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Speaker 2: This is Bloomberg Business Wait inside from the reporters and
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Speaker 2: podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Speaker 3: Today's Bloomberg Business Mean, we're walking chairs in. Netflix down
Speaker 3: two percent in the after hours. The company reported streaming
Speaker 3: paid net change for the second quarter that beat the
Speaker 3: average analyst estimate. But I think what has investors concerned, Carol,
Speaker 3: is the outlook and the third quarter forecast. The company
Speaker 3: seeing revenue at nine point seven three billion. That's just
Speaker 3: shy of estimates of nine point eight three billion, though
Speaker 3: it does see EPs coming in above estimates at five
Speaker 3: dollars and ten cents versus estimates of four four dollars
Speaker 3: and seventy four cents.
Speaker 4: Yeah.
Speaker 5: I really get a feel that investors are trying to
Speaker 5: make a little sense as the stock's been bouncing. It's
Speaker 5: been lower in the aftermarket, but bouncing around at different times.
Speaker 4: Let's get to it, let's make sense of it. Back
Speaker 4: with us.
Speaker 5: So grateful to have Bloomberg Intelligence, Technology Media analyst KEITHA.
Speaker 5: Ringanatan and also Bloomberg News earnings reporter Red Brown. Gither
Speaker 5: to you that number. I know you guys were looking
Speaker 5: for about five million and subscribers. They easily blew that
Speaker 5: out of the water. It seems like everybody's estimates.
Speaker 6: Oh, absolutely complete blowout, crushed it. Sixty five percent higher
Speaker 6: than obviously what consensus was expecting. So the subscriber momentum
Speaker 6: is very very much intact. And you're absolutely right there, Carol,
Speaker 6: about you know, the guidance being a little bit tepid,
Speaker 6: and I think that is what is kind of weighing
Speaker 6: on the stocks at this point of time.
Speaker 5: Are you worried about by that guidance? Forgive me, tim,
Speaker 5: Are you worried about that guidance?
Speaker 6: Yeah, because this is you know, this is where it's
Speaker 6: getting really really hard to kind of model out this company. Remember,
Speaker 6: they're going to stop reporting subscriber metrics altogether. They're going
Speaker 6: to stop reporting that average revenue per user metric altogether
Speaker 6: in a few quarters, and so it's kind of becoming
Speaker 6: hard to figure out that all of the different puts
Speaker 6: and takes. So, you know, we were kind of expecting
Speaker 6: fifteen percent revenue growth in the third quarter, that's obviously
Speaker 6: a little bit light. They point to, you know, Argentina
Speaker 6: being a source of the weakness. But then going forward,
Speaker 6: as more and more you know, subscriber growth comes from
Speaker 6: emerging markets, comes from some of these other you know,
Speaker 6: developing countries, is that really going to weigh on revenue growth?
Speaker 6: I think that becomes the big question. And then the
Speaker 6: other thing, of course, as you had pointed out earlier,
Speaker 6: was that they are not expecting a meaningful acceleration in
Speaker 6: the ad business in twenty twenty four or even in
Speaker 6: twenty twenty five, and I think that'll give investors some
Speaker 6: pause as well.
Speaker 3: What's interesting, though, is that even though revenue GITHA is
Speaker 3: coming in below estimates for the third quarter or forecast,
Speaker 3: we're seeing the company at least tell us it's going
Speaker 3: to be more efficient because earnings per share is going
Speaker 3: to be five dollars and ten cents that beats estimates,
Speaker 3: an operating margin significantly higher than the twenty five point
Speaker 3: seven percent analysts had expect coming in at twenty eight
Speaker 3: point one percent. So what's happening to Netflix where revenue
Speaker 3: is going down but efficiency is going up?
Speaker 6: Efficiency is going up big time. And this is really
Speaker 6: I mean that we've been talking about the operating leverage
Speaker 6: in this model deem for such a long time right
Speaker 6: now and this is that operating leverage that we get
Speaker 6: to see. I mean, they are giving that to us
Speaker 6: in the margin guide. Remember they had first predicted twenty
Speaker 6: four percent operating margin for the whole of twenty twenty four.
Speaker 6: They took that up to twenty five percent last quarter,
Speaker 6: now up to twenty six percent. That's a five hundred
Speaker 6: basis point increased from last year. So you know, very
Speaker 6: likely that we can see up to thirty percent margins,
Speaker 6: maybe even as early as next year. This is huge
Speaker 6: in terms of just you know what the streaming streaming
Speaker 6: models unit economics are, how they're shaping up, just because
Speaker 6: there's been so many questions about whether it could ever
Speaker 6: be profitable and whether it could ever generate those thirty
Speaker 6: percent margins that the BATV bundle was generating. And obviously
Speaker 6: we have a resounding yes with this report from Netflix.
Speaker 5: Which is why, as you said earlier, kind of Netflix
Speaker 5: stands alone and is the one to be red Brown,
Speaker 5: I want to bring you into it. Also listen to
Speaker 5: Githa and going through the numbers. What stands out for you?
Speaker 7: Yeah, I think it's just kind of this confluence of
Speaker 7: the revenue drivers that were kind of looking to pay dividends.
Speaker 7: When they say, don't look at our subscriber numbers anymore,
Speaker 7: we're all saying, okay, we won't look at the revenue growth,
Speaker 7: and they're not kind of painting as pretty as a
Speaker 7: picture I think is we would as the marker would
Speaker 7: like to see for the time being. Maybe that does
Speaker 7: raise some questions on where is the levers that they
Speaker 7: can still pull to Yeah, to hit the numbers that
Speaker 7: that you know, everyone was expecting them to do.
Speaker 8: I've read.
Speaker 3: On the content side, I mean what sticks out to you?
Speaker 3: Because the company did call out Bridgerton season three Baby Reindeer,
Speaker 3: which I heard was really good.
Speaker 8: I haven't seen that.
Speaker 4: I didn't watch Baby Rain, Bridgeton, Queen.
Speaker 3: Of Tears, The Great Indian Kapel Show, Under Paris Atlas,
Speaker 3: hit Man. Oh, I have heard of hit Man. I'm
Speaker 3: like somebody of these I'm I'm reading. I'm like, these
Speaker 3: are not on my radar at all. The Roast of
Speaker 3: Tom Brady, though that was one that everybody watched. It
Speaker 3: felt like, Yeah, I mean except for Paul Brannan, who's
Speaker 3: just shaking his head in there. Oh he watched it. Okay,
Speaker 3: he did watch it. Thumbs up, two thumbs up.
Speaker 7: All right, well Paul watched it, then it must have
Speaker 7: been good. I think you are pointing to something interesting there,
Speaker 7: is that the live I think the thing that generated
Speaker 7: the most like content not on Netflix, but the most
Speaker 7: buzz was the live roast of Tom Brady. So I
Speaker 7: was reading some analyst notes They're kind of called the
Speaker 7: content besides that a little bit lackluster this, So yeah,
Speaker 7: maybe that is again kind of pointing to the direction
Speaker 7: that they need to be heading, is the live entertainment,
Speaker 7: because yeah, it seems like if they're still attracting people
Speaker 7: with the content that they are, but it's you know,
Speaker 7: we don't get to we don't get to speak to
Speaker 7: every subscriber, but like, did you sign up because it
Speaker 7: was live TV or because it was Bridgerton?
