Week Ending: July 27, 2024

First: A Timely read as we come to the end of July: How Executives approach work during holidays Link to the Financial Times

Interesting Reads:

·??????? The Indispensability of Risk (Oaktree/Howard Marks) Link to Article

o?? Cryan Out Loud (COL): There is a podcast episode below that talks about this as well, but I thought it was a good refresher on the need to take risk and opportunity costs. As it relates to business strategy (and investments) I particularly liked this part “A skilled adversary is normally able to handle solid, conservative play… not being willing to take risks is an extremely risky strategy”. Of course, in business, most folks don’t lose their job for executing on a conservative strategy

·??????? SEC Charges Andrew Left and Citron Capital for $20M Fraud Scheme Link to SEC Press Release

o?? COL: Wow, a pretty shocking outcome (from what I’ve seen of him in the press Left always seemed to profess the moral high ground argument that short sellers provide a great function to the capital markets. Wachtell Lipton has a good memo out on this too which says “it’s an important reminder that companies are not powerless in responding to a short attack, and have a range of options…”

·??????? The director’s guide to shareholder activism (Harvard Forum on Corporate Governance) Link to Article

o?? COL: A well written primer on shareholder activism and engagement by PwC’s Matt DiGuiseppe. His last point (more companies are finding ways to work with activists) is an important one. Given all that boards have on their “plate” recent surveys suggest activism isn’t a top five issue for them so it’s best to have a constructive way of responding

·??????? Corbin Advisors Releases Q2’ 24 Inside the Buy-Side Industrial Sentiment Survey Corbin Advisors Releases Q2’24 Inside The Buy-Side? Industrial Sentiment Survey?

o?? COL: ?Investors are getting more cautious, surprisingly high consensus (94%) that expect broad-based industrial weakness (2x last quarter). Odd to see that M&A continues to see increased support given that backdrop

·??????? Ducera Quarterly Update 2nd Quarter 2024 (July 2024, link not available)

o?? COL: A lot of good market data (both M&A and ECM/DCM). Table I found most interesting was the recent credit rating activity (“ in 2Q24 Moody’s and S&P both continued to announce more upgrades than downgrades”)

·??????? Recovery in dealmaking will fuel an activist comeback (Financial Times) Link to Article

o?? COL: “The activist greatest weapon is timing. And market conditions now mean a tailwind to their success”- agree with the comment, still TBD (in my opinion) on whether we have a tailwind or a luffing sail for now

·??????? US Deals 2024 midyear outlook by PwC Link to Article

o?? COL: Good survey data on the state of M&A, they have a really interesting chart in here on M&A volumes vs. interest rates. “M&A can grow at higher rates but the outlook matters” also an interesting stat showing that 57% of respondents (who tried to fix a business unit pre-divestiture) said the unit’s value deteriorated or stagnated

·??????? Even Wall Street bankers’ ids need lessons in financial literacy (Financial Times) Link to Article

o?? COL: Completely agree with this, such an important concept ?

·??????? JP Morgan Eye on the Market: The Lion in Winter Link to Article

o?? COL: The “unholy” trinity of small caps, large cap value and non-US stocks. “all three out of favor strategies are at their cheapest levels in 20 years but for good reason: weaker earnings growth than US large cap growth”. Paper includes some very interesting analysis/comparison of the SP600 (higher quality index) vs. the Russell 2000 ?

·??????? Return on Tangible Invested Capital (ROTIC) Education – Metrics – Return On Tangible Invested Capital - New Constructs

o?? COL: A quick primer on ROIC analytics looking with and without goodwill, always an interesting topic

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Podcast Episodes:?

·??????? HBR Ideacast: Is People-Pleasing Holding You Back? (July 16, Episode 979)

o?? COL: A useful framework for identifying “people pleasing” from being a helpful teammate etc. Also a good debate on how there are times where taking on extra work and leaning in is the right answer

·??????? Think Fast Talk Smart: Get Hired: How the Right Communication Can Advance Your Careers (July 16, Episode 151)

o?? COL: A good back-and-forth discussion about social media and the role it can play in hiring decisions. Also some useful pointers on answering (effectively) some of the traditional interview questions. Also really liked the point made that interviewers should really prepare properly for an interview

·??????? Behind the Memo by Howard Marks: The Indispensability of risk (July 23, Episode 60)

o?? COL: Being too conservative can be a risk. A short version of the "memo" linked at the top

·??????? Freakanomics: Why do Eyeglasses cost $1,000 (July 17, Episode 597)

o?? COL: The simple answer is a dominant machine (company) most people have probably never heard of (EssilorLuxottica) a vertical integrated eyewear behemoth which massive margins. (episode also contains perspectives from Tim Wu Columbia Law professor and Obama/Biden administration anti-trust policy expert

·??????? Goldman Sachs Exchanges: Private Credit Investing with Ares Management’s Mike Arougheti (July 23)

o?? COL: A really good primer on the private credit markets, how they have evolved and where they are going. Of course Mike is literally “talking his own book”