FT : Trump employs scorched earth tactics to overturn election

Trump employs scorched earth tactics to overturn election
President makes unprecedented claims of vast conspiracy and leans on officials to reject result

In the almost three weeks since the American people delivered their verdict in a democratic election, Donald Trump has taken steps like no president before to undo the results and cling to power.

The president has launched a barrage of lawsuits to disenfranchise millions of voters on the thinnest evidence, tweeted lies and conspiracy theories, and stymied Joe Biden’s incoming administration even as thousands in the US die each day in a pandemic.

This week those efforts intensified, with a surreal press conference in which his lawyers alleged a vast conspiracy unparalleled in American history, and an overt pressure campaign by the president to convince state officials to overturn the result.

These acts, brazen even by Mr Trump’s standards, prompted rebukes from some prominent Republicans, even as most of his party has refused to acknowledge Mr Biden’s victory or publicly reject the president’s attempt to undo the election.

The attempt by an incumbent US president to stay in office despite losing an election have revealed alarming weaknesses in America’s democratic experiment. The traction of Mr Trump’s baseless claims among his supporters also leaves Mr Biden to govern with swaths of the public holding the false belief that he stole his way into office.

“There have been transitions where there has been tension, but there hasn’t been what we’re seeing now. We haven’t seen this kind of wholesale rejection of the vote,” said Nicole Hemmer, a historian with the Obama Presidency Oral History Project at Columbia University.

Mr Trump had long-approached his re-election battle with little care for democratic norms. He was impeached for using government money to solicit election interference on his behalf from Ukraine, although the president was ultimately acquitted by his party in the Senate. And he publicly urged his Department of Justice to investigate Mr Biden, fuming when his appointees failed to take overt action.

The president spent much of his campaign telling his supporters that the US election system was rife with fraud arising from the use of mail-in ballots, preparing the ground to denounce any outcome other than his victory as a fraud upon the American people.

Since November 3, Mr Trump has continued to peddle that falsehood. He has not only refused to concede, but he and his supporters have baldly suggested courts, election officials or Republican-controlled state legislatures simply disregard or throw out millions of votes.

The US had seen contested elections before, as well as “sore losers”, said Timothy Naftali, who teaches history and public policy at New York University. In 1824, the election ended in a tie, with the House of Representatives choosing the president, and the 1876 vote was disputed in several states, leading to a political crisis resolved just days before inauguration.

More recently, the 2000 election was resolved through litigation and ultimately by the US Supreme Court. But none of those cases involved an incumbent president wielding his power and influence to publicly sow confusion and doubt about his defeat.

Mr Naftali pointed to Mr Trump’s comments about supposed mass voter fraud ahead of the election, saying: “The president was already seeding the clouds for this conspiracy theory before the election was over.

“It’s not like we haven’t had presidents who have gone to the dark side to ensure re-election, that’s not new. What’s new [are] Trump’s tactics to engage in a federally sponsored disinformation campaign at home to ensure re-election,” he said.

Though judges have generally rejected Mr Trump’s lawsuits, noting among other things that his campaign has not presented evidence to support its claims of massive voter fraud, the president has seen some temporary wins from throwing sand in the gears of the election.

On Tuesday, two Republicans officials in Wayne County, which includes Detroit, refused to certify its ballots and forced a deadlock on a local elections board, a startling portent for the upcoming certification of Mr Biden’s statewide win in Michigan. The officials backtracked and approved the ballots that same day but, after reported calls from Mr Trump, they sought on Wednesday to take back their approval.

Similar problems at the statewide level in Michigan could open the door for the Republican-controlled state legislature to assert that with no certified results, they should determine the winner. “If the state board follows suit, the Republican state legislator will select the electors,” Jenna Ellis, a Trump campaign legal adviser, tweeted on Tuesday.

On Friday, Mr Trump welcomed top Michigan Republican lawmakers to the White House. His press secretary claimed it was merely a routine get together. “This is not an advocacy meeting,” Kayleigh McEnany told reporters.

After the meeting, the Michigan Senate leader and House speaker, Mike Shirkey and Lee Chatfield, rejected the idea that they would make a dramatic intervention to undo Mr Biden’s 154,000 vote margin victory in the state.

“We have not yet been made aware of any information that would change the outcome of the election in Michigan and as legislative leaders, we will follow the law and follow the normal process regarding Michigan’s electors, just as we have said throughout this election,” they said in a statement.

On the whole, Mr Trump’s attempt to flout the verdict of a democratic election has so far failed, with neither evidence, law, nor high-powered lawyers or the weight of votes on his side.

The calibre of his legal team was on display at a press conference on Thursday, as Rudy Giuliani, the former New York City mayor, repeated election fraud claims already rejected by courts as what appeared to be hair dye ran down his face, while another lawyer, Sidney Powell, touted conspiracy theories involving the late Venezuelan dictator Hugo Chávez.

“What’s happening right now is tempered by the foolishness of the Trump team’s arguments and the fact that they’re getting laughed out of court over and over again,” said Ms Hemmer at Columbia University. But she added the events showed the vulnerabilities of the US democratic system that a more competent set of actors in a closer election could easily exploit: “It is holding on by a thread.”

The president’s behaviour has enjoyed both tacit and explicit approval from much of his own party, including Senate Republican leader Mitch McConnell, though there have been some exceptions.

Mitt Romney, the Utah Republican senator, said on Thursday it was “difficult to imagine a worse, more undemocratic action” by a US president than Mr Trump’s “over pressure on state and local officials to subvert the will of the people”.

Other Republicans, like Senators Ben Sasse and Joni Ernst, have denounced the antics at Thursday’s press conference, while Georgia’s Republican secretary of state, Brad Raffensperger, has forcefully rejected attempts by Mr Trump and his allies to cast Mr Biden’s win in the state as fraudulent.

Mr Trump’s scorched earth approach to his defeat has gone beyond contesting the election. He has refused to begin the transition process, a period in American government that is fraught even in calm times, let alone as the US struggles with the coronavirus pandemic.

Instead, his administration has taken moves on big policy issues that would tie Mr Biden’s hands. The Treasury Department is refusing to extend certain stimulus measures beyond December and the Defense Department, drawing down troops in Afghanistan and Iraq after Mr Trump purged its top leadership.

Most critically, perhaps, Mr Trump has not opened the door to the incoming Biden administration on the federal pandemic response, which Mr Biden will soon oversee.

“There’s a whole lot of things that we just don’t have available to us,” Mr Biden said this week, such as the distribution plan for Covid-19 vaccines. “Unless it’s made available soon, we’re going to be behind by weeks or months.” 

