TheChek News Flow

For decades, watches have been symbols of luxury, wealth and personal taste.

But their potential as investments is now more easily tracked and understood.

“At the time, it was every dime I had,” said Mr. Mlodinoff, 33. “My obsession kind of grew from that.”

For decades, watches have been symbols of luxury, wealth and personal taste. But their potential as investments is now more easily tracked and understood. You can credit technology for shining a light in dusty watch shops.

An auction for vintage and modern watches this week at Sotheby’s raised more than $9 million, while Christie’s plans to hold an auction of rare watches in Hong Kong on Monday. Last year, Paul Newman’s Rolex Daytona sold for $15.5 million, not including the auction premium.

But that’s rarefied air.

“Quality vintage watches can be bought for a few thousand dollars,” said John Reardon, the international head of the watches at Christie’s. And the market for watches that cost less than $10,000 “is one of the areas of most aggressive growth at the moment.”

One of the Rolex Submariner watches given to winning crew members of the 1964 America’s Cup.Jeenah Moon for The New York Times

Until recently, collectible or vintage watches were generally bought at watch shops or through auction houses. Mr. Mlodinoff, who lives in Chicago, said he remembered going shop to shop, trying to find what he was looking for.

Continue reading the main story

“There was the Rolex guy, the Cartier guy, the Omega guy — that’s what you did back in the day,” he said. “I didn’t have the disposable income for five or 50 watches. I had the income for one, two or three watches, so if I wanted something new, I sold something old.”

He now has about 20 watches, but he is still selling as well as buying.

Websites like WatchBox and Hodinkee go beyond just selling watches and aim to create greater transparency for people who buy watches for thousands, not millions, of dollars. They want to increase visibility in a market that has often been opaque.

“We’re monetizing a wristwatch as if it’s an asset,” said Danny Govberg, the chief executive of WatchBox. “Watches have an underlying value, just like a diamond. You can take a diamond anywhere in the world and sell it. We’re creating a worldwide market for watches.”

Mr. Govberg, whose family has been in the jewelry business for three generations, said certain watches trade like the most liquid of stocks. A Rolex Submariner is popular in new and vintage styles, so its price range is tight, he said. WatchBox recently had nine on offer, from $9,000 to $13,000.

Continue reading the main story

Photo

A watch specialist taking pictures in order to show clients extra details of watches up for auction at Sotheby’s in New York. Credit Jeenah Moon for The New York Times

But markets for brands like Audemars Piguet or Breguet are not as fluid. Those companies make fewer watches, but their brands also lack the easy association with luxury that Rolex has.

Mr. Govberg said part of his hope was to make markets for these and lesser-known watch brands. He wanted his site to serve as a platform to certify vintage watches, similar to the way a luxury automaker sells certified pre-owned models of its cars.

Its fee for doing this varies depending on the watch. But Mr. Govberg said if he bought a Rolex for $8,500, he’d sell it for about $10,000.

“We’re basically saying we are going to value these timepieces and support the prices of them,” Mr. Govberg said. “But we’re also going to resell them at a high standard, not like it’s some flea market.”

When it comes to watches as investments, the market is dominated by two brands: Rolex and Patek Philippe. But that does not mean all of their watches are great investments.

Rolex watches span the gamut from affordable to exclusive, starting at less than $6,000 and soaring to limited-edition models that cost more than $300,000. It’s like the range of Mercedes cars between a basic C Class sedan, which has no rarity value, and a more coveted AMG Cabriolet that tops $300,000.

“Rolex has become a cultural symbol and a status symbol,” said Benjamin Clymer, founder and chief executive of Hodinkee. “The quality you receive in a Rolex is above most other watches at that price point.”

Patek has invested heavily in marketing campaigns that focus on its watches as heirlooms. But Mr. Clymer said the brand does not translate immediately into appreciation.

He said that the company’s signature watch, the Calatrava, which costs about $20,000, is like any new car. “If you bought it and tried to sell it the next day, you’d take a bath,” he said.

“They’re not always great investments, but there is a track record for them becoming great investments,” he said of the Patek Philippe timepieces.

Photo

“We’re monetizing a wristwatch as if it’s an asset,” said Danny Govberg, the chief executive of WatchBox. Credit Mark Makela for The New York Times

Discerning the investment potential of watches can be as complex as the intricate machinery that runs them.

