Growth. We want growth. We want growth if there are tariffs. Growth if there are no tariffs. Growth if China is all powerful. Growth if China is a paper tiger. Growth if the Fed is tightening. Growth if it is not tightening.
Yes, I know, I sound like Dr. Seuss. But I am trying, I am I am, to explain why Comcast (CMCSA) and Disney (DIS) are in a multi-billion poker game for some Fox (FOXA) assets. I want to put in context how FANG can keep going higher. I need to enlighten about how the stock of Thor Industries (THO) , so down just last week, came alive today. I want to parse why Oracle's (ORCL) stock's getting hammered despite an upside surprise. And I very much want to tell the story why it makes sense that the stock of Starbucks (SBUX) is getting laid to waste.
Let's start with Disney's cash and stock boost to its previous all-stock offer for some crucial Twenty-First Century Fox assets in order to check Comcast's all-cash offer from last week. Disney's $38 offer, $10 higher than its previous, is $3 above Comcast's all-cash bid.
Now it stands to reason that Comcast can pay more; it's got superb, bankable cash flow, not that Disney doesn't, and most followers of the situation now believe Comcast will come up with still one more higher price before Disney hikes again.
Now what is this about? I think it's about growth, namely the growth of India, where these Fox assets dominate. If you remember not that long ago Walmart (WMT) bought 77% of Flipkart, the Amazon of India, for $16 billon. Walmart did that because by 2025 India will be the most populous nation on earth.
Fox has a lot of assets, some iconic characters like Avatar and the Simpsons, a big stake in Hulu which could turn out to be an aggressive competitor to Netflix for the company that controls it, but more important the Indian assets, vital given how China boxes out everyone.
If you are Comcast or Disney and you want accelerated multi-year growth the hitherto massively undervalued Fox assets -- undervalued first because they were never thought to be for sale and then because any suitor might have been blocked for antitrust reasons -- represent the best hope to get immediately rising revenues and profits.
Judging by the fact that the stocks of both bidders have acted well since the contest began in earnest after a federal judge shot down the Justice Department's attempt to block AT&T (T) from buying Time Warner, the market is saying that to the victor AND the loser belong the spoils. The victor gets the international growth and can have its revenue prospects re-rated upward. The loser has so much more borrowing capacity than could be believed that it could do the biggest buyback in the world save that of Apple (AAPL) .
Still, make no mistake about it, these two companies' stocks will go up until the market perceives that they are, at last, paying too much for growth and that's obviously not anywhere around here hence the belief of multiple rounds to get the assets.
We just learned today that Facebook's Instagram is close to a billion users. Facebook is about to start monetizing Messenger. And the company is testing paid for subscription groups. That's all in one day! All about growth and no trade war can stem any of these.
Amazon's all about pin action. There was an extraordinary conference call last night by Fedex (FDX) which talked about skyrocketing e-commerce trends. If you weren't on it you are probably puzzled about the rally in the stock. If you were you are surprised it isn't up more.
Netflix? Two reasons. The first is that both Comcast and Disney are said to covet HULU as I mentioned earlier, because they want their flanks covered against Netflix. I buy that somewhat. I think more important, though, is the chatter that international sales have accelerated. Again, without China.
Alphabet, meanwhile, is rolling out a whole bunch of new stations on YouTube. We will hear later tonight that Laura Alber, the CEO of the red-hot Williams Sonoma WSM thinks she gets the most bang for her advertising buck from YouTube. How many others feel that way? No Google in China. Yippee!
If you didn't' know any better you would think that FANG was set up as a way to invest in non-China growth stocks.
Now there are a lot of other growth stocks flying My favorite subscription stock, Spotify (SPOT) , is rallying again. Twitter's (TWTR) the alternate ad platform. Square (SQ) and Paypal (PYPL) are in the fastest growing space in fin tech, payment processing. None needs China; all have accelerating growth rates.
Last week Bob Martin from Thor, the largest RV maker in the country, came on Mad Money and I thought he was a little subdued because of inventory levels, even as I think he wanted to say they were better. Marcus Lemonis, the star of The Profit on Tuesday nights as well as the CEO of Camping World say things had gotten better, too. All guesswork was off the table, though, when this morning Winnebago (WGO) said inventories are now at appropriate levels and business is better despite some painful raw costs because of the tariffs. What mattered is that if the inventory is worked off then growth can begin again. So Thor and Camping World soared along with Winnebago.
Okay, those are the good. Now let's talk the bad: Oracle (ORCL) . The company did report an upside surprise. It did seem to win some big orders. But Oracle's growth story is about on premises information technology moving to the cloud and the company changed the way it reports so we can no longer follow how quickly the cloud is being adopted by Oracle's clients. The co-CEO, Mark Hurd, called the carping about the new reporting method a "nothing burger," but the analysts acted as if it were a double cheese Baconatar from Wendy's. While analysts were placid on the call, no doubt out of fear of the troika up top -- Safra Katz, who changed the methodology without a hint of it coming, the aforementioned Mark Hurd, and the always uber competitive Larry Ellison -- they were pretty vicious in their notes and the stock imploded.
The ugly? Starbucks (SBUX) . If Oracle is about opaque growth, so opaque as to presume that it is slowing, then Starbucks is about the upfront, in-your-face slowdown coupled with the insistence that nothing is wrong -- a nothing Latte!
Here's the deal. Starbucks has seen growth go from 8% to zero in China because of two hitherto unflagged problems: cannibalization -- so much for the need for more stores everywhere -- and a third party delivery method that had to have been known before it was talked about today. Meanwhile, the U.S. had some meager comps, too. Starbucks is slowing its growth, closing 150 stores and calling into question willy-nilly expansion of licensed stores even as I have asked the company if licensed stores weren't lower quality than owned shops. Not only that, but the coffee saturation here is palpable and the new costs associated with its open bathroom policy aren't even being discussed. These guys are in total low- to no-growth denial and yet are sticking with a 3-5% long-term growth target. Now that Howard Schultz has moved on, this was the chance for new CEO Kevin Johnson -- who has had to guide down in three of the four quarters he has presided over -- to lower the boom on growth to a level that can be beaten. Nope, these guys are still overpromising and undelivering. In a world where growth is all that matters, these guys just don' have it, yet the price-to-earnings multiple remains elevated. What's worse than a slowing growth stock? The stock of a company with no growth.
So, here's the bottom line: the fulcrum is growth, not trade, not the Fed, not rates. Not everyone can have growth. It can be bought. It can be had. But if it's gone, you can buy all the shares you want, but don't expect me to pay you Tuesday for a nothing burger tomorrow.