I am going to tweak the podcast of the week series to focus more generally on finance media (I’ve actually already included videos and other media in the posts anyway). I will mostly focus on podcasts, but this way I can highlight articles and other stuff in case all the pods are mediocre that week. This week, I found a new podcast.
I kind of already spilled the beans on this one on Twitter:
Binged the first three episodes (20 min per) of Behind the Money pod from the FT: @AimeePKeane host; favorite episode about WeWork bubblesanity (my take) with guest @alexandrascaggs
— CorpRaider (@Thecorpraider1) May 17, 2018
To elaborate, this podcast covers an article in the FT every week and drills down on the subject with the reporters who worked on the article. The first three episodes covered the multitudes of Qualcomm drama, the strength in the beauty/cosmetic industry, and how WeWork operates, including a recent (fascinating and bubble-tastic) WeWork bond issuance and attendant financial disclosures.
The home of the podcast is here, but it also seems to be available through your normal outlets.
Qualcomm
I was interested in all three episodes really. First, Qualcomm keeps popping up on Magic Formula and other “cheap stock” screens I look at. It also seems relevant to this whole roll out of 5G and what that does to…everything.
Another great piece of media I consumed this week, related to that issue, comes in the form of a CNBC interview with Verizon CEO, Lowell McAdam on the future of 5G:
I thought this was interesting, as I keep thinking about the impact of 5G on cable and other telecom companies. Such as those controlled by John Malone. McAdam says they can run build their network to within 2000 meters of homes currently and deliver 5G (without fiber to the home…as it were).
He also has some commentary on content media, versus the purely digital stuff (like Yahoo) that they have decided to buy.
Beauty Bidness
The second episode of Behind the Money was about how beauty is “beasting” on the rest of retail. As I have mentioned before, I like this industry and am long (in my own modest, retail schmuck sort of way) a couple of names, most notably Coty.
Here was Coty’s view on the industry at the time of the P&G roadshow (late 2016), it matches up with the favorable characteristics as explored in the second episode of the podcast:
I keep meaning to do a Coty earnings update post, but I’ve been busy watching Berkshire videos so I probably won’t. [Man in 1996 Buffett said he didn’t have a book recommendation because he was playing online bridge 10 hours a day and it was killing his reading…I thought he read 500 pages a day or whatever the debate was. Also, he and Charlie are killing it with the agency costs/charming Icahn routine. Stupid tech investor questions are still nascent in 1996.]
As for Coty, I think the Q1 2018 earnings were a little troubling, as they seem to be having some sales erosion and cash burn related to trying to stabilize/fix the P&G cosmetic brands. I suppose that was to be expected but you know…I’m not sure it was [it never is].
I think they said they only have about half the new CoverGirl product out on shelves now and then they still have to work on Clairol and Max Factor, so it could take a while (and some $$$). That would probably explain the ~$200MM inventory build/decrease in operating cash flow.
I do want to drill down on the top line figures though but there is some chop with the Younique and GHD acquisitions, so I’m not sure I can get my head around the movement in the top line/revenues. So maybe I will have to wait to next quarter.
I think COTY is probably still just rational guys with a good track record, in a good industry, that they just helped consolidate in a pretty major way, and we wait and see if they can block and tackle. Here’s Coty’s overview on their consolidation of the industry [also, damn Avon has/had a lot of sales to have been such a cluster ____]:
Coty’s TTM sales are about $9.4 billion now, but that includes some additional acquisitions. In addition to Younique (a digital MLM platform) and Good Hair Day, Coty has also acquired Burberry’s fragrance and cosmetics business. They are definitely not scared to undertake some “integration risk.”
I did notice the short interest was higher than I thought. So that’s [empirically…check out work from Verdad Capital, among others] not a good thing. If they buy anything else material before next quarter, I might sell it just out of annoyance/fears of never ending integration hell.
WeWork
The most recent episode of Behind the Money is about a story covering WeWork and its recent bond issuance and related financial disclosures. Headline: They are burning a ton o’ cash. I thought this story was interesting as a real estate/REIT investor, and just as a gauge of the markets.
My takeaway was “oh, ok they are just another office space sublessor.” But it does seem like they are probably sopping up a lot of supply/space. What happens if they get into trouble being on the hook for a bunch of long-term leases when short term demand dries up? On the other hand, their weakness might reduce some of the angst about their “disintermediation” of the office market, so it could be viewed as a positive factor for office REITs.
I also might be interested to look into exposure to WeWork among office REITs. I think I’ve noticed analysts asking about this on quarterly calls, but I will perk up next time I hear that question.
I have a position in EQC. I doubt I will be looking at that space, absent some real weakness in the sector, but it is something to keep an eye on (could precipitate said weakness). EQC would be in a position to benefit from that, with tons of cash on the balance sheet currently.
With that…back to Omaha, circa 1996, I go. Thanks for reading!