Lamar Alexander, the Republican senator from Tennessee, on Friday pushed Mr Trump to begin the transition, though his statement did not acknowledge Mr Biden’s victory, instead saying he had a “very good chance” of becoming president.

Mr Trump’s obstinacy stands in marked contrast to the ordinary approach of previous administrations, who have made the handover as smooth as possible, including the Obama administration in 2016 when Mr Trump was preparing to take office.

Russell Riley, co-chair of the Miller Center’s Presidential Oral History Program, noted that US officials have usually viewed it as a “mark of honour and patriotism” to be helpful to the incoming government, even if it was of the opposing party.

“This is something that shouldn’t have to be said in the middle of a global pandemic in which literally thousands of Americans are dying every day,” he added.

Barrons : It May Be Time to Invest in Emerging Market Value Stocks. Here’s Where

It May Be Time to Invest in Emerging Market Value Stocks. Here’s Where to Look.

Rotation from growth into value stocks is the talk of the financial world, as light starts to gleam at the end of the Covid-19 tunnel. Emerging markets may be following the trend. The MSCI Emerging Markets Value Index jumped 5% in the week after Nov. 9, when Pfizer unveiled encouraging vaccine results. “That rally can continue for the next several quarters,” says Louis Lau, director of investments at Brandes Investment Partners.

The arithmetic for a value catch-up is compelling enough, after a 2020 rally driven by a handful of Chinese tech champions. The emerging markets value asset class trades at a 60% price/earnings discount to growth, says Alejo Czerwonko, chief investment officer for Americas emerging markets at UBS Global Wealth Management. “We are positioning our portfolios toward value for the next leg of the rally,” he says.

Bets on downtrodden cyclical sectors such as finance or energy could carry bigger payoffs in emerging than in developed markets, adds Arjun Divecha, head of emerging markets equity at GMO. “Russian oils are much cheaper than Exxon, ” he says. Brazil’s Itau Unibanco (ticker: ITUB) or Russia’s Sberbank (SBER.United Kingdom), for instance, “are much cheaper than Citigroup. ”

Yet value has been trailing growth in emerging markets for a decade now, and with good reason. The category is still larded with commodities producers whose pre-2008 glory days seem behind them, and with state-owned enterprises little concerned about shareholder returns.

“Value’s problem is you have a lot of industries that are impaired,” says Justin Leverenz, chief investment officer for developing-market equities at Invesco. Still, he is shaving positions in Chinese tech high-flyers like Alibaba Group Holding (BABA) and Meituan (3690.Hong Kong) and adding “idiosyncratic” value names. His biggest bets have been on India’s HDFC Bank (HDB) and Kotak Mahindra Bank (KMB.India), private institutions gobbling market share from state-owned competitors.

Another fan of financials is Conrad Saldanha, head of emerging markets strategies at Neuberger Berman. He is digging deeper into India with ICICI Bank (IBN) and IndusInd Bank (532187.India). He also favors Brazil’s Banco Bradesco (BBD), which is priced for distress near a five-year low, and South Africa’s Capitec Bank Holdings (CPI.South Africa). “Default rates in various countries are much lower than what banks had feared,” Saldanha observes.

Non-Chinese banks aren’t the only potential bargains in emerging markets. Nearly half the Chinese market is itself in value territory, UBS’s Czerwonko says. Among this other half, Leverenz likes fast-food conglomerate Yum China Holdings (YUMC) and Huazhou Group (HTHT), formerly China Lodging. Both display “clear leadership in fragmented industries,” where damage from the pandemic may speed consolidation.

Not all tech has gotten expensive. A bunch of Taiwanese components makers have been left behind, says Edmund Harriss, an Asia portfolio manager at Guinness Atkinson. These include Novatek Microelectronics (3034:Taiwan), Largan Precision (3008.Taiwan), and Elite Material (2383.Taiwan). They are all linked to physical hardware, such as cameras and screens, whose sales are likely to rebound in a post-Covid normal, he predicts.

GMO may have the greatest long-term expectations for emerging markets value stocks. Jeremy Grantham’s firm projects the asset class will average 9% annual returns over the next seven years, while large-cap U.S. stocks could lose 5% a year. Still, it’s hard to say if this epic run is starting now. “We’ve been waiting for this a long time,” Divecha says. “But one swallow doesn’t make the spring.”

Barrons : More People Are Driving. That Could Give Tire Maker Michelin’s Stock a

More People Are Driving. That Could Give Tire Maker Michelin’s Stock a Lift.

French tire maker Michelin has seen its shares punctured over the past three years, deflating 13.78% to 106.10 euros ($118). Weakness in its truck division, competition from cheaper rivals, and high pension liabilities have weighed on the stock (ticker: ML.France).

Compagnie Generale des Etablissements Michelin has a global market share of 14%, and is the second-biggest tire maker behind Bridgestone ‘s 14.6%. It produces about 200 million tires a year, from 117 plants in 26 countries. The business has three divisions: passenger cars, trucks, and a specialty unit that makes wheels for agricultural and aviation vehicles and earth movers such as bulldozers and excavators.

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While Michelin has been busy focusing on growth through cost savings and geographical expansion, mainly in China and Latin America, it has emerged as a pandemic winner and could be positioned to enjoy some short-terms gains.

Like many companies, the business was disrupted at the beginning of the pandemic, with sales falling 15% over the first nine months of the year. But it has bounced back fast—sales were down just 5% last quarter, and in October Michelin raised its full-year targets.

Key to the short-term growth is more people traveling in cars in a bid to avoid more risky public transport in the pandemic. Also, while auto production has suffered during the crisis, 70% of Michelin’s sales have come from replacement tires for existing vehicles rather than new cars.

Tom Narayan, an analyst at RBC Capital Markets, has marked the stock Outperform, estimating that it will increase 12% to €119. Christoph Laskawi, an analyst at Deutsche Bank, has a price target of €115.

Michelin is based in Clermont-Ferrand, France, employs 127,000 workers, and has a market value of €18.1 billion. It fetches a low 12.8 times this year’s expected earnings and is valued in line with its peers. It posted net income of €1.7 billion for 2019, up from €1.6 billion on 2018 sales of €24.1 billion.

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Michelin Managing Chairman Florent Menegaux told Barron’s in a statement that “Our ‘all sustainable’ vision—which reconciles the development of people, the capacity to generate good results, and the preservation of the environment—will emerge strengthened from this crisis because it is revealing itself to be more relevant than ever. Throughout these months, we have not stopped innovating, creating, and being agile in our activities and decisions.”

