Thursday Mar.05, 2020

😅 Healthcare's extra Super Tuesday

_Health insurance companies after Super Tuesday_

Hey Snackers,

Pancake poll: Extra syrup, tripled-stacked, or with a hearty serving of criminal? This English police force is stamping the faces of most wanted suspects on pancakes — because breakfast tastes better with a dollop of danger.

US markets rallied on news that lawmakers set aside $8B for coronavirus emergency funding. All 3 major indexes are now less than 10% down from their 52-week highs — aka, out of "correction territory."

Surge

Biden's big day is UnitedHealth's best day since 2008

An extra Super Tuesday... for the healthcare sector, which rallied massively after Joe Biden scored wins in most of the 14 Super Tuesday states. Biden's victory affected healthcare stocks because it suggests a lower likelihood of a Bernie Sanders Medicare for All reality, which would abolish private health insurance. Health insurance companies/investors breathed a collective sigh of relief:

The S&P health care sector soared 5.8% and recorded its best day since 2008 — health insurers added around $48B in market value Wednesday.

"Pricing in" the risk of a Bernie win... A stock's price is largely dependent on what investors perceive to be the future growth/profit potential of the company. Tuesday changed things for health insurance:

Before Super Tuesday, UnitedHealth's stock had a priced in chance that the company might be decimated by a Bernie presidency.
Now, the odds of that are lower. Biden's wins increase his odds of becoming the Dem's presidential nominee, and he advocates for less dramatic healthcare reform.
The result: The less-probable Bernie victory boosted UnitedHealth's market value by $20B.

"Policy risk" affects some more than others... And it's baked into the stock prices of companies in certain industries: Tobacco and gun stocks reflect the risks of anti-tobacco and gun-control policies — Defense stocks mirror the risks of foreign military conflicts. When industry-specific policies shift, the industry stocks react (for better or worse). And 2020 is a year of policy risks.

Supply

H&M wants to "share" its supply chain with retail rivals (for a cost)

Secret's in the (faux) leather bag... H&M is your go-to for $7 dollar sunnies and floral basics. It's also 1 of the world's top 3 fashion retailers. Now, it wants to share its know-how with rivals — for a price. H&M is debuting "Treadler," a service that allows other brands to use its massive clothes-churning infrastructure.

Not so glam: Clothing supply chains are complex — fashion companies (especially smaller/newer ones) often struggle to organize their own suppliers, production, and logistics.
Supply Chain as a Service: H&M is offering retailers access to its massive global supply chain — from development, to sourcing, to production, to delivery. Clients can leverage H&M's scale/expertise, and get connected to its supplier partners.

Sharing "progressive sustainable work"... What H&M is positioning this as. It's faced heat for fueling an economy of frequently replaced (and then thrown away) clothes/accessories — aka, fast fashion.

The fashion industry may be responsible for 10% of the world's greenhouse gas emissions because of those long and energy-intensive supply chains.
H&M has been on a big sustainability kick, touting the use of recycled materials, using AI to make sustainable production decisions, and aiming to be carbon neutral in 10 years — also, its new CEO is its former sustainability chief.

Not about generosity or sustainability... More about H&M leveraging its massive infrastructure and excess production capabilities to make a buck. Right now, H&M is only catering to consumers — and fast fashion is struggling. Treadler could generate revenue from other businesses as H&M basically Airbnbs out its extra resources. It's a potential H&M revenue source that also reduces others' carbon footprints.

Slurp

Soup is back — Campbell jumps 10% on canned foods and Millennial families

Surpassing the impossible... Tomato, Chicken Noodle, Cream of Mushroom — Campbell's iconic posse of condensed soups is back in action. Campbell Soup stock jumped 10% after expectations-beating 1% sales growth — That's fantastic, considering US soup sales for Campbell have fallen 8 of the past 9 years. Some things to slurp on:

Pantry-staples like canned soup are a hot commodity as coronavirus-fearing shoppers stockpile non-perishables.
Demand for Campbell's products has grown, both in-store and online. Now, Campbell is increasing soup production to prep for more demand.
Campbell has also been investing in better ingredients and more hard-hitting soup marketing (advertising costs rose 7% in the quarter).

Millennials are soup-ing now... The CEO credited the surprise sales from "younger households." Apparently, he was surprised: “Frankly, this is a trend that many believed was not possible” (including him).

Millennial tastes are growing up (kind of)... In 2020, a Millennial is anyone aged 24 to 39. As we become heads of households and families, our biz-shifting powers grow. Maybe Millennials' juice-cleanse-loving, acai-bowl-scarfing ways are evolving as they transition to buying food for families, not just themselves. Managers should pay attention.

What else we’re Snackin’

Fleeting: Twitter will test disappearing tweets with users in Brazil — it's latching onto Snap and Insta's 24 hour "fleeting" vibes
Late: Same-day delivery services from Amazon, Walmart and Instacart have been hit with delays as coronavirus fears cause a surge in online ordering
TLDR: ViacomCBS is exploring a sale of its Simon & Schuster book-publishing biz for at least $1.2B, according to PFWTM (aka people familiar with the matter)
Push: Japan's Olympic minister says the Tokyo 2020 Games could be postponed to the end of the year, instead of their scheduled summer start

Thursday

Earnings expected from Costco, Kroger, and LaCroix-maker National Beverage Corp

Disclosure: Authors of this Snacks own shares of Amazon

ID: 1109704

Latest Stories

Rani Molla

Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.

