DealBook Briefing: F.C.C. Reignites Fight Between Tech and Telecom
It’s Google and Netflix against Comcast and Verizon again.
In choosing to dismantle net neutrality regulations, the F.C.C. chairman Ajit Pai has pleased traditional broadband providers who want to charge for some kinds of internet traffic while angering online tech giants who want all internet services to be treated equally. Expect the court battles to begin soon.
Here’s how Mr. Pai described his thinking:
Under my proposal, the federal government will stop micromanaging the internet. Instead, the FCC would simply require internet service providers to be transparent about their practices so that consumers can buy the service plan that’s best for them and entrepreneurs and other small businesses can have the technical information they need to innovate.
(Here’s the NYT explainer on what the rule change might mean.)
Verizon’s statement: “We continue to believe that users should be able to access the internet when, where, and how they choose.”
Facebook’s statement: “We are disappointed that the proposal announced today by the F.C.C. fails to maintain the strong net neutrality protections that will ensure the internet remains open for everyone.”
Extra credit: The F.C.C.’s next fight will be with states that seek to impose net neutrality on a more local level, Politico reports.
Critics corner
• Devin Coldewey notes that millions of comments opposing a rollback of net neutrality rules were posted to the F.C.C.’s website. “For someone who claims to be working for the American people, F.C.C. Chairman Ajit Pai sure doesn’t seem to care what they have to say.” (TechCrunch)
• Shira Ovide writes, “No matter what the FCC does, America’s internet is not an equal place and it’s only going to become less fair.” (Bloomberg Gadfly)
Gapping down
In reaction to disappointing earnings/guidance:
In reaction to disappointing earnings/guidance:
- CAL -10.6%, GES -10%, FRO -7%, DRYS -6.2%, HPE -4.7%, (also announces effective February 1, 2018, Antonio Neri, current President of HPE, will become President and CEO, and will join the HPE Board of Directors), HPQ -4.7%, QADA -2.4%, CRM -1%
M&A news:
- RLOG -36.2% (to be aquired by private equity firm American Industrial Partners)
- ROK -1.3% (Rockwell Automation rejects latest unsolicited acquisition proposal from Emerson)
Other news:
- CHFS -25.5% (filing a Form EFFECT (Notice of Effectiveness for an S-1) for a possible $9 mln offering)
- PTLA -2.1% (receives extension from FDA for the review period for the Co's Prior Approval Supplement for Bevyxxa)
- TYHT -1.8% (files for $25 mln mixed securities shelf offering)
Analyst comments:
- MNK -1.8% (downgraded to Perform from Outperform at Oppenheimer)
Gapping up
In reaction to strong earnings/guidance:
In reaction to strong earnings/guidance:
- CPRT +4.9%, GME +4.8%, DE +4.2%
M&A news:
- AXTA +3.3% (confirms discussions with Nippon Paint for potential acquisition)
Other news:
- CLNT +39.3% (enters into a conditional share swap agreement with Marvel Finance Limited, to acquire Marvel's 51% interest in the issued share capital of Integrated Media Technology)
- EKSO +10.9% (after 40% move higher on Tuesday)
- TIVO +10.5% (ITC gives favorable ruling in U.S. trade case against Comcast)
- CLSN +8% (after 30% move higher on Tuesday)
- SBGL +3.5% (Sibanye-Stillwater and DRDGOLD (DRD) announce surface mining partnership)
- MRVL +1.8% (CEO featured on Mad Money)
- DRE +1.6% (declares special cash dividend of $0.85/share)
- EXEL +1.3% (Exelixis phase 3 CELESTIAL trial results have been accepted as late-breaking presentation at 2018 ASCO-GI Symposium Jan 18--20; to submit supplemental NDA in Q1)
- SSY +1.3% (commences tender offer to repurchase up to 1,562,500 of common shares at $1.60 per share), .
