AT&T and Time Warner Acquisition

12.07.2016 · Posted in Uncategorized

By: Qian Wang

 

Perhaps one of the most controversial and topical acquisitions that happened recently is the $85 billion acquisition deal reached between AT&T and Time Warner. As many people are familiar with AT&T, a leading multinational telecommunication conglomerate with market capitalization of $233 billion is going to acquire another media industry leader, Time Warner with a $68 billion market capitalization. Acquisition between these two titans will transform the media and telecom industries and reshape the business models on delivering video content. Over reading many of the articles on this acquisition, there are major two takeaways from this topic that are discussed most of the time. It is still a bit early to call for the deal given that a challenge most likely will happen. The magnitude of the acquisition will definitely be scrutinized under Department of Justice’s antitrust division.

Before anything becomes realistic, the deal has to pass its first challenge and perhaps the most critical block to complete the acquisition, regulatory scrutiny. Given the combined power after the acquisition, it arouses the idea of monopoly and eyes from various different legal aspects. Regulators are analyzing whether the acquisition will benefit the consumer and improve a healthy competition. Especially, they are looking for any anti-competitive behavior. The biggest concern now is the increased power that combined company would have on content distribution. On the negative side, AT&T would distribute Time Warner’s content exclusively on AT&T’s network, so it will eliminate consumer choice and destroy competition that already licenses such content. Yet, obviously, price for consumer will not go down after this transaction. Historically, regulators have been reluctant to approve cable companies’ mergers, because it might create national fear that it would put too much power into hands of distributors. Conversely, AT&T and Time Warner acquisition could increase competition across competitive streaming landscape. Integrating Time Warner, plus earlier acquisition with Direct TV into streaming bundle would allow AT&T directly to compete with online streaming content providers, such as Hulu, Netflix, and Amazon Video. Overall, it increases the competitive offerings of streaming bundles and forces others to enhance their services to keep their competitiveness.

Second takeaway is the economic sense of the acquisition. Many people know that it is a huge acquisition, but how is it beneficial for both companies that let them to make such move? The deal comes with stock purchased at $107.5 a share, which AT&T offers roughly 35% premium to where Time Warner stock was trading before the news emerged. How the price justifies the benefit that will accrue from the investment? The best metric to value the investment is through the ratio of Return On Invested Capital (ROIC). Through analysts estimates, assuming 5.7% revenue growth after 2017, the acquisition earns 5% ROIC, which is equals to AT&T’s current ROIC and its Weight of Average Cost of Capital (WACC). AT&T could pay $149 per share, which is 39% higher than proposed price for Time Warner. With ROIC equal to WACC, it implies the investment neither destroys nor creates shareholder value. One other scenario, 8.7% growth rate assumes the acquisition creates higher revenue through expanded platform. This will yield 6% ROIC, and slightly higher than AT&T’s current ROIC. With 8.7% growth rate and 6% ROIC, the implied price for Time Warner is $119 per share, which is still 11% higher than the proposed price. Yet, any deals that yield higher ROIC are attractive to shareholders. Besides the ROIC, AT&T will benefit from increased data usage across its network. Also the acquisition will improve AT&T service by bring high quality original content from cable channels such as CNN to a streaming bundle and creates a

differentiated steaming package. The companies said that they aim to be the first U.S wireless company to compete national wide with cable companies by providing online bundles.

The acquisition emphasizes one of the most noticeable trends in media and telecom industries. The traditional cable television and traditional mobile network inevitably are having a declining trend in profit growth. As more of content consumers are shift from watching cable television to online streaming, the sustainability of cable companies to maintain profit is a major concern. It is same to mobile network. data usage business for wireless service is nearly mature. The only way to expand its data usage is through providing more contents that consumers could stream from its wireless network.

Stocks to Watch with a Trump President

12.07.2016 · Posted in Uncategorized

 

By: Nick Landano

With new president elect Donald Trump waiting to be put into office, there are a few stocks that should be watched once he starts to make good on his promises on immigration. Though globalization may be on hold for years to come, internal improvement is destined in the near future.

Laying down the hammer on illegal immigration was one of Trump’s major pillars in his campaign. Though it is seen as being a major cost to the U.S. economy, certain companies would benefit greatly. The GEO Group ($GEO) is a private prison real estate investment trust that has strong ties with the federal government and the U.S. Immigration and Customs Enforcement (ICE). Trump’s immigration plan is set to deport 11 million undocumented immigrants, but before they leave the country, they will need to go through judicial process and spend time in jail. GEO would benefit directly through this mass deportation.

