Speaker 1: This is Bloomberg Business Week. I'm Carole Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanibek. We're here every day bringing
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Speaker 1: You can also listen to our radio show at two
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Speaker 1: YouTube search Bloomberg Global News. Let's get to the remarks
Speaker 1: in the current issue of Bloomberg Business Week magazine coming out.
Speaker 1: It's a double issue. It's about how America has a
Speaker 1: housing mess and President Biden wants to fix it. Let's
Speaker 1: get into it. The story by Bloomberg News Finance reporter
Speaker 1: no ble Hire with us in Seattle along with Bloomberg
Speaker 1: Business Week at her Joe Webber in our interactive broker
Speaker 1: studio in New York. It is so true when you
Speaker 1: think of housing policy here in the United States, Joel.
Speaker 1: It's it's broken and has been for a while. Um,
Speaker 1: and Noah did a really amazing job of writing a
Speaker 1: story that UM, I think really uh helps you make
Speaker 1: sense of it and where it's been and still yet
Speaker 1: maybe maybe how it might change a little bit. Um.
Speaker 1: But you know, part of it is just rooted in, UM.
Speaker 1: You know, the fact that we've had a housing market
Speaker 1: that is on has been on fire. Uh. Inventory is
Speaker 1: incredibly low, Affordable housing is nonexistent in a lot of places.
Speaker 1: And that's the thing that looks like a growing mess
Speaker 1: and a growing problem. So so UM, no uh uh
Speaker 1: talk to us about what a solution might look like. Yeah, Well,
Speaker 1: I don't think it's I don't think it's uh necessarily
Speaker 1: going to be just one solution. Um. But part of
Speaker 1: why I wanted to write this article is to try
Speaker 1: and make sense, um of where we've been and some
Speaker 1: of these proposals that the Biden administration is putting forward
Speaker 1: to fix it. Um. First and foremost, uh, what the
Speaker 1: administration is trying to do um with more than fifty
Speaker 1: billion dollars that Congress has already allocated, is it fixed
Speaker 1: the immediate problem, which is just the enormous amount of
Speaker 1: financial strain um that the pandemic has caused. Mostly for renters,
Speaker 1: but but also for some homeowners. So there's there's more
Speaker 1: than fifty billion dollars out there. They're trying to to
Speaker 1: get out to people, UM to help them cover back
Speaker 1: rent racked up during the pandemic. UM and if they've
Speaker 1: missed mortgage payments, to do that as well. So that's
Speaker 1: part one. But UM, what's really interesting and what a
Speaker 1: lot of housing policy experts UM I talked with I
Speaker 1: want to discuss was was what's in the Infrastructure Plan
Speaker 1: and the American Families Plan, which is with the Biden administration,
Speaker 1: UM has has tried it out to you know, help
Speaker 1: the country and their words build back better UM and
Speaker 1: embedded in there are a lot of strategies to fix
Speaker 1: different parts of the housing system. So just for instance, UM,
Speaker 1: one of them, UH, which we talk about in the
Speaker 1: story is a surge in UH the Low Income Housing
Speaker 1: tax credit. These are tax credits at the federal government.
Speaker 1: What's out there. They're used by affordable housing developers and
Speaker 1: they've really been an engine for affordable housing production in
Speaker 1: this country for a long time. Hey, no, UH, to
Speaker 1: what extent does the US government actually have power? The
Speaker 1: federal government have power to do this? If if there
Speaker 1: are zoning laws and regulations and is you write in
Speaker 1: your story, um, expanding the supply of homes in some
Speaker 1: of these places we require taking on the nimbies, you know,
Speaker 1: not in my backyard. Yeah, that's that's certainly a huge issue. Um.
Speaker 1: And uh, it's it's something that you've seen, uh in
Speaker 1: places like Minneapolis, where the whole state of Oregon they've
Speaker 1: they've passed laws and were made zoning changes in the
Speaker 1: last couple of years to allow for more housing development.