“Things can change very rapidly in the watch world, the way they can with other investments,” said Daryn Schnipper, chairwoman of Sotheby’s international watch division. “One of the things I suspect people should be tuned into is production quantities and trends of a company — is it a solid company or a new company?”

As with most investments, she said, supply drives watch prices. For instance, new Rolex Daytonas are not easy to find, so the price for vintage ones has ticked up.

Watches that are known beyond aficionados have a tendency to increase in value, Mr. Clymer said. Mr. Newman’s Rolex Daytona is one. The Omega Speedmaster, which astronauts wore on the Apollo 11 moon mission, is another.

“That Speedmaster has a place in world history,” he said.

But sometimes the high prices that watches fetch have as much to do with luck as anything else.

Continue reading the main story

Dave Terry, a watch collector and chief executive of Hub International Insurance Brokers, tries not to get swayed by auction prices.

He said he focuses on collecting four brands: Rolex, Patek Philippe, Audemars Piguet and F. P. Journe, which he thinks will hold their value. He tracks the values of many models in different conditions on a variety of sites and at auction to get a sense of their worth, but he believes the value at auction is not always accurate.

“You get a bunch of boys in a room with testosterone who’ve had a few drinks and they can bid up a watch,” he said.

As Mr. Mlodinoff bought and sold watches over the past decade, he experienced both the highs and lows of the investments.

On the plus side, he has an Audemars Piguet Royal Oak, a large sports watch that he bought three years ago for $23,000. He believes the model he has is worth about $30,000 because the demand for the watch has remained strong.

Yet seven years ago, he bought an IWC Big Pilot’s Watch for $40,000. He said it’s probably worth half that much today.

“If we’d had this conversation back then, I’d say it was a historical watch,” Mr. Mlodinoff said before listing his reasons for buying it: “It was a reissue in a precious metal, they only made 500 of them, it’s going to be super valuable.”

So what happened? He said the company had made too many of them. “They kept doing different limited editions, and that hurt the market for it,” he said. “It’s where I learned I’m not the smartest.”

Could the U.S. fight dual wars in North Korea and Iran? After diplomacy breaks down, questions loom.

But beyond the saber-rattling is a sobering reality well known by strategists and planners at the Pentagon: The unlikely, worst-case scenario of sliding into open armed conflict with both Iran and North Korea simultaneously would strain the U.S. military to a degree few Americans could fathom.

Defense Secretary Jim Mattis has repeatedly warned that an open conflict on the Korean Peninsula alone would be catastrophic, resulting in the sort of warfare the U.S. military hasn’t seen in generations. The outside chance of a conflict with Iran at the same time would present Pentagon leaders with logistical, tactical and personnel challenges unenviable for any commander.

Former top Pentagon officials say the possibility of coinciding wars with Iran and North Korea remains extremely remote, and the United States could drift in the space between diplomatic breakthrough and all-out war for years. Still, if the dual wars were to occur, they would test decades of contingency planning that anticipates huge risks to the U.S. armed forces despite ultimate victory.

“Both fights would be costly,” said David Ochmanek, a senior researcher at the Rand Corp. and a former top Pentagon strategist in the Clinton and Obama administrations. “In the end you would expect the U.S. and its allies to prevail but at a human and material cost that would be almost incalculable, particularly in the case of the Korea example.”

[Summit collapse foils chance to press North Korea on suspicious sites]

For decades dating back to the Cold War, planners at the Pentagon have grappled with the question of how the U.S. military should prepare for the remote possibility of having to fight two full-scale regional wars at once. The new national defense strategy issued by Mattis, however, emphasizes the need to build up military capability for a possible great-power conflict with Russia and China, and largely backs off the focus on waging two regional wars at once that once consumed the Pentagon.

But as the U.S. military pivots its focus to countering Russia and China, regional challenges from Iran and North Korea continue to consume the administration and the public.

“If you want to ensure the Pentagon can actually plan and prepare and resource for a potential conflict with China or Russia, then getting into conflict with Iran and North Korea is the exact wrong thing to do,” said Mara Karlin, an associate professor at the Johns Hopkins School of Advanced International Studies and a former Pentagon strategist.

Whereas military planners envision a war with North Korea as primarily a land and air fight, ultimately requiring a massive ground invasion and ending in regime change followed by stabilization, conflict with Iran would more likely be primarily a naval and air battle, focused on crippling specific missile and nuclear sites rather than dismantling the government itself.

