PE Recruiting Has Kicked Off

On-cycle buy-side recruiting is here. Get ready with our certified smarty pants. June 26, 2024 | Peel #738 Silver Banana goes to... [CapLinked. ](=) In this issue of the Peel: - 🍔 It’s time to Make Prices Great Again, starting with the legendary Big Mac - 🤖 Nvidia stopped bleeding, but solar & pool stocks are suffering in the heat - 💼 Buy-side recruiting is here. Get ready with our certified smarty pants Market Snapshot 📸 Banana Bits 🍌 - Sign up for WSO’s PE Interview Course & Guide to [secure your exit here](=) - Rivian shares vroomed on Tuesday as the world’s second-largest car company by revenue [took a big stake in the EV maker]() - Gambling on big tech stocks has reached [an all-time high]() - The saga of Julian Assange is [finally coming to an end]() - Nepotism isn’t just limited to the [world of finance]( A better VDR and Team Dinner is on Caplinked! = WHY are you still using the VDR the partners used twenty years ago? Switch to CapLinked and make those tedious VDR tasks a breeze. No more late nights or weekend grinds dealing with software that should be in The Smithsonian. With CapLinked, you’ll manage your data room faster than you can say “due diligence.” Secure, efficient, and so user-friendly, you might even get your weekends back. Join the ranks of young finance pros in investment banking and private equity who’ve discovered the secret to smooth sailing. CapLinked: Making your work life easier, one deal at a time. Caplinked - A Better Platform at a Better Price [Start with a quote to get Team Dinner on Caplinked](=) Macro Monkey Says 🐒 Make Prices Great Again To paraphrase the most popular musical of all time: “Oceans rise, empires fall, but McDonald’s is forever.” Thanks, Hamilton. As the last great American institution still standing, McDonald’s has blessed our taste buds and the wallets of obesity doctors around the world. But McDonald’s food also uniquely blesses macro nerds like us, supplying one of the most fun—and useful—economic indicators around. Let’s get into it. The Numbers The [Big Mac Index]() is primarily viewed as a way to measure purchasing parity and the relative strength of currencies around the world. But localized and viewed over time, the Big Mac Index can give us a fresh lens at consumer inflation, arguably one better than the CPI and its 1/3rd weighting to the abomination that is Owner’s Equivalent Rent. [Source](=) It doesn’t take a master of econometrics to realize that inflation of the world’s greatest sandwich has outperformed broader consumer inflation for quite some time. But that’s not the point. The focal point is on the divergence in the rate of change, as seen here: [Source](=) Companies are really good at passing inflation onto consumers to protect margins. But, outside of rare occasions, those prices almost never fall back to Earth. Target, Walmart, and other retailers have recently—and surprisingly—begun cutting prices on certain items. This is the exception to the rule, as prices will normally only fall during dramatic slowdowns in consumer spending, typically found in recessions. At the start of the year, when spending looked like it could be heading towards a cliff, there was reason to believe economy-wide price cuts could be on the table. But at this point, American materialism is proving too strong. Long story short, prices are never coming back to pre-pandemic levels. Alone, that might not be a huge problem. However, when growth slows and unemployment starts to rise, this loosening of the labor market generally translates to slower wage growth, as also observed in recent data. We’ve reached a point where cumulative inflation has elevated prices by more than 22% since the pandemic showed up. Meanwhile, cumulative wage growth is up just 16% over the same period. [Source](=) At the same time, wage growth is trending lower at a faster rate than inflation. Combined with increasing jobless claims and unemployment rates, we’re approaching an environment of highly elevated costs without a labor market to support the cumulative price increases seen post-pandemic. The Takeaway? While the CPI’s rate of change is retreating, the Big Mac Index reminds us that companies have no plans to slow price growth with broad-based inflation. Factored against weakening wages and a widening job market, the ability for consumers to afford goods at post-pandemic prices is set to become even harder, not at all better. Personal Example: I sh*t my pants in the line at Harris Teeter recently as what I expected to be a $45 grocery trip turned out to be over $70, slapping me in the face with the fact that companies won’t willingly reduce their margins until they’re forced to. It’s time to Make Prices Great Again. Unfortunately, that would likely need a depression, but that might be preferable to my depression at Harris Teeter the other day. I know the janitors who had to clean up after me would sure think so. What's Ripe 🤩 Carnival Cruise Lines (CCL) 📈8.7% - Carnival cruised to victory on Tuesday after quarterly earnings beat across the board, delivering revenue $100mn higher than expectations. - Best of all, Carnival reported a surprise profit of $0.11/sh against expectations for a $0.01/sh loss. - Guidance for the next