The business can trace its roots back to 1832, when Aristide Barbier and Édouard Daubrée opened a factory to make farm equipment and rubber balls in Clermont-Ferrand. When Edouard Michelin took over, he renamed the company Compagnie Generale des Etablissements Michelin and developed the first detachable bicycle tire. The Michelin Man logo was born in 1898, and the company’s first restaurant-ratings guide arrived two years later. The company listed on the Paris stock exchange in 1946.

Last month the company forecasted a 2020 operating profit of more than €1.6 billion, which is better than previous guidance of €1.2 billion. Much of this is from cost cutting, but Michelin also stands to benefit from the boom in electric vehicles and developments in shared rides and autonomous innovation.

While the company is exposed to weakness in its specialty-tire business as mining and construction struggle, it has a strong brand and is able to charge a price premium of up to 15% over its peers, and 50% more than standard tire makers.

Regardless of the impact of the pandemic’s resurgence, the trend shows that the tire business is able to quickly recover after a lockdown shock. That is likely to help drive Michelin’s stock.

Barron,s : Bitcoin Could Hit $500,000, the Founder and CEO of Ark Invest Says

Bitcoin Could Hit $500,000, the Founder and CEO of Ark Invest Says

The price of Bitcoin has been on a tear, rising nearly 160% this year and about 25% month to date. That might be just the beginning, ARK Investment Management CEO Catherine Wood told Barron’s readers Thursday.

Bitcoin’s recent rise to $18,640 may give investors flashbacks to 2017, when the cryptocurrency reached a high of $19,783.21 in December before selling off. This time is different for one big reason, Wood said: the involvement of institutional investors, which she said could drive Bitcoin’s price to $500,000.

The founder of ARK and a noted booster of disruptive technologies such as Bitcoin and Tesla told attendees of Barron’s virtual Investing in Tech series that Bitcoin is the most recognized currency of the crypto-asset ecosystem. “It’s the equivalent to the dollar in the fiat currency system,” she said. “That’s a pretty exalted role.”

Wood added that the rise of central-bank digital currencies, or CBDCs, has added legitimacy to Bitcoin, referencing China’s ambitions to launch a digital yuan.

Some investors, she said, see Bitcoin as a digital alternative to gold or an insurance policy against inflation. With the Federal Reserve’s decision to keep interest rates low for the foreseeable future, that’s one reason Bitcoin’s price could be rising. And if institutional investors like hedge funds were to take a greater interest in Bitcoin, it could send prices even higher, Wood said. What’s more, Wood noted the supply of Bitcoin units tops out at 21 million. There are about 18.5 million currently in existence, she said.

Wood said institutions have been bumping up their exposure to the cryptocurrency recently, drawing a comparison to “the early days of institutions moving into real estate and emerging markets,” when allocations started small, then grew. “They started out with a half a percent allocation, then [1%], and then 5% or thereabout seemed to be the right number.”

If all institutions were to assign a similar mid-single-digit allocation to Bitcoin, the cryptocurrency could rise “to somewhere in the $400,000 to $500,000 range,” Wood said.

Tesla (ticker: TSLA) also has room to grow, despite its momentous 491% year-to-date rise, Wood said—although she added, “as the saying goes, the easy money has been made.”

Wood said institutions focused on benchmarks “will probably move into the stock” following the company’s inclusion in the S&P 500, announced this week. “If we’re right, [Tesla] has miles to go—miles and miles to go.”


Investors should look at Tesla as a true technology stock, not as an auto-manufacturing stock, she told attendees, adding that the stock’s lofty valuation shouldn’t be a concern. “Most people don’t understand what this animal really is,” she said. “It is a technology stock, and it is running away with the electric-vehicle market in a way that I think has been surprising to most.”

The future for Tesla is in the autonomous vehicle space, Wood said. “We believe it’s in the pole position to become—in the United States, at least—the dominant autonomous taxi network within the next few years.”

Wood also touched on recent news that Resolute Investment Managers, ARK funds’ U.S. distributor, moved to take over the business next year. She referred to ARK’s prior statement on this development, in which she said she was “disappointed” by the news. Wood said many know that “we do not want this to happen,” adding “we’re in negotiations, and so I’ll just leave it there.”

Barron,s : 20 International Stocks You Don’t Want to Miss, According to Barron’s

20 International Stocks You Don’t Want to Miss, According to Barron’s Investing Experts

The 20 stocks : AIA Group, Alibaba Group, Amadeus IT, ASML (2), Compass Group, CRH, Halma, HDFC Bank, Housing Development Finance, ICICI Bank, Indusind Bank, Just Eat Takeaway, Kotak Mahindra Bank, Moncler, New Freontier Health, Ryanair, Straumann, Taiwan Semi(2), Trip.com, Yamaha

In the past decade, staying close to home has served U.S. investors well, as foreign stocks have lagged behind their U.S. counterparts. The S&P 500 index has averaged an annual total return of 14% in this span, compared with just 4.7% for the MSCI AC World ex-USA index. But overlooking the rest of the world—home to 96% of Earth’s population and 85% of its economic activity—could now be a mistake, especially as the global economy recovers from the pandemic.

Covid-19 might be a worldwide problem, but the response—and the recovery—have been intensely local. While Europe and the U.S. grapple with a resurgence of the coronavirus and new restrictions on commerce and mobility, the ability of many Asian countries to contain it has put them back on the path to near-normalcy. At the same time, positive vaccine news could help the cheapest non-U.S. stocks stage sharp recoveries.

And many international stocks are especially inexpensive, relative to their U.S. counterparts.

At the same time, the political backdrop for international stocks is improving. Despite the European Union’s thorny negotiations with the United Kingdom over Brexit, the EU’s ability to pull off a stimulus fund for the region marked a major milestone toward rescuing its economy and enhancing the bloc’s stability. While U.S.-China tensions are likely to persist, especially around technology, the election of former Vice President Joe Biden as the next U.S. president could pave the way for a more predictable trade policy and ease one of the uncertainties weighing on global stocks.

Investors ignoring these trends are also missing more, including pockets of innovation beyond the U.S. that have given rise to fast-growing companies in technology, services, and other areas. These companies aren’t household names in America, but they are formidable competitors poised to prosper on the global stage in years to come.

Barron’s recently convened a panel of three global money managers and an economist to lead a virtual tour of international economies and markets. En route, they identified 20 attractive non-U.S. stocks that should be on investors’ radar.

Our 2020 international roundtable features Torsten Sløk, chief economist at Apollo Global Management; Jenny Davis, a manager of the Baillie Gifford International Alpha fund (ticker: BGIKX); Kristian Heugh, co-chief investment officer of Counterpoint Global and manager of the Morgan Stanley International Opportunity Portfolio (MIOPX); and Chris Dyer, director of global equity at Eaton Vance and manager of the Calvert International Equity fund (CWVGX). Sløk is based in New York; Davis, in Edinburgh; Heugh, in Hong Kong; and Dyer, in London.

