Pierre et Catherine, partners since 2009 and 2022 (360 St. James St. West – Old Montreal, Québec)
Translation: We’ve met the enemy and it’s us. Work with an advisor who can help you from yourself!
This week in charts
Retail traders
International comparisons of household debt
Big Oil mega-deals would put investors on the spot
Exxon Mobil and Chevron are rolling in cash. So are Shell, BP and TotalEnergies, but investors value U.S. oil majors way higher than European ones. That raises the question of whether Exxon or Chevron might undertake a transatlantic swoop.
The American duo’s valuation lead is tangible even though Shell’s 2022 results, released on Thursday, showed that earnings doubled year-on-year, matching those of its U.S. peers. $473 billion Exxon and $331 billion Chevron trade at 6 times expected EBITDA for 2023, twice the average of $210 billion Shell, $154 billion Total and $109 billion BP. One reason why is that as oil prices have soared, American drillers look more attractive than European ones that are also pressing into potentially lower-return renewable energy.
One [question] is whether U.S. shareholders want the bother of a mega-deal in lieu of the huge buybacks and dividends they are currently trousering. Any cross-border deal would see Chevron’s Mike Wirth or Exxon’s Darren Woods take a big bet on continuing high oil prices, and also attract political heat. They might have to dispose of UK petrol station assets on competition grounds, and spin off BP or Shell’s solar and wind assets that form a part of Britain’s decarbonisation plans. While BP’s Gulf of Mexico assets should be attractive to a U.S. acquirer, other bits would be less so.
The other question is whether UK-based institutions want to hold paper in a U.S. driller less focused on building out renewables. Some of them are genuinely attracted by Shell, BP and Total’s vision of being stewards of the energy transition, and might therefore require a bigger deal premium, or reject an offer outright. But even BP boss Bernard Looney appears disappointed with some of the returns from low-carbon investments, according to the Wall Street Journal. And despite the European groups’ environmental ambitions, shareholders have not rewarded them with higher valuations, suggesting doubts that they can make a profitable transition away from fossil fuels. A U.S. offer might therefore be a test of investors’ own green bona fides.
Accelerating shareholder value creation in private and public companies
Over the years, I have observed that private companies are more productive and have consistently outperformed public companies in value creation. I have tried to find the core reasons for this significant gap, and I want to share some of my observations with you. Although I have been associated with many private and public companies, the examples below are generic observations I have gathered watching the performance of many other companies.
• Focus on product and innovation strategy – The biggest difference I see between private companies and public companies run by public company boards is that private companies have much more focus and board discussion on product strategy, innovation, technology roadmaps, and focus on a growth agenda.
• Board Composition – Most private companies have board members who have significant ownership equity interests and hence have a direct responsibility toward company performance.
• P&L Accountability – In private companies, I have seen a lot of effort by the board and the management to define true KPIs to monitor the operational improvements in the company. Private companies try to remove FX effects, deferred revenue effects, monitor billed revenue, monitor cash EBITDA vs. adjusted EBITDA, etc.
• Management Compensation Tied to Outcomes – In private companies, management teams are heavily incentivized for shareholder value creation.
This week’s fun finds
The Daily Habits of Happiness Experts
The meaning of happiness is, to an extent, subjective. But nearly every expert we surveyed emphasized the same cocktail of ingredients: a sense of control and autonomy over one’s life, being guided by meaning and purpose, and connecting with others. And they largely agreed that happiness can be measured, strengthened, and taught. “The more you notice how happy or how grateful you are, the more it grows,” Grizont says.
The experts we surveyed had a handful of happiness habits in common. Spending time with family outside of the house, and with friends in a non-professional setting, were big ones: the majority did both at least once a week, and many gathered socially three to four times a week. John Zelenski, a psychology professor at Carleton University, describes social relationships as the chief building blocks of happiness. We all stand to benefit from close friendships, romantic partners, and a “general sense of respect and belonging in a community,” he says.
Pursuing hobbies, such as art, music, cooking, or reading, was also universally important. Most respondents carved out space for these interests five to six times a week. Mental well-being has long been linked to sufficient sleep, and our respondents prioritized getting at least seven hours a night. Exercising or playing sports was another shared habit, with respondents saying they fit it in three to six times weekly.
Prices have risen for just about everything over the past couple of years. But anyone shopping for groceries recently has probably noticed the cost of one item in particular: eggs.
Keeping the supply of these eggs flowing depends on the hens that lay them. Like so much else, feeding hens their typical diet of grains like corn, oats and barley now costs more for egg farmers. This chart shows grain prices in 2022 compared with previous years:
Another factor in egg prices is the supply of hens themselves. The population of egg-laying hens in the U.S. fell drastically when a highly contagious avian influenza broke out early last year and again in the fall. About 44 million egg-laying hens died as a result, or slightly more than one in 10 hens from the pre-outbreak population.
