Weekend Reads for Investors: Themes to Watch, MOOCs, and Olympic Predictions

The Federal Reserve’s Beige Book, published eight times a year, summarizes current economic conditions in the US by collecting anecdotal data from a range of sources, including business contacts, economists, and market experts. Goldman Sachs (GS) has adapted this practice for their own S&P 500 Beige Book, a quarterly survey of corporate conference calls which similarly collects “anecdotal evidence of fundamental and thematic trends” from which they highlight major themes. Their most recent edition, based on fourth quarter earnings calls, presents four themes for the year ahead that bear close watching. They include:

• Margin expansion will be a challenge in 2014 — Managements noted difficult pricing environments and higher raw material and labor costs as key offsets to further efficiency gains.
• Continued optimism for emerging markets — Surprisingly, most companies remain optimistic about their prospects in emerging markets. While some firms noted a slowdown in business activity, most still see emerging markets as a key driver of growth.
• Capital return vs. capital spending — With cash levels still at record levels and cash flows holding strong, many companies continue to favor returning cash to shareholders via dividends and stock buybacks. Capital expenditures and M&A activity are lesser priorities.
• Currency head winds — Many firms highlighted the weakening Japanese yen and volatile emerging market currencies as primary reasons for their reduced revenue expectations.

Here are some other worthwhile reads you may have missed in recent weeks.

Strategic Thinking

• Bruce Berkowitz’s always informative annual letter to shareholders. (Fairholme Capital Management, PDF)
• Robert Huebscher’s interview with James Montier. (Advisor Perspectives)
• Jeremy Grantham’s shares his investment lessons learned. (GMO, PDF)
• A conversation with Yale economist and Nobel laureate Robert Shiller. (You Tube)

Valuation

• Aswath Damodaran on Twitter’s earnings and the market’s reaction. (Musings on Markets)
• In case you were wondering which Internet stock is the most overvalued. (The New Yorker)
• Jeff Matthews remains a skeptic when it comes to IBM’s accounting. (Jeff Matthews Is Not Making This Up)

Activist Investing

• An annual review of trends in shareholder activism. (Activist Insight, PDF)
• Carl Icahn’s letter to fellow Apple shareholders. (Shareholders’ Square Table)
• An unlikely alliance is seeking to check the power of activist hedge funds. (The New York Times)

Big Data

• Aaron Timms on the race to topple Bloomberg. (Institutional Investor)

Frontier Markets

• “Winning in Africa: From Trading Posts to Ecosystems” (BCG Perspectives)
• Sub-Saharan Africa: A major potential revenue opportunity for digital payments. (McKinsey & Company)

Online Education

• “The Digital Disruption of Education Publishing” (BCG Perspectives)
• The disruptive power of MOOCs. (The Economist)
• John Cochrane on Mooconomics. (The Grumpy Economist)

Behavioral Matters

• For US biotech firms, IPO fever stokes bubble fears. (Financial Times)
• Jason Voss on the top anecdotal signs of a market bubble. (Enterprising Investor)

Bad Actors

• “Taming the Wolves of Wall Street” (Huffington Post)

The Lighter Side

• Discussing strategy and leverage with Jeopardy! Champion Arthur Chu. (Mental Floss)
• “The Flying Tomato Would Rather You Not Call Him That Anymore” (The New York Times)
• “Predicting the Winter Olympics with Economics” (Freakonomics)

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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