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This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Today's Bloomberg Business Mean, we're walking chairs in. Netflix down two percent in the after hours. The company reported streaming paid net change for the second quarter that beat the average analyst estimate. But I think what has investors concerned, Carol, is the outlook and the third quarter forecast. The company
seeing revenue at nine point seven three billion. That's just shy of estimates of nine point eight three billion, though it does see EPs coming in above estimates at five dollars and ten cents versus estimates of four four dollars and seventy four cents.
Yeah.
I really get a feel that investors are trying to make a little sense as the stock's been bouncing. It's been lower in the aftermarket, but bouncing around at different times.
Let's get to it, let's make sense of it. Back with us.
So grateful to have Bloomberg Intelligence, Technology Media analyst KEITHA. Ringanatan and also Bloomberg News earnings reporter Red Brown. Gither to you that number. I know you guys were looking for about five million and subscribers. They easily blew that out of the water. It seems like everybody's estimates.
Oh, absolutely complete blowout, crushed it. Sixty five percent higher than obviously what consensus was expecting. So the subscriber momentum is very very much intact. And you're absolutely right there, Carol, about you know, the guidance being a little bit tepid, and I think that is what is kind of weighing on the stocks at this point of time.
Are you worried about by that guidance? Forgive me, tim, Are you worried about that guidance?
Yeah, because this is you know, this is where it's getting really really hard to kind of model out this company. Remember, they're going to stop reporting subscriber metrics altogether. They're going to stop reporting that average revenue per user metric altogether in a few quarters, and so it's kind of becoming hard to figure out that all of the different puts and takes. So, you know, we were kind of expecting fifteen percent revenue growth in the third quarter, that's obviously
a little bit light. They point to, you know, Argentina being a source of the weakness. But then going forward, as more and more you know, subscriber growth comes from emerging markets, comes from some of these other you know, developing countries, is that really going to weigh on revenue growth?
I think that becomes the big question. And then the other thing, of course, as you had pointed out earlier, was that they are not expecting a meaningful acceleration in the ad business in twenty twenty four or even in twenty twenty five, and I think that'll give investors some pause as well.
What's interesting, though, is that even though revenue GITHA is coming in below estimates for the third quarter or forecast, we're seeing the company at least tell us it's going to be more efficient because earnings per share is going to be five dollars and ten cents that beats estimates, an operating margin significantly higher than the twenty five point seven percent analysts had expect coming in at twenty eight
point one percent. So what's happening to Netflix where revenue is going down but efficiency is going up?
Efficiency is going up big time. And this is really I mean that we've been talking about the operating leverage in this model deem for such a long time right now and this is that operating leverage that we get to see. I mean, they are giving that to us in the margin guide. Remember they had first predicted twenty four percent operating margin for the whole of twenty twenty four. They took that up to twenty five percent last quarter, now up to twenty six percent. That's a five hundred
basis point increased from last year. So you know, very likely that we can see up to thirty percent margins, maybe even as early as next year. This is huge in terms of just you know what the streaming streaming models unit economics are, how they're shaping up, just because there's been so many questions about whether it could ever be profitable and whether it could ever generate those thirty
percent margins that the BATV bundle was generating. And obviously we have a resounding yes with this report from Netflix.
Which is why, as you said earlier, kind of Netflix stands alone and is the one to be red Brown, I want to bring you into it. Also listen to Githa and going through the numbers. What stands out for you?
Yeah, I think it's just kind of this confluence of the revenue drivers that were kind of looking to pay dividends. When they say, don't look at our subscriber numbers anymore, we're all saying, okay, we won't look at the revenue growth, and they're not kind of painting as pretty as a picture I think is we would as the marker would
like to see for the time being. Maybe that does raise some questions on where is the levers that they can still pull to Yeah, to hit the numbers that that you know, everyone was expecting them to do.
I've read.
On the content side, I mean what sticks out to you? Because the company did call out Bridgerton season three Baby Reindeer, which I heard was really good.
I haven't seen that.
I didn't watch Baby Rain, Bridgeton, Queen.
Of Tears, The Great Indian Kapel Show, Under Paris Atlas, hit Man. Oh, I have heard of hit Man. I'm like somebody of these I'm I'm reading. I'm like, these are not on my radar at all. The Roast of Tom Brady, though that was one that everybody watched. It felt like, Yeah, I mean except for Paul Brannan, who's just shaking his head in there. Oh he watched it. Okay, he did watch it. Thumbs up, two thumbs up.
All right, well Paul watched it, then it must have been good. I think you are pointing to something interesting there, is that the live I think the thing that generated the most like content not on Netflix, but the most
buzz was the live roast of Tom Brady. So I was reading some analyst notes They're kind of called the content besides that a little bit lackluster this, So yeah, maybe that is again kind of pointing to the direction that they need to be heading, is the live entertainment, because yeah, it seems like if they're still attracting people with the content that they are, but it's you know, we don't get to we don't get to speak to every subscriber, but like, did you sign up because it
was live TV or because it was Bridgerton?