Simultaneous warfare in the two countries would stress intelligence and reconnaissance assets such as drone overflights, which the U.S. military has come to rely on heavily, according to former Pentagon officials. Battles in two theaters also would strain Special Operations forces and possibly electronic warfare and tactical air support units, they said. Another challenge would be getting forces and equipment to both theaters in a prompt manner and sustaining them once they arrive.

Amid the attention on Iran and North Korea, Trump has stressed the strength of the U.S. military and his administration’s efforts to reverse what military commanders say has been underinvestment in the force.

“We’re sharpening the fighting edge of everything, from Marine infantry squads to combat ships to deliver maximum lethal force,” Trump said during his Naval Academy address. “We will have the strongest military that we’ve ever had, and it won’t even be close. And when did we need it more than now?”

While Trump has boasted of major increases to defense spending, the impact of greater budgets won’t be felt for some time. Meanwhile, the military continues to feel the effects of more than a decade and a half of war in Afghanistan and Iraq.

“It’s still in many respects a tired force — the toll of the wars and constant deployments, the effect on both manpower and equipment, the lack of opportunity to do the right kind of training,” said Brian P. McKeon, who served as acting undersecretary of defense for policy during the Obama administration.

Mattis has regularly emphasized the need for diplomacy for Iran and North Korea, even as other members of the Trump administration have threatened military options.

Michael O’Hanlon, a senior fellow at the Brookings Institution, suggested Mattis’s approach might reflect his firsthand understanding of the potential costs and uncertainties of any conflict, regardless of the Pentagon’s many contingency plans.

“There’s such an inherent unpredictability to war,” O’Hanlon said. “The minute you start to think your beautiful battle plan is going to work the way you designed it, that’s where it gets dangerous.”

American master of the horror tale H.P. Lovecraft once wrote, “The oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is fear of the unknown.”

Surely that applies to spooking readers. Perhaps it also applies to finding undervalued stocks.

“The trick is being able to identify those things that everybody else is fearful of and turn it around,” says Andrew Clifford, Platinum Investment Management’s chief investment officer, in a video on the Australian hedge fund’s site. Platinum says its investment style is seeking out companies “whose true worth and prospects are yet to be fully recognised by the market.”

For example, Platinum was buying shares of offshore drilling contractor Transocean (ticker: RIG) in the first quarter when the outlook for energy was weak. Transocean traded down into the single digits and ended the first three months with a 7.3% loss. Platinum bought a total of 4.8 million shares in the period. (It didn’t own any in the previous quarter.)

Since the end of March, Transocean has surged 32% through Thursday’s close, and are now up 22% for the year.

That pick wasn’t a fluke for Platinum. Its flagship Platinum International Fund, which represents about 42% of the firm’s $28 billion Australian assets under management, has returned 13.1% a year on average through the end of April since its inception in April 1995. That figure nearly doubles the S&P 500’s annual return of 7.3% over that time frame. (The fund holds about a third of the firm’s assets. For more information, click here.)

The hedge fund firm also disclosed Tuesday two other significant buys in the first quarter that have gained since the end of March: Intel (INTC) and Facebook (FB). Platinum sold nearly all of its investment in Coca-Cola (KO) and has nearly completely exited its position in Oracle (ORCL).

Platinum didn’t respond to a request for comment on the trades.

The firm tripled its Intel investment by buying 3.1 million more shares in the first quarter, ending March with 4.7 million shares of the chip giant. Intel had gained nearly 14% in the quarter, and since then has tacked on another 6% on the strength of first-quarter earnings.

Facebook slid more than 9% in the first quarter, pressured by user outrage over the company not protecting personal information and revelations of the exploitation of the platform by players seeking to influence the 2016 Presidential election. Since the end of March, however, the shares have done an about-face, rising 5.4% after Chief Executive Mark Zuckerberg performed well in front of lawmakers and first-quarter earnings came in strong. Platinum scooped up an additional 1 million Facebook shares in the first quarter, after owning fewer than 2,000 shares in the fourth quarter.

Platinum poured out more than 80% of its investment in Coca-Cola in the first quarter, selling 2.2 million shares to end with a relatively scant 435,600 shares. Coke slipped 5% in the first three months of 2018 in the face of an ongoing soda slump. Barron’s thinks the stock’s a bargain, however. “Coke has sold a lot of its bottling operations, which could make it less capital-intensive and help returns as it focuses more on selling concentrate,” we noted earlier this month.