Speaker 8: Right?
Speaker 7: So yeah, it remains me seeing I guess geth.
Speaker 5: I want to go back to you earlier when we
Speaker 5: talked to you to preview what Netflix. You talked about
Speaker 5: Netflix having the durable advantage over the long term. I
Speaker 5: look at you know, part of I guess they have
Speaker 5: that durable advantages. I think about the cash that they generate,
Speaker 5: talk about cash flow and what we got from Netflix
Speaker 5: on that front.
Speaker 6: So cash flow still continues to be really, really strong, Carol.
Speaker 6: So they're still guiding to six billion dollars in cash
Speaker 6: flow this year, and remember they had generated about six
Speaker 6: and a half billion last year. But the reason we're
Speaker 6: seeing a little bit of lumpiness this year is because
Speaker 6: of all the strikes that happened last year and so
Speaker 6: much of production kind of got pushed to this year.
Speaker 6: But the real metric that we should be looking for is,
Speaker 6: you know, the twenty twenty five free cash flow, and
Speaker 6: I'm thinking just with the kind of profitability and the
Speaker 6: operating margins that they reported, you know, we could easily
Speaker 6: be seeing about ten billion dollars in free cash flow
Speaker 6: going to next year. And that now gives them a
Speaker 6: lot of flexibility. They could invest in more content, of course,
Speaker 6: but it also gives them flexibility to do buybacks, and
Speaker 6: that again it becomes then your EPs booster over the
Speaker 6: long term.
Speaker 5: They did say in the release during the second quarter,
Speaker 5: we repurchased two point six million shares for one point
Speaker 5: six billion. We have five billion remaining under our existing authorization,
Speaker 5: So I guess stay tuned to see whether or not
Speaker 5: we see more. What's the number one question you would
Speaker 5: be asking Netflix on the call here, Githa.
Speaker 6: I think a lot of concerns are still going to
Speaker 6: center around the advertising business, so I think we definitely
Speaker 6: want more clarity on that. Yes, they did give some
Speaker 6: perspective in terms of how many new signups game, but
Speaker 6: they still haven't actually given us a number in terms
Speaker 6: of how many number of subscribers are on the a
Speaker 6: year or what is the revenue that they're generating. I
Speaker 6: mean they say it's not it's deminimus, but still I
Speaker 6: think we would definitely like to have a little bit
Speaker 6: more clarity on that.
Speaker 8: RD.
Speaker 4: I want to bring you back in.
Speaker 5: You watch the earnings, you watch the market, certainly for us,
Speaker 5: I mean Netflix is a big one when we think
Speaker 5: about the earning season. We're just getting kind of started.
Speaker 5: But how are you thinking.
Speaker 4: About it in terms of maybe what it means for
Speaker 4: some of the other players.
Speaker 7: Yeah, I mean it's the first tech name, like, you know,
Speaker 7: really prominent tech name that we're getting, you know. I
Speaker 7: guess we'll have to wait and see kind of how
Speaker 7: things shake out here with the market reaction, I mean,
Speaker 7: it's it's not as bad as it guess it could be.
Speaker 7: I think there's definitely some areas of thing that'll be
Speaker 7: of optimism. I think to take away from this the
Speaker 7: fact that they did add more more subscribers, and we're
Speaker 7: expected they did it across all of their regions, even
Speaker 7: with some of that weakness that they're pulling out in
Speaker 7: Latin America, I think that still speaks to maybe some
Speaker 7: strength forward the tech companies that are a little bit
Speaker 7: more consumer facing to maybe have you know, a decent,
Speaker 7: decent earning season still.
Speaker 3: Here, hey, gtha. On page three of the earnings release,
Speaker 3: they talk about engagement and competition, and there's this donut
Speaker 3: chart that shows that streaming now accounts for forty percent
Speaker 3: of US TV screen time. Still broadcasting cable account for
Speaker 3: more than forty percent.
Speaker 8: Together.
Speaker 3: Netflix and YouTube though, are the clear leaders when it
Speaker 3: comes here, everyone else they kind of leave in the dust.
Speaker 3: That's according to Nielsen. Who are they pulling? Who are
Speaker 3: they going to pull more share from? Or who do
Speaker 3: they need to pull more share from? Is it competition
Speaker 3: or is it the traditional cable and broadcast.
Speaker 6: It's a little bit of everybody. So you know, clearly
Speaker 6: we're seeing cord cutting. I mean, we've already seen thirty
Speaker 6: million subscribers leave the PayTV ecosystem. Where have they gone, Well,
Speaker 6: they've gone to Netflix, They've gone to Amazon Prime, they've
Speaker 6: gone to all of these other streaming services. But what
Speaker 6: is going to happen is all the competing services and
Speaker 6: Netflix raised prices. People are going to have to make
Speaker 6: a choice, and they are going to make that choice,
Speaker 6: and we think that default choice is going to be Netflix.
Speaker 6: So we're going to see their share kind of increase
Speaker 6: from the current eight percent or nine percent that it
Speaker 6: is and go higher, not only because people are moving
Speaker 6: from linear to streaming, but also moving within streaming, gravitating
Speaker 6: more towards Netflix and YouTube.
Speaker 5: All right, Keitha, ten seconds left here. This is a
Speaker 5: strong report.
Speaker 4: Good report. How do you describe it?
Speaker 6: I would say definitely a very strong report in terms
Speaker 6: of subscriber momentum. You know, they've kind of checked all
Speaker 6: the boxes.
Speaker 4: Here, all right, kind of run.
Speaker 5: Hey, Keitha, thank you so much of our Bloomberg Intelligence team,
Speaker 5: and of course our Bloomberg NER's Earnings reporter are Red Brown.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch just
Speaker 2: Lie weekday afternoons from two to five pm Eastern Listen
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Speaker 5: Already though on our radar the eighty hours of nevarades
Speaker 5: that trade here in the United States dropping the most
Speaker 5: in more than three years. This is after sales of
Speaker 5: the company's closely watched prostate cancer drug disappointed in the
Speaker 5: latest quarter, taking the shine off of raised profit forecast
Speaker 5: from the Swiss pharma company, Nevada shares following as much
Speaker 5: as about three percent in trading that we've seen, trimming
Speaker 5: this year's gains to about fourteen percent after sales of
Speaker 5: the treatment fell short of analyst estimates.
Speaker 4: A lot to.
Speaker 5: Unpack here, so let's get to it with vas Narasimon.
Speaker 5: He is CEO of Novardies, joining us from the company's
Speaker 5: US headquarters in East Hanover, New Jersey. Boss, great to
Speaker 5: have you here on Bloomberg. Let's talk about the quarter.
Speaker 5: You reported profit that beat expectations, you raise your forecast,
Speaker 5: your shares are down. As we mentioned, we hear in
Speaker 5: the market that there are concerns about how long your
Speaker 5: growth driver, drugs will keep delivering. Why do you think
Speaker 5: that you're having a hard time winning the market.