Speaker 1: But you you hit the nail on the head. I mean,
Speaker 1: the federal government can own do so much here. A
Speaker 1: lot of what's holding back housing production in this country,
Speaker 1: especially in really prosperous places, it's just the fact that
Speaker 1: you can't build there or I mean, we make it
Speaker 1: so much harder for people to add more density and
Speaker 1: more housing. And so the Biden administration's planned there, um,
Speaker 1: which has been criticized is too timid, is to give
Speaker 1: municipalities grants to help them rezone and clear away some
Speaker 1: of these barriers. Um. But they're not you know, at
Speaker 1: some economists point out really, uh, you know, they're giving
Speaker 1: a carrot, but there's not so much of a stick.
Speaker 1: Involved here. Um, some folks pointed out to me that,
Speaker 1: you know, a more effective way to deal with this
Speaker 1: would basically be the high transportation dollars from the federal government. Um,
Speaker 1: you know, getting those to making these sorts of zoning reforms.
Speaker 1: One of the things I thought was interesting Noah in
Speaker 1: the story that talked about, you know, right now the
Speaker 1: mortgage market, you can get government back loans to buy
Speaker 1: homes and parts of South Florida that are already experiencing
Speaker 1: seasonal flooding because of rising sea levels. I know the
Speaker 1: magazine has done stories about this. We're in some communities
Speaker 1: the local governments are actually buying up the homes and
Speaker 1: taking them off the market because we know it's not
Speaker 1: a good home to own. I mean, there are just
Speaker 1: parts of the existing infrastructure and housing law and policy
Speaker 1: that just doesn't make sense anymore. Yeah, And I think
Speaker 1: that's a that's that's a really good point. It's sort
Speaker 1: of underscores how some things we do in certain parts
Speaker 1: of our government, uh promote a certain kind of activity,
Speaker 1: but while at the same time we're trying to like,
Speaker 1: uh maybe not develop in these areas that are going
Speaker 1: to be prone to climate change and and that I
Speaker 1: think is really um the very hard work that has
Speaker 1: to be done, which is how do you align all
Speaker 1: of these policies, be they at the federal level of
Speaker 1: the state level or the local level, local level, so
Speaker 1: they were actually working towards um goals, you know, whether
Speaker 1: they be around climate change or racial equity or affordability.
Speaker 1: And it's it's just we have this very complex system
Speaker 1: that's been built up over decades in decades, and just
Speaker 1: making sense of that is going to be a challenge,
Speaker 1: right especially in politics who are also involved in all
Speaker 1: of this good stuff. Nobu Hire Finance Report at Bloomberg News.
Speaker 1: These are the remarks in the new issue of Bloomberg
Speaker 1: Business Week magazine. Till Webb, thank you so much. This
Speaker 1: is Bloomberg Business Week with Carol Masser and Bloomberg Quick
Speaker 1: Takes Tim Stinovic on Bloomberg Radio. All right, Tim, safe
Speaker 1: to say it's one of the more telegraphed de yields
Speaker 1: in a while. And today we got confirmation Amazon buying
Speaker 1: the MGM Movie Company eight point forty five billion dollars.
Speaker 1: Really a bet that a nearly central old Hollywood icon
Speaker 1: can feed an insationable demand for streaming content. Feed me,
Speaker 1: feed me. It's all about that machine exactly. We've got
Speaker 1: a great pair to talk about the really the two
Speaker 1: sides of this story, the media and content side, as
Speaker 1: well as what this move means for Amazon. Kitaathan is
Speaker 1: technology and media analyst re Bloomberg Intelligence, our in house
Speaker 1: research team. She's on the phone in New Jersey. Spencer.
Speaker 1: Soaper is Limberg, news technology and e commerce reporter on
Speaker 1: the phone in Seattle. So let's start with you, Gita.
