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Hold on.
We got a Supreme Court ruling. The Supreme Court allows emergency abortions in Idaho for now. And this was the case that if the woman's life was not in danger but was compromised, would it be legal for a doctor to wind up performing that abortion. It looks like the Supreme Court allows emergency abortions in Idaho for now. June Grasso is still sitting with us in the studio, June, give me your take.
So this is a sort of kick the can down the road decision, because what they're saying is that the case was improvidently granted. So it's dismissed because improvnently granted, we call it a dig, and that means that we shouldn't have taken the case in the first place. And the justices were split three three three, So the three liberals thought that the federal law supersedes the Idaho state law. The three concurrences, which were the justices in the middle.
This really shows you the setup of the court. The justice in the middle, the Chief Justice, Barrett and Kavanaugh said we you know, we shouldn't go forward with this case. We should send it back. But they didn't. They didn't endorse any particular theory. They said, this case has changed since we got it, and the three in dissent Alito Thomas van Gorsich said, no, the state should have the right to say that you can't have abortions unless it's the mother's life is in danger.
So the setup was really weird.
Now it goes back to the Ninth Circuit and there's more litigation. This could come up again, and the issue will come up again, probably because Texas has a similar law, and the Fifth Circuit, which is so conservative, has not allowed, you know, has not allowed the federal law to supersede the state law. So Justice Skatanji Brown Jackson wrote, really, I thought compelling concurrence saying that you know, we're not
making decisions here, we're just kicking. She actually said, we're punting, yeah, punting. And meanwhile, the people like doctors and women don't know what the rules are because we're not making okay.
So that was my question.
So if I'm a doctor in Idaho and I have a woman that comes to me in the emergency room who is ill that I can help with an abortion, but she's not dying, can I do it or not?
Now you can do it. You couldn't do it yesterday, and you can do it today.
Now you can do it today and maybe not in a month.
And that was one of the things that the Justice Kagan wrote about that there has been so much, so many problems on the ground. Women have had to be flown out because doctors this is criminal penalties for doctors five years. So doctors were afraid to make the decision is this woman, you know, is there life in.
Jeopardy or not?
Or women had to wait until they went into like septic shike in order to get the trade.
Even Justice Barrett, who you know is uh is very you know, very conservative on the issue of abortion, talked about that what about sepsis and things so and what was funny in the in the in the arguments where the women on the court were so much in tune, which was with what was happening on the ground, And you know, here where you have Alito, Well, he's talking about the there's a there's two words in the statute unborn child, and if you put it in context, it
doesn't mean the feetus should But he his dissent is all about you know, it says unborn child. So it's it's more along the lines of what he wrote in the Dobbs decision.
That's all I'll say.
What's what's the next next thing from the courts on this abortion issue is? I mean, there are other cases because I mean this one as it kicked the can down the road. It's a punting type scenario. So it just it feels like we're just gonna be bouncing back and forth between the states and the federal And.
That's why anyone who thought that, you know, what.
Justice Kavanaugh wrote in the Dobbs decision was, Okay, we're done with this now. Abortion the issue is for the states and there are that's just too simple and it doesn't it doesn't work in real life. So here two years after that, we have you know, two cases having to dealing with this, and both of them, if you think about it, both of them kicked the can down the road. Because the myth of pristone case. They went off on the procedural issue of standing. So that's coming back.
To oh yeah, all right, Jude, we really appreciate it. Thank you so much. Jene Grasso, no doubt we'll be sitting here with me. Will pause at the beach. She'll be here with me tomorrow at ten am. I was just introducing Nathan Dean as we got this ruling. He's senior policy analyst over at Bloomberg Intelligence, and I was
asking Nathan about the presidential debate tonight. Who sits in the White House and who is in the Senate is critical for who is on the Supreme Court, for example, and these kind of decisions make it all the more important on who's going to be sitting in the White House. The expectation game is key. How have President Trump and President Biden set the expectations going into tonight at nine pm?
