What You Need To Know This Week — February 22nd, 2020

What You Need To Know This Week

A weekly recap to keep you informed on the most important events this week impacting markets, business, tech and the global economy.

MORGAN STANLEY TO ACQUIRE E*TRADE FINANCIAL FOR $13 BILLION AS CONSOLIDATION OF THE DISCOUNT BROKERAGES CONTINUES
Wall Street investment bank Morgan Stanley agreed to acquire online discount brokerage firm E*TRADE in an all-stock, $13 billion merger. This consolidation follows Charles Schwab’s recently announced acquisition of TD Ameritrade and its elimination of trading commissions, which pressured E*TRADE’s share price. The deal further moves Morgan Stanley away from investment banking, trading and towards the more consistent wealth and investment management business. Morgan Stanley’s stock fell 4.6% on the news, while E*TRADE rose 21.8%.

MUTUAL FUND COMPANIES LEGG MASON AND FRANKLIN RESOURCES MERGE IN A $6.5 BILLION DEAL
Venerable but fading mutual fund companies Franklin Resources and Legg Mason announced a $6.5 billion merger. Franklin Resources, which manages nearly $700 billion in assets under its Franklin Templeton brand, agreed to acquire Legg Mason for $50.00 cash, representing a premium of 22.8%. The combined company will have $1.5 trillion in assets under management, making it the sixth largest global asset manager

REAL ESTATE INVESTMENT FIRMS STARLIGHT AND KINGSETT TO ACQUIRE NORTHVIEW APARTMENT REIT FOR $4.8 BILLION
Northview Apartment Real Estate Investment Trust has agreed to be taken private by real estate investment firms Starlight Group and Kingsett Capital for $36.25 cash per unit. The acquisition continues the trend of institutional investors pouring capital into private real estate, seeking to generate yield from residential apartment buildings. Northview’s stock was up 13% on the news.

DOMINO’S PIZZA STOCK SURGES 25% ON FOURTH QUARTER RESULTS
Shares of the pizza chain Domino’s soared after the company reported fourth quarter results, which topped analyst expectations. Investors were concerned that the company’s results would come under pressure from meal delivery companies such as UberEats and DoorDash, however, same-store sales growth for the company of 3.4% topped analyst estimates of 2.3%. The stock has been a star performer, returning over 1,200% (nearly 40% annualized) over the past 8 years.

Recommended Articles, Podcasts, Books and Tweets

Save the date: Listen to Accelerate CEO Julian Klymochko discuss 3 Alternative Strategies to Diversify Your Portfolio on the AIMA webcast, February 24th at 11:00am EST. Click here to register.

Listen to an “Ask Me Anything” with Basecamp founder Jason Fried, in which he discusses work-life balance, avoiding burnout, defining success, company culture, and more on Peter Attia’s The Drive podcast.

Warren Buffett will release his annual letter to Berkshire Hathaway shareholders on the morning of Saturday, February 22nd.

Alpha + Beta represents one of the latest innovations in investment management because it offers a considerable improvement over the traditional index. Alpha + Beta provided significant outperformance compared with the index in Canada over the past 20 years. The strategy returned 17.4% annualized while the index gained 6.3% per year.

Virgin Galactic, a speculative stock deemed “Tesla Junior”, has rallied 400% since early December. The catalyst for the share price rally? Retail traders on Reddit chat rooms.

Charlie Munger’s advice to young people, as stated at the recent annual general meeting of the Daily Journal: “It would be a lot harder than it was to get ahead in the world the way it was when I came up. My best advice, I think you would be happier if you reduced your expectations.”

Can venture capital be replicated with liquid public securities? Yes, “VC fund performance from 2002 onward is comparable to that of the NASDAQ.”

The value factor has suffered a poor start in 2020. “That is, in a decade quite bad for value investing, the start of 2020 is the absolute worst 6-week period.”

Japan’s GDP declined by a -6.3% annualized rate in the fourth quarter. Not good.

World’s richest man Jeff Bezos started a $10 billion Earth Fund to fight global warming.

France’s richest man, Bernard Arnault, had his leveraged buyout of Tiffany & Co partially funded by the European Central Bank at interest rates of between 0% and 1%.

Sprint and T-Mobile revised the terms of their merger, cutting Sprint shareholder Softbank back by -11% and leaving public Sprint shareholders whole.

-The Accelerate Team

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