken steps to diversify their supply chains after the 2011 Tohoku earthquake and tsunami, when car factories worldwide ground to a standstill after production of Renesas microcontrollers was hit.

Partly as a result of those efforts, about two-thirds of the chips affected in the latest fire can be produced elsewhere. But Shibata acknowledged that finding alternative facilities to make its chips would be difficult since the industry is already struggling with a lack of spare production capacity at foundries such as Taiwan’s TSMC, the world’s largest contract chipmaker. 

Renesas had been increasing production to address the semiconductor shortage, shifting some of the chips outsourced to TSMC to the manufacturing line that was damaged by the fire. The Taiwanese company has been scrambling to meet a surge in demand after a rebound in car sales coincided with a surging consumer electronics market. 

The chip shortage has already slowed automotive production around the world and threatens to delay output for other forms of electronics, including smartphones. 

The drought in semiconductor parts has been compounded by the extreme weather in the US, which has triggered a shortage of petrochemicals that are used in seats, airbags and dashboards. 

Toyota, one of Renesas’s biggest clients, said on Friday it would close its factory in the Czech Republic for two weeks as disruption to its North American supply chain caused by the cold spell spread to Europe.

Takeover of US railroad group comes months after it rejected a Blackstone-led consortium bid

Railway group Canadian Pacific has agreed to buy Kansas City Southern for $28.9bn including debt in the largest takeover deal this year, people with direct knowledge of the matter said.

The transaction is the biggest in CP’s history and will see it add the smallest of the seven Class I US railway operators that dominate a significant share of freight activity in the country.

The Calgary-based company will pay $275 per share in cash-and-stock to buy the US freight group, the people said. The transaction is expected to be announced on Sunday.

CP’s proposal represents a 23 per cent premium on Kansas City Southern’s closing stock price of $224 at the end of last week. The deal values its equity at $24.9bn before the inclusion of debt.

The board of Kansas City Southern’s board approved the offer on Saturday and the two companies notified the Surface Transportation Board, the US regulator for freight rail, about the deal, the people added. The acquisition will need to be approved by the STB.

Kansas City Southern’s fortunes have been closely tied to trade between the US, Canada and Mexico, with its main routes running north to south and linking the two countries neighbouring the US. It also has extensive operations in Mexico and owns a 50 per cent stake in the Panama Canal Railway Company.

The railway sector was hit hard in the early phase of the pandemic because of restrictions imposed by the US government to contain the spread of the coronavirus.

But the industry’s prospects have improved markedly over recent months, as the US accelerated its rollout of vaccines and business activity picked up considerably. US president Joe Biden’s moves to strengthen US-Mexico trade relations are expected to further boost railway activity.

Shares of Kansas City Southern have more than doubled in the past year. The company rejected a takeover bid last September from a Blackstone and Global Infrastructure Partners-led consortium that valued its shares at $21bn.

Kansas City Southern reported an 8 per cent drop in revenues in 2020 to $2.6bn and a 23 per cent increase in net income to $617m. It employs about 6,200 staff, according to Capital IQ, compared with nearly 12,000 at the Canadian group.

Shares in CP have climbed 80 per cent over the past year and have a market value of C$63bn ($50bn). The company’s largest shareholder is Chris Hohn’s TCI hedge fund which had an 8.4 per cent stake, according to filings from the end of last year.

CP declined to comment. Kansas City Southern did not respond to a request for comment.

Barron’s Weekend Summary: The space-travel business is taking off as more entrepreneurs get into the sector

* Cover Story: Entrepreneurs are increasingly creating opportunities in the space travel sector, and while tourism draws most of the attention, investors can choose from satellite makers, launch-service providers, and space logistics companies, all of which are generating revenue from new businesses; The market capitalization of pure-play space companies now totals roughly $25B, up from essentially nothing a few years ago, a figure that doesn’t include privately held SpaceX or Blue Origin; Investors can play the sector with SPCE, VSAT, LMT, BA, as well new companies set to list via SPACs, such as AST & Science, Astra, Black Sky Holdings, Momentus, Rocket Lab USA, and Spire Global.