So I think every candidate it goes into a presidential debate, going back to the last fifteen years, always tries to underperform or at least announce in advance that they're going to, you know, keep expectations low, because then if they perform well, then it just seems that much greater. But there's really two things that we are telling our investors or clients to look at to is. The first is just the fear of the headline risk. You know, assuming that there
are policy debates tonight. At the debate, you know, if you see something like President Trump double down on his statement of a sixty percent tariff on all goods coming from China, well that's already been baked into the market, But anticipate a headline risk tomorrow. The other thing is is that any statement from either President by nor President Trump is saying I'm going to do this or I'm going to do that, always just remember to put how is this going to get through Washington?
Had on?
Is it going to be executive order, regulation, legislation? And a lot of times that statement just doesn't actually equate to the reality of the situation where they can say lots of things, but depending on how the Congress plays out and how the regulators play out, ultimately the impact could be much less.
What do you think investors should focus on the most in this debate here? Policy wise?
So there's two things. The first is the geopolitical aspect, because the power of the presidency is a lot more powerful when it comes to geopolitical, national security, and trade. So any statement from President Trump or President Biden on Ukraine, Taiwan, tariffs and so forth like that certainly should be paid attention to and then put in the back of your brain as we get closer to the election, because more
statements will come. The other is tax related because the Trump era at tax cuts from twenty seventeen expire for individuals at the end of twenty twenty five. So no matter who wins as president, the House in Waste Means Committee and the presidency is going to be focused on tax next year. Now it's going to be individual and I think for most individuals their tax rate is not going to go up. But if you are exposed to evs, like if you have investments in Rivian or Tesla for example,
that could come up under a Trump presidency. High net worth individuals could see higher taxes under a Biden presidency. So next year is definitely going to be about tax and somebody to pay attention to tonight.
Which is so interesting because a lot of the argument is like, oh, well, what they say on that campaign trail is not going to actually materialize, or it'll be sort of you know, muted or won't actually wind up happening, which makes it so hard for investors to understand how to price any of this. What's your best recommendation here?
So I view it as just an incremental step. So if you think of like the you know, if you think that President Trump or President Biden comes out at a high level and says like I want to do this, but over time, expectations lower, and so forth, you'll get additional information as they go through the campaign trail. Look, tonight's that Maate is not going to set the stone
in anything in terms of policy. But statement tonight, plus a statement tomorrow, plus a statement at the next debate, so forth, you'll begin to get a better picture of what ultimately could happen. So I'm not gonna say that you know you're gonna see massive headlines tomorrow saying the markets are moving based off of this. But you know,
we've told a lot of our clients. If you have an associate that wants to stay up late tonight, have the association to take a look at it, watch this, and then send you a report in the morning.
All right, I'll get you can send me my report. You've got my email address because I'm not understating I'm watching this. I don't think the Yankees are on anyway.
Nathan Dean off tomorrow, you technically can.
You're right, You're hey, thank you for pointing that I want not have to get up at four twenty. Okay, very good, Nathan Dean Senior Polo Sanos for Bloomberg Intelligence. He's down there in DC for better or worse. That's where he's located here. So are you gonna watch the debate tonight?
Yes?
No, I mean like I don't want to, but like I want to, and I feel like I have to.
Although you know, with the ground rules, no audience, no the moot and MIC's, it's not gonna be as much drama as it could be, which is why I think some people watch it just for the drama.
Maybe, But I am actually interested, you know, if any kind of policy is actually discussed, like if it's gonna be barbs thrown back and.
Forth, I can tell you who the loser is going to be intelligent, discourse.
Intelligent, but like, but you know, I don't know. Yes, I'll probably turn it on, okay until we have family reading time.
At around nine thirty.
Definitely reading.
I'll give it half an hour. I'll give it half an hour, and then we'll circle back before that family reading.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa play Bloomberg eleven thirty.
Alex Deal Paul Sweeney live here in our Bloomberg Interactive Brokers studio, or streaming live on YouTube as well.