The roundtable was conducted in late October on Zoom. We checked in with all of the panelists again by phone in mid-November, after the U.S. election. An edited version of the conversations follows.


Barron’s: What impact will a Biden administration have on the outlook for international stocks?
Chris Dyer: A Biden presidency is good for international stocks, primarily because he will have a more constructive approach to the U.S. relationship with China. That’s critically important because when the U.S. and China got into a trade war [in 2018], it had an even bigger impact on European and Japanese companies because those economies are more tied to global trade.
Jenny Davis: The U.S still has to wrestle with the identity crisis that comes from the potential diminishing of its position as the sole global superpower, but there is hope that a mutually destructive approach is a less likely course of action now. The most important thing for businesses is to be able to operate without significant geopolitical upheaval getting in the way of their ability to plan and invest, which drives future growth.

Torsten Sløk: The election is important, especially with the trade war. But the virus resurgence in Europe, emerging markets, and the U.S. is the near-term risk.

Torsten Sløk, chief economist at Apollo Global Management
Illustration by Aaron Dana
There has been another wave of lockdowns, but also positive news on the Covid-19 vaccine front. What does that mean for the global recovery?

Dyer: The new lockdowns will have less of an impact on the European economy than the first. Live events, theater, and sports never reopened, so you can’t close them down again. More important, companies have amended their business models and already taken costs out, and customers have become more adept at buying things online so there’s less disruption. Schools are also generally staying open, so that gives parents the ability to work.
Straumann Holding [STMN.Switzerland] is a Swiss global leader in dental implants. In the first lockdown, all dental offices were closed. Now, they are open. Implants are more of a discretionary purchase, so if the vaccine creates an environment where people can regain employment, they can spend money on their teeth.
Sløk: Even if you don’t have lockdowns, people may still behave more cautiously in going out to restaurants or shopping less. I agree with Chris that consumers and companies know how to respond, but it’s still too early to conclude that this second round of the virus isn’t a problem.

Kristian Heugh: The hospitalization and death rate is far reduced. The medical knowledge about how to treat this terrible virus has improved dramatically, and more people understand the value of washing hands and wearing a mask. The U.S. Centers for Disease Control and Prevention finally came to its senses as of Nov. 10, agreeing that wearing a mask is beneficial to the wearer, in addition to people nearby. The belief in masks based on science is what led to positive outcomes throughout Asia. Now, with a vaccine that could be more than 90% effective, people will start thinking about what can be, versus what is right now.
Globally, the economic recovery from the virus has been uneven. Which countries will come out ahead?
Sløk: Those governments that have been most successful on health and fiscal response will generally also be those that are most successful in building a bridge, from an economic perspective, over this hole now on the road—with the least damage.
We are looking at more of a W-shape economic recovery because of these second rounds of restrictions. Shutdowns might mean that Europe can get the virus under control faster than the U.S. or countries in Latin America that decide not to do a lockdown. If they succeed, they will reap the benefits on the other side. In the near term, for Europe, there’s a clear negative impact for the economy and corporate earnings. China and its neighbors stand out, especially amid deterioration in the U.S. and Europe. China is the only major country that the International Monetary Fund predicts will not have a recession in 2020.

Investors have done relatively well focusing just on the U.S. Why is this a good time to take a closer look at foreign stocks?
Sløk: There’s light at the end of the tunnel for global growth, with more than 200 vaccines in the pipeline pursuing different methodologies. For 2021, the Hail Mary is to bet on a vaccine, and then everything that is cheap today should normalize around the world. That picture broadly favors international markets.
Dyer: Over the next year, we’re going to be in the midst of a global economic recovery. That will favor more cyclically oriented, or value, companies and those geared to global trade, of which there are plenty more candidates in Europe and Japan.
Uncertainty in the U.S. will continue to unfold as we understand the policy implications of the election, whereas in Europe we are seeing greater cohesion than we have had for a long time. The best representation is the European recovery fund, [the 750 billion euro, or about $889 billion, stimulus package agreed to in July.]

Sløk: That was a game changer; it lets hard-hit countries, mainly Italy and Spain, get access to funds from the rest of Europe. It’s very supportive for European equities because it eliminates the fear that Europe will be at risk of falling apart.
Davis: I’d take a bigger-picture view. The U.S. has this fantastic and impressive burst of innovation; valuations have followed. But we shouldn’t rule out the burst of innovation elsewhere. Look at Europe: The number of tech companies worth over $1 billion has increased by four times in five years. We see the same in Hong Kong and in China. The number of listed stocks in the U.S. fell by 50% from 1997 to 2017, while the top markets for initial public offerings are Hong Kong and Shanghai. We’ve seen massive growth in listed stocks there. Not only that—these are really inefficient markets. Now is the time to be going international.
Kristian Heugh, co-chief investment officer of Counterpoint Global
Illustration by Aaron Dana
What does the economic recovery look like on the ground in Asia?

Dyer: We talked with a Japanese company that does aircraft leasing. It was beginning to receive payments again from its Chinese airline customers, as Chinese consumers are traveling within the country. Sales of Yamaha [7951.Japan], a global leader in musical instruments, rebounded through the end of September—a function of the company’s stores opening again and a return in China to more normalcy. They are seeing good growth from emerging markets, as parents spend more on children’s musical educations. The pandemic has stimulated more purchases of guitars and electric pianos.


Heugh: We have seen a dramatic recovery in China—and even India. Collections from loans in India are rising, from the 65%-to-70% range to 97% for the leading company HDFC Bank [HDB]. Their normal rate is about 99%. You’re starting to see growth in the past two months in freight-car and motor vehicle sales—a really good sign that you’re getting close to a more normal situation. Now, the stocks in India don’t reflect that, with all the major private banks down on the year, even though we have a mass stabilization. There’s a huge opportunity.
What do you like in India?
Heugh: Indian private banks. There is a huge opportunity based on the economic engine of India, which is growing at a nominal 7%. Plus, people are using more financial services, and private banks are gaining market share from the state-owned banks. [Customers] are getting more used to banking apps. As a result, the private banks will see increasing penetration in terms of deposits, which lowers the cost of funding and raises the return on equity for these companies—and ultimately the multiples. That can get private banks to mid- to high-teens revenue growth.
HDFC Bank is privately controlled and widely owned. What other banks look attractive to you?