Cemex ($CX) would be another company to benefit at large by Trump’s immigration views. Trump plans to build a 1,000-mile wall along the U.S. and Mexico border. Of the $14.1 billion in net sales during 2015, $2.8 billion of it came from Mexico. If his plans were to pass, Mexico would likely source local materials from the San Pedro-based Cemex and that would lead to a large pay day for the firm. Whether his plan is practical or will be executed, it would lead to large financial gains in major infrastructure companies such as Cemex.

A Trump president shows promise for national infrastructure, but many believe his ideas would be hard to execute. The stocks mentioned would be some of the major gainers if any of his large-scale plans are put to action. As for general areas of growth, looking towards banks and on-shore manufacturers would also be a strong play.

FMA Panel Event

11.29.2016 · Posted in Uncategorized

 

This past week, Stonehill’s FMA and Beta Alpha Si collaborated in hosting four recent Skyhawk alums to come and speak on a post-graduate panel. We were joined by Nicolas Stanley ’15, Mary Louise Dixon ’14 (more commonly known as MJ), Jacqueline Durand ’16, and Elyssa Feliciano ’12.

Stanley is a portfolio analyst at BNY Mellon Wealth Management, and is in the process of earning in CFA certification. Dixon is an Associate at First Republic Investment Management and recently completed a Master’s in Business Management from Durham University. Durand is currently an Associate Financial Analyst for Dell EMC, and while she was a student at Stonehill, she partook in the SCIFI program as well as being a Peer mentor and member of the SGA Senate. Feliciano is a Recruiting Coordinator for Public Consulting Group and is currently working on creating a standard internship program across the company .

Each panel member brought their own insights on the paths they are on and the direction they want their career to go. When asked if Stonehill prepared them well enough for their current careers, the answer was pretty unanimous. Stonehill gave them all the necessary skills and preparedness to excel in each of their fields. They went on to discuss the internships that partook in and the hiring process to get them where they are. They emphasized the need to network at every step in your careers as well as go above and beyond that of your job description. In order to move up and stand out in your line of work, those two lessons will put you on a path of success.

Following the panel, each panel member stayed behind for any personal questions or individual networking. They gave each student in attendance valuable insight on the work world after graduation, and the steps it took them to get there.

On behalf of FMA and BAP, a special thanks to all that attended and a special thanks to the alumni who returned to share their insights with each of us. Once a Skyhawk, always a Skyhawk.

FOMC, Rates and the Economy

11.05.2016 · Posted in Uncategorized

In the world of finance, we look at a variety of data from the unemployment rate to consumer confidence.  However, one piece of policy that takes these factors into consideration would be the target range for the federal funds rate. The federal funds rate is defined as the rate at which banks lend from each other overnight and is used as a guideline for the health of the economy, as well as an indicator of the direction the economy is heading. The institution that controls this rate is known as the Federal Reserve, this private entity is the central bank for the United States and has the duty of controlling inflation and achieving maximum employment. The way it achieves the goals set by the United States government is through monetary policy. The Fed has two choices of policy, either expansionary policy which is when they lower the fed funds rate, or tightening policy in which case they raise the fed funds rate. This is relevant because the Federal Open Market Committee (FOMC) released their policy going forward on Nov 2, 2016., their decision was to keep the federal funds rate at ¼ to ½ percent, which was unchanged from their previous meeting in late September. After the conclusion of each meeting, the FOMC releases a statement in which they asses the health of the economy and any future expectations they have. One notable quote that appeared in the statement was, “The Stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.” The main theme throughout this released statement was to reveal that although the case for a rate hike has continued to grow, due to recent strong economic data, the FOMC and the Federal Reserve would like to wait for further evidence before making a change. The next meeting of the FOMC is scheduled to end on December 14th, 2016 and then we will know if they will decide to keep rates constant, or with more evidence, they will decide to raise them.

Suffolk Graduate Program

10.26.2016 · Posted in Uncategorized

To start the year off, FMA brought in Suffolk University employees Jon Ahern, the Assistant Director of Graduate Programs in Finance, and Abu Jalal, PhD, an Associate Professor of Finance, to discuss the opportunities available to Stonehill finance students who are interested in attending graduate school. They explained the many different concentrations that they offer as well as the after-graduate opportunities and connections they have in Boston.