Speaker 9: Over Yeah, Look, I think first it's really important to
Speaker 9: take a step back and see how well we've done
Speaker 9: over the recent years. When you look at our shares
Speaker 9: over a five to three year and even a year
Speaker 9: to day, we're really at place now where we've been
Speaker 9: trending at all time highs. So really today we've just
Speaker 9: given back a little bit of what we gain in
Speaker 9: the recent weeks, but still trading really really near all
Speaker 9: time highs for the company. I think, really demonstrating that
Speaker 9: investors are recognizing the outstanding performance we've had as we've,
Speaker 9: after one hundred billion dollars of transactions, focused into an
Speaker 9: innovative medicines pure play company that's allowed us to drive
Speaker 9: our sales growth in a dynamic way, increase our profit
Speaker 9: guidance today to even higher levels, and we feel really
Speaker 9: good now about the trajectory of the company coming out
Speaker 9: of the quarter when you look at it in the
Speaker 9: next five years, we've committed to grow five percent plus
Speaker 9: and we have the growth drivers in hand to deliver that.
Speaker 9: We also have committed to be a forty percent margin
Speaker 9: plus company, and we're already at forty percent margin today,
Speaker 9: so we're delivering against what we said we're going to
Speaker 9: do now.
Speaker 8: I think one of the things we learned today.
Speaker 9: Is it's just really important that every one of these
Speaker 9: growth drivers hit their targets. Plu Victo's a little bit behind,
Speaker 9: but we believe that in the long run we're on
Speaker 9: the right trajectory. This will be a multi billion dollar drug,
Speaker 9: and more importantly for US radio ligen therapy, this whole
Speaker 9: class of medicines we're working on could be a significant
Speaker 9: fifteen to twenty billion dollar area that we can build
Speaker 9: over time.
Speaker 5: Pluvicto, let's just go there, because that seems to be
Speaker 5: what maybe is putting so much pressure on the share price.
Speaker 5: The eightyr is down more than four percent as we
Speaker 5: seek that is your prostate cancer drug. You did or
Speaker 5: you seem to have rain did some of the optimism
Speaker 5: over it. The CFO telling reporters this morning that that
Speaker 5: next dynamic boost in sales probably won't come until the
Speaker 5: drug tests a broader label.
Speaker 4: So I am curious, are you guys raining in the optimism?
Speaker 5: What are you doing to rein in or excuse me
Speaker 5: not to Radium but to win over physicians to that
Speaker 5: medicine in particular.
Speaker 9: We're certainly not ranting in our optimism on PLAVICTI. I
Speaker 9: think what we're trying to articulate is right now we're
Speaker 9: on a run rate if you look at it in
Speaker 9: the US, of around one point two to one point
Speaker 9: three billion. We're going to add a couple of one
Speaker 9: hundred million overseas. And we always knew in this first
Speaker 9: indication we were going to reach a max of around
Speaker 9: two billion dollars. Now, the speed at which we're going
Speaker 9: to get that ramp is a little bit slower than
Speaker 9: what we've expected from that one point four to one
Speaker 9: point five level up to the two billion dollar level.
Speaker 9: It may take us a little bit longer, mostly because
Speaker 9: in the US now we have to get this medicine
Speaker 9: more broadly available with community oncology, which will take us
Speaker 9: some time.
Speaker 8: We're making those steps.
Speaker 9: We have over four hundred and fifty centers not providing
Speaker 9: the medicine. But what that's really importantly going to do
Speaker 9: is build the base which allows us when we triple
Speaker 9: the size of the population we can address next year,
Speaker 9: we hope with the approval of our next indication we'll
Speaker 9: see another ramp in the sales again towards a multi
Speaker 9: billion dollar medicine that we think will drive our growth
Speaker 9: through this decade and.
Speaker 8: Into the next decade.
Speaker 9: So I think we just want to be realistic that
Speaker 9: getting to that next phase in our first syndication is
Speaker 9: going to take time because we have to get into
Speaker 9: the community. But once we do that, we'll have built
Speaker 9: the foundation for all our future launches with radio ligend therapies.
Speaker 3: Okay, well, speaking of the next phase, let's talk about Kiskali,
Speaker 3: the breast cancer drug for early breast cancer, because analysts
Speaker 3: have pointed to a three month delay and FDA approval
Speaker 3: for it. So how confident are you, Voss that you'll
Speaker 3: win this approval in the second half for a broad
Speaker 3: group of patients.
Speaker 8: We're very confident.
Speaker 9: I mean right now with the FDA, we've submitted some
Speaker 9: manufacturing adjustments that we agreed that we needed to make.
Speaker 9: We've submitted the stability data which they always ask for
Speaker 9: when you make manufacturing changes, and we have a three
Speaker 9: month clock extension. Now it's important to note with Kiskali,
Speaker 9: we were already on what's called a priority review timeline, So.
Speaker 8: Now we've added three months.
Speaker 9: All it does is put Kiskalie back into a normal
Speaker 9: drug approval timeline, and we believe we're not going to
Speaker 9: get the approval, but everything that we've seen suggests we
Speaker 9: will get the odd label. And I think importantly what
Speaker 9: we announced this morning is we've seen that longer follow
Speaker 9: up data that continues to show the positive impact cascale
Speaker 9: is having for patients of all subtypes of early breast cancer,
Speaker 9: along with an outstanding safety profile. So we believe this
Speaker 9: will be a very significant medicine. We've guided to four
Speaker 9: billion plus in the metastatic setting, three billion plus in
Speaker 9: the early breast cancer setting, so at least seven billion dollars,
Speaker 9: and certainly if we continue to see the data of
Speaker 9: all as nicely as it has, it could be much
Speaker 9: bigger than that. So we're really excited about it. We're
Speaker 9: going to get that approval, we hope, in Q three,
Speaker 9: and then we'll take it from there.
Speaker 5: All right, you know better than most everybody is so
Speaker 5: into the GLP one diet drugs, and you did mention
Speaker 5: on the analysts call that no Artists is working on
Speaker 5: a next generation of b CD projects not advanced yet
Speaker 5: to patient trials yet.
Speaker 4: Are you willing to do now.
Speaker 5: Maybe a significant deal to a more advanced pipeline in
Speaker 5: this area, maybe to give no artists a more competitive position.
Speaker 4: Roasted one last fall.
Speaker 5: It looks like it was a pretty smart move, roasted
Speaker 5: very well yesterday and kind of awaken the market once
Speaker 5: again for the diet drugs. What about you guys and
Speaker 5: your strategy.
Speaker 8: Yeah, we've looked really closely at this.
Speaker 9: I mean, we've been in cardiovascular disease for many decades,
Speaker 9: really one of the largest cardiovascular medicines companies in the
Speaker 9: world consistently over time, and our view is that the
Speaker 9: current wave of therapies, there are many companies out there.
Speaker 9: You have two very large incumbents that are already doing well,
Speaker 9: a number of companies chasing them on the injectable GLP
Speaker 9: one or GLP one combinations, and then you have oral
Speaker 9: drugs and you have a number of companies with oral
Speaker 9: GLP ones. You know in my experience that when you
Speaker 9: have situations where it looks to be relatively easy for
Speaker 9: many companies to come into space, you're going to get
Speaker 9: payer pressure, You're going to get very difficult competitive dynamics,
Speaker 9: You're going to get rebate dynamics, particularly in the US,
Speaker 9: and so when we looked at that, and when we
Speaker 9: look at these these deals, we think to play the
Speaker 9: long game and actually say, where can we bring really
Speaker 9: differentiated medicines, medicines that could hopefully add something new less
Speaker 9: frequent dosing, maybe a better tolerability profile, maybe better muscle
Speaker 9: sparing attributes. And so that's where we've decided to focus
Speaker 9: our energy. I'm sure you will hear every month on
Speaker 9: your broadcast about another GLP one or another oral GLP
Speaker 9: one or GIP one that's come out, But that's really
Speaker 9: indicating that this market is getting extremely crowded. And I
Speaker 9: think in our sector, the companies that win are the
Speaker 9: ones that find differentiated positions with really important medicines that
Speaker 9: can replace the standard of care.
