Peloton's stock soars 30%; Articles I enjoyed about Cliff Asness, Jane Street, and Boar's Head; I'm still married; First days in New Zealand

1) Shares of Peloton Interactive (PTON) are on a tear...

Regular readers will recall I wrote favorably about the fitness company on October 29 and shared the bullish presentation on the stock that my friend David Einhorn of hedge fund Greenlight Capital delivered at the Robin Hood Investors Conference the previous week.

As David noted in his presentation regarding potential upside for Peloton:

Companies like this trade at 9 to 32 times EBITDA [earnings before interest, taxes, depreciation, and amortization].

9 times $450 million of EBITDA implies a $7.50 share price.

32 times implies a $31.50 share price.

And as I said in my e-mail:

With PTON shares closing yesterday at $6.40, a move to $7.50 would be a 17% jump... and a move to $31.50 would be a massive 392% gain. That's a lot of potential upside.

It's a good sign for the stock when someone like David is bullish like this.

And the idea looks interesting enough that I'll take a closer look with my team here at Stansberry Research.

Two days later, the stock had its best day ever on a better-than-expected earnings report and this news, as MarketWatch reports: Peloton's stock soars 30% after company names Apple Fitness+ co-founder as new CEO. Excerpt:

Peloton Interactive's stock jumped 30% Thursday, after the connected exercise-equipment maker topped estimates for its fiscal 2025 first quarter and named a hardware/software industry insider as its new leader.

The company said it has appointed Peter Stern as chief executive, effective Jan. 1. Stern is the co-founder of Apple Fitness+ and has done stints at Ford Motor and Time Warner Cable...

New York-based Peloton posted a loss of $1 million, or breakeven on a per-share basis, for the quarter to Sept. 30, narrower than the loss of $159.3 million, or 44 cents a share, posted in the year-earlier period.

Revenue fell to $586 million from $595.5 million a year ago.

The FactSet consensus was for a loss of 15 cents and revenue of $573 million.

Stern looks like a smart hire – Peloton posted his bio here.

With solid leadership now in place and another quarter of positive operating cash flow, I think the stock remains interesting, even though it's up 31% (through Friday's close) since I last wrote about it.

2) Catching up on some interesting reading, here are three articles I enjoyed about two hedge funds that are minting money and a highly profitable private business that's struggling...

• Institutional Investor: Cliff Asness Has Steered Hedge Fund AQR Through Not One, Not Two, But Three Quant Crises. Excerpt:

"Cliff absolutely is a survivor," says Michael Trotsky, chief investment officer of Massachusetts Pension Reserves Investment Management, which has been an AQR investor for 15 years and now has about $1 billion invested in two of the firm's funds. "He and AQR believe in value, and being a long-term believer in that style is a rarity these days." Trotsky calls Asness "a big bright light" in the investment landscape.

"We are hard to kill," quips Asness.

Yet despite the resurgence, AQR's $110 billion in assets are less than half of their peak of $226 billion before what has been dubbed the "quant winter." With offices around the globe, the firm remains a behemoth, offering dozens of strategies in everything from hedge funds to long-only and mutual funds.

• Financial Times: New titans of Wall Street: how Jane Street rode the ETF wave to 'obscene' riches. Excerpt:

"The amount of money they make is almost obscene. And that comes from handling instruments that many other people don't want to touch," said Larry Tabb, a longtime analyst of the industry who now works at Bloomberg Intelligence. "That's where the greatest profits are, but also the greatest risks."

There are no signs of Jane Street slowing down. In the first six months of 2024 net trading revenues rose another 78 per cent year-on-year to hit $8.4bn, according to people familiar with the matter. If it can match those revenues in the second half of 2024, it would mean Jane Street bringing more trading revenues than the vastly larger Goldman Sachs did last year.

If the 70 per cent profit margin disclosed in documents to investors is also maintained, it would mean Jane Street comfortably out-earning the likes of Blackstone or BlackRock this year, according to analyst forecasts collected by LSEG.

Jane Street's prowess is particularly noticeable in the bond market, where it has rapidly muscled its way into a world long-dominated by banks and considered impossible for standalone trading firms to crack.

• New York Times: The Secretive Dynasty That Controls the Boar's Head Brand. Excerpt:

It is odd, to say the least, when a top executive of a company claims not to know who his boss is. And Boar's Head is no fly-by-night enterprise. The company is one of the country's most recognizable deli-meat brands; it generates what employees and others estimate as roughly $3 billion in annual revenue and employs thousands of people.

But anonymity and secrecy have been central features of Boar's Head, a privately owned company run by two intensely guarded families, the Brunckhorsts and the Bischoffs.

That armor of secrecy has not cracked, even as the company is facing the biggest scandal in its history.

3) Dozens of readers wrote to me to share their advice on the dilemma that I shared in Thursday's e-mail that "could end my marriage" (tongue in cheek) – whether to give Susan, my ever-patient wife of 31 years, the flat-bed business class seat on our 17-hour flight to New Zealand that day.

The consensus views were: a) of course I should give up the seat... and b) I'm an idiot for not having paid $8,000 for a second business class seat rather than $1,700 for the economy class seat I bought.

Well, I agree with half of that advice...

I of course gave Susan the seat because, as I told her, "that's the kind of guy I am" – and I had promised it to her! She was very happy – and, as the saying goes, "happy wife, happy life."

But I have no regrets about saving $6,300 because:

• I'm a bargain-hunting value guy (I'll pay for a flat-bed seat on a long flight, but not more than $100 per flight hour)...

• I don't mind discomfort (in fact, I pay a lot of money to suffer during things like 24-hour races!)...

• And I figured one of my tricks would pay off and I could get a flat-bed seat for a discount price (no luck), get a row of three to myself (no luck), or at least get an empty middle seat next to me, which I was able to get by moving my seat when I checked in.

This let me stretch out my legs diagonally and I got eight hours of decent sleep, so I didn't mind being back in coach.

4) Susan and I have had a fabulous first few days in New Zealand!

So far, we hiked along the coast in Christchurch, the largest city on the South Island (it has a population of 415,000)... then we drove two hours north to Kaikōura and swam with dolphins... and we did "heli rafting."

I never knew there was such a thing as heli rafting – it entailed taking a helicopter 30 minutes into the nearby mountains, unpacking gear (paddles, life jackets, etc.), inflating a raft, paddling down the river with a guide for three hours, having a barbeque ("barbie") on the beach, and then the helicopter whisked us back to our lodge. It was a novel and beautiful adventure!

Here are some pictures and a video (I've posted more on my Facebook page here, here, and here):

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.