Right?
So yeah, it remains me seeing I guess geth.
I want to go back to you earlier when we talked to you to preview what Netflix. You talked about Netflix having the durable advantage over the long term. I look at you know, part of I guess they have that durable advantages. I think about the cash that they generate, talk about cash flow and what we got from Netflix on that front.
So cash flow still continues to be really, really strong, Carol. So they're still guiding to six billion dollars in cash flow this year, and remember they had generated about six and a half billion last year. But the reason we're seeing a little bit of lumpiness this year is because of all the strikes that happened last year and so much of production kind of got pushed to this year.
But the real metric that we should be looking for is, you know, the twenty twenty five free cash flow, and I'm thinking just with the kind of profitability and the operating margins that they reported, you know, we could easily be seeing about ten billion dollars in free cash flow going to next year. And that now gives them a
lot of flexibility. They could invest in more content, of course, but it also gives them flexibility to do buybacks, and that again it becomes then your EPs booster over the long term.
They did say in the release during the second quarter, we repurchased two point six million shares for one point six billion. We have five billion remaining under our existing authorization, So I guess stay tuned to see whether or not we see more. What's the number one question you would be asking Netflix on the call here, Githa.
I think a lot of concerns are still going to center around the advertising business, so I think we definitely want more clarity on that. Yes, they did give some perspective in terms of how many new signups game, but they still haven't actually given us a number in terms of how many number of subscribers are on the a year or what is the revenue that they're generating. I mean they say it's not it's deminimus, but still I think we would definitely like to have a little bit more clarity on that.
RD.
I want to bring you back in.
You watch the earnings, you watch the market, certainly for us, I mean Netflix is a big one when we think about the earning season. We're just getting kind of started. But how are you thinking.
About it in terms of maybe what it means for some of the other players.
Yeah, I mean it's the first tech name, like, you know, really prominent tech name that we're getting, you know. I guess we'll have to wait and see kind of how things shake out here with the market reaction, I mean, it's it's not as bad as it guess it could be. I think there's definitely some areas of thing that'll be
of optimism. I think to take away from this the fact that they did add more more subscribers, and we're expected they did it across all of their regions, even with some of that weakness that they're pulling out in Latin America, I think that still speaks to maybe some strength forward the tech companies that are a little bit more consumer facing to maybe have you know, a decent, decent earning season still.
Here, hey, gtha. On page three of the earnings release, they talk about engagement and competition, and there's this donut chart that shows that streaming now accounts for forty percent of US TV screen time. Still broadcasting cable account for more than forty percent.
Together.
Netflix and YouTube though, are the clear leaders when it comes here, everyone else they kind of leave in the dust. That's according to Nielsen. Who are they pulling? Who are they going to pull more share from? Or who do they need to pull more share from? Is it competition or is it the traditional cable and broadcast.
It's a little bit of everybody. So you know, clearly we're seeing cord cutting. I mean, we've already seen thirty million subscribers leave the PayTV ecosystem. Where have they gone, Well, they've gone to Netflix, They've gone to Amazon Prime, they've gone to all of these other streaming services. But what is going to happen is all the competing services and
Netflix raised prices. People are going to have to make a choice, and they are going to make that choice, and we think that default choice is going to be Netflix. So we're going to see their share kind of increase from the current eight percent or nine percent that it is and go higher, not only because people are moving from linear to streaming, but also moving within streaming, gravitating more towards Netflix and YouTube.
All right, Keitha, ten seconds left here. This is a strong report.
Good report. How do you describe it?
I would say definitely a very strong report in terms of subscriber momentum. You know, they've kind of checked all the boxes.
Here, all right, kind of run.
Hey, Keitha, thank you so much of our Bloomberg Intelligence team, and of course our Bloomberg NER's Earnings reporter are Red Brown.
You're listening to the Bloomberg Business Week podcast. Catch just Lie weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brought auto with a Bloomberg Business app or watching us live on YouTube.
Already though on our radar the eighty hours of nevarades that trade here in the United States dropping the most
in more than three years. This is after sales of the company's closely watched prostate cancer drug disappointed in the latest quarter, taking the shine off of raised profit forecast from the Swiss pharma company, Nevada shares following as much as about three percent in trading that we've seen, trimming this year's gains to about fourteen percent after sales of the treatment fell short of analyst estimates.
A lot to.
Unpack here, so let's get to it with vas Narasimon. He is CEO of Novardies, joining us from the company's US headquarters in East Hanover, New Jersey. Boss, great to have you here on Bloomberg. Let's talk about the quarter. You reported profit that beat expectations, you raise your forecast, your shares are down. As we mentioned, we hear in the market that there are concerns about how long your
growth driver, drugs will keep delivering. Why do you think that you're having a hard time winning the market.