* Tech Trader: Fast-growing cloud companies are using complex metrics such as annual recurring revenue, remaining performance obligations, net retention rate, contributions, adjusted Ebitda, and total addressable market that should be of concern to investors at a time when traditional metrics matter more than ever.

* Trader: Positive on CAT, BLMN: Buying Caterpillar now is a bet that its earnings will grow faster than expected, making its shares cheaper than they look, while Bloomin’, which trades at about $28, will benefit from its operating leverage, as well as a $40M cost-savings program; The Federal Reserve may yet find a way to keep yields from rising, but if chairman Jerome Powell continues to back away from this effort, owning banks, energy, and other value stocks will be one of the only ways to protect a portfolio.

* Interview: John Calamos, the 80-year-old founder of $35B Calamos Investments, whose flagship Calamos Convertible fund is up 87 percent over the past 12 months, talks about convertibles’ strong performance last year and their current outlook; his alternative strategies are about adjusting for the current environment, and he says that market-neutral is a good alternative to fixed income.

* Profile: Jeffrey Kolitch, manager of the Baron Real Estate fund, uses a different strategy than those of peers, most of whom invest in REITs, which offer a narrow investment opportunity set, including office buildings, malls, shopping centers, apartments, self-storage facilities, industrial warehouses, hotels, and niche categories—instead, his is a “real estate related fund,” with only 19 percent of its assets in REITs (top 10 holdings WYNN, PENN, GDS, BYD, RRR, LVS, TRIP, DEI, OPEN, BAM).

* Features: 1) Positive on SPLK: The company, which helps improve computing systems and manage system security and compliance, failed to pivot when cloud computing took off, but analysts think it can grow annual recurring revenue as much as 40 percent for years to come, topping $5B in fiscal 2025, when more than 80 percent of revenue will come from the cloud, putting Splunk on track to be one of the world’s biggest cloud companies; 2) Positive on ELF: As the pandemic comes under control and lockdowns start to ease, things are looking up for cosmetics companies and their shares, and e.l.f. Beauty, a value-priced brand sold at TGT, ULTA, and other stores is particularly well positioned to benefit from the return to normal and the next round of stimulus checks hitting bank accounts, as well as from continued product innovation; 3) Nonfungible tokens (NFTs) are the hottest asset of 2021, and have taken in more than $200M in just the past month, which doesn’t include the recent $69M sale of a digital artwork by an artist named Beeple—and while some investors are expressing disbelief, NFTs are a bridge between cryptocurrencies and the mainstream world of art and sports.

* Follow-Up: Positive on LLY: Shares fell last week on investor disappointment about Alzheimer’s disease therapy donanemab, but stock swings don’t tell the whole story: The data that Lilly presented were positive for Alzheimer’s drug development in general, and for donanemab in particular, even if the results didn’t meet investors’ high expectations, a sign the company is on the right track.

* European Trader: Positive on Flutter Entertainment: The London- and Dublin-listed company has underperformed rivals William Hill and Entain, but is benefitting as soccer and racing continue during the pandemic, and could see its stock rise further if it holds an initial public offering for US-based FanDuel.

* Emerging Markets: Some Chinese internet stocks—including BABA and Tencent—may be showing their age, but there are opportunities for investors as the country’s healthcare industry starts to come into its own, with companies such as WuXi Biologics and Ping An Healthcare & Technology set to grow much bigger as the population ages and drug development grows more sophisticated.

* Commodities: China’s efforts to drastically reduce pollution levels could lead to lower demand for iron ore, a raw material for the steel industry, which is a big source of the nation’s harmful emissions, though change isn’t on the immediate horizon.

* Streetwise: MS suggests looking for tocks whose earnings growth can more than offset declines in P/E ratios, and has screened for such stocks since September, refreshing its list about every two months—the current one, cross referenced with companies it has rated Overweight, includes GOOGL, C, DRI, XOM, and TTWO.