Many of Stonehill’s business graduates go straight into the work force upon graduation, however, there are a sizable amount of graduates that pursue further education. Suffolk provides a program for Stonehill students to earn their graduate degree in as little as a year, following graduation. Ahern and Jalal provided information, to the students in attendance, about all of the programs and benefits from seeking a graduate program at Suffolk University.

There presentation left the students with more options and life paths to consider upon completing their four years at Stonehill College.

img_0111

 

 

 

 

 

 

 

The photo, from right, Jon Ahern, Abu Jalal, PhD, Ben Monte (FMA President).

 

U.S. Economy for the Month of September

10.26.2016 · Posted in Uncategorized

U.S. consumer prices recorded their biggest gain in five months, as the cost of gasoline and rents surged this September. There was a 5.8% jump in gasoline prices last month which accounted for more than half of the increase in the consumer price index (CPI). Along with this, Americans paid more for electricity, with prices having their biggest gain since December 2014. Rent recorded its biggest increase in nearly 10 years. These price increases in gasoline and rent point to a steady pickup of inflation. The CPI increased 0.3 percent last month. This in turn will help keep the Federal Reserve on track to raise interest rates this coming December. The central bank has a 2 percent inflation target, and the tracked inflation right now is at 1.7 percent.

Increasing prices are bad news for retirees because social security recipients are only to get a 0.3 percent cost of living adjustment increase next year. Good news for households was that food prices did not have any effect on the CPI. Food prices have been unchanged for the third straight month, but the cost of food consumed at home declined for the fight straight month. Consumers also paid more for grooming, motor vehicle insurance, tobacco, and airline fares. Communication prices recorded their largest decline in two years. Motor vehicle prices decreased and and apparel prices went down 0.7 percent.

Who Is Behind Those Advertisements?

04.28.2016 · Posted in Uncategorized

Nanigans 2

For our final speaker of the year, the Stonehill FMA brought in Luigi Testa, Senior Director of Finance and Strategy at Nanigans, a software company that is responsible for about 10% of the ads you see on Facebook.  First about Mr. Testa, after graduating Bentley, he started his career off working for a venture capitalist firm, but felt it wasn’t truly what he wanted to do.  He instead shifted his job search to cater more towards opportunities within younger companies under the Business Development department or as a potential Analyst. Mr. Testa stated in regards to his style as a worker, “I am more of a shipbuilder than working on a ship that is already sailing.” Mr. Testa found that he preferred working for smaller companies, where he can interact with everyone and have better access to C-suite level personnel.

Currently at Nanigans, he describes the finance department as being the mold for cement, in other words, his job is to make sure that everyone else has enough resources and structure to succeed.  Mr. Testa had a lot of advise for us, but what he emphasized most was to at some point in your life try to take a job in sales. The skills and experiences you will learn as a salesperson will most definitely benefit you in most other professions.

Mr. Testa described Nanigans as a software supplier, it is similar to software used for high frequency trading, only this software is used for marketing on social media platforms.  Software like this accounts for the mega data that is on the internet and filters it to a state that is understandable and user friendly.  Mr. Testa described Nanigan’s software as the Ferrari of the industry because it is luxurious, powerful, and respected. It was interesting hearing about how important software is to businesses and how prevalent it is in our own lives, yet we sometimes overlook its importance.

In conclusion of his presentation, Zack Van Dyke, the FMA President, presented Mr. Testa with the Professional Honor Society award. Zack Van Dyke has had the pleasure of working with Mr. Testa as an intern and has developed a strong relationship with both Mr. Testa and Nanigans. We again want to thank Mr. Testa for coming in to speak with us, it was a pleasure and we wish you best of luck in your success.

Nanigans 2

 

 

 

 

 

Alexandria Real Estate Equities

04.08.2016 · Posted in Uncategorized

Alexandria-Real-Estate-Equities-Inc_This Friday, the Stonehill FMA and SCIFI, took a trip into Boston to visit the real estate investment trust, Alexandria Real Estate Equities, Inc. While there we were able to meet with Mr. Thomas Andrews, Executive VP and Regional Market Director of the Greater Boston area. Mr. Andrews gave us a presentation on the company, its back story and what makes it different.

Alexandria has a portfolio of properties across the county, in cities where the life science industry is prevalent.  Since Alexandria focuses on real estate for tenants in industries such as biotechnical and pharmaceutical, to list a few, all the buildings are specialized to meet the needs of the life science industries. A large portion of the company’s clients consist of companies in the life science industry and because of this, Alexandria has been able perform well over the past few years because of upward trends in the life science industry.

