2013 HIts & MIsses

Strong roots of growth set in

Market View from The Wall Street Analyst


The major happenings in 2013 have buoyed investors’ faith in the stock market. Moreover, the US stock market is witnessing the green shoots of economic growth after many years of uncertainties and fluctuating market conditions. Firstly, the major indexes rallied after the Fed announced that it will start trimming its monthly asset purchases in January 2014. The Federal Reserve made this announcement at its monetary policy meeting on December 18. The central bank’s announcement comes close on the heels of strong retail sales, positive consumer sentiment, and robust employment data being witnessed in the US market during the recent quarter.

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On the other hand, the much-awaited rollout of Obamacare, the US Government’s healthcare initiative passed in 2010, met several legal hurdles, lowering Obama’s popularity ratings. The Obama administration made some recent changes, which are intended to show flexibility, but have resulted in confusion for consumers as well as health insurance companies. This has resulted in the first payment deadline for the insurance coverage being moved from 1 January 2014 to 10 January 2014.

Is Bitcoin Here to Stay

On another note, the Bitcoin saga is still fresh in the minds of people after its value shot up to a large extent because of its growing popularity as an alternative currency. However, major banks, government bodies, and financial institutions, shunned the virtual currency citing regulatory concerns. The Bitcoin literally bit the dust after a major Chinese bank refused to accept deposits in Bitcoins. Despite this, VCs are eyeing a slice of lucrative Bitcoin start-ups in recent years. Bitcoin’s value has shot up to a large extent because investors are looking to cash in on its growing popularity. Major investment trusts are ploughing in millions of dollars into the virtual currency, putting faith in the Bitcoin’s bullish run. Investors are sensing the huge opportunity in this new tech currency and are jumping into the Bitcoin bandwagon.

Investors Gun for Social Media Stocks

In 2013, social media stocks emerged as the flavor of the season and investors’ new best friend. This in turn has resulted in their sharp rally, buoyed by investors’ faith and their high growth potential. For instance, Twitter’s (NYSE: TWTR) stocks have witnessed unprecedented volatility, with its market capitalization zooming to record levels for no major reason. Twitter also came out with its IPO in early November. At $26 per share, Twitter is valued at more than $18 billion, which makes it the biggest market debut for a technology firm since Facebook’s IPO in May 2012.

Facebook (NASDAQ: FB) has proved its worthiness by joining its S&P 500 stock index after the close of trading on December 20. Now there is no looking back for Facebook, which will replace Teradyne Inc. (NYSE: TER) in the S&P 500 at the close of trading on December 20. According to Reuters, Facebook’s market cap is roughly $120 billion, making it the 30th largest component of the S&P 500. In addition, Facebook will replace Williams Cos (NYSE:WMB) in the S&P 100 index of large US companies.

Telecom Goes the Wireless Way

Telecom companies across the world are increasingly focusing on the highly profitable wireless business to shore up revenues and increase margins. AT&T Inc. (NYSE:T), the largest phone company in the US, has sharpened its focus on its highly profitable wireless business. As part of its larger plans to give its wireless business undivided focus, AT&T has agreed to sell its Connecticut wireline assets to regional telephone operator Frontier Communications for $2 billion in cash. The deal comes at a strategic time when most households in the US are opting for wireless services over the traditional line phones.

2013 – Year of Biggest IPOs

In a major trend reversal, the number of IPOs in 2013 is breaching the number of IPOs that were launched before the tech bubble burst, indicating a strengthening of investors’ confidence in the stock markets. Cashing in on the rising valuations and the equity market’s strength, the Hospitality industry is witnessing the largest ever hotel IPO. Hilton Worldwide Holdings Inc., the world’s biggest hotel operator in terms of number of rooms, launched its IPO raising $2.34 billion and selling 117.6 million shares at $20 each on 12 December. Hilton’s IPO will be the largest offering by a hotel operator. At the midpoint of its expected pricing range, Hilton would be the second-largest IPO in 2013, behind the $2.8 billion initially raised by oil and gas pipeline company Plains GP Holdings (NYSE: PAGP) and ahead of the $1.8 billion initially raised by Twitter.

Emerging Markets Offer Improved Efficiencies, Better Pricing Policies

In a recent trend, global pharmaceutical firms are seen heading to emerging markets for their manufacturing and R&D needs. This is mainly because emerging markets are seen to offer several cost advantages in terms of operations, manufacturing, and R&D skills. Moreover, the availability of cheaper and highly skilled labor force is enticing pharma firms to look beyond the regulatory hurdles and credibility crisis to establish their presence in these markets.

For instance, Mylan Laboratories Inc. (NASDAQ:MYL), the world’s third-largest generic and specialty pharmaceutical company, is betting on biosimilars to propel growth in its Generics segment. Biosimilars are generic versions of biologic drugs and represent a huge opportunity since many blockbuster biologic drugs are expected to lose exclusivity and patent protection in the coming years. Sensing the promising market for biosimilars, Mylan has a partnership with India-based Biocon to develop a biosimilar version of Roche Pharmaceuticals’ (OTC: RHHBY) breast cancer drug Herceptin (trastuzumab).

On another note, Pfizer Inc. (NYSE:PFE), the world’s largest drug maker, has sharpened its focus on strategic opportunities that will expand its portfolio of leading brands. As part of these plans, the drug maker announced that its wholly-owned Polish subsidiary has acquired the rights to Polocard, a low-dose aspirin and the leading over-the-counter (OTC) brand for heart attack prevention. Polocard is a leading OTC brand in Poland and belongs to ZF Polpharma SA. Hence, Pfizer’s acquisition is expected to enhance its Consumer Healthcare portfolio and overall market position in Poland.

Tech Majors Make Big Splash

shutterstock 111291713Apple Inc. (NASDAQ:AAPL) created headlines with its $350-million acquisition of Israel-based 3D sensor company PrimeSense. This is the second acquisition of an Israeli company by Apple in less than two years. Earlier in January 2012, Apple had acquired flash storage chip maker Anobit. However, Apple’s futuristic move has made several investors and company watchers wonder how the tech giant plans to use the motion-sensing technology in its products. While PrimeSense has currently licensed its technology to Microsoft, it is not clear how the deal changes following Apple’s acquisition of the Israeli company.

Another tech major, Google Inc. (NASDAQ: GOOG) was in the news due to its foray into experiential retailing. The company opened its pop-up stores called ‘Winter Wonderlabs’ in six US cities: New York, Washington, Chicago, Los Angeles, Sacramento, and New Jersey, to promote some of its latest products. The stores will feature products such as its Nexus 7 tablets, Chromebook computers, and Chromecast video-streaming devices. Google is offering consumers an experiential retailing experience as compared to traditional stores through its Winter Wonderlabs.

Overall, 2013 ended on a positive note, showing the resilience of the stock markets despite many challenges in the form of regulations, funding issues, and slackening government efforts to prop up economic growth.