Speaker 1: We knew this was coming. So, um, I don't know
Speaker 1: what's the key takeaways? How do we need to as
Speaker 1: investors maybe look at what this means and what what
Speaker 1: else might be out there and what might be to come. Yeah,
Speaker 1: I think Carol of Virsual, Caroline Tim, thank you so
Speaker 1: much for having me. And I just want to say that, um,
Speaker 1: you know, this is really part of this whole vast
Speaker 1: reshaping of the media business, of the media landscape. The
Speaker 1: big are obviously looking to compete by getting bigger. We
Speaker 1: had the Disney Fox acquisition a few years ago, just
Speaker 1: a couple of weeks ago, we had Discovery with Warner
Speaker 1: and now you have Amazon and MGM and and it's
Speaker 1: really I think it really speaks to uh, you know
Speaker 1: the power of content and how everybody is kind of
Speaker 1: looking to consolidate their position in the streaming space. Talking
Speaker 1: about what this means for the other companies, I think, uh,
Speaker 1: it really kind of now separates the halves and the half.
Speaker 1: Not that you will, so obviously the independent studios, a
Speaker 1: few of them being you know, the Lions Gaze of
Speaker 1: the world, probably even a Sony. Obviously they might see
Speaker 1: their valuations go up as it's kind of, I think,
Speaker 1: almost to make or a great moment now in media
Speaker 1: when the other remaining players have to really kind of
Speaker 1: take take a step back, look where they are positioned
Speaker 1: and if they really have enough firepower to last the
Speaker 1: streaming shake out, if you will, they Spencer Souper, come
Speaker 1: on in here and give us the Amazon perspective, because
Speaker 1: for for years, when I've looked at what Amazon has
Speaker 1: done with Amazon Prime Instant Video or Amazon Prime Video
Speaker 1: or whatever iteration of it is now, I've always looked
Speaker 1: at it through the lens of of Amazon Prime and
Speaker 1: and sweetening the deal for that year Amazon Prime subscription,
Speaker 1: because the research has shown that people who are Prime
Speaker 1: members they buy more, they buy more expensive items, and
Speaker 1: they shot more frequently. Is it to the point though,
Speaker 1: where you have to look at Amazon's video ambitions beyond
Speaker 1: Amazon Prime. Uh, that's what they're trying. And there are
Speaker 1: people who are subscribing for the standalone video sub scription.
Speaker 1: So that's part of the play is Amazon needs to
Speaker 1: offer more to unbundle. But I think the big thing
Speaker 1: here with Amazon and this acquisition is Amazon traditionally tries
Speaker 1: to build it on its own. It's spent a lot
Speaker 1: of time and you know, several years and in a
Speaker 1: boatload of money in Hollywood trying to create its own
Speaker 1: hits and and really doesn't have any. And so they
Speaker 1: finally had to capitulate and say, you know what, we
Speaker 1: gotta buy James Bond, we gotta buy Rocky Balboa. Uh
Speaker 1: and kind of, you know, use our purse to get
Speaker 1: into this business. That that we've been kind of you know,
Speaker 1: trying to get in on our own without without a
Speaker 1: big hit to show for it. It was really about
Speaker 1: buying legally Blonde. Come on, Spencer, we know interesting how
Speaker 1: they highlighted that film in the press release? Who what not?
Speaker 1: L come on? Well two questions real quickly. I mean, Spencer,
Speaker 1: go ahead. I was gonna say it was eight billion
Speaker 1: for RoboCop and then I think half a million for
Speaker 1: the rest of it. Alright, alright, but but two questions
Speaker 1: I have. First of all, um, well, let me let
Speaker 1: me bring you back eight almost eight and a half
Speaker 1: billion dollars. Did they pay too much or they're going
Speaker 1: to get you know, a lot for that amount of money. Um, So,
Speaker 1: I don't necessarily think they paid too much. So we
Speaker 1: ran some numbers. It's a twenty five x multipost for MGM.
Speaker 1: That's pretty much in line with what we've seen in
Speaker 1: the past. So just a few years ago, we had
Speaker 1: Comcast Coops go out and buy Dreamwork for almost thirty
Speaker 1: five times either it to you kind of look at
Speaker 1: some of those deals, not too bad. Then again you
Speaker 1: had Comcasts and Apple who came in and take took
Speaker 1: a look at MGM and said they really didn't think
Speaker 1: it was worth more than six billion dollars. So so
Speaker 1: from that context, yes, I think Amazon paid up a
Speaker 1: little bit, but I think they're they're they're getting the
Speaker 1: bank for their part. You just look at what they've
Speaker 1: done during the pandemic. They paid millions for coming to America.
