In today’s briefing:
- Elon’s Trying To Get Out Of Buying Twitter—As We Knew He Would
- TMT Quick Hits: INTC/AMD, NFLX/ROKU
- Yield Comparisons Across ETH Based Protocols
- Diamond Hill Long-Short Fund 2022 Market Commentary
- Ironwood Pharmaceuticals (IRWD US): Brand Leadership of Linzess Continues; Pipeline Advances
- Crypto Biweekly – Breakdown In Correlation Between Crypto and Equity as Market Wait for ETH 2.0
- Diamond Hill International Fund 2022 Market Commentary
- This Week in Crypto – Big Milestone for ETH
- Diamond Hill All Cap Select Fund Q1 2022 Market Commentary
Elon’s Trying To Get Out Of Buying Twitter—As We Knew He Would
- Elon can’t get out of his stupidly overpriced, but solidly binding agreement to buy Twitter. But he can tie it up in court indefinitely.
- Meanwhile, Twitter’s prospects for operational improvement are mixed at best.
- Twitter is left in limbo, as are its investors. What should bondholders do?
TMT Quick Hits: INTC/AMD, NFLX/ROKU
- Intel warned that conditions outlined in 1Q22 have worsened, key to see what AMD says tomorrow.
- Netflix – Roku rumor doesn’t make much sense, we think its more likely Roku cut off insider selling because it is looking to acquire Starz.
- Netflix churn is rising among longtime customers – going to ad-supported Peacock and Paramount. We think another guide down is coming in 2Q22.
Yield Comparisons Across ETH Based Protocols
- We compare the yields in some Ethereum based protocols and figure out what an effective USD denominated yield would be, which is more relevant for most investors.
- On Curve and Convex, the ETH-stETH liquidity pool can pay liquidity providers (APY) close to 10% in USD terms which appears attractive.
- However, this reflects systematic liquidity concerns among major trading crypto firms and could be a canary in the coal mine for the crypto space.
Diamond Hill Long-Short Fund 2022 Market Commentary
- Diamond Hill invests on behalf of clients through a shared commitment to its valuation-driven investment principles, long-term perspective, capacity discipline and client alignment.
- The Diamond Hill Long-Short Fund’s returns were just about flat—slightly positive— in Q1.
- After a strong rebound in 2021, global GDP growth is expected to moderate in 2022.
- From current levels, equity market returns over the next five years are likely to be below historical averages.
Ironwood Pharmaceuticals (IRWD US): Brand Leadership of Linzess Continues; Pipeline Advances
- Ironwood Pharmaceuticals, Inc (IRWD US)’s sole marketed drug Linzess is the #1 prescribed branded treatment in the U.S. for adults with IBS-C/CIC with ~4M unique patients since launch.
- First commercialized in December 2012, Linzess achieved blockbuster drug status in 2021. The earliest licensed entry of any generic Linzess in the U.S. is expected only in March 2029.
- The company’s potential drug candidate IW-3300 is in phase 1 trial for interstitial cystitis/bladder pain syndrome (IC/BPS). Recently, Ironwood has shared positive findings from the study.
Crypto Biweekly – Breakdown In Correlation Between Crypto and Equity as Market Wait for ETH 2.0
- Crypto and equity correlations are at all-time highs this year as both are negatively impacted by global headwinds like rate hikes. However, correlations decoupled over the past two weeks
- Equities were in the positives while crypto prices continued to decline due to idiosyncratic factors such as the continued impact from Luna and the execution risks of ETH 2.0 merger
- However, public crypto valuation is now overly depressed and the worst may be over with the Luna impact while the ETH 2.0 execution risk will be derisked imminently
Diamond Hill International Fund 2022 Market Commentary
- Diamond Hill invests on behalf of clients through a shared commitment to its valuation-driven investment principles, long-term perspective, capacity discipline and client alignment.
- During a volatile quarter, the portfolio held up better than the Morningstar Global Markets ex-US Index by a decent margin.
- After a strong rebound in 2021, global GDP growth is expected to moderate in 2022.
- We expect to see varying states of economic growth aroundthe world in 2022 and believe persistent inflation will be one of the mostcritical risk factors economies face this year.
This Week in Crypto – Big Milestone for ETH
- Ethereum Testnet Successfully Moves to PoS on June 8 – Ropsten, Ethereum’s oldest testnet, has successfully competed its transition to proof of stake — as one of the final tests ahead of the merge on the main Ethereum blockchain, which is expected for August or September 2022 and will substantially reduce net ETH issuance and electricity usage after it is complete on ETH mainnet.
- Bi-Partisan Digital Asset Bill Introduced to the U.S. Senate – Senator Cynthia Lummis (Wyo.) has introduced a major new bill called the Responsible Financial Innovation Act to expand the purview of the CFTC within the digital asset industry. See the thread of the week explaining the bill below.
- US Probes Binance Over Token That Is Now World’s Fifth Largest – US regulators are investigating whether Binance Holdings Ltd. broke securities rules by selling digital tokens just as the crypto exchange was getting off the ground five years ago.
Diamond Hill All Cap Select Fund Q1 2022 Market Commentary
- Diamond Hill invests on behalf of clients through a shared commitment to its valuation-driven investment principles, long-term perspective, capacity discipline and client alignment.
- During a volatile quarter, the Diamond Hill All Cap Select Fund held up meaningfully better than the Russell 3000 Index.
- After a strong rebound in 2021, global GDP growth is expected to moderate in 2022.
- While the year-to-date pullback in equity markets has created some investment opportunities, broad market valuations remain above historical averages.
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