01 July Watchlist 👀
Today we are watching…
1. Nintendo (#nintendo)
Nintendo hit a home-run with ‘Animal Crossing,’ it’s best-seller in lockdown. We thought it was brilliant when the in-game Bank of Nook cut interest rates and forced players into riskier assets, I mean, minigames, but the business ties go further. The game has spawned real gray markets in China where merchants sell in-game cosmetic items. It’s forbidden by Nintendo, but Chinese gamers don’t know any different. The direct winner from this is Tabau, hosting the merchants. The indirect winner is Nintendo, as more people will hear about the game!
2. PG&E Corp (#pacgas)
You might remember PG&E, the utilities giant responsible for the “Camp Fire” disaster in Paradise, California. It couldn’t brunt the legal fees and went under, but today, it emerges from bankruptcy restructured, and still listed. PG&E has a natural monopoly with regulated returns, that’s why income investors used to love its dividend, and that’s what makes it interesting now: it’s earnings projections for 2021 have credibility, and they’re $2 billion. Post-bankruptcy share count that’s $1 in earnings per share and given today’s stock price, that’s a price/earnings ratio of 9. It’s peers trade in the high teens. There’s a lot hinging on peers still being comparable and regulators being kind, but the road to forgiveness starts today.