🗞️The Wrap: Buyback

Billionaires are printing money as stocks get bought back by the billions and a look back at the most expensive 280 characters ever. Plus, Zoom (ZM) is now worth more than all the major American airlines combined by market cap. How about that.

5 Companies Turning Up in the Shutdown

  • Citrix (CTXS) +16.0% in the last week
  • Quidel (QDEL) +14.1%
  • Docusign (DOCU) +8.7%
  • Five9 (FIVN) +7.7%
  • Cloudflare (NET) +4.8%

Billion Dollar Bill

US$27m to US$2.6b in a few trading sessions. Bill Ackman pulled off a Burry style return over the last month. By buying Credit Default Swaps, the commissions and premiums adding up to 8 figures, Ackman’s fund Pershing Square cashed in as CDS indices plunged alongside markets.

The hedge more than made up for portfolio’s other losses as Pershing added to a 50% return in 2019, after a rough time before. Jim Simons may scoff but that’s a turnaround to be applauded. Does Pershing count as this week’s Best Buy?

While Ackman did what any good fund manager should in protecting his portfolio, he has been criticised for fear mongering on CNBC after speaking emotionally about the bleak outlook of the market and the world. He has since defended his position.

Buyback Mountain

You know that “rainy day” fund we’re encouraged to keep ready for a time like this? Some companies didn’t get the memo. Air and cruise liners are getting hammered as their revenue lines shut down. You have to feel for the employees though. So why the outrage when it’s suggested these companies get bailed out?

Maybe they could have been in a better position without share buybacks. Instead of issuing a bigger dividend to shareholders or holding cash, a company uses its own money to buy its own shares before taking those out of circulation; increasing the demand and reducing the supply. Just another way to return money to shareholders? Yes. A way to boost executive pay checks? Also true. By reducing the number of shares, metrics like Earnings Per Share can skyrocket, often used to judge C-Suite performance bonuses as well as making the company look more attractive to investors without actually improving the company.

Trump is pushing to put a temporary end to buybacks, especially after the 2018 Airline stimulus was used to buy back shares rather than spend on recovery and expansion. 96% of free cash flows were spent on buybacks by airlines in the last decade according to Bloomberg.

Killer Birdies

Our friends at Boss Hunting have done the hard yards to deliver a list few want to be part of. The 5 most expensive Tweets in history. In 280 characters, billions disappeared from portfolios across the world (or added if you were long Tesla).

The biggest? The Associated Press’s account was hacked and falsely tweeted out that the White House had been attacked and Obama was injured. Within minutes US$136.5b were wiped off the Dow before claims could be verified.

Of course, the list was always going to include President Trump. After threatening Toyota with an ultimatum regarding their new factory location, US$12b was wiped from the Japanese stock as it fell 5%.

Top 5 Gainers

  • Hailang Education Group (HLG) +44.6% in the last week
  • Bancolombia (CIB) +44.2%
  • Canadian Natural Resources (CNQ) +44.2%
  • Universal Health Realty (UHT) +43.5%
  • Enable Midstream Partners (ENBL) +41.2%

Top 5 Fallers

  • Amarin Corp (AMRN) -66.4% in the last week
  • Kontoor Brands (KTB) -25.8%
  • Continental Resources (CLR) -25.8%
  • Cimpress (CMPR) -22.9%
  • 8×8 Inc (EGHT) -21.1%

What We’re Reading | Daily Dose of Dalio

Ray Dalio is using his time in isolation to pump out some articles as he tries to make sense of what is going on. Read anything from the ‘articles’ tab for a bit more clarity on the current world order.

‘The Mechanics of the War Economy’ is a great one. Between 1930-1945 the world was in a similar position; ultra low interest rates with unprecedented fiscal spending as crisis ravaged society. Essentially, Dalio draws on history to lay out what we can expect to come; no real short term risks but definitely longer term effects on our economies.

It’s a long read but some of the best free content out there. And when you’re done, there’s plenty more to get stuck into. Especially since Dalio will be releasing a new article every Wednesday US time on ‘the changing world order’.

Trader Teaser

In the division calculation 952473 ÷ 18, which two adjacent digits should be swapped in order to increase the result by 100?

Best Buy | CNQ +55%

Buying the dip done right. In a few trading sessions, this trader’s position rocketed up 55%. Canadian Natural Resources is a hydrocarbon (oil) exploration company with operations from Gabon to the UK. News that Canada will be building a pipeline to ship oil out of the country has sent Canadian oil stocks flying.

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