Speaker 1: They paid eighty million for the boor app pequels. Right,
Speaker 1: so you look at all of those individual movies and
Speaker 1: you look here at a studio library that they're getting.
Speaker 1: I think it's definitely uh uh you know a bank
Speaker 1: for their book. Well, and you me, you beautifully set
Speaker 1: me up for what I wanted to ask Spencer, and
Speaker 1: that is Spencer, is this all about Jeff and franchise development? Right?
Speaker 1: You own these brands now and you can just kind
Speaker 1: of run with them. They're remaking everything, right, It's like
Speaker 1: so it's it's kind of like, you know, it's a
Speaker 1: safe bet. It's formula Hollywood. They've taken the risk, they've
Speaker 1: tried to create their own hits. Uh, they haven't created them.
Speaker 1: So let's let's buy what people love to watch in
Speaker 1: the past and try to try to uh make new
Speaker 1: versions of new iterations of it for the future. Knowing
Speaker 1: that we have that big groad appeal fan base cooked in.
Speaker 1: So that's definitely a big, a big piece. And we
Speaker 1: know that Jeff Zos does see hollow even though Hollywood
Speaker 1: seen is this creative place that he does see a
Speaker 1: lot of the hits as being fairly formulaic. So this
Speaker 1: kind of appeals more to his his you know, the
Speaker 1: math part of his brain. Yeah, Ga, come on in
Speaker 1: here and talk a little bit about what this means
Speaker 1: for consumers of of Hulu and consumers who have been
Speaker 1: used to watching some of this content in other places.
Speaker 1: The Handmaids sale, for example, it was touted in the
Speaker 1: press release today announcing the acquisition, and I'm wondering if
Speaker 1: that means that handmaid still leaves it leaves Hulu if
Speaker 1: it goes to Amazon, or is this all about the
Speaker 1: future future content and less about what exists now. So
Speaker 1: I think him that's an excellent point. I think what
Speaker 1: would be really seeing over the at least past few
Speaker 1: years is that you have all of these studios that
Speaker 1: are part of conglomerates, and they're all now trying to
Speaker 1: use their studios to feed their own streaming platforms. So
Speaker 1: Disney obviously doing that with Disney Class. They also own
Speaker 1: two thirds of Hulu. Uh. We're seeing Warner kind of
Speaker 1: do that with HBO Max. So it's all about, you know,
Speaker 1: using that studio content. Amazon obviously did not have that.
Speaker 1: Now they're getting that with MGM. So we're really gonna
Speaker 1: have to wait and watch and see what they do.
Speaker 1: But I think we can pretty much count on the
Speaker 1: fact that they are going to take the handmade sailor
Speaker 1: at least future um, you know, seasons of the handmade
Speaker 1: sale and definitely to it on Prime as a way
Speaker 1: to kind of turbo charge their subscribe to me. All right, well,
Speaker 1: great stuff and certainly a company that is always on
Speaker 1: the move. Amazon. Great to get so many multiple sides
Speaker 1: to this story and get them from our own guitar
Speaker 1: Ranganath on Tech and Media analyst of Bloomberg Intelligence are
Speaker 1: in house group of analysts, and Spencer Soper we go
Speaker 1: to him when it comes to Amazon. He is Bloomberg
Speaker 1: News Technology and e Commerce reporter on the phone in Seattle.
Speaker 1: It's a big deal. Eight half biggs after well and
Speaker 1: if you think right exactly like they do smaller acquisitions.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stenovic on Bloomberg Radio. So a lot
Speaker 1: going on on this Wednesday. No doubt the world has reopened,
Speaker 1: certainly when it comes to the business and financial world.