quarter and full fiscal year were both raised as well. Other cruise stocks like Norwegian (NCLH, 5.1%) caught a bid as well. Nvidia (NVDA) 📈6.8% - Big money begets bigger money, so it probably shouldn’t be a surprise that Nvidia is cozying up to the Rockefellers and Vanderbilts of the Middle East. - Reuters reports that the AI kingmaker has inked a deal with Qatari phone company Ooredoo to bring its tech to the region for the first time. - Investors loved it, especially after the ~$550bn selloff from Thursday to Monday. But, export controls over high-tech products could be an issue. What's Rotten 🤮 SolarEdge (SEDG) 📉20.6% - Amid the raging heat plaguing everyone without an AC unit from LA to London, you might think solar stocks would be booming. - But alas, SolarEdge decided instead to implode on itself with a $300mn 5-year convertible note offering. Investors retreated at the threat of dilution. - Even worse, SolarEdge announced it wouldn’t collect the $11.4mn it’s owed from an Arizona-based installation firm after their installer filed for bankruptcy. Pool Corp (POOL) 📉8.0% - Shares in this pool company plunged on Tuesday after the company made the mistake of being way too honest. - After Monday’s close, Pool Corp updated earnings guidance much to the chagrin of shareholders, guiding for 20% lower than previously issued. - Other pool-related stocks dove as well, with Pentair and Leslie’s off 7.1% and 4.8%, respectively. Thought Banana 🤔 Searching For PE-ace Welcome to the second most wonderful—or most depressing—time of year. We all know earnings szn is the real most wonderful time of year, but buy-side recruiting szn is a solid silver medalist. Dreams of escaping the sell-side will be made and, for many more people, shattered over the next few months. Make sure you’re not one of those shattered apes with our [PE Interview Guide and Course here](. The handshakes made, and networking emails ghosted over the next few weeks will largely determine how the rest of the year looks for the PE industry. But, already, one of the most coveted mega-funds is gearing up for 2H’24. Let’s see what Elizabeth Warren’s least favorite company, Apollo Global, has to say. What To Expect [Source](=) Permanently higher rates are just the first of three themes highlighted by certified smarty pants Torsten Sløk, Chief Economist at Apollo, one of the largest PE firms in the U.S. Elevated rates will cause PE funds to seek more opportunistic investments, likely found in distressed and soon-to-be distressed companies. According to Sløk, slowing growth combined with high rates creates the textbook environment for this trend. Lastly, Sløk adds that the above factors, paired with the elevated uncertainty of macro forces, create the need for funds to be flexible, saying that “Strategies with the ability to invest opportunistically across the capital stack are well-positioned…” Based on the data supplementing these lukewarm takes from our certified smarty pants, funds certainly do need to be opportunistic but, at the same time, hyper-selective. [Source](=) Fundraising remains in a helluva drawdown, making investment resources more scarce and increasing the hurdle for target companies. At the same time, exit opportunities are still slimming up faster than Jonah Hill, especially for public market exits (a.k.a. IPOs). The Takeaway? Don’t let your exit opportunities slim up alongside the industry’s—once again, check out our guide [right here](=) to avoid Cheddar-Bob’ing yourself. As we can see in these charts and the accompanying comments from Apollo’s Chief Economist, the industry is far from the boom times of 2021 when anyone with a pulse and an MBA was getting an offer. Best of luck to all our wise and loyal apes. And best of luck to your portfolio companies as well. The Big Question: How can you improve your skillset to secure an offer and help your future fund? What is Sløk missing in his analysis? Banana Brain Teaser 💡 Previous 🗓 At a certain fruit stand, the price of each apple is 40 cents and the price of each orange is 60 cents. Mary selects a total of 10 apples and oranges from the fruit stand, and the average (arithmetic mean) price of the 10 pieces of fruit is 56 cents. How many oranges must Mary put back so that the average price of the pieces of fruit that she keeps is 52 cents? Answer: 5 Today 🕐 A pharmaceutical company received $3mn in royalties on the first $20mn in sales of the generic equivalent of one of its products and then $9mn in royalties on the next $108mn in sales. By approximately what percent did the ratio of royalties to sales decrease from the first $20mn in sales to the next $108mn in sales? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “To be successful, you need to get people’s attention by adding value to the thought process. Some of the goal is to be a little bit wild and unusual because there’s a lot of things going on that are very relevant.” — Torsten Sløk How Would You Rate Today's Peel? 😁[All the bananas]() 😐[Meh]( 😩[Rotten AF]( Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]() // [WSO ALPHA]( // [ACADEMY]() // [COURSES](=) // [LEGAL]() [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 14435 Big Basin Way PBN 444 Saratoga, California 95070 United States