Speaker 8: And that's where we're focusing our energy.
Speaker 3: Well, what would you say to investors who may say
Speaker 3: that you're missing out right now on something that is
Speaker 3: obviously turning out to be pretty huge and that you
Speaker 3: know sooner than later would be better to get a
Speaker 3: competitor in the space.
Speaker 9: Yeah, I think when you look at it, most of
Speaker 9: the drugs we talk about, even the ones that have
Speaker 9: been recently in the news, are going to be launching
Speaker 9: at the end of this decade. So I think you
Speaker 9: have to step rate investor reaction to the realities of
Speaker 9: launching medicines in our industry and developing them. And so
Speaker 9: you know, I would say I think most long run
Speaker 9: investors who understand our sector would know it's prudent to
Speaker 9: think about what is the world going to look like
Speaker 9: in twenty twenty nine, twenty thirty, twenty thirty one, when
Speaker 9: a medicine that's in phase one finally comes to market,
Speaker 9: and ask yourself what would put you in a position
Speaker 9: to win at that point in time. And that's the strategy.
Speaker 9: You know, we're thinking here, it's easy. We've had it
Speaker 9: in the past with immunooncology, and that time we piled in.
Speaker 9: We did a number of deals in amunooncology that didn't
Speaker 9: work out so well. And I wonder also when you
Speaker 9: do that, you crowd out other innovation within your R
Speaker 9: and D portfolio. So rather focus on places where we
Speaker 9: have differentiation we can win, rather than being now, what
Speaker 9: might be the fourth or fifth or sixth oral of
Speaker 9: obesity first class drug or maybe the seventh or eighth
Speaker 9: injectable drug.
Speaker 8: I don't think that's a good use of our capital made.
Speaker 5: To mention to what the world you know, kind of
Speaker 5: looks like going forward. And I am curious your CFO
Speaker 5: on the call post earnings did talk about US China relations.
Speaker 5: And you know, no matter what the political scenarios are,
Speaker 5: what do you think the environment looks like for Big
Speaker 5: Pharma the business environment post the November US presidential elections?
Speaker 4: Does it matter who is in the White House? And
Speaker 4: just got about a minute here.
Speaker 9: Yeah, I think first, you know, we're you know, not
Speaker 9: taking sides with respect to the election. Most importantly, we
Speaker 9: need better policies in the United States to support innovation
Speaker 9: and support patient access.
Speaker 8: We think the.
Speaker 9: IRA is a flawed policy for at least the healthcare portions.
Speaker 9: We need to fix nine to thirteen. We need to
Speaker 9: keep addressing out of pocket by fixing the PBM situation,
Speaker 9: fixing other legislative areas like the three point forty B
Speaker 9: program that's on the US side, and hopefully whichever administration
Speaker 9: and constellational government is there takes that head on to
Speaker 9: create the right innovation ecosystem for the long run. And
Speaker 9: then I think we're obviously want free trade. We believe
Speaker 9: our ability to provide medicines around the globe is absolutely critical.
Speaker 9: China is a very important market for US, we grow
Speaker 9: double digit, but also Japan and Europe, and so we're
Speaker 9: hopeful that we can keep shaping policies that recognize that
Speaker 9: ours is a very global industry. Healthcare is a global area,
Speaker 9: and we need policies that enable us to work freely
Speaker 9: around the globe to bring our medicines to as many
Speaker 9: patients as possible.
Speaker 5: Boss, So appreciate your time today. Thank you so much,
Speaker 5: Really appreciate it. Bos Narasimon. He's the CEO of Novartist,
Speaker 5: joining us from their headquarters in the United States in
Speaker 5: East Hanover at New Jersey.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 4: We also post had an IPO today.
Speaker 5: Ardenhell Partners began trading around twelve thirty eight pm Wall
Speaker 5: Street time, the stock opening at fourteen dollars a share.
Speaker 5: It was a red sticky I think on the Bloomberg
Speaker 5: opening at fifteen dollars a year, was below its IPO price.
Speaker 4: Just some numbers for you.
Speaker 5: The company raising one hundred and ninety two million in
Speaker 5: that IPO, shrinking the size of the share sale, pricing
Speaker 5: it below a marketed range, so selling twelve million shares
Speaker 5: for sixteen dollars each.
Speaker 4: This was yesterday.
Speaker 5: They had marketed about fourteen point three million shares for
Speaker 5: twenty to twenty two apiece.
Speaker 4: I'm looking at the stock.
Speaker 5: It is lower in the trade, but we're looking at
Speaker 5: a market captain of about two point two billion dollars.
Speaker 3: Okay, So let's get more on the business, on the outlook,
Speaker 3: and of course the IPO with the president and CEO
Speaker 3: of Ardent Health, owner of thirty hospitals in eight markets,
Speaker 3: six different states, and many more sites of care, a
Speaker 3: couple hundred of them. Actually, we got Marty Botnik here
Speaker 3: in our studio. Marty, good to have you. First of all,
Speaker 3: congratulations on the IPO. This day a long long time coming.
Speaker 8: For you and the team. Thank you.
Speaker 10: You know, I'm delighted to be here and it's an
Speaker 10: exciting day for our company. And most importantly, the twenty
Speaker 10: four thousand team members. We have caring patients across the
Speaker 10: United States. So it's a great day.
Speaker 8: Thank you.
Speaker 3: Carol mentioned the reception not ideal on an IPO day
Speaker 3: when you see a share price fall when it starts
Speaker 3: to trade.
Speaker 4: The market is down overall.
Speaker 3: So yeah, to be fair, the market is down overall.
Speaker 3: But give us your thoughts around that in the way
Speaker 3: that it's been received, at least on the first day.
Speaker 8: Yeah.
Speaker 10: Now, we're really excited about the future of this company.
Speaker 10: We've got a strong balance sheet, modest leverage, and a
Speaker 10: strong growth profile that we're confident in the future in
Speaker 10: And so this is something that you know, this is
Speaker 10: a long journey. I'm an endurance athlete and I tell
Speaker 10: my team all the time that this is a marathon,
Speaker 10: not a sprint, and any one day is not going
Speaker 10: to make or break our training. And that's how we
Speaker 10: think this. This is the starting point of a new
Speaker 10: journey from this company.
Speaker 4: We'll speak about endurance.
Speaker 5: Right the second time you guys filed for IPO, did
Speaker 5: it in twenty eighteen you withdrew in twenty twenty? Was
Speaker 5: it much much better market conditions to do it now?