Over Yeah, Look, I think first it's really important to take a step back and see how well we've done over the recent years. When you look at our shares over a five to three year and even a year to day, we're really at place now where we've been trending at all time highs. So really today we've just given back a little bit of what we gain in the recent weeks, but still trading really really near all
time highs for the company. I think, really demonstrating that investors are recognizing the outstanding performance we've had as we've, after one hundred billion dollars of transactions, focused into an innovative medicines pure play company that's allowed us to drive our sales growth in a dynamic way, increase our profit guidance today to even higher levels, and we feel really good now about the trajectory of the company coming out of the quarter when you look at it in the
next five years, we've committed to grow five percent plus and we have the growth drivers in hand to deliver that. We also have committed to be a forty percent margin plus company, and we're already at forty percent margin today, so we're delivering against what we said we're going to do now.
I think one of the things we learned today.
Is it's just really important that every one of these growth drivers hit their targets. Plu Victo's a little bit behind, but we believe that in the long run we're on the right trajectory. This will be a multi billion dollar drug, and more importantly for US radio ligen therapy, this whole class of medicines we're working on could be a significant fifteen to twenty billion dollar area that we can build over time.
Pluvicto, let's just go there, because that seems to be what maybe is putting so much pressure on the share price. The eightyr is down more than four percent as we seek that is your prostate cancer drug. You did or you seem to have rain did some of the optimism over it. The CFO telling reporters this morning that that next dynamic boost in sales probably won't come until the drug tests a broader label.
So I am curious, are you guys raining in the optimism?
What are you doing to rein in or excuse me not to Radium but to win over physicians to that medicine in particular.
We're certainly not ranting in our optimism on PLAVICTI. I think what we're trying to articulate is right now we're on a run rate if you look at it in the US, of around one point two to one point three billion. We're going to add a couple of one hundred million overseas. And we always knew in this first indication we were going to reach a max of around
two billion dollars. Now, the speed at which we're going to get that ramp is a little bit slower than what we've expected from that one point four to one point five level up to the two billion dollar level. It may take us a little bit longer, mostly because in the US now we have to get this medicine more broadly available with community oncology, which will take us some time.
We're making those steps.
We have over four hundred and fifty centers not providing the medicine. But what that's really importantly going to do is build the base which allows us when we triple the size of the population we can address next year, we hope with the approval of our next indication we'll see another ramp in the sales again towards a multi billion dollar medicine that we think will drive our growth through this decade and.
Into the next decade.
So I think we just want to be realistic that getting to that next phase in our first syndication is going to take time because we have to get into the community. But once we do that, we'll have built the foundation for all our future launches with radio ligend therapies.
Okay, well, speaking of the next phase, let's talk about Kiskali, the breast cancer drug for early breast cancer, because analysts have pointed to a three month delay and FDA approval for it. So how confident are you, Voss that you'll win this approval in the second half for a broad group of patients.
We're very confident.
I mean right now with the FDA, we've submitted some manufacturing adjustments that we agreed that we needed to make. We've submitted the stability data which they always ask for when you make manufacturing changes, and we have a three month clock extension. Now it's important to note with Kiskali, we were already on what's called a priority review timeline, So.
Now we've added three months.
All it does is put Kiskalie back into a normal drug approval timeline, and we believe we're not going to get the approval, but everything that we've seen suggests we will get the odd label. And I think importantly what we announced this morning is we've seen that longer follow up data that continues to show the positive impact cascale is having for patients of all subtypes of early breast cancer, along with an outstanding safety profile. So we believe this
will be a very significant medicine. We've guided to four billion plus in the metastatic setting, three billion plus in the early breast cancer setting, so at least seven billion dollars, and certainly if we continue to see the data of all as nicely as it has, it could be much bigger than that. So we're really excited about it. We're going to get that approval, we hope, in Q three, and then we'll take it from there.
All right, you know better than most everybody is so into the GLP one diet drugs, and you did mention on the analysts call that no Artists is working on a next generation of b CD projects not advanced yet to patient trials yet.
Are you willing to do now.
Maybe a significant deal to a more advanced pipeline in this area, maybe to give no artists a more competitive position.
Roasted one last fall.
It looks like it was a pretty smart move, roasted very well yesterday and kind of awaken the market once again for the diet drugs. What about you guys and your strategy.
Yeah, we've looked really closely at this.
I mean, we've been in cardiovascular disease for many decades, really one of the largest cardiovascular medicines companies in the world consistently over time, and our view is that the current wave of therapies, there are many companies out there. You have two very large incumbents that are already doing well, a number of companies chasing them on the injectable GLP one or GLP one combinations, and then you have oral drugs and you have a number of companies with oral
GLP ones. You know in my experience that when you have situations where it looks to be relatively easy for many companies to come into space, you're going to get payer pressure, You're going to get very difficult competitive dynamics, You're going to get rebate dynamics, particularly in the US, and so when we looked at that, and when we look at these these deals, we think to play the long game and actually say, where can we bring really
differentiated medicines, medicines that could hopefully add something new less frequent dosing, maybe a better tolerability profile, maybe better muscle sparing attributes. And so that's where we've decided to focus our energy. I'm sure you will hear every month on your broadcast about another GLP one or another oral GLP one or GIP one that's come out, But that's really
indicating that this market is getting extremely crowded. And I think in our sector, the companies that win are the ones that find differentiated positions with really important medicines that can replace the standard of care.
