日常议程:流动性燃料Continuing M&A Boom

在一年的并购市场,周四报道,New York drug giant Pfizer has begun discussions with Irish drug company Allergan in a deal that would exceed $100 billion came as little surprise to equity investors. While the “tax inversion” for Pfizer in an Allergan deal is a potential advantage for shareholders, many analysts are linking the consolidation trend with the ocean of liquidity created through a prolonged accommodative policy by theFederal Reserve. With earnings season well underway, the relatively uninspiring results from most sectors has made this catalyst for mergers to continue to be a critical factor for stock-market bulls. In a note to clients, New Albion Partners chief market strategist Brian Reynolds noted “once again the S&P 500 has pulled above its 200-day moving average, but most stocks in the index haven’t,” adding, “to us, this indicates how hard it is to be a stock picker in a world that is dominated by macro forces, and that there will be more CEOs using buybacks and mergers to try to boost their share price in the months and years ahead.”

Budget deal finalized.In the early morning hours Friday, the U.S. Senate voted to pass legislation that averted a shutdown of federal government operations by lifting the debt ceiling. President Obama is expected to sign the legislation, which passed in the House earlier in the week, into law today.

Valeant drops Philidor. On Thursday beleagured Valeant Pharmaceuticals International announced a termination of its business relationship with Horsham, Pennsylvania-headquartered specialty pharmacist Philidor Rx Services. The Montreal, Quebec-based drug company’s ties to the drug distributor became a major issue last week after short-seller Citron Research claimed the relationship has caused revenues to be booked improperly by Valeant. While Valeant management has denied these claims, subsequent media reports have raised questions about Philidor’s sales methods and the exact nature of Valeant’s ownership relationship with Philidor. Both CVS and Express Scripts have ceased doing business with Philidor.

RBS earnings better than anticipated.Royal Bank of Scotland announced third-quarter results on Friday that included a profit of $1.4 billion, exceeding consensus analysts estimates. In addition to increased efficiencies, including scaled-back emerging markets operations, the bank also reported gains on a sale of part of its stake in U.S. retail bank Citizens Financial Group, based in Elkins, West Virginia, that helped offset legal costs associated with regulatory settlements.

Portfolio Perspective: Capitalizing on a Changing Media Landscape

We have been paying a lot of attention to how television consumer habits have been changing in recent years. While more and more video entertainment is being viewed online, traditional broadcast and cable television still accounts for roughly 40 percent of advertising revenues globally. We think that this will change rapidly as more advertisers migrate to online programing and take advantage of the flexibility to deploy targeted advertising. This will mean a tremendous amount more advertising dollars flowing to the firms spearheading the charge towards online programing. So far in this cycle almost all of the spoils have gone to leaders such as Google and Facebook—a handful of players that have gained dominance.

For investors looking to capitalize on long tails, the challenge is finding value among those firms positioned to be the gatekeepers of a new media age. The good news is that some of these firms have such rapidly accelerating revenue potential that today’s share price could well be below 20 times 2017 earnings.

As value investors, we want stocks that look cheap and not all of the media companies leading this charge fit that bill. Some that we have held in the past have accomplished amazing things, but we sold them when share prices better reflected their vast potential. The good news is that, for now, the pace of transformation occurring in media remains so rapid that the valuation of many of the industry’s leading innovators remain attractive.”

Connor Browne is a portfolio manager and managing director for Thornburg Investment Management in Santa Fe, New Mexico.