Friday 16/04/21

1. In MACRO, MARKETS & VACCINE NEWS, the US and Chinese economy strengthen and CureVac hopes to get approval by June
2. In FINANCIALS NEWS, BlackRock sees a surge in AUM, Bank of America sees surging profits and Peel Hunt considers an IPO
3. In CONSUMER/RETAIL NEWS, UK job vacancies rise to pre-pandemic levels, a flexible rail ticket is offered to tempt commuters back, video dating goes mainstream, Travis Perkins gets a DIY boost and AO World continues with its Tesco deal (every little helps 😁)
4. In INDIVIDUAL COMPANY NEWS, Elliott wades into GlaxoSmithKline and Deliveroo manages expectations while Entain, Naked Wines and THG benefit
5. AND FINALLY, I thought I’d leave you with a good idea badly executed…

So the US and Chinese economy strengthen and CureVac has high hopes..

US economy ramps up on spending surge, hiring gains (Wall Street Journal, Amara Omeokwe) highlights progress being made in the US economic recovery as stimulus money, vaccine rollout and business reopenings combine to get American consumers spending again. The US Commerce Department reported yesterday that retail sales shot up by 9.8% in March, the largest monthly gain since May 2020 after initial lockdown lifting. The Labor Department also reported that jobless claims also fell sharply last week to 576,000 versus 769,000 a week earlier – so clearly things are heading in the right direction. US markets hit record highs as economy appears to rebound strongly (The Guardian, Dominic Rushe) shows that US stock markets hit record highs again yesterday as a result.

Meanwhile, China economy grew more than 18% in first quarter (Wall Street Journal, Jonathan Cheng) shows that China’s GDP shot up by 18.3% in Q1 versus the previous year – a record growth rate (but clearly this was from a very low base as this was at the low point of the pandemic). Interestingly, this didn’t quite live up to analyst expectations of 19.2%, but it is still very impressive. * SO WHAT? * This is great news for China but I would expect

subsequent quarters to show lower growth rates versus their corresponding 2020 levels as China was really the first major economy to pull itself out of the pandemic.

Then in vaccine news, CureVac hopes to win regulatory approval for its Covid vaccine by June (Financial Times, Erika Solomon) shows that German biotech company CureVac is hoping to get approval in May or June for its Covid-19 vaccine, with a view to producing up to 300m doses this year ramping up to 1bn in 2022. It uses mRNA technology, which is what the BioNTech/Pfizer and Moderna vaccines use, and would undoubtedly be very welcome for the EU given that its distribution failures are being compounded with problems with Oxford/AstraZeneca and now Johnson & Johnson vaccines. * SO WHAT? * The company did an IPO in August and its share price has shot up by 500% on hopes that it will come out with an effective Covid vaccine, so I am sure that there will be huge sighs of relief when they get approval. It will be especially welcome given that it can be refrigerated for three months at non-sub-zero temperatures (which is the case with other mRNA vaccines) and only requires a small amount of active ingredient (which presumably means it can make more doses). It announced a partnership with Bayer to manufacture its vaccine. This could be brilliant news for our European cousins who are struggling somewhat at the moment  👍

BlackRock and Bank of America rake it in and Peel Hunt considers an IPO…

And the financials sector bonanza continues in BlackRock assets under management surge to record $9tn (Financial Times, Michael Mackenzie) as the fund management giant saw its AUM skyrocket in Q1 from record inflows especially on its fixed income platform and then Plain sailing for Bank of America as profits soar in choppy markets (The Times, Callum Jones) highlights BoA’s stellar performance as America’s second biggest bank, like Goldman Sachs and JP Morgan Chase before it, benefitted from increased trading volumes in volatile markets and investment banking fees from the ongoing frenzied activity in IPOs and M&A.

The feelgood factor is pretty good this side of the Pond as well as Peel Hunt weighs IPO on back of UK corporate recovery (Financial Times, Daniel Thomas) shows that the British investment bank is considering a flotation this year and has appointed Evercore to look at its options. The company was only founded in 1989 and, to cut a long story short, most of the firm is owned by staff following a buyout in 2010. Like its (much) bigger American peers, it too has been benefitting from increased trading revenues and fees from IPOs. This could get very interesting! * SO WHAT? * This is pretty exciting for a company that does a solid job of punching above its weight and just goes to show how much investment banks are benefiting at the moment. This company only has about 250 people in it, according to the most recent accounts, so some individuals are bound to get eye-watering amounts of money if a flotation goes ahead. If the IPOs keep coming, I see no reason why they wouldn’t go public!

We look at what’s going on with the UK consumer at the moment and how AO World’s venture with Tesco is doing…

Following on from what I said yesterday about City jobs, UK job postings return to pre-pandemic levels (Financial Times, Valentina Romei) cites the latest figures from the ONS which show that the number of online job adverts (according to Adzuna) posted on April 9th reached the average levels of February 2020. Recruitment was particularly strong in areas like construction and logistics, which had done well during lockdown, but rose even more in areas like hospitality and retail that were gearing up for reopening on April 12th.