Speaker 1: We're feeling it. We also are noticing a story on
Speaker 1: the Bloomberg first time activist investor Tiny Tiny Steak in
Speaker 1: x on Mobile scoring a historic win in its proxy
Speaker 1: fight with the oil giants, signaling the growing importance of
Speaker 1: climate change to invest is this is a big deal
Speaker 1: Bloomberg deal Reporter Scott Devote here in our Interactive Brokers studio. Um,
Speaker 1: it does feel like a big deal. Are we putting
Speaker 1: it in perspective in the right way? Yeah? I think
Speaker 1: like what we're seeing out of this one in particular,
Speaker 1: and we've started to see this a little bit lately,
Speaker 1: is that, UM, it doesn't really matter how big of
Speaker 1: a steak an investor has in a company, UM, if
Speaker 1: they have a really good argument. So at Exxon, what
Speaker 1: they argued was there was uh an engine number one
Speaker 1: is by the way, the fun they bought a thirty
Speaker 1: seven million dollar steak and xxon which is a two
Speaker 1: billion dollar company point zero two steak. Yeah, basically nothing.
Speaker 1: They basically spend as much on the proxy fight as
Speaker 1: they did on the initial steak. But they came with
Speaker 1: an argument that said, you know you've been underperforming your peers,
Speaker 1: your climate goals are not aggressive enough, and you know
Speaker 1: you're putting your dividend in at risk basically, you know,
Speaker 1: based on this strategy, So you have to make some
Speaker 1: some you know, significant changes and I think you know,
Speaker 1: well the company probably was not you know, open to
Speaker 1: these ideas. The other investors were, and they got some
Speaker 1: momentum and obviously, you know today they got at least
Speaker 1: two seats on the board. So Scott, what what are
Speaker 1: they going for? What's engine number one going for? In
Speaker 1: terms of changes? What do they want to see? Well,
Speaker 1: basically what they argued was up until this point that
Speaker 1: and I think you know, there's a lot of evidence
Speaker 1: of that. You know, Excellon was a leader in the
Speaker 1: oil and gas industry UM, but then started to trail
Speaker 1: behind some of its piers, Chevron in particular, UM. And
Speaker 1: then uh they also argued that there was a climate
Speaker 1: angle on this, that Exxon was entrenched in carbon based UM,
Speaker 1: the carbon based fuels, and wasn't doing it enough to
Speaker 1: reach the goals or the Paris Agreement, and that you know,
Speaker 1: a lot of what they were saying and when it
Speaker 1: came to climate was lip service, and so they called
Speaker 1: them on it. And you know, we've seen obviously the
Speaker 1: institutional investors like black Rock and whatnot been very vocal
Speaker 1: this year about how they were going to vote based
Speaker 1: on E s G issues and so it really struck
Speaker 1: a chord with a lot of these institutions. UM, and
Speaker 1: I think, you know, I think a lot of people
Speaker 1: that you know, follow activism didn't think that Engine Number
Speaker 1: one had much of a shot at this, but um,
Speaker 1: they really did have their finger on the pulse of
Speaker 1: the simmering tension between x on itself and its investors.
Speaker 1: How much is Black Rock pushing kind of the whole
Speaker 1: momentum here with that? You know, Larry Fink has been
Speaker 1: so vocal in terms of the importance of climate specifically,
Speaker 1: and listen, they're the second largest shareholder institutional shareholder when
Speaker 1: it comes to ex On Mobile. Um. Kathy would told
Speaker 1: me that that she kind of speculated that maybe some
Speaker 1: of what Elon Musk and his kind of pulled back
Speaker 1: on bitcoin because of its impact, uh and on energy
Speaker 1: usage and impact on the environment, that maybe Black Rocks
Speaker 1: a big investor in Tesla. How much are they kind
Speaker 1: of moving the needle on this cam station. Well, I
Speaker 1: think there's no doubt that they're moving the needle on
Speaker 1: the conversation. I think that you know, you wouldn't have
Speaker 1: I cover a lot of activism campaigns and I'll put
Speaker 1: it in the perspective from an activist perspective. Now, when
Speaker 1: you see one of these letters go out criticizing a company,
Speaker 1: there is always going to be an E s G
Speaker 1: angle on it. And what they're trying to do is
Speaker 1: not only attract investment from funds that want to invest
Speaker 1: in you know, these hedge funds, but want to make
Speaker 1: sure that they're doing an E S G angle. They're
Speaker 1: also trying to win over the institutions who have you know,
Speaker 1: these these bents on making sure that they're supportive of
Speaker 1: boards that are implementing these E S G issues. Are
Speaker 1: we going to look back on today, on this period
Speaker 1: of time as being just a turning point when it
Speaker 1: comes to E S G? As you point out in
Speaker 1: your piece. On the same day, management at Chevron were
Speaker 1: reviewed by their shareholders, who voted a proposal to reduce
Speaker 1: emissions from the company's to pont recently stuffer vote against
Speaker 1: management on plastic pollution disclosures. Are we to turning point here?