Speaker 10: Well, we've been preparing for this for years and I
Speaker 10: don't believe you can ever time the market. That's not
Speaker 10: what we were trying to do. We've got a great
Speaker 10: company that's poised for growth, and so we were really
Speaker 10: making sure that we can come out of the market
Speaker 10: is a strong public company and we know that the
Speaker 10: performance and the growth trajector we have is going to
Speaker 10: set us up for the future.
Speaker 4: So the market conditions had nothing.
Speaker 8: To do with it.
Speaker 10: Now, we really see the tapping the IPO market as
Speaker 10: a currency for our future growth and that's what we're
Speaker 10: focused on.
Speaker 3: There have only been five healthcare services IPOs so far
Speaker 3: this year, including yours, so there aren't that many of them.
Speaker 3: Why is now the right time to go public? And
Speaker 3: also how do you differentiate yourself out there?
Speaker 10: Yeah, So for us, we always said we will go
Speaker 10: public when we're ready, and we are ready. Our team
Speaker 10: has been working relentlessly to prepare for this moment. We're
Speaker 10: going to be a strong public company and we said
Speaker 10: we'll go ready when it's time for us to grow,
Speaker 10: and we know that the markets right now are ripe.
Speaker 10: We've got a lot of inbound interest based upon the
Speaker 10: joint venture partnerships and the markets that we're in to
Speaker 10: continue to build, and we've got multiple growth strategies.
Speaker 8: To do that.
Speaker 5: Marty, talk about the markets you're in. What is the strategy,
Speaker 5: because my understanding is you're very much in a Q
Speaker 5: care mid sized urban markets, growing populations. Explain kind of
Speaker 5: the thesis for the growth trajectory.
Speaker 10: Yeah, we operate in mid sized urban communities and we
Speaker 10: go really deep into those communities. Hospitals are obviously the
Speaker 10: front door of what people see, but every day we
Speaker 10: see twenty times more patients in our outpatient clinics than
Speaker 10: we do our hospitals, and so we really believe in
Speaker 10: building an ecosystem of care around the person. As the patient,
Speaker 10: as a person and a consumer, they have choice and
Speaker 10: so not everybody has to come to the hospital for care.
Speaker 10: We want to have an ecosystem that provides for that
Speaker 10: care wherever.
Speaker 5: And however, they needed explain a little bit more the
Speaker 5: reason we are, you know, I want to ask that
Speaker 5: Tim and I had a great conversation with a doctor
Speaker 5: at a public health hospital, public hospital, i should say,
Speaker 5: in San Francisco, and talked a lot about the pressure
Speaker 5: on doctors in the medical community to kind of get
Speaker 5: through their patients quickly and as a result, they're not
Speaker 5: talking to their patients.
Speaker 4: What does it mean when you say.
Speaker 5: You want to develop the care around a patient when
Speaker 5: we've all experienced out and out. I can't even get
Speaker 5: appointments that doctors, we'll call me back in six months
Speaker 5: or have aout an appointment six months. How do you
Speaker 5: develop care around a patient when there's a lot of
Speaker 5: stress points right now?
Speaker 10: Yeah, no, it's a great question. I'll give you a
Speaker 10: personal antidote. I was training for an iron man and
Speaker 10: I got hit by a car. So I got to
Speaker 10: be a patient for the first time.
Speaker 8: Cycling wow.
Speaker 10: And so I got to be a patient for the
Speaker 10: first time probably in my career outside of a clinic
Speaker 10: visit or something. And what I realized is we have
Speaker 10: really great caregivers in this industry, and we have challenging
Speaker 10: systems and processes, and this industry hasn't always catered to
Speaker 10: people's input, or their money or their time, and so
Speaker 10: at aren't putting the patient at the center of everything
Speaker 10: that we do. Has become our north star, and so
Speaker 10: we're creating that ecosystem that we want to embrace technology
Speaker 10: to make it easier for our caregivers to deliver care
Speaker 10: to those patients and safer and more effective for patients
Speaker 10: to receive it. So that is a really big portion
Speaker 10: of our strategy and how we go at it.
Speaker 4: How do you do it?
Speaker 5: And then as a publicly held company where you know,
Speaker 5: Tim and I and everybody's going to be watching those
Speaker 5: quarterly reports, how do you balance making sure you provide
Speaker 5: that care and really put the patient first, but also
Speaker 5: you've got to be a profitable company and we're all
Speaker 5: watching well.
Speaker 10: I mean, having great people is the start of it.
Speaker 10: And our chief medical officer always says creating good process
Speaker 10: workflows lead to good clinical outcomes, which lead to good
Speaker 10: financial outcomes. I've been doing this for over twenty five years,
Speaker 10: and what I've always said is that if we take
Speaker 10: care of the patient, provide good service, good quality, good safety,
Speaker 10: the finances won't follow. And that's what we've seen.
Speaker 3: I want to go back to that anecdote that you
Speaker 3: shared about becoming a patient because you know, obviously we're
Speaker 3: glad that that wasn't a worse outcome because that can
Speaker 3: be really bad when a cyclist is hit by a car. Obviously,
Speaker 3: but how did that specifically change the way that you're
Speaker 3: doing business? Like what changes did you make as a
Speaker 3: result of becoming a patient.
Speaker 8: Yeah.
Speaker 10: I told that story, which we don't have time to
Speaker 10: get into, to our entire leadership, and I said, this
Speaker 10: is an opportunity. My wife said, God gave me a
Speaker 10: second chance to be here and do something with that.
Speaker 10: And so, whether it was banned the clipboards in terms
Speaker 10: of making it easier for patients to get into our clinics,
Speaker 10: focusing on technology that again is going to allow our
Speaker 10: nurses to be able to provide more effective care. You know,
Speaker 10: we're not immune from the headwinds that this industry has faced.
Speaker 10: There's been a lot of turnover and nursing physician burnout
Speaker 10: issues that you were talking about, Caro, Yes, and so
Speaker 10: we are just embracing technology to make that easier for
Speaker 10: our consumers.
Speaker 8: We think about it.
Speaker 10: I can control my whole world from my iPhone no
Speaker 10: matter where I'm at, but in healthcare it's always been
Speaker 10: a challenge.
Speaker 3: We call necessarily hippo compliant.
Speaker 10: Yeah, Well, you call somebody, you go through a phone tree,
Speaker 10: you get disconnected or rerouted. So we want to make
Speaker 10: it easy for people to access our system.
Speaker 3: They're still using facts to send and CD ROMs for MRIs,
Speaker 3: for example.
Speaker 10: And so we've introduced virtual nursing, if you know, bringing
Speaker 10: more nurses to the bedside to help take care of
Speaker 10: the more detailed, cumbersome, time consuming tasks, so our nurses
Speaker 10: at the bedside can go and address acute emergencies for
Speaker 10: the patient. And so being very thoughtful and thoughtical about
Speaker 10: how we are embracing technology, importing our team members and
Speaker 10: creating good retention. That's what this is about.
Speaker 5: What do you do with the IPO proceeds? What's the
Speaker 5: focus for a lot of investing going forward right now?
Speaker 10: Yeah, No, we are a company that's poised for growth.
Speaker 10: We have built a scalable platform that we know is
Speaker 10: in demand. You know that there's still a lot of
Speaker 10: hospital struggling. We've had a lot of inbound interest in
Speaker 10: terms of expanding our footprint, and so these proceeds are
Speaker 10: to help fuel the next round of growth as we
Speaker 10: grow into new communities and continue to invest in the
Speaker 10: communities that we're in today.
