Deals Trump the Market, How Equities React, Fundamentals Make the Pitch…
07.10.2020 17:28 - GAMCO International SICAV
By: Michael Gabelli, Managing Director, Director of Alternative Investments – Gabelli Group
U.S. equities scored a second consecutive strong gain for the quarter ended September 30, and the best trailing six-month performance since 2009. Overcoming a weak September, the new bull market that started on March 23 is intact and has been driven by record monetary and fiscal stimulus, the evolving Chinese and U.S. economic recoveries, and heightened virus vaccine hopes. However, this positive investment backdrop may be losing steam as the September employment report was below expectations and recent academic research and speeches by various Federal Reserve officials have cast doubt on the longer-term viability of the U.S. economic expansion. Additionally, President Trump has tested positive for COVID-19, which sets up a new election dynamic with a myriad of unique investor uncertainties and possible political outcomes. Offsets to a developing economic slowdown include a potentially historically large inventory restocking cycle, the strong residential housing market and, hopefully, a new fiscal stimulus package including infrastructure spending.
Deals are back as merger and acquisition activity rebounds sharply from the lows and CEO and Boardroom confidence returns: September 30, 2020 Reuters News story headline and sub headlines – “M&A spikes in record third quarter as boards go on pandemic deal spree - Global deals top $1 trillion in record third quarter - Deals mostly with stock as companies hang on to cash - M&A activity still down 21% for the year so far - Healthcare and technology sectors in vogue.”
On September 18, Barron’s financial writer Andrew Bary wrote a piece titled “Malone at Bat: Will He Use the Mets Deal to Boost the Braves' Value?” Excerpts: Liberty Braves Group, a tracking stock for John Malone's Liberty Media, is valued at about $1.2 billion, a big discount to both Forbes' valuation of $1.8 billion for the team and the Mets price… Many investors would like Malone to spin off the Braves as a regular stock as a prelude to selling the team. But the team is the only active business within Liberty Media, as defined by the Internal Revenue Service…Tax expert Robert Willens says Liberty could "finesse" the active-business test. "All Liberty has to do is acquire some other active business, of relatively modest size, which has been actively conducted for at least five years, in a tax-free transaction," he emailed Barron's. Malone, he adds, is a master of tax-efficient transactions. He thinks the Braves ought to be worth at least as much as the Mets… G. Research analyst John Tinker has been bullish, putting a private market value of $44 a share on the tracking stock.
Batter up!