Oracle slipped 3% in the first quarter as Platinum sold 3.8 million shares, whittling down its holdings to a mere 50,500 shares. Disappointing guidance in mid-March sealed its fate to end the period in the red. Evercore ISI analyst Kirk Materne wrote in a May 20 report that hedge funds and mutual funds “continue to cut exposure” to Oracle and that holdings in its stock are “now near all-time lows.

The Ned raises the bar on City club offerings

Bet on nightlife venue pays off as Soho House entrepreneur pushes ‘accessible glamour’

It took several months for The Ned, London’s swish new members club, to work out how best to lure in the City’s bankers and lawyers: less spa, more bar. 

The Ned opened its doors next to the Bank of England in April 2017 after a lavish £200m refurbishment of the Grade I listed building that was once home to Midland Bank.

By the winter, Nick Jones, the Ned founder and entrepreneur who is also behind the Soho House club network, made the decision to spend an extra £2m converting part of the beauty parlour into another bar, in a venue that already had 15 of them. 

“Everyone in the world likes a good time,” Mr Jones said. “We brought something to the City that everyone appreciates . . . accessible glamour.” 

Swiftly adapting to demand for more drinking space is just one part of a bet that Mr Jones — a club tycoon more familiar with catering to “creatives” and known for his dislike of “packs of people in suits” — has made on the City. 

So far, that bet seems to be paying off — despite more general signs of a downturn in the hospitality sector and financial strains at Mr Jones’ Soho House brand. 

In one year, the Ned has built up a 3,000-strong membership that brought in revenues of between £7m and £10m. On top of that, its 10 restaurants — most of which are also open to the public — often bring in weekly revenues of more than £1m.

While he would not reveal overall performance figures, which would also include takings from its 250 hotel rooms, Mr Jones said it took three months for the privately held venture to move into profitability. 

The Ned is part of Mr Jones’ ambition to put the City on the map as a nightlife hotspot. “I know we’ve helped change perceptions of the City as far as our business — hospitality and retail — is concerned,” he said. “We’ve got lots of other business to come in, lots are looking at [the] City as a seven-day, 24-hour operation.” 

The building the Ned occupies was designed by British architect Edwin “Ned” Lutyens, and the club is a joint venture between Mr Jones’ Soho House — which agreed a lease on the building in December 2012 — and New York hotel group Sydell Group. 

Its encouraging first year will give a welcome boost to Soho House, whose finances have come under strain from the expense involved in a rapid global expansion. The company, which has 19 clubs around the world, was unprofitable in 2016 and in 2017 signed a £275m refinancing agreement with Permira Debt Managers.

Some fear that the Ned’s success bears the hallmarks of excess typically seen during a peak market cycle. Membership — which includes access to a bar based in the former bank’s velvet-clad vaults as well as the rooftop bar — is not cheap. A regular package costs £3,150 a year with a joining fee of £1,000. For the under-30s — about a third of the members — the annual fee is £2,000 with a joining fee of £250. It employs 850 staff. 

To celebrate its first anniversary, the Ned held a pool party for about 400 members, with DJs Groove Armada providing entertainment. 

Meanwhile, the wider UK restaurant sector is grappling with market saturation, rising costs and falling consumer confidence. Recent research shows profits at the UK’s top 100 restaurant groups have fallen 64 per cent over the past year, forcing numerous high-profile brands, including Gaucho and Jamie’s Italian, to restructure and look at closing branches. 

Mr Jones is steadfastly optimistic, however. “We’ve been through downturns through Soho House — people still eat and drink,” he said. “I’m not saying we are above a big economic slowdown. [But] we’re very quick to react as a company, very responsive.” 

The Ned has been “very careful in our pricing”, he added, particularly for the sections open to the public. “We don’t want people to come only for birthdays and anniversaries . . . but several times a week.”

The club launched at a time when corporate hospitality has come under increased scrutiny over the treatment of women, following revelations by the Financial Times of hostesses being subject to harassment at a men-only Presidents Club charity dinner at the Dorchester.

Richard Caring, the entrepreneur behind The Ivy who is one of the largest shareholders in Soho House as well as a director, attended the event and bid on several of the prizes at its auction, including a course of plastic surgery billed as “a boob job for the missus”. 

Mr Jones said he was unaware of Mr Caring’s links to the Presidents Club and would not comment on the matter. But he added that the Ned had a “strong door policy” which included turning away “large groups of hyperactive blokes”. 

