We Be Huntin' Series - What is the Catalyst for the Catalent Inc (NYSE: CTLT) Trade

 

Hunting in Packs - Paul Singer -- Catalent (CTLT)

Investing is a lot like fishing or poker -- it takes patience and discipline. I've found that some of my best trades have come about because I did my research early, had conviction, and then entered the terms of my trade in hopes it would be filled when the market met my expectations -- NOT the other way.

My Mansa Musa network often helps to shape my thinking and when we execute trades together or hunt -- we often make money together in business, real estate, investing, etc. When I combine all these concepts or mentalities into one you get the Mansa Musa Mentality. Arguably the richest person in history, Mansa Musa, ruled over a large empire and put cities like Timbuktu on the map as they were known for their cities and libraries.

This posts is an example of how the #MansaMusaMentality work and how I use my extended network to invest. Almost like a case study, I'll highlight how these contacts guide me on investments such as buying real estate, stocks, precious metals, cryptocurrencies, etc. And I want to foster a community culture, so I'll show you how I learn from them and maybe in the future we can crowdsource or here we call it #tribesource investment ideas for the future.

"Detail" - A Breakdown of my Catalent (CTLT) Investment

Year: 2023

Throwback Link:  n/a

Research Timetable: July 2023

Research Details:

I read a really good article about Paul Singer, an investor, who is in my Mansa Musa network. Don't believe me just look him up in this 2021 article: URBANOMICS: Mansa Musa Mentality - Building Your Investment Empire

Paul Singer is a hunter, or should I say investor that comes across as shrewd and non-compromising. I started reading articles last year about how he was setting his sights on Catalent. They've had of issues going on:

• Declining business after the COVID-19 pandemic
• Senior Management leaving the company
• FDA notice about cleanliness issues at a facility (a notice or citation is when the regulators find a problem and in healthcare this is bad)
• Left at the Alter - Snubbed by the company Danaher, there was hook up here
• Delayed earnings reports (think about getting your annual checkup, but not wanting to tell anyone)
• Down 50% of their value in since 2022; down 65+% since 2021

I don't rock with Paul on a number of social issues but when he invests in companies to agitate and change things -- good things usually happen.

• Catalent caved and gave Paul's investment firm four board positions,
• Created a strategic review committee, which usually means they wanna hook up with someone (swipe right)
• They are the primary manufacturer of Novo Nordisk's weight loss drug, Wegovy, and could be a takeover target as companies want to consistent pipeline to deliver these blockbuster drugs

Huntin' In Packs Alert: In August 2023, I decided it was worth riding shotgun with Paul on this one.

The Setup:

Aug 2023: $40 

Feb 2024: 2 Trades at the following prices:

• $60
• $56.2691

How is it Performing: Well in February 2024, Novo Nordisk's holding company made an announcement they want to hook up with Catalent at a range of $16 Billion dollar value. So, I went shopping again and you can see the prices above.

All was well until April 2024 when the Federal Trade Commission and Novo Nordisk discussed initial hook up plans with Catalent. Novo pulled their filing to the FTC and subsequently refiled. Then in May 2024, the Federal Trade Commission requested more information on Novo Nordisk hook up plans, shortly after an application was filed.

I'm exhausted watching this soap opera but the stock has been steadily climbing from the low $50s and is now approaching $60. They buyout price would be around $65 if all goes well. I wish I would have done more research and identified how entangled Catalent was with other providers like Eli Lilly but at the end of the day, Lilly could have swiped right and tried to hook up with this company too. We'll see if CTLT is too important to be bought out when the FTC decides, so stay tuned. Right now, I'm up only slightly but it will be a nice win, in a short period of time if this hook up makes it to the alter.

CAPRI HOLDINGS LIMITED - Is the owner of Versace | Jimmy Choo | Michael Kors a BUY, SELL, OR HOLD?