Speaker 3: Equity Group Investments is the majority owner of an affiliate
Speaker 3: of Equity Group Investments, I should say, and they're going
Speaker 3: to continue to hold the majority shareholder voting power. Just
Speaker 3: very briefly, twenty seconds, does that give you more freedom
Speaker 3: or does it constrain you.
Speaker 10: Equity Group has been a great partner. They've been part
Speaker 10: of us for nine years and for this audience, which
Speaker 10: I know Sam Zel I wish he could have been
Speaker 10: here to celebrate with us today. This would have been
Speaker 10: his fourteenth company that when public Key had that vision
Speaker 10: for us. And so they're a great partner and we'll
Speaker 10: continue to see us grow. We've doubled the size of
Speaker 10: the company since they've been a part of us, and
Speaker 10: we're going to continue on that trajectory.
Speaker 5: All right, good leave it on that note, look forward
Speaker 5: to hearing more in the future. Thank you so much
Speaker 5: for coming in the presidency of Ardent Health. Marty Botnik
Speaker 5: joining us in studio. As we mentioned an IPO today,
Speaker 5: it's first day of trading. Stockdown right now just about
Speaker 5: two and a half percent. Will continue to track it
Speaker 5: into the clothes.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
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Speaker 4: You know, our.
Speaker 5: Focus is certainly the RNC. Donald Trump is set to
Speaker 5: address his party tonight for the first time since officially
Speaker 5: becoming the presidential nominee and surviving an assassination attempt, with
Speaker 5: a speech aimed at uniting Republicans and his campaign to
Speaker 5: defeat President Joe Biden.
Speaker 3: Meantime, President Biden faces a growing drumbeat of calls from
Speaker 3: lawmakers for him to stand aside, with The Washington Post
Speaker 3: reporting today that former President Barack Obama has told allies
Speaker 3: that Biden needs to consider his viability as a candidate.
Speaker 5: Margaret Tealov is the director of Institute for dem Cristy,
Speaker 5: Journalism and citizens Citizenship at Syracuse University. She's been on
Speaker 5: the ground in Milwaukee. She is also a former colleague
Speaker 5: Senior White House correspondent for Bloomberg News and contributes to Axis.
Speaker 5: She joins us from the RNC Milwaukee. Margaret's so great
Speaker 5: to have you here with us.
Speaker 4: How are you.
Speaker 1: Thanks, It's so great to be back home as it were.
Speaker 1: I'm doing great, but this has been an exhausting week.
Speaker 1: As you can imagine what this seemed like, sort of
Speaker 1: the most least action filled election here for so many
Speaker 1: months was like, Okay, we know Donald Trump, we know
Speaker 1: Joe Biden. We know the contours of this race. It's
Speaker 1: about turn out. What else could happen? That's every reporter's mistake.
Speaker 1: In the last three weeks, we've seen a complete turn
Speaker 1: of fortune. Donald Trump and his followers here at the
Speaker 1: convention feel that all the winds favor him now, and
Speaker 1: so you see a tremendous amount of almost jubilation and
Speaker 1: enthusiasm in the convention hall. At least these folks think
Speaker 1: it's now his race to lose.
Speaker 4: Yeah, it's hard not to feel whipsaw the headlines.
Speaker 5: It feels like of the last couple of weeks changing
Speaker 5: very dramatically, you know, post the debate with Joe Biden
Speaker 5: and a really tough showing there, and of course the
Speaker 5: assassination attempt on Donald Trump, and then of course just
Speaker 5: the momentum that we're seeing at the RNC. Having said that,
Speaker 5: are you getting ready to be whipsawd again in terms
Speaker 5: of maybe Joe Biden stepping aside at least for the
Speaker 5: next run here it come November.
Speaker 1: We might very well. I think we all need to
Speaker 1: be prepared for any contingency. What we're hearing here on
Speaker 1: the ground from folks around the former president, former President
Speaker 1: Trump and his orbit is that they don't think it
Speaker 1: makes any difference. They're running against the Biden administration and
Speaker 1: Democrats record and the inflation and some of the other
Speaker 1: economic factors of the last few years. They think, if
Speaker 1: it's not Biden, they're most likely to be running against Harris,
Speaker 1: and if they're running against Haterras, they're run against Biden.
Speaker 1: They're saying that even if it were to be someone else,
Speaker 1: they think they would still run against the Biden record.
Speaker 1: But in reality, I think they have not really prepared
Speaker 1: for a different contest that is not against Joe Biden
Speaker 1: or Kamala Harris. So the next few days are going
Speaker 1: to be obviously very determinative, and nobody knows what's going
Speaker 1: to happen or when it's going to happen, and that
Speaker 1: that is the only wild card per se at this convention.
Speaker 1: You know, Vance well received last night, I would say,
Speaker 1: not jubilant, but the crowd liked him and was interested
Speaker 1: in his message, and I think outside of the convention hall,
Speaker 1: it's a message they are banking on that resonating in
Speaker 1: Ross belt states.
Speaker 3: That's so interesting to hear that. I want to go
Speaker 3: back to what you were saying about a potential change
Speaker 3: at the top of the ticket. What if there isn't
Speaker 3: a change at the top of the ticket, how do
Speaker 3: how does the nominating process move forward when there is
Speaker 3: so much division within the Democratic Party, at least in
Speaker 3: certain levels, and also when you know, every little moment
Speaker 3: of the current president's day is sort of seized on
Speaker 3: for signs that he's not fit to run.
Speaker 10: Uh.
Speaker 1: Yeah, I think you're asking a question about a lot
Speaker 1: of journalists covering stories are asking, and that a lot
Speaker 1: of Democrats who have a vested interest in this race
Speaker 1: are asking. I mean, there are a few different ways
Speaker 1: that if President Biden decides that he's going to continue
Speaker 1: his re election, but there's a few different ways that
Speaker 1: things could emerge. Either, Number one, they could do a
Speaker 1: virtual nomination. There is a possibility that that could happen
Speaker 1: as soon as next week, but it just doesn't feel
Speaker 1: like that's where the mood of Democratic delegates is now.
Speaker 1: He could be nominated at the convention, or there could
Speaker 1: be a challenge. So those are essentially the scenarios that
Speaker 1: all of the Trump campaigns planning is for a campaign
Speaker 1: to run against Joe Biden. So I don't think they're
Speaker 1: looking at switching it up. But I think even if
Speaker 1: Biden decides to stay in the race, his campaign is
Speaker 1: going to need to rethink the way they are messaging
Speaker 1: in the final weeks of the race because right now,
Speaker 1: the majority of the American public, and it seems that
Speaker 1: in some bully majority Democrats are not confident that he's
Speaker 1: the best student to carry on for the next four years.
Speaker 5: Well, the presidential race is on, so is the messaging race.
Speaker 5: I'm looking at your election graph report that you guys
Speaker 5: have put out. More than twenty two hundred Facebook pages
Speaker 5: have run ads since last fall mentioning US presidential candidates
Speaker 5: collectively exceeding one billion impressions billion with a B as
Speaker 5: of the end of April. That's according to your analysis.