Speaker 1: I think you're I think what you're seeing is something
Speaker 1: that's been simmering from a little while, like, but there
Speaker 1: was a very fine point put on a lot of
Speaker 1: these institutions. You think pension funds, all these other institutions.
Speaker 1: They're very serious about climate change now, and that's something
Speaker 1: that the oil and gas industries are going to have
Speaker 1: to deal with. Well, it's also to be fair, like,
Speaker 1: we know at some point there's going to be probably
Speaker 1: increasingly greater regulation. We're seeing it globally, we're seeing it
Speaker 1: here in the United States. I mean, the dynamics of
Speaker 1: this company. Eventually, I'm assuming we will transition to from
Speaker 1: a carbon based economy. I mean that's where the world's going.
Speaker 1: May not happen overnight, right, Well, that was that was
Speaker 1: the argument. I mean, if you don't start now, you're
Speaker 1: going to be left behind. I mean, I think Engine
Speaker 1: Number one said something along the lines of, you know,
Speaker 1: you there have been great American companies that have missed
Speaker 1: the way the world's going and you know, fall into
Speaker 1: the wayside. And so they were they were saying, you're
Speaker 1: risking becoming one of these like defunct iconic brands. Well,
Speaker 1: I think it's funny, funny, is it the right? And
Speaker 1: like the companies that were in the Dow initially or
Speaker 1: over it tunder twenty five year lifespan, there are those
Speaker 1: companies that aren't around anymore, and you do wonder about
Speaker 1: the fate of something like an exent. Yeah, I mean
Speaker 1: that's that was the argument. So we'll see, we'll see
Speaker 1: what happens. Well, it's amazing we ran out of time,
Speaker 1: but I've got to just tell you. Your story and
Speaker 1: your interview with Carl Icon really a killer. It's among
Speaker 1: the most read on the Bloomberg terminal, and I know
Speaker 1: our TV team also caught up with him, but it
Speaker 1: was greased thanks to your story. So thank you. Everybody
Speaker 1: can check it all out all of Scott's work at
Speaker 1: Bloomberg dot com. I'm bro journal Yeah, but you let
Speaker 1: me drive none please, I want to drive. Just drive
Speaker 1: good questions. Here is the drive to the globe. Thanks,
Speaker 1: We'll drying us Dawn on Bloomberg Radio. I just got
Speaker 1: about ten and a half minutes left in today's trading session.
Speaker 1: Is time for the drive to the close? And Amy
Speaker 1: Saying is with us. She is executive vice president portfolio
Speaker 1: manager over it at Alger. She oversees several small cap
Speaker 1: and MidCap stenogies. She is with us on the phone
Speaker 1: from Connecticut. Amy, nice to have you here, How are
Speaker 1: you great? Thank you, Carol, thank you for having me
Speaker 1: here today. Well, it's good to have you here in
Speaker 1: an interesting day, interesting week, and maybe partly because of
Speaker 1: the holiday, we had a fair amount of news flow.
