What we’re reading (10/8)
“Stocks Look To Be Setting Up For A Year-End Rally Despite Election Worries And Lack Of Stimulus” (CNBC). “Even with election year volatility and no stimulus package in sight, it looks like the stars are aligning for a fourth quarter stock market rally. Technical analysts say they see underlying trends that signal strength and further gains, including broader groups of stocks participating, like small caps. The small cap Russell 2000 was up 5.6% week-to-date, compared to a 2.8% gain for the S&P 500.”
“Morgan Stanley To Buy Eaton Vance for $7 Billion” (Wall Street Journal). “Morgan Stanley said it is buying fund manager Eaton Vance Corp. for $7 billion, continuing the Wall Street firm’s shift toward safer businesses like money management. The deal comes just days after Morgan Stanley completed its $11 billion takeover of E*Trade Financial Corp., and is another leg in a decadelong turnaround project for Chief Executive James Gorman, who has closed risky trading operations and doubled down on wealth and asset management.”
“A New Activist Playbook” (Dealbook). “It isn’t often that an activist investor wants a company to spend more money on itself and less on shareholder payouts. But that’s precisely what the hedge fund billionaire Dan Loeb is pushing Walt Disney to do with its Disney+ streaming service.”
“What Takeovers Of Fund Managers Tell You About Markets” (The Economist). “Could a roll-up work in fund management? The question is often asked, only to be dismissed: you would have to be unusually daring (or smoking roll-ups of the jazz variety) to consider taking on such a challenge. So a few eyebrows were raised when it emerged last week that Trian, a hedge fund led by Nelson Peltz, a veteran agitator for corporate change, had taken stakes of almost 10% in two asset managers, Invesco and Janus Henderson. Asset management is undergoing significant change, noted Trian in its regulatory filings. Firms with scale and a breadth of products are better placed to succeed. So Trian has in mind ‘certain strategic combinations’ to generate value from its newly acquired stakes.”
“While Millions Lost Jobs, Some Executives Made Millions In Company Stock” (New York Times). “The pay gains are a result of the sharp rise in the stock prices of these companies, which investors are betting are well positioned to grow during the pandemic. Another reason these stock awards have appreciated so much is that some of the grants were made when the stock market was close to its lowest point for the year. Of course, many executives are also sitting on gains on stock they got in earlier years. But the surge in wealth also highlights how the compensation of senior executives is designed to give them enormous windfalls, which they have gotten even during one of the sharpest economic downturns in decades.”