Speaker 5: But one of the things that you guys identified that
Speaker 5: is troubling is these inauthentic actors. Information versus misinformation. It
Speaker 5: is critical, especially when it comes to a presidential race.
Speaker 10: Oh, that's right.
Speaker 1: I'm glad you're in this project. I'd love to tell
Speaker 1: you a little bit about it. My institute at Syracuse University,
Speaker 1: which is focused on the connection between people's civic involvement,
Speaker 1: their trust and government and their trust in the news, right,
Speaker 1: that's our sweet spot. Was very happy to be able
Speaker 1: to apply for and receive a grant from a company
Speaker 1: called neo Forge. If you have not heard of these guys,
Speaker 1: they're really interesting. They've been involved in everything from NASA
Speaker 1: projects and projects in London to that great reporting on
Speaker 1: the Panama papers. And what they are is they are
Speaker 1: an analytics and graph database company. And if you think
Speaker 1: about spreadsheets or kind of the old school researcher in
Speaker 1: times of in terms of ros and columns, they allow
Speaker 1: you to see in sort of more of a three day,
Speaker 1: three D way, the hidden connections between actors and you
Speaker 1: can see patterns that are hard to uncover. My lead researcher,
Speaker 1: my colleague Jenny Stromergali, and her team built these searches,
Speaker 1: these algorithms to look at messaging right now in paid
Speaker 1: ads on Facebook and Instagram, and that is what they found.
Speaker 1: A portion of these ads around the campaign involved in
Speaker 1: authentic influencers. These are groups that seem like they're unique
Speaker 1: and different, but they're really appear to just be shells
Speaker 1: of other groups. They're carrying the same often misleading videos
Speaker 1: or texts. Some of them are spreading financial scams, and
Speaker 1: as social media platforms like Facebook seek to shut them down,
Speaker 1: there's another one under a slightly different name, just ready
Speaker 1: to pop up and carry on. In some cases, these
Speaker 1: could be misleading voters about policy, and often they are.
Speaker 1: Sometimes they're just financial scams, and so they're taking advantage
Speaker 1: of people's interest in the presidential election in order to
Speaker 1: capture voluntarily their credit card information, their CBC code, and
Speaker 1: then they're getting bills for things they never thought they
Speaker 1: were authorized. And so you really is it is really
Speaker 1: voter beware because they're not just trying to manipulate your vote,
Speaker 1: they're just trying to take your money too. And that's
Speaker 1: not the majority of ads, but it's impossible to tell
Speaker 1: the difference when you're just online and market information.
Speaker 3: We only have about forty seconds left, but I'm wondering
Speaker 3: if you think that the social media company are doing enough.
Speaker 1: The reason our research only looks at Facebook and Instagram
Speaker 1: is it's the only research we have access to. And
Speaker 1: my group is not an advocacy group. We don't lobby
Speaker 1: for anything. But I'll tell you, just as journalist, Congress
Speaker 1: needs to get much more involved in compelling these social
Speaker 1: media platforms, other ones to make this kind of information
Speaker 1: available if they truly want to stop it. It's impossible
Speaker 1: to stop it on their own if they don't, if
Speaker 1: the public and journalists and researchers don't also have access
Speaker 1: to do this sort of tracking.
Speaker 5: I feel like journalists know this. We have to really
Speaker 5: understand our sources and where things are coming from. That's
Speaker 5: kind of journalism one oh one. But even as you know, voters, citizens,
Speaker 5: especially in a social media world where we get so
Speaker 5: much of our news from social media, you have to
Speaker 5: be really smart about understanding exactly where the sources. And
Speaker 5: that's true certainly when it comes to political campaign messaging. Margaret,
Speaker 5: great to reconnect, Really appreciate your time today, Margaret talav
Speaker 5: She is director of the Institute for Democracy, Journalism and
Speaker 5: Citizenship at Syracus University and of course, former senior White
Speaker 5: House correspondent here at Bloomberg News. Joining us from the
Speaker 5: RNC in Milwaukee.
Speaker 2: Bromarco a journal Now about you? Let me drive?
Speaker 8: Oh no, no, no, no, who's gone to drive?
Speaker 10: Honey?
Speaker 7: Please?
Speaker 8: How do the ride gravels? Let's mate, I want to drive.
Speaker 8: It's good question that try.
Speaker 2: This is the drive to the Globe dot.
Speaker 8: Com Tim Mefeck, Well, buy a round.
Speaker 2: Don on Bloomberg Radio.
Speaker 5: All right, everybody, just about eighteen minutes left in today's
Speaker 5: trading session on this Thursday, July eighteen. Charlie just breaking
Speaker 5: down the numbers. We're just coming off our loads of
Speaker 5: the session. But it's definitely more of a risk trade
Speaker 5: or risk off trade, I should say. If I look
Speaker 5: at the S and P five hundred though, if I
Speaker 5: pull it up on the Bloomberg, I've got yeah, most
Speaker 5: names lower three hundred and eighty one names to the downside.
Speaker 5: Tim one hundred and twenty gaining ground two unchained.
Speaker 3: It's pretty amazing to see. Oh, thank you for turning
Speaker 3: on my microphone.
Speaker 2: What I was saying.
Speaker 3: It's pretty notable to see the broad based decline today,
Speaker 3: also hitting the rest of two thousand. As we just
Speaker 3: heard from Charlie. Let's see what Max Wasserman has to
Speaker 3: say about it. He's founder in senior portfolio manager at
Speaker 3: the Ria Miramar Capital. He joins us from Northbrook, Illinois. Max,
Speaker 3: how are you.
Speaker 8: I'm doing well? Thank you? Were you guys?
Speaker 3: We're doing pretty well. Hey, we're gonna get to your
Speaker 3: stock picks because you send us. Thanks for sending us
Speaker 3: some really interesting companies to talk about in a second.
Speaker 3: But I want to talk big picture first, because you're
Speaker 3: you argue that that the haves are doing pretty well
Speaker 3: in our country, but the have nots are not doing
Speaker 3: so well. Talk a little bit about that.
Speaker 8: Well.
Speaker 11: When I say the haves with ability is to trade down,
Speaker 11: what we're seeing is people who have their resources are
Speaker 11: trading down in their picks, so they still have the ability,
Speaker 11: but inflation, high cost real estate is affecting their choices more.
Speaker 11: People who don't have that ability, you know, they're really
Speaker 11: suffering more. I mean, if you only have ten dollars
Speaker 11: and inflation's higher, then it's a hitting you harder than
Speaker 11: someone who has one hundred dollars who has more flexibility.
Speaker 11: So what we're seeing is that people in the lower
Speaker 11: to middle class are being hit by the inflation, the
Speaker 11: rising costs, and their ability to navigate through this expensive
Speaker 11: inflationary environment is much harder than someone who has much
Speaker 11: more discretionary income.
Speaker 5: Always important to point out, and we have been saying,
Speaker 5: I feel like fairly regularly too, that we have to
Speaker 5: remember that our society, not everybody's in the stock market.
Speaker 5: A lot of people are not, and that Wall Street
Speaker 5: is not necessarily main street. Why are you, though, thinking
Speaker 5: that it's really important to make the point that you
Speaker 5: just did.
Speaker 8: Well, I think what you just said.