Frozen Dead Guys

The audacious and expensive world of cryogenics

Jamie Wilde

US-NORWAY-TRADITION-DEATH-FESTIVAL-OFFBEAT

3.07¢

The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th-straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

Meta’s not telling where it got its AI training data

Today Meta unleashed its ChatGPT competitor, Meta AI, across its apps and as a standalone. The company boasts that it is running on its latest, greatest AI model, Llama 3, which was trained on “data of the highest quality”! A dataset seven times larger than Llama2! And includes 4 times more code!

What is that training data? There the company is less loquacious.

Meta said the 15 trillion tokens on which its trained came from “publicly available sources.” Which sources? Meta told The Verge’s Alex Heath that it didn’t include Meta user data, but didn’t give much more in the way of specifics.

It did mention that it includes AI-generated data, or synthetic data: “we used Llama 2 to generate the training data for the text-quality classifiers that are powering Llama 3.” There are plenty of known issues with synthetic or AI-created data, foremost of which is that it can exacerbate existing issues with AI, because it’s liable to spit out a more concentrated version of any garbage it is ingesting.

AI companies are turning to such data because there’s not enough good, public data on the entire internet to train their increasingly greedy AI models. (Meta had reportedly floated buying a publisher like Simon & Schuster to satisfy its insatiable data needs.)

Meta, of course, isn’t the only company that’s tight-lipped about where its AI data is coming from. In a now infamous interview with WSJ’s Johanna Stern, OpenAI’s chief technology officer Mira Murati was unable to answer questions about what Sora, OpenAI’s video generating app, was trained on. YouTube? Facebook? Instagram — she said she wasn’t sure.

Meta’s battle with ChatGPT begins now

What is that training data? There the company is less loquacious.

Matt Phillips

Today’s earnings: Who’s making money edition

Here are some some notable numbers out this morning, as earnings season gathers steam. Thursday’s main event will be Netflix after the close of trading. (Keep an eye on its advertising business.) But until then...

Parts distributor Genuine Parts beat, offsetting weak sales with cost control.
Credit card company Discover jumps, as delinquencies stabilize.
Builder D.R. Horton benefitted from the fact that there’s still no houses to buy.
Credit score giant Equifax was hurt by the fact that nobody wants mortgages.
KeyCorp, Comerica latest banks bummed by depositors demanding higher rates .
Insurance Marsh & McLennan did well by investing cash at high short-term rates.
Private equity giant Blackstone’s results were meh, due, in part, to lack of exits.

7.13%

The 30-year fixed rate mortgage is back above 7%, according to weekly numbers from the Mortgage Bankers Association, the highest level in four months. High borrowing costs are creating havoc for would-be buyers, as affordability lingers at the low levels not seen consistently since the late 1980s.

Rani Molla

10h

Amazon’s spy ops on rivals: shell companies, printed docs, and a fake Japanese streetwear brand

Some companies check out rivals’ websites, stores and public filings to stay abreast of the competition. Amazon made its own fake shell company and brands, transacted hundreds of thousands of dollars per year undercover on competitors’ platforms, and kept its intel operation a secret for nearly a decade even from others at Amazon, according to a fascinating investigation by the Wall Street Journal.

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."

Exclusive | Inside Amazon’s Secret Operation to Gather Intel on Rivals

April 18th

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More taxes, eh?

4/17/24

Capital gains taxes won’t fix Canada’s terrible housing market

Canada's proposed solution to its housing crisis may exacerbate the problem instead.

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Worldcoin pivots to the blockchain… with a 'humans only' discount

Worldcoin, the “proof of personhood” crypto project launched by OpenAI’s Sam Altman, said it plans to launch its own ethereum layer-2 (L2) blockchain dubbed World Chain. The pitch: a blockchain where it’s both easier and cheaper for people to transact than bots.

Worldcoin has made waves for its iris-scanning metallic orb that promises a future where people can mathematically prove they’re real humans and not AI bots.

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses.

Which is what may make World Chain attractive. Crypto exchange Coinbase launched its own L2, Base, last year. Base has since seen rapid user growth — activity that’s generated the exchange millions of dollars in weekly fees.

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

Worldcoin, Sam Altman's Crypto Project, Is Building a Layer-2 Chain

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses.

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

Rani Molla

Ad-ing up

4/17/24

Turns out Netflix makes more money if it just acts like regular TV

Streaming companies will let you watch ad-free, but it will cost you.

Earnings

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Companies report things

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Smooth sailing? Not for superyachts

Sales of the luxury boats sank 17% last year. Meanwhile, Super-SUPER yachts (over 650 feet long) took the biggest sales dip, falling around 40%. Part of the problem: a pandemic-era backlog has led to a three- to four-year waitlist for new yacht orders. Meanwhile Russian oligarchs — former MVP customers — are largely out of the boat-buying business due to sanctions.