So heent over to YouTube dot.
Com and search Bloomberg Podcast. I'll get a new guy in here today, a new guy. We'll see how he does.
Jake Silverman, Jordans, Sorry, Jake, it's going to be fine.
It was an analyst Bloomberg Intelligence. I did not hire them, so I can't vouch for him. Hire everybody else. He comes to the technology Stace. We got a great, great technology team all around the world. Everywhere you need tech people to be Silicon Valley, Asia, New York, we got them as well. Micron Technologies, the largest US maker of computer memory chips is John Talker's just reporting dropped after it's forecast disappointed investors.
Uh so we got an issue there about this chip maker.
Jake, thanks so much for joining us here in studio. Give us the Micron technology story. How were their earnings? Why is this TOC trading word is?
Yeah, thanks so much for having me on. Yeah. So three Q was a beat, but the stocks up.
Over sixty percent or prior to earnings, was up over sixty percent a year today. So coming into the quarter, expectations were fairly high. And so when we've seen a
beaten raise beaten rays. As pricing has improved, supply has been pretty tight intentionally by all of the memory suppliers over the last year or so because there was a severe demand reduction back in twenty twenty three, and now as we're looking into twenty twenty four, supply is tight, demand has stabilized now is beginning to recover quarter to quarter. So investors, the market was really expecting another beaten Rays.
I think coming into three Q with the outlook being related to four Q so being a sort of inline guide at least on revenue, I think was pretty disappointing. And you also have the AI aspect, which I think adds to a little bit of that multiple expansion that we're seeing, and so I think that that plays a part into those expectations.
So well, if we just separate for a second, if we can, like you have the AI growth story, which still was delivering on all cylinders from Micron, and then there's the actual boring stuff like the things that go into your phone and your computer and things like that. That market has been has troughed. But the pickup is when the question is do we learn anything about when we might see a real recovery in that, because my front still needs.
That, right.
Yeah, So that was actually what was more important about the tight supply story from twenty twenty three up until now and then continuing through the rest of this year
and probably in the next year as well. The AI part of the story was pretty nascent up until more recently, and we're still only now starting to see AI revenue actually inflect high bandwidth memory revenue for HBM THREEE, their product that's being sold into in Nvidia's H two hundred GPU, that's only that was only about a little more than one hundred million this quarter, So there's other AI products
as well, but yeah, we're starting to see demand. I think stabilizing for smartphones, PCs, traditional servers, and we're expecting some growth throughout the rest of this year, primarily on
the back of seasonal demand. So yeah, I think that those are definitely areas that investors are certainly going to be looking for, and if that demand doesn't necessarily materialize, then the pricing might not increase at the magnitude at which the market is expecting, which would impact revenue and margin growth throughout the rest.
I don't know a lot about the semiconductor business, and I want to keep it that way, But what I do know is it's a cyclical business. You got to get those cycles right.
Does AI change the cyclicality? Do you think?
Do we know enough to say that maybe it don't make it less cyclical or maybe more so.
Yeah, it's a very good question. It's difficult to say right now. I think because this AI build out for AI infrastructure, it's so early, so we don't really know what that cycle will look like. But this is certainly a secular driver in the near term. AI infrastructure buildouts
from the hyperscalers are continuing. There's potentially some upward bias to those estimates and those expenditures this year, and so as long as that continues, that should have like a multifold impact on Micron because there's another aspect, which is, first of all, there's a couple aspects. First of all, HBM is margin acreative, and some of those other products that are related to AI are also margin acreative, so talking about high capacity DRAM module, solid state drives, but
HBM more so. But also HBM takes up additional wafer capacity.
High band with memory, yes.
High bandwid memory, sorry HBM, but that also takes up way it.
Took me like ten minutes. That will remember that, so you don't want to say nice, yes.
Sorry, I go in and out of h memory.
No, thank you.