Speaker 1: But it does feel like investors kind of not quite
Speaker 1: sure where to go next. And maybe it's because we're
Speaker 1: in this Netherlands between earning cycles. But how do you
Speaker 1: see and how do you see the market environment, especially
Speaker 1: for the midcake MidCap space that you play within. Yeah, well,
Speaker 1: I think I feel very constructive overall equity market, and
Speaker 1: I am very bullish UM makehaps now, especially UH makehap
Speaker 1: growth stocks. I think we can make a strong cage
Speaker 1: now for those stocks UM. As you know, there's been
Speaker 1: a significant you know rotation from UH growth to value,
Speaker 1: but I think over the long term, you know, value
Speaker 1: is more of a trade not investment in the sense
Speaker 1: that also a lot of value stocks now have built
Speaker 1: in a lot of great expectations going forward, whereas a
Speaker 1: lot of UM growth stocks the structural secular till wings
Speaker 1: for them UH still are intact and the valuation wise
Speaker 1: they come down a lot. But more unfortunately in that
Speaker 1: algier we are UM stock pickers and we think you
Speaker 1: can really you know, have your growth cake and either
Speaker 1: recovery too. So those are the company that we have
Speaker 1: exposure to a the growth, high quality growth stock with
Speaker 1: cyclic coal and markets exposure. UM. You know today, well
Speaker 1: we want to talk picks. I just want to give
Speaker 1: our audience on YouTube and also here at Bloomberg Radio
Speaker 1: just a little perspective. If I look at the Russell
Speaker 1: Russell two thousand small camps, it's up almost fourteen percent
Speaker 1: on the year. The SMP five hundred big cap companies,
Speaker 1: it's up just shy of twelve percent. And if I
Speaker 1: look at the SMP MidCap four hundred index, looking at
Speaker 1: that mid radio sector, it is up about seventeen almost
Speaker 1: eighteen percent on the year. So Amy, let's let's drill
Speaker 1: down a little bit. One of the names that you
Speaker 1: like specifically is US Food Stickers U s f T.
Speaker 1: What's the fundamental story as to why you like it? Uh? Right.
Speaker 1: US Food is the second largest food service distributor in
Speaker 1: the United States. It's also the most innovative food distributor
Speaker 1: and most tax saving savvy. So it really fit into
Speaker 1: you know what I talked about. You know, they both
Speaker 1: have the segular trends UH and cyclic covidc RAY. And
Speaker 1: here's why First of all, you know, there's a multi
Speaker 1: decade secular trends for dining outside of home UM and
Speaker 1: with the pandemic, unfortunately that that number, you know, that
Speaker 1: sort of regress you know, before the pandemic is almost
Speaker 1: like fifty fifty inside home and outside of home and
Speaker 1: during at this moment is roughly about say thirty five
Speaker 1: percent by industry reports. So now as you know, we
Speaker 1: have a lot of pendemy men as people have been
Speaker 1: cooper at cooper at home, and it is also you know,
Speaker 1: restaurants also have a lot of benefits from government support,
Speaker 1: you know, with the twenty nine billion restaurants revitalizzation found recently.
Speaker 1: So so that's a very strong secular trend is still
Speaker 1: in play. And you are, too, specifically as a company,
Speaker 1: is extremely well positioned in all of those you know,
Speaker 1: in the hospitality and a restaurant, So it's really a
Speaker 1: pixel shovel play for us. They also have the scale
Speaker 1: capital technolog a GM product offerings to really um meet
Speaker 1: customers needs. And you know, in the indus continue to
Speaker 1: gain market share from the weaker smaller players because the
Speaker 1: industry is consolidating. And also it's just great catch up
Speaker 1: play because US Food still trades as a discount to
Speaker 1: its piers Cisco and Performance Foods. So we think the
Speaker 1: company is really well positioned at this point. And takular,
Speaker 1: let me just correct. I think I said U s
Speaker 1: f T M at U s F D just to
Speaker 1: make sure our audiencewer that rate. Yeah, I'm curious, Amy
Speaker 1: about another company that's in that's one of your picks
Speaker 1: that's somewhat in the restaurant industry. Middleby Corporation ticker m
Speaker 1: I D D so far this year up more. Why
Speaker 1: are you bullish on it? Yeah? Which Middleby has been
Speaker 1: a you know, compounder for US and it's a market
Speaker 1: leader in the food service equipment industry. Um, you know,
Speaker 1: was a very well diversified portfolio and customer. Uh. It's
Speaker 1: definitely recovery play because restaurants have been hit hard by COVID. Uh.