And that's where we're focusing our energy.
Well, what would you say to investors who may say that you're missing out right now on something that is obviously turning out to be pretty huge and that you know sooner than later would be better to get a competitor in the space.
Yeah, I think when you look at it, most of the drugs we talk about, even the ones that have been recently in the news, are going to be launching at the end of this decade. So I think you have to step rate investor reaction to the realities of
launching medicines in our industry and developing them. And so you know, I would say I think most long run investors who understand our sector would know it's prudent to think about what is the world going to look like in twenty twenty nine, twenty thirty, twenty thirty one, when a medicine that's in phase one finally comes to market, and ask yourself what would put you in a position to win at that point in time. And that's the strategy.
You know, we're thinking here, it's easy. We've had it in the past with immunooncology, and that time we piled in. We did a number of deals in amunooncology that didn't work out so well. And I wonder also when you do that, you crowd out other innovation within your R and D portfolio. So rather focus on places where we have differentiation we can win, rather than being now, what might be the fourth or fifth or sixth oral of obesity first class drug or maybe the seventh or eighth injectable drug.
I don't think that's a good use of our capital made.
To mention to what the world you know, kind of looks like going forward. And I am curious your CFO on the call post earnings did talk about US China relations. And you know, no matter what the political scenarios are, what do you think the environment looks like for Big Pharma the business environment post the November US presidential elections?
Does it matter who is in the White House? And just got about a minute here.
Yeah, I think first, you know, we're you know, not taking sides with respect to the election. Most importantly, we need better policies in the United States to support innovation and support patient access.
We think the.
IRA is a flawed policy for at least the healthcare portions. We need to fix nine to thirteen. We need to keep addressing out of pocket by fixing the PBM situation, fixing other legislative areas like the three point forty B program that's on the US side, and hopefully whichever administration and constellational government is there takes that head on to create the right innovation ecosystem for the long run. And
then I think we're obviously want free trade. We believe our ability to provide medicines around the globe is absolutely critical. China is a very important market for US, we grow double digit, but also Japan and Europe, and so we're hopeful that we can keep shaping policies that recognize that ours is a very global industry. Healthcare is a global area, and we need policies that enable us to work freely around the globe to bring our medicines to as many patients as possible.
Boss, So appreciate your time today. Thank you so much, Really appreciate it. Bos Narasimon. He's the CEO of Novartist, joining us from their headquarters in the United States in East Hanover at New Jersey.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and ANDROYD Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station just Say Alexa playing Bloomberg eleven thirty.
We also post had an IPO today.
Ardenhell Partners began trading around twelve thirty eight pm Wall Street time, the stock opening at fourteen dollars a share. It was a red sticky I think on the Bloomberg opening at fifteen dollars a year, was below its IPO price.
Just some numbers for you.
The company raising one hundred and ninety two million in that IPO, shrinking the size of the share sale, pricing it below a marketed range, so selling twelve million shares for sixteen dollars each.
This was yesterday.
They had marketed about fourteen point three million shares for twenty to twenty two apiece.
I'm looking at the stock.
It is lower in the trade, but we're looking at a market captain of about two point two billion dollars.
Okay, So let's get more on the business, on the outlook, and of course the IPO with the president and CEO of Ardent Health, owner of thirty hospitals in eight markets, six different states, and many more sites of care, a couple hundred of them. Actually, we got Marty Botnik here in our studio. Marty, good to have you. First of all, congratulations on the IPO. This day a long long time coming.
For you and the team. Thank you.
You know, I'm delighted to be here and it's an exciting day for our company. And most importantly, the twenty four thousand team members. We have caring patients across the United States. So it's a great day.
Thank you.
Carol mentioned the reception not ideal on an IPO day when you see a share price fall when it starts to trade.
The market is down overall.
So yeah, to be fair, the market is down overall. But give us your thoughts around that in the way that it's been received, at least on the first day.
Yeah.
Now, we're really excited about the future of this company. We've got a strong balance sheet, modest leverage, and a strong growth profile that we're confident in the future in And so this is something that you know, this is a long journey. I'm an endurance athlete and I tell my team all the time that this is a marathon, not a sprint, and any one day is not going to make or break our training. And that's how we think this. This is the starting point of a new journey from this company.
We'll speak about endurance.
Right the second time you guys filed for IPO, did it in twenty eighteen you withdrew in twenty twenty? Was it much much better market conditions to do it now?