Heugh: HDFC Bank and Kotak Mahindra Bank [500247.India] are the highest quality, but there are some opportunities with ICICI Bank [IBN] and IndusInd Bank [532187.India]. IndusInd trades at about 1.6 times book value; over the past five years it has traded for around four times book. The bank had some funding issues through the Covid crisis, but we think it will have worked through most of them. If it can grow its loan book at 15% to 20% over a five-year period, you get halfway back, in terms of the multiple.
Davis: Investors get bored with Housing Development Finance Corp. [500010.India; parent of HDFC Bank] at their own peril. It is a phenomenal company with a long runway. The penetration of mortgages in India is less than 10% to gross domestic product; it’s more like 60% to 70% in the U.S. and U.K. That’s just for the parent company; then you look at the number of things they incubate, like HDFC Asset Management [the leading mutual fund company in India].
Many companies, including non-U.S. companies, have tapped the capital markets this year for cheap funding. Which companies have done so in a way that will allow them to emerge stronger?
Dyer: We own Compass Group [CPG.UK], a global catering business that serves businesses, hospitals, and sports arenas. They have reduced costs and raised capital to shore up their balance sheet. Here’s a company that has been battered, but they’re not hemorrhaging money like many others. They are a big global player, and lots of smaller peers will struggle, creating acquisition opportunities.

Jenny Davis, a manager of the Baillie Gifford International Alpha fund
Illustration by Aaron Dana
Davis: Amadeus IT Group [AMS.Spain], which operates booking systems for airlines and hotels, raised capital at the beginning of the lockdown in Europe. It’s part of a three-player oligopoly and the only one that is investment grade. Amadeus’ balance sheet becomes a competitive advantage, supports the share price in times of crisis, and enables greater access to capital, which perpetuates the strength on the other side [of the crisis].
Another example is Just Eat Takeaway.com [TKWY.Netherlands]; they need to do a land grab now to fend off [rivals], so they’re raising capital. As growth investors, we are looking for companies that generate tomorrow’s economy by investing today.
Sløk: Growth has outperformed value for more than 10 years. Are we concluding that this will continue for international stocks?


Davis: Yes. There’s a flaw in the logic of the widely held view that low interest rates have pumped up the valuation of growth stocks, and therefore they’re overvalued now.

Given the pace of creative destruction and the acceleration of trends, you have to focus on those that are going to be stronger tomorrow, not weaker. If you just buy a cheap stock, you’re more likely to have an incumbent that is more likely to shrink. Hendrik Bessembinder [a professor at Arizona State University] did a fantastic study of real returns of the whole stock market, and found that in international markets, from 1990 to 2018, less than 1% of companies generated 100% of the real wealth creation from equities.
Heugh: People are equating low, short-term multiples like price/earnings ratios with proxies for value. But that is not value investing. Value investing is paying a price less than the value. It can mean a company growing rapidly or slowly, one with assets that are mispriced, or a company trading below liquidation value.
After vaccine developers Pfizer [PFE] and BioNTech [BNTX] released positive news, investors rotated out of some of this year’s winners, such as work-from-home and tech stocks, and into the battered shares of cyclical companies. Will this rotation persist?
Heugh: In the short term, it may be more positive for companies that were left out, but we are going to focus on five-year outcomes and [those] well positioned, whether there is a vaccine or not. If the vaccine is real—and it looks like it is—that’s universally good for 99%-plus of companies. If the economy is down 20%, there’s a smaller economic pie to capture. Over time, as that pie increases, it will improve [companies’] ability to add value—and they will get paid for that.
Chris Dyer, director of global equity at Eaton Vance
Illustration by Aaron Dana
What are some other businesses that represent good value and are poised to emerge even stronger after the pandemic?
Dyer: We added CRH [CRH], an Irish building-materials company that is the largest road builder in the U.S., this year. It’s not a sexy business, but [could benefit] in an economic upturn, particularly if you get an increase in infrastructure spending, which isn’t priced into our numbers. The company is trading for only 14.3 times our 2022 expected earnings and has improved the quality of the business by disposing of units and focusing more on costs. We can see 30% upside over the next year, just as that takes root.


Davis: Ryanair Holdings [RYAAY] is a fantastic example. There are 96 airlines in Europe; 90 of them make less than one euro of profit per seat. The other six make the 95% of the industry’s earnings before interest and taxes, or Ebit. A load of those smaller airlines are going to go bust. That gives Ryanair the ability to take market share. It raised capital pre-emptively and is expanding capacity, with plans for 200 planes on order for the next couple of years. It’s investing in a crisis, rather than retrenching. That’s exactly what you want to see from a business to make sure it can emerge stronger on the other side. We see a fair amount of upside. We’re going to have to get through the next couple of years before we can start seeing that play out. That’s where the balance sheet can be a competitive advantage.
Heugh: China’s Trip.com Group [TCOM], formerly Ctrip.com, aspires to be the world’s No. 1 online travel-agency platform. We bought the stock when the occupancy ratio in hotels got down to 10%-20% in China. As of October, that’s back up to 80%. The company has used this opportunity to renegotiate prior arrangements and cut costs. When you think about the long-term trajectory of travel for the Chinese population, these are double-digit types of returns. These are the types of opportunities that can really surprise you when people start getting more positive.
When investors think of China, they usually think of internet titans like Alibaba. Is there still opportunity here?
Davis: Valuations for the likes of Alibaba Group Holding [BABA] suggest the stocks are values. You’ve got 1.4 billion people, all of whom speak the same language. Therefore, you can roll out things where each transaction can be tiny, but they add up to something absolutely enormous.
It’s a really different business model, worth not underestimating. If you look at some of the umbrellas in China—Alibaba, Tencent Holdings [700.Hong Kong], and also Ping An Insurance [2318.Hong Kong]—they incubate and bring out a lot of innovation.
The market was rattled this month when China rolled out draft antitrust guidelines and microfinance regulations that scuttled financial-technology giant Ant Group’s IPO. Will increased regulatory scrutiny be an ongoing risk for investors?
Davis: The most recent guidelines follow many such [consultation] papers since the 2008 Antitrust Law and focus on internet platforms—in particular, regulating activities that could abuse a monopolistic position. It is perhaps marginally beneficial to the weaker players in the short term, but in the longer term, competition is healthy for everyone because it spurs innovation. And the crackdown in 2015 on counterfeit goods sold on Taobao almost certainly helped improve customer trust in the platform in the long run.
As for Ant, regulators are asking Ant to share more in the risk, as well as the reward. While it impacts the near-term financials, it increases the credibility of the overall system. Financial stability is a good thing in the long term, and Ant Group is eminently able to adapt.
Which lesser-known Chinese companies look attractive to you?
Heugh: It’s wonderful to be in Asia and close to 60% of the world’s population and the majority of economic growth—and where there is a lot of optimism for the future. Quoting Charlie Munger [vice chairman of Berkshire Hathaway ; BRK.A], when you go fishing, go where the fish are.
New Frontier Health [NFH] is a $1.3 billion market-cap company with high-end private hospital brands strategically located in all of China’s Tier 1 cities. This is a very underserved market. The number of hospital beds in China is half that in the rest of Asia. You have a potential triple or quadruple on profit margins as their hospitals get to maturity, and the possibility of even higher margins as they go into an asset-light hospital-management business.
That’s why we like companies in Asia: You can benefit from longer-term trends, get management that really understands what it’s doing and leverages competitive advantages, and potentially has the ability to leverage that strength into an adjacent market. That could lead to five- and 10-baggers.
Davis: Another is AIA Group [1299.Hong Kong], a pan-Asian life insurer with a huge opportunity in China. Asia has an $83 trillion mortality protection gap— the shortfall in household income should the breadwinner die. You’ve got all these people born in the cultural revolution of China now in their 50s and at peak earnings power and looking toward protecting themselves. In a country with low pensions and loads of out-of-pocket health-care costs, you’ve got to provide for yourself.
Most analysts expect U.S.-China tensions to persist. How do you assess the risks for the companies caught in the middle?
Davis: Semiconductors are at the center of this war between the U.S. and China. because they power the entire modern world—everything from laptops to smartphones to 5G and cars, even Bitcoin. If anything, this is drawing attention to the centrality of this industry to the future economy. Taiwan Semiconductor Manufacturing [TSM] has a 50% global share in foundry. You can’t have the next iPhone 5G without their technology. Taiwan Semi has spent $20 billion in capex [capital expenditure] in the 12 months to September. You can’t really replicate that.