 

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
How to Open My First Brokerage Account	https://urbanomics.blogspot.com/2015/04/personal-finance-101-starting.html
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CAPRI HOLDINGS LTD (NYSE: CPRI) POSITION UPDATE

As a small business owner, I have to make decisions often about what is an optimal outcome for my clients, staff, and me.  I get heckled for my consistent response of "What is the risk"? If we don't know the risk, then we should not be doing it. I then get a look of surprise when I share teachable moments to people by applying and concepts from business, cybersecurity, finance, marriage, and raising children. I believe in the 'Circle of Life' and how complex systems share similar principles. I ironically ask my business team to consider the risk of what they are doing and how it impacts our business and then I come how and discuss with my kids (all under the age of 10) about the risks of their actions.  The goal is to create accountability for one's own actions. I stay consistent because instead of accountability I often hear the opposite when things go awry. With my kids, I might hear "well I didn't know" and in the corporate world I see two things: 1) analysis paralysis - the inability for departments to make a decision without escalating to the highest levels of the organization and 2) 'call a guy' mentality - let me outsource my task or decision to another person by adding them to an email or meeting even when they don't add value. This article is to hold me accountable for my investment in CAPRI HOLDINGS.

Human nature is to only write about our investments when they go up. When people ask for financial advice, I joke they should find the podcaster, blogger, influencer, or coach that will be honest about their investments that aren't working. That is someone I want to talk with because there is integrity there. For CAPRI, the buck stops with me and my current investment is not working out and currently has me down or under water by 5 figures! My job is to keep it real, I haven't log into my account recently but I'm sure my investment is down roughly $10K or so. The amount is significant because CPRI represents my largest investment in my personal account. I made a series of trades to amass this position and I have to reflect on whether I miscalculated the risks. Let's revisit the details:

Details by Capri

In the 3rd Quarter of last year, my spidey senses tuned into an announcement from a stock I used to have a decent position in called Tapestry, Inc. In August 2023, Tapestry slid into the DMs of Capri. I saw this hook up of high fashion as a investment that made sense for my portfolio. 

Tapestry, owner of Coach, was approaching the house of Versace. So, what were the risks I weighed:

1. Risk of Capri Saying No: I didn't think this was a high risk because on August 10, 2023, Capri made the announcement that they wanted to hook up with Tapestry as the terms of engagement were favorable. I personally think it makes sense because as a connoisseur of hip-hop I hear in songs that the fashion trends are constantly changing. I presume to compete with fast, every day, and high fashion, these brands will acquire each other to keep the marketing efforts in your face, costs down, and prices premium.

2. Risk of Government Regulators Blocking the Acquisition: I didn't think was a high risk because my assumption is fashion is global. One would believe the various countries where these fashion brands live would be on board with supporting their local brands. I have no knowledge of high fashion but image France not supporting Louis Vuitton or Italy and their iconic brands. Heck, I've read that even if these two brands combined, they would only be the 4th largest luxury company in the world.

But why isn't the investment working:

I thought I was correct on all fronts. Capri accepted the terms of marriage and agreed to the hookup. Next, I read that Japan and the European Union regulators even signed off on the marriage and regulators are like parents who approve of marriage. All that was left were US regulators known as the Federal Trade Commission (FTC). I joke someone must have known something because this investment has not done well since I made it. Or I should have calculated a higher probability or rejection by the FTC because I got burned on my Tegna investment last year. The FTC has been very aggressive in looking into these deals and just about a week ago they voted to block the marriage. This is bad news for an investor like me but I would agree if I thought communities and companies would be harmed. What is the harm to my community when high fashion brands link up??

Per the FTC, Coach, Kors, and Kate Spade all participate in the handbag and compete and monitor each other to make strategic decisions pricing. Also, every large acquisition could result in the reduction of employees to save costs (and often do).

My response would be: I assume all of these products are out of the common persons reach. I love my spouse and have never attempted to purchase any of these products. Heck, I thought Birkin was the sought after bag according to Cardi B and other celebrities. So whether prices stay high, doesn't impact the average American. Maybe if outlet prices go up it would but again these are vanity purchases...or so I thought.

