• Alphabet (GOOGL) recently announced that it is going to do a 20-for-1 stock split. Historically, companies that conduct stock spits rise 25% over the next year (compared to just 9% for the S&P500). Alphabet’s move may encourage other high priced companies to do stock splits as well. Currently 17% of the S&P 500’s value is currently in stocks that have a share price of $500 or higher.
• Companies that are targets for an impending acquisitions tend to trade 5% or less below the announced acquisition price. Recently, however, companies like Activision (to-be acquired by Microsoft) and Change Healthcare (to-be acquired by United Healthcare) are trading 17% and 26% below the offer price. Clearly, investors believe regulatory risk is high.
• Over the past year the cost of bread, meat and eggs all rose by double digits and the price of gasoline increased 40%. These inflationary pressures have decreased the purchasing power of Americans. Reflecting this fact is University of Michigan consumer confidence reading, which is at it lowest level since 2011.
• Private-equity-backed transactions in China increased by 26% in 2021, accounting for a record $108 billion in transaction value. This indicates that the private equity industry, which has been much larger in the US and EU, is in growth mode in China.