So but also it takes up additional wafer capacity for high bandwidth memory, so about three times as much. So that actually, as you shift capacity away from standard memory towards HBM, that has a specific impact on the actual supply allocation. So as that demand continues to increase, that
actually takes supply away from traditional markets as well. So ultimately you have a two fold impact where you have margin expansion, but you also have pricing probably increasing even if demand is somewhat stable because the supply comes offline from traditional end markets and goes towards AI well.
Also to the cyclical point too. As long as AI chips keep getting better and better with each iteration, doesn't that take away some of the near term cyclicality, Like because by the time you get your old chip, then the new chip is like that much more awesome, so you have to go buy it, and at some point that runs out.
So I just yeah, it's difficult to determine actually what the magnitude of the cyclicality will be up or down. I think what this is really going to do right now, at least in the near term, will extend the current up cycle. So the peak is difficult to determine when that will happen. I mean, you can always guess. I don't think people are very accurate at guessing peaks and
troughs at least multiple quarters out. But you know, in this case, as long as there's those secular demand drivers, we think the cycle can continue its upward trajectory.
Jake, great stuff. Yeah, we can bring him back right.
Oh yeah, he was great.
He was really good.
Yeah.
Yeah, another tech voice, which we desperately need because we can't.
Keep going back from man deep at on a rock.
I mean, you know, boring, they have other jobs.
Thank you so much, all right, Jake Silverman semi conduct around.
Also Bloomberg Intelligence joining us here on our Bloomberg Interactive brokers to you talking about the chip business.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Affo, Cardplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Are joining us sound Kate Richards, founder and CEO of Warwick Investment Group. So, Warwick Investment is the largest PE firm in the US that's founded and led by a woman founder and it focuses on real assets like natural resources in real estate. I've known Kate for a long while, it feels, but I haven't seen you in forever in a day.
How are you great? Thanks for having me.
I think that the fact that I haven't seen you is probably sort of reflective of what most people haven't seen, which is commodities in their portfolio over the past decade.
Oh way to turn that in.
I like this.
So what we're seeing in the trend is a people want to own commodities in their portfolio, but like not all commodities, but be very specific. But we almos seen a ton of m and a big guys with the medium guys, medium guys, with medium guys, small guys and small guys. How do you think this winds up playing out? And what are the opportunities set for you?
I think two things.
So number one, we're probably at the beginning of a new commodity price super cycle. And the first one was two thousand to twenty fifteen driven by urbanization and industrialization in China.
This one's driven by the energy transition.
And what's ironic is that it's obviously increasing demand for battery metals like nickel, lithium, copper, maybe cobalt. And secondly that it's actually increasing demand for hydrocarbons because the energy transition is hydro carbon intensive. And if you need any evidence of that, you can look at what happened with China last year, the largest ev market in the world,
where hydrocarbon demand actually went up. And so the cautionary tale is looking at gasoline demand trends, which in China went down last year, and equating that to price trajectory for oil or demand for oil, So I think that's really something that's important. It's a subtlety, but whatever's happening with EV's and what what ever's happening with gasoline trends? Because of v adoption, you can't relate to the price
of oil or demand for oil. But even that being said, oil and gasoline where at all time highs in terms of demand last year.
Well, Alex as you know, is the energy expert, I am not.
What's your view of this energy transition because it seems like just if I just think about evs to kind of take it a tick down a little bit over the last couple of years.
How do you guys view that?
Well, I think that you know, we deal in communities that don't want to talk about energy transition at all, and then on the mining side of our life, we deal in communities that will not talk about hydrocarbons as an ongoing source of energy in the world, and both of those are unrealistic.
We talk about energy as kaleidoscopic, and.
You will have certain jurisdictions like the East Coast, the West coast of the US, the OECD, certainly Europe that will skew more renewable in terms of power and more ev in terms of vehicles, and then you will have
groups that do not. And I think the problem is that in sitting in the OECD and reading all of the kind of typical like New York Times, Wall Street Journal, FT economists, maybe Bloomberg Axios, you sort of think like, oh, the energy transition is happening, and conventional vehicles and conventional.