ASML Holding [ASML] looks like it’s at the epicenter of a geopolitical problem, but it could benefit. For example, Taiwan Semi is building a fabrication plant in Arizona, which means they’re going to need even more EUV lithography machines to produce the next node of semiconductor chips, and ASML has a monopoly on them. We call ASML an “Atlas company”—like Atlas holding the world on its shoulders. You can’t get to tomorrow’s economy without it.
Dyer: We own both. They have phenomenal technology advantages that will be in place for years to come. Most important, their customers rely on them. They will need to find solutions to the geopolitical issues that involve those two companies.
What are some niche areas in which foreign stocks dominate?
Dyer: Halma [HLMA.UK] is a global manufacturer of safety, medical, and environmental technology products, with sales largely driven by regulatory requirements. There is a framed letter from 1994 from Warren Buffett in their boardroom that says, “Yours is just the sort of company in which we wish to be investors.”
Heugh: I’d highlight Moncler (MONC.Italy). It has a visionary management that understands Italian quality and business sense to create functional luxury in an ignored niche of premium outerwear. It has industry-leading operating margins, on par with Hermès International [RMS.France] at over 30%, and exceptionally high returns on capital. Over a five-year period, there’s the potential to double or triple your investment.
Could Moncler be a takeover candidate by some of the larger luxury firms?
Heugh: I don’t think that [CEO Remo] Ruffini really wants to sell. I prefer they operate the business on their own. They’re doing a great job. But it would fit in nicely with one of the larger-platform luxury players, as well.
Moncler maintains leading market positions in a variety of attractive niches and is one of the highest-quality companies in the European industrials sector, delivering 13% compounded annual earnings-per-share growth since 2005 and 40 years of unbroken dividend growth. The market consistently underestimates and undervalues future acquisitions, and the company has demonstrated an ability to create value through acquisitions.
Currency translation matters to global investors. What is the outlook for other currencies versus the dollar?
Dyer: I have concerns about the level of debt to GDP in the U.S. The International Monetary Fund forecasts that the government debt-to-GDP ratio in the U.S. will be 43 percentage points higher than in the euro zone coming out of this crisis. That has implications for various policies—and whether dollar weakness continues. A weaker dollar makes foreign stocks more valuable for dollar-based investors in unhedged portfolios.
Sløk: When I worked at the International Monetary Fund, I used to fly around the world and tell politicians, “Can you please not spend that much money?” Now you have Jay Powell and other central bankers asking politicians, “Can you please spend some more money?” To put it mildly, it is very unusual to have all this support for fiscal expansion everywhere.
Because of the developments around the virus everywhere but in China, and the news of vaccines, I’d expect the dollar to move sideways for now. Once we get a vaccine and move back to a more normal state, the dollar might slowly depreciate.
We’ve talked a lot about the opportunities in non-U.S. markets. What are the risks that investors should be attuned to next year?
Sløk: The risk that policy makers aren’t able to deal with the virus, fiscal policy, and monetary policy. It’s a very narrow path because policy makers have been spending a lot of money on the fiscal front. Central banks have less ammunition than they’ve had in a long time. On top of that, there’s China’s role in the global economy, including the tensions in trade and tech wars.
Dyer: The biggest risk is the coronavirus—that supersedes everything else. Longer term, there’s the issue of China’s relations with the rest of the world. When I grew up, I was fascinated with the Soviet Union. The Cold War defined the 1950s to 1980s. I hope this isn’t a parallel situation, but it will be a theme that is present for decades to come.
Heugh: The largest geopolitical risk is the South China Sea. The biggest risk is the price you pay. You have to look at how big a company can be versus its market cap. Are you getting a big enough discount to get a good return? There are idiosyncratic opportunities out there. Fortune favors the brave.
Indeed. Thanks, all.

(HFW) Hedge Fund 13F Intelligence -3rd Quarter 2020

>>> Hedge Fund Consensus Buy List
Consensus New Buys
* Snowflake (SNOW): This was one of the hotly anticipated tech IPOs of the year and firms including Viking
Global, Lone Pine Capital, Coatue Management, Tiger Global, and Berkshire Hathaway all show stakes in the
company. Snowflake is a data warehouse provider, which basically allows companies to manage and extract
insights from their data. It runs a cloud-native database platform that is neutral and as such works with all three
of the major cloud computing services like Amazon AWS, Microsoft Azure, and Google Cloud Platform.
Their IPO prospectus noted that new customers were up 101% year-over-year, and their dollar based net
expansion rate (DBNER ~ a measurement of how much more customers spend over time) was 158%, and
revenue growth was up 121%. Frank Slootman currently leads the company and he previously successfully
brought ServiceNow (NOW) public.

* Reinvent Technology Partners (RTP.U): With specialty purpose acquisition companies (SPACs) all the rage these days, it should come as no surprise that hedge funds have gotten in on the act as well. This particular SPAC was founded by LinkedIn co-founder Reid Hoffman and Zynga founder Mark Pincus. It’s targeting a private business to bring public with this vehicle and is looking in their sector of expertise: technology. It raised $600 million and hedge funds that show new positions include Baupost Group, Third Point, Tiger Global, and Greenlight Capital.