Analyst comments:
- SBS +3.4% (upgraded to Buy from Hold at HSBC Securities)
- D +1.5% (upgraded to Buy from Neutral at BofA/Merrill)
- NTNX +1.3% (initiated with a Buy at Needham)
Early premarket gappers
Gapping up:
- EKSO +15%, TIVO +12.2%, CLSN +11.2%, GME +6.7%, AXTA +6.3%, CPRT +4.9%, SBGL +3.5%, DE +3.4%, DCIX +2.3%, MRVL +1.8%, DRE +1.6%, EXEL +1.3%, SSY +1.3%
Gapping down:
- RLOG -31%, CAL -10.6%, GES -10%, DRYS -7.6%, HPQ -5.2%, HPE -4.9%, FRO -4.4%, QADA -2.4%, PTLA -2.1%, TYHT -1.8%, CRM -1.8%
Hedge funds maintain conviction in outperforming growth stock favorites
The average equity long/short hedge fund has posted a 10% YTD return, the strongest since 2013. Fund performance has been lifted by sector (Information Technology) and factor (growth, momentum, large-cap) exposures. Our Hedge Fund
VIP list of the most popular long positions, whose top five stocks are FB, AMZN, BABA, GOOGL, and MSFT, has outperformed the S&P 500 by 770 bp YTD (25% vs. 17%). In this report we analyze the holdings of 804 hedge funds with $2.1 trillion of gross equity positions ($1.4 trillion long and $704 billion short) at the start of 4Q.
--> 5 key points from the Goldman Sachs Hedge Fund Trend Monitor
This Hedge Fund Trend Monitor analyzes 804 hedge funds with $2.1 trillion of gross equity positions ($1.4 trillion long and $704 billion short). Our analysis of positions at the start of 4Q 2017 is based on 13-F filings as of November 14, 2017.
1. PERFORMANCE: The average equity long/short hedge fund 1. has returned +10% YTD on the strength of the most popular long positions, high exposure to Information Technology, and atypical factor tilts toward large-caps and away from value stocks. This ranks as the strongest return since 2013 and compares with 17% for the S&P 500, 16% for the average large-cap core mutual fund, and 2% for macro hedge funds.
2. SECTORS: Information Technology remains the largest net sector exposure, accounting for 27% of fund portfolios. However, the 307 bp overweight tilt relative to the Russell 3000 is 100 bp smaller than at the start of 3Q. Materials represents the largest sector overweight. Financials is the largest underweight and a major source of disagreement with large-cap mutual funds, which are overweight the sector. Current overweights in Energy and Consumer Discretionary are nearly the smallest tilts in recent history, as is the underweight in Utilities.
3. LEVERAGE: Hedge funds increased net leverage in 3Q 2017 as the most popular positions continued to outperform a rising equity market. Short interest as a percent of S&P 500 market cap remained close to 2%, near the lowest level in five years.
4. VERY IMPORTANT POSITIONS: Our Hedge Fund VIP list (ticker: GSTHHVIP) of the most popular long positions has outperformed the S&P 500 by 770 bp YTD.
The VIP list contains the 50 stocks that appear most often among the top 10 holdings of fundamentally-driven hedge fund portfolios. The basket’s absolute and risk-adjusted YTD returns rank as the strongest since 2013. The list’s top 5 stocks are FB, AMZN, BABA, GOOGL, and MSFT. The basket has outperformed the S&P 500 in 65% of quarters since 2001, generating an average quarterly excess return of 62 bp. 10 new constituents entered the basket this quarter, compared with a quarterly average of 16 stocks since 2001: EQIX, GDDY, IAC, IQV, MGM, MPC, NRG, SBAC, TTWO, and XPO.
5. CROWDING AND TURNOVER: Hedge funds continue to demonstrate high conviction in their favorite positions. The typical hedge fund has 68% of its long equity assets in its top 10 positions, just below the record high of 69% in 1H 2016. Similarly, our crowding index increased but remains shy of its 2016 extremes. Quarterly turnover of the largest portfolio positions fell to new historical lows, at 13%, declining in all sectors but Health Care.