Fuels are going out of business.
The problem is that if we look at the last twenty two years, the OECD, which is about four in a million people, has taken demand for hidercarbons down two million barrels a day, and the nano ACD has taken hydercarbon demand up twenty five million barrels a day.
So it's just a law of large numbers.
And the fact is that if you wanted to say no traditional energy, that's unrealistic.
We don't have enough copper in the world to supply that.
But if you wanted to say no renewables, we don't have enough oil or energy to supply the world. So it has to be kaleidoscopic. And it's really in all of the above energy solution, including nuclear, which last year came into the conversation as carbon.
Free, kaleidoscopic. I'm totally stealing this one.
Yeah, so Kate. When we have this interest though in the energy space among energy companies, does that make exit strategies more appealing for you?
Like are you buying more? Are you selling more? Right now?
Because for a while it felt like assets in private equity when related to energy was stuck.
It was going nowhere fast.
So in twenty eighteen, we had a number of oiling gas companies one could probably argue too many.
In the US.
Sixty percent of the oiling gas companies that existed in twenty eighteen don't exist today because of M and A.
So there has been massive consolidation in this space. And we're probably not going.
Back to the seventies where it was like the seven Sisters, you know, seven big companies, but we might be going back to fifteen companies. So definitely there is consolidation. And that consolidation was localized in the Permian basin in West Texas until this year. And I would say now the Permian's pretty consolidated, and now it's going to other basins in the US. So this is sort of a cross base in US consolidation story. That's number one. Number two,
it's definitely cheaper to buy assets. So twenty you know, fourteen fifteen, we would pay seven to ten times EBITDA. We're buying assets now for one to three times ebit.
Do it doesn't mean that you're sorry. Sorry, doesn't mean that you're selling assets for that too, though.
It does not mean that because in a lot of cases, people need to pay for inventory because the reason, like to your point, why are the midcaps buying small caps or why are the small.
Caps trying to buy?
Like why is this game of pac man happening where it's either get consolidated or consolidate?
It's because people are short inventory.
So in your private portfolio, if you have inventory, or if you're a public company and inventory, you are attractive and it's it's a game to get bigger before.
All of the chips are sort of held by big public companies.
You mentioned nuclear, What is a a what is a reasonable nuclear policy from your perspective, because I'm hearing more about the technology changing now we don't have to build these monster reactors, the little ones.
Yeah, that seems reason to me.
So I actually think there's a really interesting fight that's sort of like brewing between big tech and LNG exporters frankly, because big tech knows that they are massive power consumers and they need power quickly, especially if you're depositing that.
It's like this AI fight nationally, that's a national interest.
So if you talk to big tech, they'll say, you know, AI ushers in a nuclear renaissance, and it's not that hard because we have these small modular nuclear reactors.
This is an existing technology. It's on submarines all over the world.
The fact is you'll probably see some of that, but you will also probably see some of it go.
To natural gas and some more go to renewables.
I think that big tech is probably going to have to embrace many like a kaleidoscopic power outlets.
We haven't put any nuclear plants in operation like like right right, Yeah, So to say I'm going to power this data center with a small nuclear plant, that is a huge deal.
Yeah.
You know.
There's also probably not the uranium to power a nuclear renaissance right now, particularly with the House and Senate now restricting twenty percent of the uranium market to be imported into the US. And that matters because the US is the largest consumer of uranium and we are now like as of twenty twenty seven or twenty two eight, not allowed to buy uranium from Kazakhstanta, Russia.
So yeah, but to your point, Paul, they are considering restarting a nuclear plant that was closed that's quite big. And the SMRs, these small modular reactors, they're just the economics are so wide, like you just can't make the economics work yet. Okay, But I like that you brought the uranium factor because what we are seeing is oil companies going to mining, particularly with lithium.
And I'm wondering if like there's a.
Way that you are thinking about your oil and your like real play, like the hard asset plays, Like is there a play?
