What we’re reading (2/16)
“Investors Spot Signs Of Market Froth During Long Bull Market” (Wall Street Journal). “One source of concern: Ordinary investors are really bullish about a handful of popular companies. Shares of Palantir Technologies, a highly popular stock among individual investors, surged 24% on Feb. 4 after the data-analytics company reported strong sales growth and robust demand for its artificial-intelligence products. Palantir’s stock has jumped roughly 58% this year and was last year’s best performer in the S&P 500. Traders are also bidding up shares of Strategy, formerly MicroStrategy, the software company turned bitcoin-buying machine. The company’s market capitalization was recently about $87 billion, nearly twice the value of the bitcoins it holds. Meme stocks have also jumped. Shares of GameStop, BlackBerry and online pet-products retailer Chewy have all soared more than 90% over the past 12 months, according to FactSet.”
“Fears Of Massive Crash On Wall Street After America’s Top 50 Companies See Record Levels Of ‘Fragility’” (The Daily Mail). “According to Bank of America strategists, ‘stock fragility’ is on track to reach its highest level in more than three decades among the largest 50 stocks in the S&P 500 index. That includes tech stocks such as Apple, Amazon, Microsoft and Nvidia, bank stocks such as JPMorgan Chase and Wells Fargo, and retail stocks like Costco and Walmart. Stock fragility is a measure of how much a share price moves a day relative to its usual volatility, Bloomberg reported.”
“Japan Perfected 7-Eleven. Why Can’t The US Get It Right?” (Bloomberg). “In Japan, which is much smaller, the chain relies on a robust supplier network, where inventory and food preparation take place at more than 150 factories churning out breakfast, lunch and dinner. Product lineups and displays change quickly based on consumer tastes, with each store responsible for analyzing the sales of every product and adjusting orders to reduce waste and control inventory. It’s a management method known as tanpin kanri, which was even taken up as a Harvard Business School case study. ‘Japan’s convenience stores’ food preparation central kitchens and logistics infrastructure would be more challenging to establish and operate efficiently over vast areas in the US,’ Boston says.”
“The Dot-Com Bubble Burst 25 Years Ago. AI Could Be Next.” (Barron’s). “The early internet bubble and bust isn’t the only tech antecedent to today’s tech industry. Radio Corp. of America was the pre-eminent tech stock of the first Roaring 20s. ‘All you had to do was include ‘radio’ in the name of your company and the price of your stock would shoot up, even if there was very little behind the company,’ Bryan Taylor, chief economist at data provider Finaeon, wrote in a 2023 essay. RCA stock rose 200-fold during the 1920s, only to plunge 98% from its 1929 peak to 1932.”
“Why Total Shareholder Yield Matters More Than Dividends” (Morningstar). “[T]here is nothing special about dividends, except that they are a tax-inefficient way to return capital to shareholders, and they are certainly not income (except from a tax perspective); they are just a return of investor capital—by definition, income increases wealth while dividends do not. Second, investors are better served by focusing on investing in strategies that provide exposure to the factors they want to invest in. A focus on dividends, whether dividend growth or high-dividend yield, is not likely to add value.”