“We couldn’t be a less men-only company. I can’t think of anything worse, none of that is good for business,” he said.

In future, he plans to expand the Ned’s capacity, to accommodate 5,000 members. And, as with Soho House, he has global ambitions. 

Profits will go towards “keeping on investing and expanding”, he said, adding that he wanted to open Ned clubs in cities around the world and had already been looking at sites in New York. “Ned has a good pair of legs. We’re looking for Ned two, Ned three.”

Banks hold the key to whether the City ultimately embraces digital currencies

For a financial centre that still dominates the $5tn-a-day global foreign exchange market, London’s reluctance to embrace cryptocurrencies will ultimately prove a blessing, or a costly mistake.

It is a subject that has come into sharper focus as Asian financial centres such as Tokyo encourage the nascent market by regulating crypto exchanges, while prominent US futures exchanges, such as the CME Group and Cboe Global Markets, have tried to muscle in on bitcoin. About 8,000 delegates attended a recent crypto conference in New York.

The tentative approaches to cryptocurrencies by the world’s leading financial centres reflect the strident debate over whether the likes of bitcoin, Ethereum and Ripple should be embraced or shunned. Critics view crypto as a tool facilitating money laundering, with a level of volatility and a lack of fundamental underpinnings that disqualifies it as a reliable store of value. Proponents argue that cryptos are an alternative medium of exchange that will free people from a financial system run by commercial banks and regulators.

London has historically been at the forefront of creating and profiting from new financial products, including the development of eurodollar deposits in the 1960s, the free floating currency era of the 1970s and the explosive rise of derivatives that began with swaps in the 1980s.

But Mark Yallop, chairman of the FICC Market Standards Board, an industry standards-setting body, said the City of London felt it could wait to see how the crypto market evolves. “Their overall size, even in aggregate, is so small that they are too small to really be of relevance in wholesale markets.’’

“UK market participants have been very cautious in engaging with them because of fears about their vulnerability to fraud, financial crime and other ‘conduct’ risk categories,’’ he adds.

Alongside an unease among UK authorities on how to regulate digital assets, the strength of wholesale banking in London and the dominance of banks have proved less conducive to the development of a market that has proved popular with retail investors.

The inroads made by London have been led by publicly traded spread betting companies such as Plus500 and IG Index. These firms offer retail investors cryptocurrency derivatives, but many of these customers take their cue from news out of the more developed markets in Asia.

Growth and innovation in cryptocurrencies reside mainly in Asia, a region that hosts the biggest cryptocurrency exchanges as well as a source of the cheap electricity bitcoin miners need. In the US, the large proprietary trading firms such as Cumberland, an arm of Chicago-based DRW, have entered the market.

Oliver Robinson, a director of Markets Regulation at AIMA, a London hedge fund trade body, believes there are significant opportunities in creating an institutional UK digital assets industry. 

“They stem from what the UK offers global capital markets more generally — a central timezone, a respected legislative and judicial system and a deep global talent pool,” he said.

However, the game changer for London would be if banks decided to embrace cryptos, a move that would open the door for institutional investors such as asset managers to follow.

Monica Summerville, analyst at Tabb Group, a capital market consultancy, said there was “a wall of institutional money just waiting for the right conditions — such as adequate technology and regulatory clarity — to enter the market’’.

So far, larger banks have resisted, with the exception of Barclays agreeing to open an account for Coinbase, a US digital wallet provider and owner of the GDAX exchange. 

“Banks have been unusually strict in dealings with crypto,” said Max Boonen, a former Goldman Sachs trader and now chief executive of B2C2, a London cryptocurrency market maker. “It’s nearly impossible to open an account for crypto in the UK. The problem is that in the UK there is a perception that banks have issues with anti-money laundering and decided to be a lot more conservative.”

Mark Carney, governor of the Bank of England, said in March that holding crypto asset exchanges to the same standards as those that trade securities, such as equities, would address “a major underlap in the regulatory approach”. 

A UK crypto task force, comprising the Treasury, BoE and the Financial Conduct Authority, is planning to lay out this summer initial thoughts on how the financial industry could manage the risks associated with handling cryptos. 

While many in the City sit back and wait, others are not wasting time. 

Cryptocurrencies – investing or gambling?

David Mercer, chief executive of London based LMAX, a trading venue, which recently began trading digital currencies, said he expected banks would come to the market in the next year. “London is very bank-driven and we see it as being a late adopter.”