Well, we've been preparing for this for years and I don't believe you can ever time the market. That's not what we were trying to do. We've got a great company that's poised for growth, and so we were really making sure that we can come out of the market is a strong public company and we know that the performance and the growth trajector we have is going to set us up for the future.
So the market conditions had nothing.
To do with it.
Now, we really see the tapping the IPO market as a currency for our future growth and that's what we're focused on.
There have only been five healthcare services IPOs so far this year, including yours, so there aren't that many of them. Why is now the right time to go public? And also how do you differentiate yourself out there?
Yeah, So for us, we always said we will go public when we're ready, and we are ready. Our team has been working relentlessly to prepare for this moment. We're going to be a strong public company and we said we'll go ready when it's time for us to grow, and we know that the markets right now are ripe. We've got a lot of inbound interest based upon the joint venture partnerships and the markets that we're in to continue to build, and we've got multiple growth strategies.
To do that.
Marty, talk about the markets you're in. What is the strategy, because my understanding is you're very much in a Q care mid sized urban markets, growing populations. Explain kind of the thesis for the growth trajectory.
Yeah, we operate in mid sized urban communities and we go really deep into those communities. Hospitals are obviously the front door of what people see, but every day we see twenty times more patients in our outpatient clinics than we do our hospitals, and so we really believe in building an ecosystem of care around the person. As the patient, as a person and a consumer, they have choice and so not everybody has to come to the hospital for care.
We want to have an ecosystem that provides for that care wherever.
And however, they needed explain a little bit more the reason we are, you know, I want to ask that Tim and I had a great conversation with a doctor at a public health hospital, public hospital, i should say, in San Francisco, and talked a lot about the pressure on doctors in the medical community to kind of get through their patients quickly and as a result, they're not talking to their patients.
What does it mean when you say.
You want to develop the care around a patient when we've all experienced out and out. I can't even get appointments that doctors, we'll call me back in six months or have aout an appointment six months. How do you develop care around a patient when there's a lot of stress points right now?
Yeah, no, it's a great question. I'll give you a personal antidote. I was training for an iron man and I got hit by a car. So I got to be a patient for the first time.
Cycling wow.
And so I got to be a patient for the first time probably in my career outside of a clinic visit or something. And what I realized is we have really great caregivers in this industry, and we have challenging systems and processes, and this industry hasn't always catered to people's input, or their money or their time, and so at aren't putting the patient at the center of everything
that we do. Has become our north star, and so we're creating that ecosystem that we want to embrace technology to make it easier for our caregivers to deliver care to those patients and safer and more effective for patients to receive it. So that is a really big portion of our strategy and how we go at it.
How do you do it?
And then as a publicly held company where you know, Tim and I and everybody's going to be watching those quarterly reports, how do you balance making sure you provide that care and really put the patient first, but also you've got to be a profitable company and we're all watching well.
I mean, having great people is the start of it. And our chief medical officer always says creating good process workflows lead to good clinical outcomes, which lead to good financial outcomes. I've been doing this for over twenty five years, and what I've always said is that if we take care of the patient, provide good service, good quality, good safety, the finances won't follow. And that's what we've seen.
I want to go back to that anecdote that you shared about becoming a patient because you know, obviously we're glad that that wasn't a worse outcome because that can be really bad when a cyclist is hit by a car. Obviously, but how did that specifically change the way that you're doing business? Like what changes did you make as a result of becoming a patient.
Yeah.
I told that story, which we don't have time to get into, to our entire leadership, and I said, this is an opportunity. My wife said, God gave me a second chance to be here and do something with that. And so, whether it was banned the clipboards in terms of making it easier for patients to get into our clinics, focusing on technology that again is going to allow our nurses to be able to provide more effective care. You know, we're not immune from the headwinds that this industry has faced.
There's been a lot of turnover and nursing physician burnout issues that you were talking about, Caro, Yes, and so we are just embracing technology to make that easier for our consumers.
We think about it.
I can control my whole world from my iPhone no matter where I'm at, but in healthcare it's always been a challenge.
We call necessarily hippo compliant.
Yeah, Well, you call somebody, you go through a phone tree, you get disconnected or rerouted. So we want to make it easy for people to access our system.
They're still using facts to send and CD ROMs for MRIs, for example.
And so we've introduced virtual nursing, if you know, bringing more nurses to the bedside to help take care of the more detailed, cumbersome, time consuming tasks, so our nurses at the bedside can go and address acute emergencies for the patient. And so being very thoughtful and thoughtical about how we are embracing technology, importing our team members and creating good retention. That's what this is about.
What do you do with the IPO proceeds? What's the focus for a lot of investing going forward right now?
Yeah, No, we are a company that's poised for growth. We have built a scalable platform that we know is in demand. You know that there's still a lot of hospital struggling. We've had a lot of inbound interest in terms of expanding our footprint, and so these proceeds are to help fuel the next round of growth as we grow into new communities and continue to invest in the communities that we're in today.