Speaker 11: I mean basically, a stock market, you know, is reflecting
Speaker 11: financial assets and everything that goes into that, you know,
Speaker 11: federal fund policy, fiscal policy. But if you look at
Speaker 11: people are living the day to day and they go
Speaker 11: to the grocery store, you know, higher inflation, higher cost
Speaker 11: of goods, you know, milk, gas, it affects their day
Speaker 11: to day and it makes tough choices where people again
Speaker 11: who have the ability. So if you look at where
Speaker 11: people are shopping, you look at are they trading down,
Speaker 11: so you look at companies that can benefit from the
Speaker 11: change in consumer spending. So that's really the key thing.
Speaker 11: Who has the money and who doesn't have the money?
Speaker 11: And what we're still seeing, even in this environment of
Speaker 11: the halves, the stock market is extremely well off right now.
Speaker 11: And I say extremely because you're still looking at an
Speaker 11: index about seventeen percent up. So people who have money
Speaker 11: in four oh one case, they're not feeling hurt even
Speaker 11: with any pullback in the market. They're feeling like they're
Speaker 11: doing well. But people who don't have money in the market,
Speaker 11: who have to go to the grocery store, who have
Speaker 11: to pump the gas, who have to they're feeling inflation
Speaker 11: a lot more tangibly interesting.
Speaker 3: Yeah, I mean, it's not something. It's interesting that we're
Speaker 3: talking about this now when inflation has come down max then, right,
Speaker 3: you know, and you know because we were talking a
Speaker 3: lot about this over the last eighteen months. But the
Speaker 3: FED is I'm not going to say it's but every
Speaker 3: person we talk to pretty much says there's going to
Speaker 3: be a soft landing, and the FED chair is pretty
Speaker 3: confident that we will see inflation return to that target
Speaker 3: two percent. Why is this on your radar right now
Speaker 3: as we speak.
Speaker 11: Well, I think what you're going to see is you're
Speaker 11: going to see a hiccup. You're always going to do it.
Speaker 11: There's no such thing as a pure smooth landing. It
Speaker 11: could be sparked by politics, it could be doing anything.
Speaker 11: But with these valuations levels at this high, at what
Speaker 11: we have right now at the S and P, the Nasdaq,
Speaker 11: anything that hiccups this market's going to pull it back.
Speaker 11: But the reason I'm bringing that up is because everybody
Speaker 11: knows it, and everybody's been concentrating their investments in the
Speaker 11: top seven technology stocks. Like there's a big discrepancy between
Speaker 11: the S and P five hundred, which is cap weighted,
Speaker 11: and the equal weighted index of the S and P.
Speaker 11: And the general market itself has been struggling, but the
Speaker 11: market caps of these big large tech companies have been
Speaker 11: doing extremely well. So when you listen to companies reports,
Speaker 11: as I do, you listen to conference calls, you're seeing
Speaker 11: the majority of companies are being hurt by inflation. They're
Speaker 11: being hurt by the cost of goods, and that reflects
Speaker 11: the consumer. But the high tech has been immune for
Speaker 11: now do you.
Speaker 5: Need to be or should we be worried about the rotation?
Speaker 5: But what's interesting even today the you know, we've seen
Speaker 5: megacap tech pulling back, but we've also small caps were
Speaker 5: on or moved to the upside a rise, a little
Speaker 5: bit of a trend there, but we're seeing small caps
Speaker 5: financial shares also way down today, concerns about economic weakness.
Speaker 5: Is there something though in the economic outlook that should
Speaker 5: make us start to be as investors a little bit
Speaker 5: more worried and concerned about some kind of economic downturn?
Speaker 11: Well, I think there's two ways you look at from
Speaker 11: the ambassadors from people are relying on income like fixed
Speaker 11: income or money markets. Right now, they're getting about five
Speaker 11: percent on short term money markets. So if the cond
Speaker 11: to slow down in the FED cut interest rates, that's
Speaker 11: going to affect those people looking for or what I
Speaker 11: call safe money market returns of five percent, So that
Speaker 11: could affect them. Although a rotation in the market is
Speaker 11: perfectly healthy. When you look at these valuations of these
Speaker 11: top tech they're thirty seven forty times earnings. When that
Speaker 11: money comes out, it's going back into companies that have
Speaker 11: been hit hard. You know, you know, you look at healthcare,
Speaker 11: you look at financials, you look consumer staples. These stocks
Speaker 11: have already reflected this slow down in the market, so
Speaker 11: when money comes into them, that creates opportunity. So if
Speaker 11: we look at risk reward in the market, we think
Speaker 11: you have better reward outside of technology than in the
Speaker 11: fact that your technology.
Speaker 4: So let's go there. Hershey is one of the names
Speaker 4: that you like. It's up three percent year to date.
Speaker 4: Tell us why Hershey?
Speaker 3: Have you ever had a more come on, Carol? Why Hershey?
Speaker 8: How do you not like s'mortes?
Speaker 5: Yeah?
Speaker 2: I got.
Speaker 4: In diseases beyond.
Speaker 11: But we're dividend investors, so we're looking for companies that
Speaker 11: are miss priced playing a good dividend. Now it's paying
Speaker 11: about two point eight percent the average dividend increase, where
Speaker 11: five years been twelve percent, trained roughly twenty times earnings.
Speaker 11: Five year average is twenty three. And it's been hit
Speaker 11: by cocoa prices. So cocoa prices inflation's been hurting them.
Speaker 11: But their organic growth is still two to four percent.
Speaker 11: So when I look at a company that's traded in
Speaker 11: a discounts, what's five year average underlining growth is still there.
Speaker 11: It's paying me a growing dividend. You know, the year
Speaker 11: high on the stop was roughly about two forty eight,
Speaker 11: So I'm not buying it near the top. I'm actually
Speaker 11: buying it near the lower half where it's been trading.
Speaker 11: I think there's more upsides, especially as inflation comes down.
Speaker 11: This company should benefit when it has organic growth already.
Speaker 3: Okay, I want to get to one more. We only
Speaker 3: have about forty seconds left. But you like defense stocks,
Speaker 3: including General Dynamics up thirteen percent so far this year,
Speaker 3: around two hundred ninety three dollars a share.
Speaker 8: Make your case for it.
Speaker 11: Okay, look at eighty percent of it is defense and
Speaker 11: twenty percent is the Gulf Stream. So eighty percent is
Speaker 11: the Striker, the Abrams tanks and the nuclear subs. So
Speaker 11: if you look at China, you look at nuclear subs,
Speaker 11: you're looking at Eastern Europe, you're looking at the striker,
Speaker 11: looking at Abram tates the Middle East, then you got
Speaker 11: twenty percent of their business at golf Stream is coming
Speaker 11: online with the new G seven hundreds, which would really
Speaker 11: help them benefit them. So we think it's a core
Speaker 11: defense company, and it has a cyclical kit with the
Speaker 11: airline industry with the G seven hundred eight hundred series,
Speaker 11: which would really propel their earnings.
Speaker 4: All right, good to leave it on that note.
Speaker 5: The stock, by the way, General Dynamics up about thirteen
Speaker 5: percent so far here in twenty twenty four. Max Wasserman,
Speaker 5: thank you so much, Founder and senior portfolio manager at
Speaker 5: the registered investment advisor mir Mark Capital. Joining us from Northbrook, Illinois.
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