Flexible rail ticket plan to lure back commuters (Daily Telegraph, Oliver Gill) shows that ministers and senior rail execs are about to launch a new system of flexible rail season tickets to tempt commuters back to city centres, although the discounts won’t be as much as they are for a traditional season ticket. There will be things like buying five return tickets per month which give you a 15% and other variations. * SO WHAT? * ABOUT BLIMMIN TIME, I SAY!!! The current system is ridiculously complicated and does not appear to have any consistent logic about it. Obviously the railways are going to have to do things like this given that more people will undoubtedly be working fewer than five days a week in the office. This will no doubt be welcomed as a move in the right direction by companies like SSP (which owns concourse stalwarts Caffè Ritazza and Uppercrust among others) and WH Smith who rely on commuter trade.

So what other trends have emerged from lockdown that may be taken forward into a less restricted world? Well Video dating is the new normal for finding love (Daily Telegraph, Margi Murphy and James Cook) shows that the normalisation of video calls is likely to continue going forward as a way of screening out potential disasters/people who are a bit flexible with the interpretation of their own age. Bumble was the first of the major dating apps to introduce a video chat feature and once lockdown hit the UK, the company saw a massive 42% hike in the number of video calls on the app. Tinder’s

parent company Match bought Hyperconnect – the #1 video app in South Korea – in February, which would suggest it will go down the video road as well and even Facebook is now looking at its own video speed-dating offering called Sparked.

And on a less romantic and more practical note, Travis Perkins orders get boost from DIY boom in first quarter (Daily Telegraph) shows that the ongoing popularity of DIY boosted Q1 like-for-like sales by over 17% – but will this continue? * SO WHAT? * I think it HAS still got legs because the housing market is booming – so people either refresh their abode to get a better selling price or they will do so because they feel that they can’t afford to move and the next big thing is to do a bit of a revamp. They also tend to “put their stamp” on a new place as well, also something that will boost sales. If you mix that in with us going into spring and summer – prime DIY time – then I would have thought Travis Perkins will still have at least one or two more strong quarters ahead of it.

Then in Retailer AO World eyes Tesco deal after sales leap more than two thirds (Daily Telegraph, Laura Onita) we see that AO world is planning on opening more shops in Tesco stores after a pilot scheme with them helped contribute to sales shooting up by almost two thirds in the year to March 31st! * SO WHAT? * AO World has been a MASSIVE winner from lockdown and I don’t think it’d be overstating it to say that the pandemic has been the company’s saviour as its co-founder John Roberts was brought back in not so long ago to turn around the company that he started (a bit like Steve Jobs with Apple, albeit on a smaller scale!) after a period of weakness. You can see quite clearly the impact that last year has had on the company as its share price has shot up from 59p this time last year to 323.6p yesterday. FWIW, I think that the Tesco thing is a genius idea by AO World as it gives them some offline presence to complement their more established online presence – at much lower cost than would be the case with them actually opening up their own stores. I wonder whether we will see other tie-ups like this in future between online and offline retailers? I would not be surprised given that both sides benefit as long as they’re not cannibalising each other’s sales.

Elliott buys into GSK and Deliveroo manages expectations while Entain, Naked Wines and THG continue to show strength…

GlaxoSmithKline shares jump at news of activist hedge fund interest (The Guardian, Julia Kollewe) highlights investor excitement in the wake of news that activist investor Elliott Management has built up a reasonable stake in GSK, presumably with a view to shaking things up. Despite all the frenzy in the pharmaceutical sector at the moment, the share price is 17% lower than it was this time last year, so expect some aggressive moves from the hedge fund in the not-too-distant future. GSK/Elliott Management: seeking a tonic for moribund shares (Financial Times, Lex) points out that chief exec Emma Walmsley already has a break-up of the business on the cards but that Elliott will be laser-focused on extracting value from the company. Things will get interesting!

In other news, Deliveroo doubles orders during latest Covid lockdown (The Guardian, Jasper Jolly and Sarah Butler) shows that Deliveroo did well in the first quarter but

acknowledged that it has to prove its worth after its recent disastrous IPO. * SO WHAT? * Interestingly, co-founder Will Shu pointed out that takeaway orders rose a few weeks after lockdowns were lifted in Hong Kong and Dubai, with the implication that any initial drop-off may just be temporary. The cloud of employees/contractors continues to hang over the share price, though, and will do until it is properly resolved.

Entain, Naked Wines and THG report boost from online pandemic trading (Financial Times, Alice Hancock, Patricia Nilsson and Jonathan Eley) shows that all of these companies underlined their status as lockdown winners with Entain reporting online revenues rising by a third in Q1 despite having to close many of its betting shops, Naked Wines saw subscriber numbers up by 50% in the year to March and sales up by 68% as well as a huge rise in demand from what is now its #1 market – the US – while The Hut Group saw sales increase by 41% in its core beauty and nutrition businesses. I guess it just remains to be seen whether these companies can keep the party going! Comparatives are going to get harder given these stellar growth rates, but I still thing there is growth to be had.

…in other news…

I thought I’d leave you today with one man’s attempt at a cunning plan in Man gets morphsuit to be invisible during video calls – but it doesn’t work as he hoped (The Mirror, Courtney Pochin). If only he’d tested it out before 😂