Equity Group Investments is the majority owner of an affiliate of Equity Group Investments, I should say, and they're going to continue to hold the majority shareholder voting power. Just very briefly, twenty seconds, does that give you more freedom or does it constrain you.
Equity Group has been a great partner. They've been part of us for nine years and for this audience, which I know Sam Zel I wish he could have been here to celebrate with us today. This would have been his fourteenth company that when public Key had that vision for us. And so they're a great partner and we'll continue to see us grow. We've doubled the size of the company since they've been a part of us, and we're going to continue on that trajectory.
All right, good leave it on that note, look forward to hearing more in the future. Thank you so much for coming in the presidency of Ardent Health. Marty Botnik joining us in studio. As we mentioned an IPO today, it's first day of trading. Stockdown right now just about two and a half percent. Will continue to track it into the clothes.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple card Play and then brut Auto with a Bloomberg Business act or watch us live on YouTube.
You know, our.
Focus is certainly the RNC. Donald Trump is set to address his party tonight for the first time since officially becoming the presidential nominee and surviving an assassination attempt, with a speech aimed at uniting Republicans and his campaign to defeat President Joe Biden.
Meantime, President Biden faces a growing drumbeat of calls from lawmakers for him to stand aside, with The Washington Post reporting today that former President Barack Obama has told allies that Biden needs to consider his viability as a candidate.
Margaret Tealov is the director of Institute for dem Cristy, Journalism and citizens Citizenship at Syracuse University. She's been on the ground in Milwaukee. She is also a former colleague Senior White House correspondent for Bloomberg News and contributes to Axis. She joins us from the RNC Milwaukee. Margaret's so great to have you here with us.
How are you.
Thanks, It's so great to be back home as it were. I'm doing great, but this has been an exhausting week. As you can imagine what this seemed like, sort of the most least action filled election here for so many months was like, Okay, we know Donald Trump, we know Joe Biden. We know the contours of this race. It's about turn out. What else could happen? That's every reporter's mistake. In the last three weeks, we've seen a complete turn
of fortune. Donald Trump and his followers here at the convention feel that all the winds favor him now, and so you see a tremendous amount of almost jubilation and enthusiasm in the convention hall. At least these folks think it's now his race to lose.
Yeah, it's hard not to feel whipsaw the headlines.
It feels like of the last couple of weeks changing very dramatically, you know, post the debate with Joe Biden and a really tough showing there, and of course the assassination attempt on Donald Trump, and then of course just the momentum that we're seeing at the RNC. Having said that, are you getting ready to be whipsawd again in terms of maybe Joe Biden stepping aside at least for the next run here it come November.
We might very well. I think we all need to be prepared for any contingency. What we're hearing here on the ground from folks around the former president, former President Trump and his orbit is that they don't think it makes any difference. They're running against the Biden administration and Democrats record and the inflation and some of the other
economic factors of the last few years. They think, if it's not Biden, they're most likely to be running against Harris, and if they're running against Haterras, they're run against Biden. They're saying that even if it were to be someone else, they think they would still run against the Biden record. But in reality, I think they have not really prepared for a different contest that is not against Joe Biden
or Kamala Harris. So the next few days are going to be obviously very determinative, and nobody knows what's going to happen or when it's going to happen, and that that is the only wild card per se at this convention. You know, Vance well received last night, I would say, not jubilant, but the crowd liked him and was interested in his message, and I think outside of the convention hall, it's a message they are banking on that resonating in Ross belt states.
That's so interesting to hear that. I want to go back to what you were saying about a potential change at the top of the ticket. What if there isn't a change at the top of the ticket, how do how does the nominating process move forward when there is so much division within the Democratic Party, at least in certain levels, and also when you know, every little moment of the current president's day is sort of seized on for signs that he's not fit to run.
Uh.
Yeah, I think you're asking a question about a lot of journalists covering stories are asking, and that a lot of Democrats who have a vested interest in this race are asking. I mean, there are a few different ways that if President Biden decides that he's going to continue his re election, but there's a few different ways that things could emerge. Either, Number one, they could do a
virtual nomination. There is a possibility that that could happen as soon as next week, but it just doesn't feel like that's where the mood of Democratic delegates is now. He could be nominated at the convention, or there could be a challenge. So those are essentially the scenarios that all of the Trump campaigns planning is for a campaign to run against Joe Biden. So I don't think they're
looking at switching it up. But I think even if Biden decides to stay in the race, his campaign is going to need to rethink the way they are messaging in the final weeks of the race because right now, the majority of the American public, and it seems that in some bully majority Democrats are not confident that he's the best student to carry on for the next four years.