Are there plays for you there?
Yeah?
I think well, for definitely, so oil and gas companies are actively looking at lithium because we extract lithium when we bring water out of the ground in saltwater brine across the US, So that is definitely a play. The other thing is that a lot of the mining companies don't know how to lease acreage to do mind expansion, and that's something that oil and gas companies.
Are very good at.
So I actually think you're seeing this like merger of the natural resources Brethren in a lot of ways, and the similarities are fascinating because like mining and oil and gas globally have both decreased capex forty percent since the twenty thirteen twenty fourteen timeframe, and mining and oil and gas companies also are only spending forty percent of cash flow on capex today and they're both essential for the
energy transition. So I think you're probably going to start to see a lot more intersection of conversation around oil and gas and mining companies, just as these natural resources businesses that haven't really been super relevant for the past ten years but are increasingly very relevant.
Cool, right, super cool?
Good.
Kate appreciate it.
So don't be a stranger.
You don't have to be here to do this, so we can definitely chat remotely as well. Kate Richard, founder and CEO of Warwick Investment Group. It's sort of how do you make money in the energy transition and how that's going to wind up playing out and where the supply shortfall is going to be. Paul, What's so interesting as we talk about oil reduction use, particularly in developed nations, it doesn't mean it's going to zero, and I feel like that's a reset, a little bit like it can decline,
but we're still using it. It's not like we're going in nothing.
Okay, I mean, it's just it's gonna be a kaleidoscopic solution.
I'm never gonna be able to say that word again. Kaleidoscopic, Tucker, did you look it up? Did you have time?
Sounds too much like kolonoscopy.
Colona, Scott Colin, Now you're messing me up. I'm never gonna it does not sound like kolonoscopy.
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Walgreens Boots disappointing results stock down twenty three percent here fifty two week low the LOESSNS nineteen ninety seven, So a big move there. Let's bring a Jonathan Palmery follows all this stuff for Bloomberg Intelligence. Jonathan, what's going on with our our friends at Walgreens Boots?
Well, I think you can see from the stock reaction nothing good is happening these days. I mean, the CEO came in last year and there was a little bit of a halo effect on his hiring. I think that halo has dissipated and investors were expecting more sooner and it looks like, you know, this is structurally going to be handicapped for at least another year. I mean, they talked about seventy five cents of headwinds going into their
fiscal twenty twenty five. I mean, if you rewind a couple years ago, before the pandemic, this was a company that was earning six dollars a share. Now it looks like next year it's going to be more like two dollars a share. So investors are frustrated with waiting for the turnaround, and it looks like it's even extended further in the future here.
So what part of this is a Walgreen issue versus a macro issue?
Well, a little bit of both. I mean, they were very particular about calling out consumer weakness as one of the drivers for the downside this year, but really it's I think more of a structural issue in the pharmacy space. They've been being pressured by insurers and payers for a number of years and that doesn't to dissipate, and so they're thinking they and others like CBS are thinking about
new models for pharmacy reimbursement. But you know, they're just in a between a rock and a hard place here.
Jonathan, how much of this twenty three percent decline in Walgreens is a company specific issue or more of an industry issue.
I think it's more a company specific here versus industry wide. I mean, CBS has been doing okay in their pharmacy. They face the same structural challenges around reimbursement. You know what's going on in retail here. It's just you know, they glossed over some of those woes during the pandemic. They had a big sales leaseback program with their stores, which has now come to an end, and so they've
been looking for ways to grow the company. You know, they bought Village End a couple of years ago, and it sounds like now they don't really want to be involved with that that asset anymore, and so they undertook a strategic review. I think investors were anticipating that maybe they would sell their boots assets abroad, they would maybe do some sort of new deal with Village End and
none of that's come to pass. So the weight is on for the turnaround and there's no real inflection point in sight here.
Okay, So if that's the case, I mean, I'm going to ask you how local we go, But like, what is then a reasonable valuation for a stock like Walgreens where we don't actually know what the trough looks like.