* KE Holdings (BEKE): This is yet another IPO that drew attention from hedge funds. Managers that show
new stakes include Tiger Global, Coatue, Lone Pine, and Farallon. KE Holdings, or “Beike,” is a Chinese
online housing platform. It also operates Lianjia, which is one of China’s top real estate brokerages. For
Western readers, Beike is basically building kind of a mix of Zillow and the multiple listing service (MLS).

* Expedia (EXPE): As the sector rotation from work-from-home stocks to economically sensitive stocks has
started on and off again, more managers are dedicating some capital to the latter. Given that travel stocks have
been hit hard due to the pandemic, they also provide the potential for a snapback should the world begin to
return to normal (as evidenced by these stocks’ positive reaction to the COVID vaccine trial news). Funds that
chose online travel agency Expedia for their exposure include Tiger Management, Duquesne Family Office,
Coatue Management, and Third Point.

Consensus Increased Positions
* T-Mobile (TMUS): Last quarter, T-Mobile Subscription Rights were one of the consensus new buys among
hedge funds in the newsletter. These rights gave holders the ability to acquire TMUS shares, which is very
likely why TMUS now lands on the consensus increase list this quarter. Funds that now show increased
allocations to the wireless service provider include Pennant Investors, Maverick Capital, Duquesne, and
Viking. Given all of these funds used to own the Subscription Rights, it seems safe to assume they exercised
them.

* Microsoft (MSFT): This is the second consecutive quarter that hedge funds were adding to their existing
MSFT stakes. Funds that boosted exposure to the tech giant include Tiger Management, Appaloosa, Farallon,
Duquesne, Lone Pine, Viking Global, and Tiger Global. The company continues to ride the cloud computing
trend behind its successful Azure platform. It has also benefited from the work-from-home trend as its
Microsoft Teams platform has gained millions of users this year. The company also just released its next
gaming platforms: Xbox Series X and Series S. They also acquired gaming studio Bethesda, further signaling
their intent to continue to build out their Game Pass subscription offering.

* Uber Technologies (UBER): Shares of the ridehailing and food delivery giant were acquired by Tiger,
Bridger Management, Coatue, and Tiger Global during the third quarter. UBER largely traded sideways during
the third quarter when they would have been buying, so it’s hard to pinpoint a specific catalyst apart from
sector rotation. That said, since the end of the quarter, shares have since broken out after the company reported
earnings. While their rides revenue is obviously down due to the pandemic (-53%), their delivery revenue was
up 125% year-over-year.

* Fidelity National Information Services (FIS): This stock was accumulated by Duquesne, Hound Partners,
Viking Global and others. The company provides payment and financial services solutions and last year
acquired Worldpay.

>>> Hedge Fund Consensus Sell List
Consensus Sold Positions
* JD.com (JD): Hedge funds such as Maverick, Ruane Cunniff, and Viking Global all exited their stakes in one
of the three major Chinese e-commerce players.

* Caesars Entertainment (CZR): This had largely become a risk arbitrage play due to its merger with Eldorado
Resorts. Now that the merger has closed, many funds no longer hold positions

* Costco (COST): Berkshire Hathaway and Coatue were some of the biggest names to liquidate exposure to the
membership bulk savings retailer. The fact that Berkshire sold must have pained Warren Buffett’s business
partner Charlie Munger, who has been a longtime bull on the company and at last check owned COST shares
personally.

* Salesforce (CRM): Lone Pine and Viking are a few of the big names that liquidated exposure to this software
as a service giant. It’s hard to pinpoint an exact reason for their sales, but perhaps they were just locking in
profits on the high-flying name.

* T-Mobile Subscription Rights (TMUSR): As detailed on the previous page, these rights expired during the
quarter and the majority of funds exercised them to buy shares of TMUS common stock. Funds that previously
owned these Rights included Duquesne, Maverick, Pennant, and Viking.

Consensus Decreased Positions
* Amazon (AMZN): This is the second consecutive quarter that hedge funds have trimmed AMZN exposure.
And it might just simply be a case of taking some profits and reducing position sizes that have swelled. After
all, AMZN is up over 60% this year. The company has benefited from the pandemic as more people are
staying at home and utilizing e-commerce instead of visiting traditional brick and mortar retail. Not to
mention, the company’s cloud computing division (AWS) has benefited from the work-from-home trend.

* Alphabet (GOOG): This is now the third straight quarter this stock lands on the decrease list. Funds that
reduced exposure this time around include Brave Warrior, Tiger, Hound, Maverick, Baupost, Appaloosa, and
Ruane Cunniff. Last quarter’s issue noted that the conclusion from antitrust hearings was basically that it’s not
‘if’ an antitrust case would be brought against them, but ‘when.’ And that came to fruition as The Justice
Department sued Google for abusing its dominance in online search and advertising. That said, the bull
counterargument to this development is that any regulation could actually have the opposite intended effect: it
could just entrench incumbents further and make it more expensive and harder for upstarts to compete. GOOG
shares haven’t really traded down since news of the suit.

* PayPal (PYPL): The online payment processor has been another big winner of the pandemic, with more
commerce being conducted online instead of in-person. Shares are up 72% for the year so it seems likely funds
were taking some profits off the table. Managers that decreased their position sizes include Duquesne,
Appaloosa, Tiger Global, Lone Pine, and Coatue. Despite the reduction, some of these managers maintain
quite large positions. For instance, PYPL is Coatue’s top holding and Lone Pine’s 6th largest holding.

* Alibaba (BABA): Managers that reduced exposure to China’s e-commerce giant include Farallon, Maverick,
Appaloosa, and Tiger Global. Since quarter-end, the IPO of its financial affiliate Ant Group was pulled by the
Shanghai Stock Exchange after founder Jack Ma apparently ridiculed regulators. The Wall Street Journal
reported that Xi Jinping himself made the decision to pull it.

(HFW) Hedge Fund 13F Intelligence -3rd Quarter 2020

>>> Hedge Fund Consensus Buy List
Consensus New Buys
* Snowflake (SNOW): This was one of the hotly anticipated tech IPOs of the year and firms including Viking
Global, Lone Pine Capital, Coatue Management, Tiger Global, and Berkshire Hathaway all show stakes in the
company. Snowflake is a data warehouse provider, which basically allows companies to manage and extract
insights from their data. It runs a cloud-native database platform that is neutral and as such works with all three
of the major cloud computing services like Amazon AWS, Microsoft Azure, and Google Cloud Platform.
Their IPO prospectus noted that new customers were up 101% year-over-year, and their dollar based net
expansion rate (DBNER ~ a measurement of how much more customers spend over time) was 158%, and
revenue growth was up 121%. Frank Slootman currently leads the company and he previously successfully
brought ServiceNow (NOW) public.