What I didn't calculate was the FTC's comment on the potential for harm via job reductions. I never even factored that into my equation because that is a normal action or outcome of acquisitions. Looking at this scenario now, I'm not sure Tapestry is all of a sudden going to have all of these products being sold out of super stores, therefore cutting tons of employees. That type of action could water down the experience of these high end brands. So in my opinion the logical loss of employees is limited to the administration functions: marketing, finance, legal, purchasing, etc. 

What's Next - Well, Tapestry has sued the FTC's blocking of the merger. If this heads to court, my assumption is that fashion is a competitive contact sport for the luxury brands. I can't keep up with the name dropping in hip-hop songs of new brands every day. Next, a judge may ask why the FTC is the only regulator to block the hook up when Japan and the EU had no problem with it. Finally, I assume the rationale for the merger is it is getting hard to compete in this space and these companies want synergies, or to benefit from best practices, of the combined organization to compete against the onslaught of competition I assume comes from all ends.

For me I will hold, now that I've had a chance to spit out all my thoughts here on paper. I truly struggle with seeing how high fashion impacts the "average" consumer. My assumption is most of these brands are a bit out of reach of the average consumer so the harm is limited to the occasional premium outlet purchase for the consumer (her) feeling good, date night, and influencing on Instagram. I missed the jobs angle and will log that away for the future but if that is critical -- the world would never let any companies merge. I'll watch closely and hold because I think I've learned 2 things - where Capri is valued from here on out based on the terms of the deal and my current assumption that 2/3 approvals may sway a judge to get this across the finish line.

Drop a comment if you agree or disagree

#tapestry #capri #coach #versace #katespade #hookup alert #federal trade commission

Sprint, How A Wireless Carrier Was a Top 2019 Investment?

First things first, happy holidays to everyone out there! Next in my series of Top 2019 investments is Sprint.

Sprint Corp
Ticker: S (NYSE) Industry: Wireless Telecommunications

I have written about Sprint quite a few times so I am not going to spend much time on this investment. Sprint finally turned into an investment literally about one year ago. This was a tough decision because after doing some research on Sprint I felt like they operated more like the Cleveland Browns football team.  If you are not familiar with the Browns, they have not been a very good sports team in quite a long time. But there has been hope in the last few years as they have selected some talented players who are hoping to turn the franchise around (Mayfield, Garrett, Landry, Beckham, etc.). I was NOT a believer but many people anointed them a championship caliber team this year.  How has it gone this year for the Browns and their new look team?  Well in short, it is still dysfunctional and a work in progress.

I am already reading your mind -- and you are wondering if Sprint is similar to the Cleveland Browns, why in the world would I want to invest in them?  Well the nice think about the stock market is you can make bets on the underdog in hopes they can turn it around for a big upside. So using my Cleveland Browns analogy, I would have reminded Browns fans that I DON'T think this is the breakout year but I DO think they are headed in the right direction. As for Sprint, they, as well as the whole industry, will be looking good in future years due to the transition to 5G technology. T-Mobile appeared to like this future outlook as they made a bid to acquire Sprint which initially caused the shares to spike in 2019.  I was handsomely rewarded in 2019 on various bets I placed on Sprint and closed but was also surprised to see the T-Mobile deal still remained open.  Even though Sprint and T-Mobile squeezed through Federal regulator approval in 2019, the deal is hung up because roughly 13 states and D.C. think the combination would be bad for consumers and pricing.  I actually agree with the states argument that if there are only 3 major carriers (ATT, Verizon, T-Mobile) the aggressive pricing decline we've all benefited from probably slows down. So Sprint strangely is making the argument that they are on a path to go out of business.