Speaker 1: You know, almost all chain restaurants as their customers. Right.
Speaker 1: You may it may not be a household name, but
Speaker 1: I think we all come across Middleby every day if
Speaker 1: you're in Starbucks, Dunkin Donuts, you know Chiefecakes for extra McDonald's.
Speaker 1: So so that Um, but the man is really very
Speaker 1: very strong that they just reached the back you know,
Speaker 1: last quarter. They have a very strong quarterback lot is
Speaker 1: record high, the manage very strong, supply is very tight,
Speaker 1: so they actually institute you know, price increases. Uh, they're
Speaker 1: going to continue to have like more price increases this year.
Speaker 1: And the company also has a very strong segulative when
Speaker 1: it's been always been very innovative that you know, it's
Speaker 1: levered to the secular trend of automation within restaurants, right
Speaker 1: and also in the kitchens, so they generate a lot
Speaker 1: of savings in terms of labor, energy, and other carts
Speaker 1: for restaurants and food processing companies. A great the examples
Speaker 1: Middlebie's recently launched open Kitchen, uh Internet Things based platform,
Speaker 1: so that's really one of its kind and really can
Speaker 1: automate the whole intel restaurant. And also you know, recently
Speaker 1: the company um I had a transformative um acquisition um
Speaker 1: you know acquired it's a competitor, well built and that's
Speaker 1: you know, really going to be very accreative to them
Speaker 1: and it's going to make them more dominant in the industry.
Speaker 1: And the last but not leastic, the company has very
Speaker 1: high financial quality. Was actually with low cyclicality. You know, overall,
Speaker 1: so very strong margins and free cash flow. So it's
Speaker 1: really a compoundel that can really transcend sort of economic
Speaker 1: you know, volatility. But clearly it's extremely well positioned, uh
Speaker 1: to capitalize the cyclical recovery. Now, yeah, and the start
Speaker 1: that was up almost eighteen percent last year, I'm assuming
Speaker 1: as things started to recover a little bit, uh, and
Speaker 1: it's up about so are this year? Um, are you
Speaker 1: finding lots of opportunity in the MidCap space right now?
Speaker 1: And just got about a minute or so, Yes, definitely,
Speaker 1: because mixcap has you know, part of the past twenty years,
Speaker 1: really has outperformed both small large cats because it has
Speaker 1: the best of both worlds. Like small caps, they are
Speaker 1: less covered and operating an inefficient market, which is a
Speaker 1: very fertile ground for us at Algiers because we're stock pickers,
Speaker 1: and they also offer similar gross potential to small caps.
Speaker 1: On the other hand, they are less risky than small
Speaker 1: caps because they are more similar to large caps in
Speaker 1: terms of financial quality and liquidity. But at this point,
Speaker 1: you know, they are cheaper than large cap growth piers
Speaker 1: and also on a fundamental basis, they are projected to
Speaker 1: have higher earnings growth compared to the large cap piers. Uh,
Speaker 1: there are a lot less. I think on average there's
Speaker 1: only ten analysts covering, you know, mikecap gross companies, where
Speaker 1: it's twenty twenty analysts covering a large cap growth company.
Speaker 1: So so I think it's very attractive at this point,
Speaker 1: and we're very bulish on that. And we just recently
Speaker 1: launched Alger mickcap boody, got it? Yes, all right? And yeah,
Speaker 1: and as you said, MidCap versus large caps versus small caps,
Speaker 1: you've definitely seen the out performance so far here in Amy,
Speaker 1: Thank you so much, love talking specific names, Amy saying,
Speaker 1: portfolio manager over at Alger during us on the phone
Speaker 1: from Connecticut. Thanks for listening to Bloomberg Business Week. Download
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