Value Investor Daily #2

Paramount and Warner Bros. Mull Merger, Weight Loss Drugs Could Reach $400 Billion, FinX Breaks Down Semis

In Today's Edition:

Merger Talks: Paramount and Warner Bros. Discovery

CEOs of Warner Bros. Discovery and Paramount Global discussed a potential merger in New York.

The deal would create a news and entertainment giant and could lead to further industry consolidation. The two companies' streaming services could merge to rival Netflix and Disney+.

The merger could drive significant synergies, but Paramount's large debt is a concern.

Talks are in the early stages, and the deal may not result in a merger. Nonetheless, given the growing encroachment of Big Tech on media and the acceleration of cord-cutting, neither company can afford to stay on the sidelines for long.

Warren Buffett’s Berkshire Hathaway is the largest shareholder.

Is an 8% Withdrawal Rate Safe? Not Exactly.

After decades of compounding, the day may come when it’s time to start withdrawing from your nest egg.

  • How much should you pull out each year?

  • Should you adjust for inflation?

  • How much should you invest in bonds during your retirement vs. stocks?

Nick Maggiulli investigates Dave Ramsey’s recent claim that an 8% withdrawal rate is perfectly safe.

Spoiler, it’s not. In Maggiulli’s study, it survived only 16-51% of the time.

But does the gold standard 4% rule still stand?

In short, yes.

Some have said the rule should be adjusted to 3% due to lower bond yields than decades past, and higher inflation. Although, according to Maggiulli, you’ll likely be fine at 4%.

So the safe withdrawal rate is still 4%. But if you need to withdraw more than that, plan on counter-intuitively keeping a higher allocation in stocks, as you’ll need the gains equities typically provide to go the distance.

I’m constantly proving that I’m a good Photographer in an environment where people think a guy with bigger lens is a better Photographer and I was given a challenge when I took this Photograph to prove just some points of my skill :)

Japan’s Nippon Steel acquires U.S. Steel

Japan’s Nippon's Acquires U.S. Steel

Japanese steelmaker Nippon Steel's $14.9 billion acquisition of U.S. Steel Corp could have significant implications for the automotive industry.

The deal followed a bidding war sparked by Cleveland-Cliffs' offer for U.S. Steel, which was opposed by automakers due to antitrust concerns.

Nippon's acquisition is likely to be more favorable to U.S. automakers than the Cleveland-Cliffs offer, as it would not significantly consolidate the U.S. market.

While 100% consolidation of electrical steel (used in EV’s) production under the Cleveland-Cliffs deal raised antitrust concerns, Nippon's proposed acquisition will maintain competition in the space and is unlikely to face the same scrutiny from automakers and regulators.

Carl Icahn Starts New Proxy Battle with Illumina

Activist investor Carl Icahn is preparing to initiate another proxy battle with Illumina, the gene sequencing giant. Icahn aims to appoint additional nominees to Illumina's board, following criticism of the company's acquisition of Grail.

Shareholders previously elected one of Icahn's candidates amid concerns over the Grail deal, and he now seeks to elect more representatives as Illumina faces challenges in the wake of the acquisition. Icahn has been a vocal critic of the $7 billion Grail acquisition, which brought regulatory problems for Illumina after the European Union blocked the deal due to concerns over stifled innovation.

Icahn believes that Illumina made a mistake with the deal, which has seen the company's stock drop 75% since the acquisition and wiped out $55 billion in shareholder value.

Cevian Capital Acquires €1.2bn Stake in UBS

Cevian Capital, an activist investment firm based in Stockholm, has acquired a €1.2 billion stake in UBS AG, one of the largest banks in Switzerland.

Cevian sees "significant value potential" and is betting on the bank's efforts to narrow the gap between itself and Morgan Stanley.

Cevian also praised UBS's integration of Credit Suisse, positioning the combined firm as one of the largest global wealth managers.

Analysts from Cevian Capital stated that they believe UBS should be valued on par with Morgan Stanley and that the downside protection for UBS is immense. UBS shares have risen almost 4% following the announcement.

6 Stocks With 500% Potential Upside

Fund Manager Alex Umansky, has shared six stocks that he believes have the potential to return at least 500% in the coming years.

Umansky, whose fund has returned 55% since January compared to the S&P 500's 24%, is betting on names such as Amazon, Nvidia, and Tesla, which have all had stellar years so far.

Umansky believes in the future of artificial intelligence and is hanging on to these stocks. However, he is also bullish on three smaller names - Shopify, Crowdstrike, and Trade Desk.