* Reinvent Technology Partners (RTP.U): With specialty purpose acquisition companies (SPACs) all the rage these days, it should come as no surprise that hedge funds have gotten in on the act as well. This particular SPAC was founded by LinkedIn co-founder Reid Hoffman and Zynga founder Mark Pincus. It’s targeting a private business to bring public with this vehicle and is looking in their sector of expertise: technology. It raised $600 million and hedge funds that show new positions include Baupost Group, Third Point, Tiger Global, and Greenlight Capital.

* KE Holdings (BEKE): This is yet another IPO that drew attention from hedge funds. Managers that show
new stakes include Tiger Global, Coatue, Lone Pine, and Farallon. KE Holdings, or “Beike,” is a Chinese
online housing platform. It also operates Lianjia, which is one of China’s top real estate brokerages. For
Western readers, Beike is basically building kind of a mix of Zillow and the multiple listing service (MLS).

* Expedia (EXPE): As the sector rotation from work-from-home stocks to economically sensitive stocks has
started on and off again, more managers are dedicating some capital to the latter. Given that travel stocks have
been hit hard due to the pandemic, they also provide the potential for a snapback should the world begin to
return to normal (as evidenced by these stocks’ positive reaction to the COVID vaccine trial news). Funds that
chose online travel agency Expedia for their exposure include Tiger Management, Duquesne Family Office,
Coatue Management, and Third Point.

Consensus Increased Positions
* T-Mobile (TMUS): Last quarter, T-Mobile Subscription Rights were one of the consensus new buys among
hedge funds in the newsletter. These rights gave holders the ability to acquire TMUS shares, which is very
likely why TMUS now lands on the consensus increase list this quarter. Funds that now show increased
allocations to the wireless service provider include Pennant Investors, Maverick Capital, Duquesne, and
Viking. Given all of these funds used to own the Subscription Rights, it seems safe to assume they exercised
them.

* Microsoft (MSFT): This is the second consecutive quarter that hedge funds were adding to their existing
MSFT stakes. Funds that boosted exposure to the tech giant include Tiger Management, Appaloosa, Farallon,
Duquesne, Lone Pine, Viking Global, and Tiger Global. The company continues to ride the cloud computing
trend behind its successful Azure platform. It has also benefited from the work-from-home trend as its
Microsoft Teams platform has gained millions of users this year. The company also just released its next
gaming platforms: Xbox Series X and Series S. They also acquired gaming studio Bethesda, further signaling
their intent to continue to build out their Game Pass subscription offering.

* Uber Technologies (UBER): Shares of the ridehailing and food delivery giant were acquired by Tiger,
Bridger Management, Coatue, and Tiger Global during the third quarter. UBER largely traded sideways during
the third quarter when they would have been buying, so it’s hard to pinpoint a specific catalyst apart from
sector rotation. That said, since the end of the quarter, shares have since broken out after the company reported
earnings. While their rides revenue is obviously down due to the pandemic (-53%), their delivery revenue was
up 125% year-over-year.

* Fidelity National Information Services (FIS): This stock was accumulated by Duquesne, Hound Partners,
Viking Global and others. The company provides payment and financial services solutions and last year
acquired Worldpay.

>>> Hedge Fund Consensus Sell List
Consensus Sold Positions
* JD.com (JD): Hedge funds such as Maverick, Ruane Cunniff, and Viking Global all exited their stakes in one
of the three major Chinese e-commerce players.

* Caesars Entertainment (CZR): This had largely become a risk arbitrage play due to its merger with Eldorado
Resorts. Now that the merger has closed, many funds no longer hold positions

* Costco (COST): Berkshire Hathaway and Coatue were some of the biggest names to liquidate exposure to the
membership bulk savings retailer. The fact that Berkshire sold must have pained Warren Buffett’s business
partner Charlie Munger, who has been a longtime bull on the company and at last check owned COST shares
personally.

* Salesforce (CRM): Lone Pine and Viking are a few of the big names that liquidated exposure to this software
as a service giant. It’s hard to pinpoint an exact reason for their sales, but perhaps they were just locking in
profits on the high-flying name.

* T-Mobile Subscription Rights (TMUSR): As detailed on the previous page, these rights expired during the
quarter and the majority of funds exercised them to buy shares of TMUS common stock. Funds that previously
owned these Rights included Duquesne, Maverick, Pennant, and Viking.

Consensus Decreased Positions
* Amazon (AMZN): This is the second consecutive quarter that hedge funds have trimmed AMZN exposure.
And it might just simply be a case of taking some profits and reducing position sizes that have swelled. After
all, AMZN is up over 60% this year. The company has benefited from the pandemic as more people are
staying at home and utilizing e-commerce instead of visiting traditional brick and mortar retail. Not to
mention, the company’s cloud computing division (AWS) has benefited from the work-from-home trend.

* Alphabet (GOOG): This is now the third straight quarter this stock lands on the decrease list. Funds that
reduced exposure this time around include Brave Warrior, Tiger, Hound, Maverick, Baupost, Appaloosa, and
Ruane Cunniff. Last quarter’s issue noted that the conclusion from antitrust hearings was basically that it’s not
‘if’ an antitrust case would be brought against them, but ‘when.’ And that came to fruition as The Justice
Department sued Google for abusing its dominance in online search and advertising. That said, the bull
counterargument to this development is that any regulation could actually have the opposite intended effect: it
could just entrench incumbents further and make it more expensive and harder for upstarts to compete. GOOG
shares haven’t really traded down since news of the suit.

* PayPal (PYPL): The online payment processor has been another big winner of the pandemic, with more
commerce being conducted online instead of in-person. Shares are up 72% for the year so it seems likely funds
were taking some profits off the table. Managers that decreased their position sizes include Duquesne,
Appaloosa, Tiger Global, Lone Pine, and Coatue. Despite the reduction, some of these managers maintain
quite large positions. For instance, PYPL is Coatue’s top holding and Lone Pine’s 6th largest holding.

* Alibaba (BABA): Managers that reduced exposure to China’s e-commerce giant include Farallon, Maverick,
Appaloosa, and Tiger Global. Since quarter-end, the IPO of its financial affiliate Ant Group was pulled by the
Shanghai Stock Exchange after founder Jack Ma apparently ridiculed regulators. The Wall Street Journal
reported that Xi Jinping himself made the decision to pull it.