Well, the presidential race is on, so is the messaging race. I'm looking at your election graph report that you guys have put out. More than twenty two hundred Facebook pages have run ads since last fall mentioning US presidential candidates collectively exceeding one billion impressions billion with a B as of the end of April. That's according to your analysis. But one of the things that you guys identified that
is troubling is these inauthentic actors. Information versus misinformation. It is critical, especially when it comes to a presidential race.
Oh, that's right.
I'm glad you're in this project. I'd love to tell you a little bit about it. My institute at Syracuse University, which is focused on the connection between people's civic involvement, their trust and government and their trust in the news, right, that's our sweet spot. Was very happy to be able to apply for and receive a grant from a company called neo Forge. If you have not heard of these guys,
they're really interesting. They've been involved in everything from NASA projects and projects in London to that great reporting on the Panama papers. And what they are is they are an analytics and graph database company. And if you think about spreadsheets or kind of the old school researcher in times of in terms of ros and columns, they allow you to see in sort of more of a three day, three D way, the hidden connections between actors and you
can see patterns that are hard to uncover. My lead researcher, my colleague Jenny Stromergali, and her team built these searches, these algorithms to look at messaging right now in paid ads on Facebook and Instagram, and that is what they found. A portion of these ads around the campaign involved in authentic influencers. These are groups that seem like they're unique and different, but they're really appear to just be shells of other groups. They're carrying the same often misleading videos
or texts. Some of them are spreading financial scams, and as social media platforms like Facebook seek to shut them down, there's another one under a slightly different name, just ready to pop up and carry on. In some cases, these could be misleading voters about policy, and often they are.
Sometimes they're just financial scams, and so they're taking advantage of people's interest in the presidential election in order to capture voluntarily their credit card information, their CBC code, and then they're getting bills for things they never thought they were authorized. And so you really is it is really voter beware because they're not just trying to manipulate your vote,
they're just trying to take your money too. And that's not the majority of ads, but it's impossible to tell the difference when you're just online and market information.
We only have about forty seconds left, but I'm wondering if you think that the social media company are doing enough.
The reason our research only looks at Facebook and Instagram is it's the only research we have access to. And my group is not an advocacy group. We don't lobby for anything. But I'll tell you, just as journalist, Congress needs to get much more involved in compelling these social media platforms, other ones to make this kind of information
available if they truly want to stop it. It's impossible to stop it on their own if they don't, if the public and journalists and researchers don't also have access to do this sort of tracking.
I feel like journalists know this. We have to really understand our sources and where things are coming from. That's kind of journalism one oh one. But even as you know, voters, citizens, especially in a social media world where we get so much of our news from social media, you have to be really smart about understanding exactly where the sources. And
that's true certainly when it comes to political campaign messaging. Margaret, great to reconnect, Really appreciate your time today, Margaret talav She is director of the Institute for Democracy, Journalism and Citizenship at Syracus University and of course, former senior White House correspondent here at Bloomberg News. Joining us from the RNC in Milwaukee.
Bromarco a journal Now about you? Let me drive?
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Don on Bloomberg Radio.
All right, everybody, just about eighteen minutes left in today's trading session on this Thursday, July eighteen. Charlie just breaking down the numbers. We're just coming off our loads of the session. But it's definitely more of a risk trade or risk off trade, I should say. If I look at the S and P five hundred though, if I pull it up on the Bloomberg, I've got yeah, most names lower three hundred and eighty one names to the downside. Tim one hundred and twenty gaining ground two unchained.
It's pretty amazing to see. Oh, thank you for turning on my microphone.
What I was saying.
It's pretty notable to see the broad based decline today, also hitting the rest of two thousand. As we just heard from Charlie. Let's see what Max Wasserman has to say about it. He's founder in senior portfolio manager at the Ria Miramar Capital. He joins us from Northbrook, Illinois. Max, how are you.
I'm doing well? Thank you? Were you guys?
We're doing pretty well. Hey, we're gonna get to your stock picks because you send us. Thanks for sending us some really interesting companies to talk about in a second. But I want to talk big picture first, because you're you argue that that the haves are doing pretty well in our country, but the have nots are not doing so well. Talk a little bit about that.
Well.
When I say the haves with ability is to trade down, what we're seeing is people who have their resources are trading down in their picks, so they still have the ability, but inflation, high cost real estate is affecting their choices more. People who don't have that ability, you know, they're really suffering more. I mean, if you only have ten dollars and inflation's higher, then it's a hitting you harder than someone who has one hundred dollars who has more flexibility.
So what we're seeing is that people in the lower to middle class are being hit by the inflation, the rising costs, and their ability to navigate through this expensive inflationary environment is much harder than someone who has much more discretionary income.
Always important to point out, and we have been saying, I feel like fairly regularly too, that we have to remember that our society, not everybody's in the stock market. A lot of people are not, and that Wall Street is not necessarily main street. Why are you, though, thinking that it's really important to make the point that you just did.
Well, I think what you just said.
