Monday Market Recap - April 19, 2021
Market Highlights
U.S. Jobless Claims fell by nearly 200,000; lowest level in 13 months
Retail sales rose 9.8% higher in March thanks to a jump in spending at bars and restaurants, as well as multiple other groups after receiving $1,400 stimulus checks
CDC says fewer than 6,000 Americans have contracted Covid after being fully vaccinated
In the US, a total of 210 million doses of the vaccine have been administered with about 76 million or 23% of the total population already having been fully vaccinated. In January, we identified a slow vaccine distribution rollout as a potential risk factor for a speedy recovery in a post pandemic world. After a slow rollout in the beginning of January and February, that worry seems to be fully behind us now and the economy has reacted strongly. Additionally, not only have we been able to get the vaccines out, but they have shown to be working. The CDC has reported that fewer than 6,000 Americans have contracted Covid after being fully vaccinated. An efficacy rate of 99.992%. While there have been concerns with certain brands of the vaccine, including AstraZeneca and most recently Johnson & Johnson, the effect has been minimal. Six people were reported to have experienced blood clots after 6 million doses had been administered. In 1982, Johnson & Johnson went through a similar situation of crisis management with Cyanide laced Tylenol in 1982 and if history is any measure of future outcomes, J&J will work arduously to regain the trust and safety of consumers.
Economists are estimating gross domestic product (GDP) to grow anywhere from 6% to 8% this year—the fastest pace since 1983. The growth in jobs back to hospitality and leisure sectors has helped heal the unemployment rate back down to just 6% after a high of almost 15% at the peak of the pandemic. Just the previous month 916,00 jobs were added with 280,000 of those being in the hospitality and leisure sectors. While cruise lines are still docked until at least July 4 weekend, the sector is still prepping for a summer of travel.
The markets have reacted well to economic data with the S&P 500 up over 11% for the year. However, the growth story has changed. No longer are the beloved sectors in 2020 performing as they did in the previous year. Technology, healthcare, and consumer discretionary sectors are all lagging the S&P 500 while previously downtrodden sectors in Energy, Industrials, and Financials are all currently overperforming. As 10Y treasury rates continue to approach 2% (they have hit as high as 1.8% this year) the growth story will continue to be harder to justify. With PE ratios currently at 32 and the “Buffett Indicator” (corporate equities as % of GDP) higher than levels last seen since the dot com bubble, caution is warranted.
What I'm Reading - The Tiger Phenomenon
There’s a new velocity focused strategy of funding in venture/growth assets, and traditional VC’s are unsure what to make of it. The strategy used by Tiger Global, is heavily tech focused, highly aggressive and has been making waves with record breaking deals and at breakneck speed. In fact it is pretty much written in their credo:
Be (very) aggressive in pre-empting good tech businesses
Move (very) quickly through diligence & term sheet issuance
Pay (very) high prices relative to historical norms and/or competitors
Take a (very) lightweight approach to company involvement post-investment
Above all, deploy capital, deploy capital, deploy capital
Needless to say, traditional VC firms are not a fan.
What I'm Watching - Coinbase YCombinator Demo Day Practice - August 2012
Coinbase closed its IPO last week at a staggering $85.8 Billion valuation and $328 per share. Founded in 2012 as a way to simplify the purchase of bitcoin, Coinbase has emerged as the most popular crypto exchange in the U.S. It has soared in value as digital currencies such as bitcoin and ethereum have gained steam. The platform now has 56 million users, up from 43 million at the end of 2020 and 32 million the year before that. This video shows Coinbase’s humble beginnings, with the makings of Brian Armstrong’s first pitch for YCombinator. The same incubator which has successfully launched over 2,000 companies such as Airbnb, DoorDash and Dropbox.
Tweet I'm Thinking About - How Amazon Save You Time and Money
How easy is Amazon to use? How much time does it save us with 1-click buying and relevant recommendations? According to their annual letter, Amazon saves its users almost 75 hours per year on shopping. If you value your time at $10/hour that’s $750 saved per year, which is more than enough dollar value to pay for the annual prime membership of $120/yr. With 200 million prime subscribers, these users recapture about $126 Billion a year when valuing their time. If time is priceless, is a $1.7T market cap too low?
Quick Take - Covid Winners and Losers
Just over a year ago stocks ended their COVID-19 induced freefall. Beyond that point, we have witnessed a “double bull-run” where some stocks have benefitted from COVID and others not so much. The tale of two markets began with “stay at home” stocks such as Zoom, Peoloton, and Amazon benefitting immensely. E-commerce sales alone were up over 32% in 2020, which was the fastest growth the sector has seen all-time. But as the country reopened, and vaccine sentiment became more optimistic, the market flipped and stocks labeled as “COVID losers,” such as banks, energy producers, and hospitality businesses, began to see huge gains. The so-called “COVID winners,” pulled back dramatically with stocks like Zoom and DoorDash correcting by over 40%. With more people leaving their homes and entering back into their workspaces, the growth story will be difficult to justify.
Read more on the Hardy Cap Blog:
https://www.hardycap.com/blog/covid-winners-and-losers
Quote of the Week
“We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services.” - James Burke, Former CEO of Johnson & Johnson
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