Mr. Andrews also gave us a bit of his backstory and how he got into the business.  He started off like a lot of young people, working at a restaurant, believing that was what he wanted to do with the rest of his life.  One day he decided to apply for the Hotel Administration at Cornell, got in, and somewhere along the line decided the restaurant business wasn’t for him.  He then went to MIT for his masters where he wrote his thesis about what basically later became his career.

We want to thank Mr. Andrews for sharing his personal story, describing Alexandria’s business, and educating us about REITS!

Lending a Helping Hand

04.06.2016 · Posted in Uncategorized

Brothers Keeper

Along with our event speakers, weekly meetings, and portfolio competition, the Financial Management Association (FMA) decided to add to our  extensive agenda this year by serving our local community. The FMA’s Community Service Committee decided that our club will volunteer to aid in the day to day operations of  My Brother’s Keeper, a local non-profit service organization. My Brother’s Keeper’s mission is “To bring the Love and Hope of Jesus Christ to those we serve.” By joining up with My Brother’s Keeper, the FMA group had the opportunity to help drop off food and furniture to those in the community who are in need.

This eye opening experience helped us realize that not everyone is financially stable where acts of purchasing food and furniture can be burdensome. We learned from this experience about how important it is to help serve your community and to delegate your time to benefit others. The FMA is happy to announce that  we sent three groups to My Brother’s Keeper this year and all were a success.

The FMA is not the only organization or group from Stonehill that volunteers their time with My Brother’s Keeper. We encourage anyone and everyone to take sometime out of their day and walk over to My Brother’s Keeper and offer a helping hand. You will not regret it!

 

Dress for Success

04.05.2016 · Posted in Uncategorized

Natales Clothing 1

Carlo Agostino, second generation owner of Natale’s Men’s Clothier, located in Norwell MA, came in to talk to the FMA about, you guessed it, men’s (and women’s) apparel. Carlo gave us a bit of history on how Natale’s Men’s Clothier came to be. It all started with how his father; an Italian immigrant with very little money, but a talent for tailoring was able to open a retail store in the United States. Growing up, Carlo was heavily involved with his father’s business. This involvement enabled Carlo to gain deep knowledge of appropriate fashion and fashion construction.

 

The store carries men’s and women’s clothing of the highest quality. Carlo explained to us that he personally samples and tests all of his materials before confirming an order to ensure that it will meet his standards. Along with the high quality clothing, Carlo guarantees that you will also receive high quality customer service from the minute you walk in the door until you finalized your purchase.

Carlo also was kind enough to provide us with many tips on our wardrobe and how to dress appropriately for any occasion. One of his biggest tips for looking good, is being comfortable and wearing something that fits correctly. Even an inexpensive starter suit can be tailored to make you feel like a million bucks. Carlo brought in suits of different fabric weight, quality, and price. The purpose was to show us the differences in the texture and structure of the garment depending upon the type of materials used. He was able to show us the difference of a poorly constructed suit versus a suit found in his store.Natales Clothing 2

When it comes to your first suit, Carlo advised us to go with a deep ink blue. It is versatile and practical, and more appropriate (in most cases) than black. You can pair the blue or navy jacket with grey, camel, or khaki pants, and any number of colored shirts.  However, white and blue shirts are the most popular and versatile.

He also told us to always go with a cotton shirt as apposed to polyester or synthetic materials, because it is most breathable.  No one wants to sweat more and he advised to dry clean your clothing more often than you think to maintain the integrity of the clothing. Carlo also defined the different types of garments and explained how some people often mislabel certain types of clothing. For example, a button down shirt does not refer to a shirt with only buttons down the front, rather it refers to whether the collar buttons down or not too.  He also advised that while watches, belts and shoes are important to complete a man’s look, accessories are equally important to a woman’s look.

It was refreshing to meet someone like Carlo, a man that takes pride in continuing what his father started and deeply cares for his store and customers experience. Carlo will happily assist you with any possible questions you may have about color coordinating, suits, pants, ties or any garment in men’s clothing. What sets Natale’s apart from big department stores, is the care that Carlo has for making his customers look and feel their best, not just the sale. We strongly encourage that you visit their newly revamped website www.NatalesClothing.com and to visit Carlo whenever you are in the Norwell area!