Umansky believes that Shopify will be an alternative to Amazon for businesses, Crowdstrike will benefit from the growing online presence of businesses, and Trade Desk will benefit from the prevalence of streaming today.

Valuations are extended, however, trading at 72X cash flow on average. AMZN is the lowest at 22x.

The tech bubble of 2021 may be back:








Price/Cash Flow (TTM)







Goldman: Eli Lilly Stock Poised for 140% Surge

Goldman Sachs has predicted that Eli Lilly's stock could increase by 140% by 2028, driven by the growing use of GLP-1 weight loss drugs. The firm estimated that if all GLP-1 trials are successful, around 68 million Americans could be taking the drugs by 2028.

This potential success could result in GLP-1 drug revenues of up to $400 billion, far surpassing previous Wall Street estimates. Goldman Sachs emphasized that investors are underestimating the reach and potential of GLP-1 drugs beyond obesity.

The firm compared the drugs to platforms like Apple's iPhone and Amazon's e-commerce business. If certain upcoming GLP-1 studies meet their endpoints, the floodgates for insurance coverage of GLP-1 drugs could open, potentially increasing demand for the drugs.

Despite the bullish predictions, Goldman Sachs currently rates Eli Lilly's stock as "Neutral" with a $600 price target.

Bank of America: Long-Term Bull Market Intact

According to Bank of America, the long-term bull market in stocks is still alive and well.

The US stock market has been in a bull market since 2013, following a 13-year consolidation period that began after the dot-com bubble in 2000.

The bank expects the long-term trend for stocks to continue. "The recent upside breakouts from big bases on the Dow Jones Industrial Average and other key US equity indices suggest that the secular bull market continues," BofA said.

CLCO: Value in the LNG Shipping Sector

Cool Company Ltd. (CLCO) is an attractive value stock in the LNG maritime sector, with a potential upside of 29%.

The company is benefiting from strong demand for LNG, driven by emerging markets and Europe's shift from Russian gas. Europe is expected to increase its regasification capacity by nearly 48% by 2030.

China's LNG imports are also on the rise. CLCO's valuation ratios are lower than its industry peers, with its P/E ratio 71% lower than the market average and its EV/EBITDA 26% lower. It’s trading at just 3.3x TTM GAAP EPS.

The company has a relatively young fleet, with an average age of seven years compared to the global fleet average of ten years.

The company could be worth a deeper dive.

4 Multibaggers Ideas for 2024

The Motley Fool has identified four stocks that it believes are poised to be "unstoppable multibaggers" in 2024 and beyond. The stocks are SoFi Technologies, Progyny, Kinsale Capital, and Lovesac.

SoFi Technologies, a financial technology company, has seen growth in its financial services unit and is rapidly expanding its banking operations. Progyny, which provides fertility benefits solutions, has recorded better pregnancy outcomes than the national averages and is experiencing high customer satisfaction.

Kinsale Capital, a niche insurance company, has outperformed its peers with strong profitability metrics. Furniture maker Lovesac has gained market share in a challenging consumer spending environment.

Lovesac looks the most attractively priced:






Price/Free Cash Flow (TTM)





Time to Rethink The Fed's 2% Inflation Target?

Zachary Karabell says the Federal Reserve's 2% inflation target is an arbitrary number that lacks a solid theoretical foundation. The target has only been in place since 2012, and before that, there was no stated inflation target.

Additionally, he suggests that the Fed should consider allowing wages to grow and allow for more fluctuation in the inflation rate, rather than strictly aiming for 2%. Karabell warns that when policy becomes dogma, mistakes can be made and harm can be done.

He urges the Fed to re-evaluate whether the 2% target remains appropriate in a world that has changed since 2012.

FinX Breaks Down the Semiconductor Industry

As the industry continues to accelerate from the super-cycle of AI-fueled enterprise investment, the market is anticipating growth, especially in high-end chips (and packaging), over the next 5 years.

The VanEck Semiconductor ETF (SMH) trades at 15 times earnings now vs. the current 26 P/E on the S&P 500.

The new highs in semi stocks comes as Micron releases earnings. 

The stock was up over 4% in after-hours trading after beating expectations and raising next-quarter guidance to $5.1 to $5.5B. Estimates were at $4.99B.

Micron predicted rises in smartphone, PC, and server chip demand next year.

Questions or Suggestions?

We’ll gladly answer your most burning questions in a future issue.

What else would you like to see most from us? Just hit reply and let us know.

We’ll get to work on it, we’re here to help you become a better investor!

Happy Investing,

Value Investor Daily