Older investors who remember the last time Time Warner was involved in a blockbuster merger may have some serious trepidation today but we have other worries.
GOOD M&A AND BAD M&A
Over the weekend, we had 2 major M&A announcements. Are they good or bad for stocks? Yes to one, no to another, in our view. No we are not being coy. Here is why.
It was nearly 17 years ago today (January 10, 2000 to be exact), when AOL and Time Warner (NYSE—TMX) announced a $156 billion merger. Bulls hailed it as an incredible deal—old school media with new media. Pragmatists viewed as egregious and quizzical. Considering the market hit an all-time high a couple of months later and it is no wonder that some market watchers seem to fear that history is repeating itself with news that AT&T (NYSE—ATT) and Time Warner are combining in an $80B+ combination.
I see why there is concern here but we do not believe it is the beginning of the end. In fact, it is the end of the beginning the division of service provider and content provider. Now, success is about critical mass, subscriber loyalty, content and time/attention, targeted and higher fee advertising, etc. We view it as a catalyst for more service industry and content provision players of all sizes to combine. Outside of the big players, internet ad dollars are just dreams. Asset leverage, along with fees and ad revenue models are keys to survival and success. Look for future M&A in tech and media of all sizes, buoying the space.
The Stock Market Today
The other announced deal, TD Ameritrade potentially buying Scottrade for $4 billion, is more problematic to us. On the surface, this appears to be an extension of some smaller M&A deals of late. However, a combination of 2 of the largest discount brokerages signals to us the continuing decline in individual –directed trading, particularly in smaller stocks where volumes remain down, again. Does this mean the companies need to combine in order to maintain reasonable margins and business? I would feel more comfortable if we had a lot more IPO activity and a more favorable environment for venture capital. Hell, I would prefer if hedge funds were having greater success because that would actually be good for the market at large.
Is “Free” a good thing? Taco Bell is offering free tacos based on an obtuse marketing campaign tied to stolen bases in this year’s World Series. Will it come with or without Tums? When Chipotle (NYSE—CMG) gave away free burritos recently to try and get customers to return to the store that didn’t work out too well either. While these foods may not be appetizing, I am curious to see how many voters answer Madonna’s call for the Democratic vote in exchange of, um, oral service that has nothing to do with singing.
A trifecta of Madonna, Chipotle burritos and Taco Bell tacos is sure to give you the runs, and not for the border.
Great info, insights, and hard-hitting stories make up this week’s Say What? feature…
The New York Post
A possible market driver?
AAII Sentiment Survey (figures rounded)
|Current||Last Week||Long Term Avg|
Numbers sometimes make no sense. For example, according to the latest Lipper Fund Flows data, the total equity fund outflows last week were $3.4 billion, which happened to be the same figure recorded twice in the previous four weeks. Moreover, taxable bond inflows of the past week were are also $3.4 billion. How weird is that?
Perhaps this equilibrium is further proved by the latest Ticker Sense poll which seems to indicate confusion regarding market direction. We look for M&A activity to serve as a booster of sorts, at least until someone lifts up the hood and ruins even a short-lived rally for everybody.
1498 Reisterstown Road, Suite 286 Baltimore Maryland 21208 Phone: 410.609.7100
Launched in May 2010, The Goldman Guide is a free weekly publication of Goldman Small Cap Research and is written by Founder Rob Goldman with contributions from the GSCR contributor team. This non-sponsored investment newsletter seeks to provide investors with market, economic, political and equity-specific insights via an action-oriented, straight to the point approach. No companies mentioned in this newsletter are current sponsored research clients of the Company or its parent, unless noted, With some exceptions, all companies or investment ideas mentioned in this publication are publicly traded stocks listed either on the NYSE or the NASDAQ. Goldman Small Cap Research members and contributors’ bios, certifications, and experience can be found on our website: www.goldmanresearch.com
This newsletter was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces non-sponsored and sponsored (paid) investment research. Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
The Firm’s non-sponsored research publications category, Select Research, reflects the Firm’s internally generated stock ideas, along with economic, industry and market outlooks. In virtually all cases, stocks mentioned in Select Research offerings are listed on the NYSE or the NASDAQ. Publications in this category include the weekly newsletter The Goldman Guide, Market Monitor blogs, Special Reports, and premium products such as The 30-30 Report. Goldman Small Cap Research analysts are neither long nor short stocks mentioned in this newsletter.
Opportunity Research reports, updates and Microcap Hot Topics articles reflect sponsored (paid) research but can also include non-sponsored microcap research ideas that typically carry greater risks than those stocks covered in Select Research category. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in company-specific Opportunity Research reports, updates and articles.
Goldman Small Cap Research has not been compensated for any content in this issue.
All information contained in this newsletter and in our reports were provided by the companies mentioned via news releases, filings, and their websites or generated from our own due diligence. Economic, market data and charts are provided by a variety of sources and are cited upon publication. Stock performance data and information are derived from Yahoo! Finance and other websites or sources, as noted. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, other firms, or other financial news outlets. Goldman Small Cap Research relied solely upon information provided by companies through filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report, update, article, blog, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This newsletter does not take into account the investment objectives, financial situation, or particular needs of any particular person. This newsletter does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority. Statements herein may contain forward-looking statements and are subject to significant risks and uncertainties affecting results.
Separate from the factual content of our articles about the company featured in this newsletter, we may from time to time include our own opinions about the companies profiled herein, their businesses, markets and opportunities. Any opinions we may offer about the companies are solely our own, and are made in reliance upon our rights under the First Amendment to the U.S. Constitution, and are provided solely for the general opinionated discussion of our readers. Our opinions should not be considered to be complete, precise, accurate, or current investment advice. Such information and the opinions expressed are subject to change without notice.
ALL INFORMATION IN THIS REPORT IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit Disclaimer: www.goldmanresearch.com.
Corporate Profile Disclosure:
The information contained in this article could contain forward-looking statements relating to the developments of the featured company’s products, services and future operating results or the future of the market. Statements contained in writing or in interviews are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words “believe,”, “expect,” “intend,” “anticipate,” variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking.
These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect performance include, but are not limited to, those factors that are discussed in each Company’s most recent reports and/or registration statements filed with the Securities and Exchange Commission. Visitors to this Internet Site are cautioned not to place undue reliance on these forward-looking statements. These statements have not been independently verified by the officers, directors or employees of Corporate Profile, LLC .com.
The information on this Internet Site has been submitted by journalists and analysts or provided by the companies contained herein or other sources believed to be reliable. Corporate Profile, LLC has not independently verified the information provided to it by third parties. Each individual should perform his or her own independent analysis before investing. The information contained herein is neither an offer nor a solicitation to buy any of the securities of the companies contained herein. Investing in securities is speculative and contains a high element of risk