I mean basically, a stock market, you know, is reflecting financial assets and everything that goes into that, you know, federal fund policy, fiscal policy. But if you look at people are living the day to day and they go to the grocery store, you know, higher inflation, higher cost of goods, you know, milk, gas, it affects their day to day and it makes tough choices where people again
who have the ability. So if you look at where people are shopping, you look at are they trading down, so you look at companies that can benefit from the change in consumer spending. So that's really the key thing. Who has the money and who doesn't have the money? And what we're still seeing, even in this environment of the halves, the stock market is extremely well off right now. And I say extremely because you're still looking at an
index about seventeen percent up. So people who have money in four oh one case, they're not feeling hurt even with any pullback in the market. They're feeling like they're doing well. But people who don't have money in the market, who have to go to the grocery store, who have to pump the gas, who have to they're feeling inflation a lot more tangibly interesting.
Yeah, I mean, it's not something. It's interesting that we're talking about this now when inflation has come down max then, right, you know, and you know because we were talking a lot about this over the last eighteen months. But the FED is I'm not going to say it's but every person we talk to pretty much says there's going to be a soft landing, and the FED chair is pretty confident that we will see inflation return to that target two percent. Why is this on your radar right now as we speak.
Well, I think what you're going to see is you're going to see a hiccup. You're always going to do it. There's no such thing as a pure smooth landing. It could be sparked by politics, it could be doing anything. But with these valuations levels at this high, at what we have right now at the S and P, the Nasdaq, anything that hiccups this market's going to pull it back. But the reason I'm bringing that up is because everybody knows it, and everybody's been concentrating their investments in the
top seven technology stocks. Like there's a big discrepancy between the S and P five hundred, which is cap weighted, and the equal weighted index of the S and P. And the general market itself has been struggling, but the market caps of these big large tech companies have been doing extremely well. So when you listen to companies reports, as I do, you listen to conference calls, you're seeing
the majority of companies are being hurt by inflation. They're being hurt by the cost of goods, and that reflects the consumer. But the high tech has been immune for now do you.
Need to be or should we be worried about the rotation? But what's interesting even today the you know, we've seen megacap tech pulling back, but we've also small caps were on or moved to the upside a rise, a little bit of a trend there, but we're seeing small caps financial shares also way down today, concerns about economic weakness.
Is there something though in the economic outlook that should make us start to be as investors a little bit more worried and concerned about some kind of economic downturn?
Well, I think there's two ways you look at from the ambassadors from people are relying on income like fixed income or money markets. Right now, they're getting about five percent on short term money markets. So if the cond to slow down in the FED cut interest rates, that's going to affect those people looking for or what I call safe money market returns of five percent, So that could affect them. Although a rotation in the market is perfectly healthy. When you look at these valuations of these
top tech they're thirty seven forty times earnings. When that money comes out, it's going back into companies that have been hit hard. You know, you know, you look at healthcare, you look at financials, you look consumer staples. These stocks have already reflected this slow down in the market, so when money comes into them, that creates opportunity. So if we look at risk reward in the market, we think you have better reward outside of technology than in the fact that your technology.
So let's go there. Hershey is one of the names that you like. It's up three percent year to date. Tell us why Hershey?
Have you ever had a more come on, Carol? Why Hershey?
How do you not like s'mortes?
Yeah?
I got.
In diseases beyond.
But we're dividend investors, so we're looking for companies that are miss priced playing a good dividend. Now it's paying about two point eight percent the average dividend increase, where five years been twelve percent, trained roughly twenty times earnings. Five year average is twenty three. And it's been hit by cocoa prices. So cocoa prices inflation's been hurting them. But their organic growth is still two to four percent.
So when I look at a company that's traded in a discounts, what's five year average underlining growth is still there. It's paying me a growing dividend. You know, the year high on the stop was roughly about two forty eight, So I'm not buying it near the top. I'm actually buying it near the lower half where it's been trading. I think there's more upsides, especially as inflation comes down. This company should benefit when it has organic growth already.
Okay, I want to get to one more. We only have about forty seconds left. But you like defense stocks, including General Dynamics up thirteen percent so far this year, around two hundred ninety three dollars a share.
Make your case for it.
Okay, look at eighty percent of it is defense and twenty percent is the Gulf Stream. So eighty percent is the Striker, the Abrams tanks and the nuclear subs. So if you look at China, you look at nuclear subs, you're looking at Eastern Europe, you're looking at the striker, looking at Abram tates the Middle East, then you got twenty percent of their business at golf Stream is coming online with the new G seven hundreds, which would really
help them benefit them. So we think it's a core defense company, and it has a cyclical kit with the airline industry with the G seven hundred eight hundred series, which would really propel their earnings.
All right, good to leave it on that note.
The stock, by the way, General Dynamics up about thirteen percent so far here in twenty twenty four. Max Wasserman, thank you so much, Founder and senior portfolio manager at the registered investment advisor mir Mark Capital. Joining us from Northbrook, Illinois.
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