Hope all you Sprint customers are listening, In short, here is what I've learned about Sprint:
a) they never did a great job with the Nextel Communications acquisition (remember push to talk Nextel, yeah Sprint ran that into the ground)

b) they made a major bet on which 4G technology would win and lost (Sprint WIMAX was shut down)

c) these events have caused them NOT to invest as much into their wireless infrastructure (not a good statement if that is one of your biggest responsibilities is to invest so cell phones work properly)

d) they own Boost Mobile and spent more time trying to convert pre-paid customers into customers like you and me who get a monthly bill and can get billed for overages (not really stealing customers from the other carriers)

Final Summary -- So even though I empathize with the states, it would look bad if the Sprint deal falls apart only to have that company FAIL in a few years. That also would result in the industry consolidating to 3 major players and the same concerns return over customer pricing. I've made a small bet once again on Sprint that this deals get done in the New Year.

Sprint + T-Mobile (Hookup Alert)

Right now, my stock portfolio has more hook ups going on than the teenagers in HBO's new hit series Euphoria!  Well, you can see why I am a investor and not a comedian.  But back to the lecture at hand...a few months ago, I alerted you that things may be bubbling with Sprint and that a takeover could be in its future.  👰

How might an investor come to this conclusion? Just listen to Sprint executives themselves.  Sprint for awhile now has been publicly telling the investment community that its business pretty much sucks.  From what I can understand, the money-maker is its pre-paid wireless customers...then the HUSTLE is to convert those customers into post-paying customers like me where they can be up-charged and over-charged for services like unlimited talk, text, and data (post-paying customers). Interestingly, Sprint has publicly acknowledged they are giving out so many incentives that the business model is a money looser.

Now here comes the million dollar question, why do I care about Sprint AND why would I invest in a poor performer.  Well, I often take a contrarian view to life and believe that most things are...well "complicated".  Most people want to call Sprint a dog with fleas and they would just rather stay away.  But most things in life have layers and it's in your best interest to peel back those layers. Like in relationships, you just don't look at what's on the surface you have to look at the whole package.  Sprint's whole package is that it is one of the four leading wireless carriers in the US. I learned in elementary or middle school (can't remember) that this is essentially a cartel (monopoly, duopoly, triopoly...cartel??) haha  I prefer oligarchy but let's not get technical. The point is there is still tremendous value here. As my astute friend pointed out, how can Sprint get taken over and leave only 3 wireless carriers...that means prices go up | less choice | and maybe service declines.

The contrarian in me points out two simple facts: 1) Capitalism - the deal gets done b/c a lot of people stand to make a ton of money (it is convenient Sprint's commercials say they are doing well, but the Execs say the business is declining).  I do not usually have time to listen to quarterly conference calls but I found it MORE interesting that Sprint executives have been putting their houses on the market since the end of last year. How about the fact that the Corporate Office has already been sold. 👀 Strange this has all happened and the deal is NOT even complete as of this post.  2) Less Choice - Prices have been declining ever since T-Mobile took the American wireless industry by storm with good ole "competition". So you go with the contrarian view that Verizon, AT&T, and the market has had enough of its decline in revenue due to T-Mobile's entrance and the smart investment is for them to buy Sprint. The only thing is how do you sell it to the public. 😇 Well, the Department of Justice (DOJ) has supposedly negotiated a deal for T-Mobile to sell excess spectrum to another party to create a new 4th major wireless carrier. Wait for it...who can't wait to buy cell phone service from Dish Network 💪💪

Urb Lesson of the Day: Everything and everyone has layers. Take time to peel those layers and get to the obvious truths in life. I traded Sprint multiple times in the last 7+ months and tomorrow's announcement will eventually lead to the closure of my outstanding trades.  Disclosure: I own Sprint (S) and by trading from the bottom up...I followed everyday clues hidden in plain site to reduce my risk on what some called the "unlikeliest" deal to get done.

Executives Sell Mansions Before the Sprint Deal is Done: Follow the Mansion Money


And My Comments from May 2019:  And Sprint (S), Sprint keeps getting offers to play overseas for T-Mobile but the FTC (like the stock version of the NBA Commissioner) is telling me that the deal is unfair. Funny he doesn't say that to Verizon or AT&T the biggest cell phone carriers. Let a player get his money Commish?!?!  Approve the deal and let me bask in the glory of my draft pick prowess.

Linky: May 2019 Post on Sprint

#investandchill #Sprint #T-Mobile