Yeah, I mean I think they're getting to the trough in terms of EPs and that multiple. You know, I think you can look back and single digit multiples don't usually stick around for that long, particularly with where the S and P is trading. So, you know, from a valuation perspective and an earnings trough perspective, I think we're close to the bottom here. You know, maybe not the
absolute bottom. There might be a little bit more to go, but it's it's hard for me to envision given what they're doing around these store closures, around monetizing some of these assets that they haven't you know, kind of gotten to the worst of their earnings power here.
All right, Jonathan, thank you so much.
We appreciate that getting the latest on the Walgreens Boots situation stock down twenty three percent.
Jonathan Palmer, he covers.
All that healthcare stuff and all the pharmacies and all that great stuff for Bloomberg Intelligence. Appreciate getting a couple of minutes of his time.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play. Bloomberg eleven thirty.
Alex Steel and Paul Sweeney were live here in our Bloomberg and Director Berger's studio right in midtown Manhattan.
We're also streaming live on that internet thing. I think.
You go to YouTube dot com and search Bloomberg Podcast, and that's where you will find us. Joining us right now is the Pride of Southwestern Virginia by way of London, England. Tim Craik, head Global Chief Content Officer for Bloomberg Intelligence, joining us from zoom from our global London headquarters, Queen Victoria Street in London, extraordinary building right in the city of London. Jim, thanks so much for joining us here.
I know you guys at BI you put out your research here on some ten companies we need to watch periodically throughout the year. Here, we've got one you guys recently published about the companies.
To watch in three Q.
Give us a couple of names that we should be really taking a look at here as we approach third quarter earnings.
Yeah, absolutely so. I'll give you a smidge of a backdrop on this, if that's okay to put it into context. These are all part of what we call our focus ideas, which is a list of companies that we have a strong point of view on fundamentally that we think is different from what the market currently believes, and there's catalysts to head to hopefully turn the market towards our view. The thing that sets these ten off is that they
all have catalysts coming up in the third quarter. A lot the ten companies to watch for this quarter, and I guess the first group that you have to start, it seems like with any conversation these days is AI. And there's certainly a couple of AI related ideas here. Even though Nvidia is not on the list. Corning, Oh, interesting fiber optic cable. You can't have AI going through all of these data centers if you can't connect the
data centers together. And interestingly with fiber optic cable, there was actually a down cycle over the course of the past year where there was excess inventory and this, that, and the other with some telco build related to five G. That sort of has worked its way through, and we expect data center build out to really drive demand for fiber optic cables going forward allah the potential for positive surprise. There's another one called THHK. My guess is you've never
heard of this one. It's a machinery company out of Japan, and they have a fifty percent share in something called, now I'm going to make sure I pronounce it correctly, linear motion guide rails. And you're saying, what, Yeah, if if you think about how you picture semiconductors being manufactured, there's the equipment that buzzes across and etches these patterns into silicon. The rails that they run on are these things, and they have a fifty percent share.
So it's it's like the things.
Yeah, so you know these are things that you can't do AI unless you have these things. So we're looking for those types of opportunities you could you could draw a little bit of a further sort of second or third degree connection with Sandvik. This is another machinery company based in Scandinavia. Fifty percent of their business is mining related. And you're saying, what, Well, the current hot topics these days in mining, among others is copper, and we're seeing
a capex cycle in copper. You can't dig and mine copper without Sandi's stuff. So it's another adjunct play on AI. So those are a couple of things.
I like this.
I mean that that's I like the way you guys are thinking about this, you know, kind of by the you know, kind of the tools of AI as supposed to be, you know, kind of the direct plays here.
Another one is I think about.
The Olympics in Paris this summer, and I think it's gonna be just just a monster, monster event fingers crossed everything goes well, But that's good for all the companies associated with the Olympics. You've got one here, Nike.
Talk to us about that.
