Tuesday, May 17th 2022

Three Things (5/17)

Commentary

"I can't change the direction of the wind, but I can adjust my sails to always reach my destination.” ― Jimmy Dean

1) China’s economy slows the most since March 2020

  • More than 31 major cities remain in partial or full lockdown as China continues its pursuit of "zero-Covid."

  • Retail sales in April were down 11.1% from a year earlier, and unemployment surged to a two-year high of 6.1%.

  • Shanghai Automobile Sales Association reported the citywide lockdown led to zero cars being sold in April.

Titan’s Takeaway: As China powers through its third year of off-and-on lockdowns, the economy's challenges have exceeded expectations. Central banks worldwide have begun to raise interest rates to slow inflation, and China may need to take drastically different actions to reignite their consumer.

2) JetBlue makes a hostile bid for Spirit Airlines at a reduced price

  • JetBlue’s latest proposal is worth $30 a share, $3 less than its initial approach and 56% higher than Monday’s closing price.

  • Spirit rejected JetBlue’s first bid citing the low likelihood of winning approval from regulators.

  • Discount airline Frontier Airlines offered $2.9B to acquire Spirit Airlines earlier in the year.

Titan’s Takeaway: To combat Wall Street’s fatigue with cost creep and sluggish growth, JetBlue doesn’t plan to take “no” from Spirit that easily. With declining share prices, boards across the country can expect well-funded competitors to be looking to buy growth via M&A.

3) Microsoft raises pay to stay competitive with mega-cap tech peers

  • CEO Satya Nadella shared plans to nearly double the global budget for merit-based pay.

  • Cloud rivals Amazon and Alphabet recently announced similar plans, while some tech giants like Meta Platforms or Uber take a more measured hiring approach amidst market uncertainty.

  • According to Glassdoor, a recent graduate working as a software engineer at Microsoft earns over $160K a year.

Titan’s Takeaway: Consistent with our thesis that IT budget spend should persist throughout weaker economic conditions, Microsoft seems to be on the offensive. We expect companies with fortress balance sheets like Microsoft to position themselves to win talent today and more market share down the road.

As of this writing, AMZN, FB, GOOG, MSFT, UBER were a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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