LMAX is regulated by the FCA and hopes to attract institutional investors with technology accustomed to coping with up to 100,000 messages a second. That is far in excess of the capacity of some online exchanges that have struggled with demand in busy times, and puts it into competition with US rivals such as Coinbase, which are also upgrading their systems.

London does have another possible ace up its sleeve regarding the crypto industry in Europe by offering a mix of securities lending, cash management and trading services. “London is uniquely placed as people don’t do it in other countries in Europe,” said Mr Boonen of B2C2.

But, for now, that remains a mere ambition. In written evidence this week, the BoE told parliament “there was little appetite on the part of banks to take direct exposure to the crypto-asset market in any significant way in the medium term”.

It may take more persuasion — or pressure — from customers to change their minds.

Patrick Drahi was riding high in 2015, when his European telecom company Altice gobbled up the U.S. cable systems Suddenlink and Cablevision. Altice topped an enterprise value of $70 billion as it vowed to transform the stodgy cable business with a lean, high-tech approach that Drahi called the Altice Way.

But then investors started to lose confidence that debt-laden Altice had a way around the cable industry’s challenges, which include tough competition in countries like France and the loss of pay-television subscribers everywhere to services like Netflix (ticker: NFLX). After the Cablevision deal, the shares of Altice (ATC.Amsterdam) slid from five euros ($5.83) to below one euro this year.

So on June 8, Altice will lighten its load by spinning off its U.S. systems. Some shares of the Altice USA business (ATUS) have traded here since last year, and arbitrage sales ahead of the spinoff have pushed them down to levels that are cheap in comparison with other communications stocks. Tax loss carryforwards will shield Altice USA’s rising cash flow, so as the U.S. business buys back stock with some of that cash, the NYSE-listed shares could rise from a current $18 to the high 20s.

The French-Israeli Drahi became a billionaire in the last decade by assembling cable and wireless properties that stretch from Israel to France to the U.S. By cutting costs and reinvesting the savings in new technology, Altice had early success in the French business that accounts for half its revenue. That spurred Altice shares to a fivefold return in the year after its 2014 initial offering on the Dutch bourse.

But lately, Altice has found it hard to sustain its financial success in the French market. Its U.S. operations have fared better, with Altice USA already able to trim $1 billion in costs. At the Optimum network that it acquired with Cablevision, cash-flow margins rose from 28% in 2014 to 41% in 2017.

“When we came to the U.S.,” says Altice USA Chief Executive Dexter Goei, “people thought we were absolutely crazy…there’s no way we could take out that kind of cost. Well, we’ve not only taken out the costs that we said we would, but we’ve done it in two years, instead of the expected five, while also introducing new services.”

As the fourth-largest cable operator in the U.S., Altice USA has 4.5 million customers among the 8.6 million homes that its wires pass. To better show off its U.S. business, Altice made an initial offering of some 10% of Altice USA’s shares for $30 each in June 2017. The U.S. shares have since sagged. Cable stocks lost favor after industry leader Comcast (CMCSA) warned it had lost a larger-than expected number of pay-TV subscribers in its September quarter. An arbitrage play that shorted the U.S. stock and went long the parent’s shares further undermined Altice USA shares.

After the spinoff, the stock of Altice USA could do well. For one thing, the arbitrage trade will unwind. Both stocks started trading ex-dividend for the split last week, so the float in Altice USA will increase from a paltry 10% to 42%. Then, on June 6, Altice USA will pay a one-time cash dividend totaling $1.5 billion. And while European institutions may unload the 0.4163 of a U.S. share they’ll get for each share of Altice in the spinoff, the U.S. company plans to absorb some of that “flowback” by buying up to $2 billion worth of its stock over three years.

Those trading improvements could be shored up by continued progress in Altice USA’s business. Subscriptions will probably continue to subside for the pay-TV services that contributed 45% of the company’s $9.3 billion in 2017 revenue. To fight that decline, CEO Goei says that the company has pressed its content providers to allow Altice USA to offer skinny bundles of channels with lower price points, to counter competitors like Sling TV and Hulu Live. This year, Optimum and Suddenlink are rolling out new hardware that combines a set-top box and WiFi router in a single unit that they’re calling Altice One. The product comes with a voice-activated remote control and accommodates “over-the-top” apps that will initially include Netflix and YouTube.