Yeah, So Nike is interesting on a couple of fronts. You've got not only the Olympics coming up, but if you're at all into what they call football. Here in London we would call soccer. Obviously, the Euros are going on right now, which is a massive England Still in Euros they are, but they drew two of their first three matches, so you know they make it into the
second round, but we'll see. But Nike not only has that to look forward to, but more importantly, they've got new product that's going to be displayed there and promoted there with all the advertisement and visibility that happens running shoes like the new pegasusts. There's other products as well. They've lacked two They've lagged for two years in innovation and Puma and Adidas have taken share. You might remember we've talked about Adidas before where we had a focus
idea that Puna mcgoyle was behind. She since closed that shifted gears towards Nike because she sees market share recovery with Nike because they finally got on board with some new innovation. So interesting story there, And I would say similarly, you could kind of throw into the same bucket. Galaxy, which is one of the big casino operators in Macau
who think about innovation and new product. They opened a big new phase of their Co Tai based resort and they're starting to gain market share and summer is the big season for travel China. Travel is back up, and there's a big story there that again revolves around new product innovation, right time, right place.
So what do you also have on the list? Which is interesting is our age?
This is restoration hardware? Is that what this is?
Yes?
Okay, because the corner wasn't that good, right, and like their stuff is so expensive, but in a downturn that feels a little hard to swallow.
A lot discount. You can't get a sale.
Okay, even the outlets store at Industry City, which is they've outlet stores in Brooklyn, and stuff is just insanely expensive for something that's super boring. I've purchased some of their stuff, sure, but you get something for good quality that's not going to be like eight grand for like a table. I don't know.
Well, so you're playing, you're playing into the idea here, Alex and I am going to date myself. I remember being an equity research salesperson back at Goldman on the date and we were doing the I p O for restoration hardware. I remember traveling around with management but that's another story. RH is one of our cautious ideas, along with HCA, the big US hospital company, as well as Nintendo the gaming software electronics company. We do have negative
focus ideas as well as positive focus ideas. And the thing with r H management guidance and still consensus is guiding for recovery from what you're just talking about. But now, withstanding the resilient US consumer, we still expect the recovery that's anticipated disappoint you know, French sales last year. We're disappointing, notwithstanding the consumer, and we think a recovery is going to be delayed and expectations are going to be cut again. So that's that one.
That's cautious side, right, Yeah, Okay.
Yes, indeed I would throw out similarly in terms of we think overly optimistic expectations. And Nintendo obviously totally different story, but we all know game Boy and Switch and things like that. Boy yeah yeah, going back in the day. But you know their their current console is the Switch and there is a new console coming out called Switch too. And Paul, you know from your background these console stories are big deals, whether it be for Nintendo or Microsoft
or what have you. This one is sort of like waiting for good o. They we thought we we we've been thinking they were going to announce a date, but it still is to come, and we think it causes room for disappointment relative to work and census expectations are still setting.
All right, very good as always.
You know, so Tim's an American, but he has adapted to this whole English bank holiday thing.
You know, they have a lot of bank holidays in England.
So they get the days off for seemingly no reason, and then the whole month of August forget about it.
Yeah.
So again Tim's a good boy from southwestern Virginia, but he's all in on this whole European vacation thing.
Tim Craighead, thanks for joining us.
Tim Craighead, Global Chief Content Officer, Bloomberg Intelligence, joining us from our Queen Victoria Street offices in London.
So good stuff.
There's some good ideas coming out of BI kind of geared around maybe where they think the street isn't in terms of viewing some of these names.
So my daughter wants a Nintendo switch, Like do we like this? Like I know we don't like this, right, I stay away.
From video right as as long as you can. Yeah, we did it as long as we could, but we we kind of caved.
You did caave.
Although that's good now because my to I get two boys who communicate primarily via the games and playing games together, and so yeah, I talked to them, my brother Jordan yesday, We're playing games for an.
Hour, and I was like, okay, so that kind of counts.
Yeah, I'll give it a little bit of there soon. Now it is stressful.
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