Like its cable peers, Altice USA hopes to offset declines in video by growing its revenue from high-speed internet service. Over the next five years it will upgrade its networks by running fiber-optic lines all the way to subscribers’ homes.

The company’s fans think it will be able to pull off these upgrades while keeping capital spending at levels below peers like Comcast and Charter Communications (CHTR), as a percentage of revenue. The resulting free cash flow should rise from $1.3 billion this year to $1.6 billion in 2020, predicts JPMorgan analyst Philip Cusick, who added Altice USA to his focus list this month and has a price target of $32 on the shares.

And unlike other free-cash-flow plays in the communications sector, Altice USA has tax-loss carryforwards that should shelter its earnings from taxes until around 2020. Comparing taxed free cash flow, Goldman Sachs analyst Brett Feldman notes Altice USA shares trade at a sharp discount to other growth stories like T-Mobile US (TMUS), Charter, or Sirius XM Holdings (SIRI)—as seen in the nearby chart.

Goldman has the stock on its Conviction List, with a $28 price target. As free cash flow rises from $2.10 a share this year to $3.09 in 2020, Feldman believes Altice USA will be able to maintain a reasonable debt level of 4.5 to 5 times cash flow, while still repurchasing up to $2.5 billion a year in stock. By 2022, he thinks Altice USA will have retired 75% of its stock market capitalization.

As for CEO Goei, he’s ready to start narrowing his stock’s discount to its peers.

If you fire up your computer or phone to get your groceries, there’s an increasing chance you might rely on British online supermarket Ocado Group’s technology. That’s thanks to the company’s big deal with U.S. supermarket giant Kroger this month, which comes after negotiating other partnerships around the world.

But with Ocado’s shares (ticker: OCDO.UK) having soared roughly 60% in May, you might not want to bank on the stock. Even some fans are suggesting it’s time for shares to digest their Kroger-driven pop.

“We think there is a great deal for management to now execute on, and thus see a low likelihood of another major deal in the near term,” say RBC analysts led by Sherri Malek in a recent note. They put a price target of 7.50 pounds ($10.04) on the stock along with a Sector Perform rating, saying it’s already “fairly valued” and implying it will drop 14% from a recent £8.70.

The pact with Cincinnati-based Kroger (KR) calls for the U.S.’s largest supermarket chain to raise its stake in Ocado to more than 6% and to license the U.K. company’s technology, which facilitates deliveries and warehousing. It’s a “transformation licensing deal” that has “squashed skepticism about the validity of Ocado’s solution for online grocery retailing,” write Malek and her colleagues. Ocado, founded in 2000 by three former Goldman Sachs bankers, has a two-pronged business model, selling groceries directly to people, while also licensing its technology to other companies, including French retailer Casino Guichard-Perrachon (CO.France), Britain’s Wm. Morrison Supermarkets (MRW.UK), and Canadian grocer Sobeys, which is owned by the Empire (EMP.A.Canada) conglomerate.

The market loved the Kroger deal, sending Ocado’s stock up by 44% on the day the agreement was unveiled—May 17. Traders said a short squeeze added to the surge.

Now comes the tricky part. The Kroger deal and other recent agreements have left management with a lot to do, the RBC analysts note. “While Ocado’s solid operational track record gives us confidence in management’s ability to execute, the large number of projects occurring simultaneously does present a greater degree of execution risk than previously,” they write. The analysts “generously assume” that nine other sizable deals will be signed over the next decade, but estimate Ocado won’t see positive free cash flow until the 2022 fiscal year.

And that relates to another challenge for bulls: The company’s valuation is along the lines of caviar rather than potato chips. FactSet’s figures put Ocado’s price/earnings ratio above 5,000. There is no multiple from FactSet for forward-year estimated earnings, because Ocado isn’t expected to turn a profit in 2018 or 2019.

To be sure, some bulls see the stock running higher in the year ahead. Ocado, based in Hertfordshire in southern England, has “developed a credible and profitable alternative to Amazon.com’s (AMZN) threat,” say Bank of America Merrill Lynch analysts in a recent note, as they put a Buy rating on shares along with a price target of £10.20, implying a rally of about 17%. Enthusiasts also have highlighted how Ocado’s stock, part of the mid-cap FTSE 250, could enjoy a lift if it’s promoted during the coming week as expected to the blue-chip FTSE 100, as part of that equity index’s regular reshuffling.

But it might be prudent to use Ocado for fruits, vegetables, and other groceries, rather than for boosting your portfolio’s performance.