Hi fellow Finimizer, here's what you need to know for November 21st in 3:12 minutes.

☕  Finimized over a Nariño blend at Azahar Café, Bogotá, Colombia.

🤓 Keep it brief

  • Results from retailers Target, Best Buy, Lowe’s, and Kohl’s weren’t the shopping party investors had hoped
  • Medical device maker Boston Scientific announced it was buying British rival BTG for $4.2 billion
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The Retail Detail

What’s Going On Here?

On a day that saw the US stock market erase what was left of its 2018 gains, retailers Best Buy and Kohl’s managed to avoid the worst of it – but shares of Target and Lowe’s fell by 11% (tweet this).

What Does This Mean?

All four retailers reported quarterly results on Tuesday. Best Buy’s stock rose 1%, thanks to better-than-expected sales growth and a higher forecast for the rest of the year. Kohl’s fell short of investors’ quarterly profit goal, but increased its prediction for 2018 overall: indulgent investors sent its stock down “just” 4%.

Target also missed: its sales growth and profit were below expectations, partly thanks to higher wages and aggressive price cuts. And Lowe’s didn’t do much home improvement of its own, with sales growth also lower than hoped and spirit levels for the rest of 2018 knocked down. Lowe’s new CEO might have chosen to “kitchen sink”, setting himself a low bar for future success.

Why Should I Care?

For markets: Thin margins for error.
Investors have been focusing recently on traditional retailers’ sales growth in the face of online competition – and as most have delivered (sorry, Sears), the lens has shifted to profit margins. Companies are spending big on ecommerce and inventory management, but both are expensive and come with heightened costs, like shipping. Getting either wrong can leave retailers stuck with dud stock which they then have to discount in order to sell – meaning lower margins.

The bigger picture: Taking profit, or taking money off the table?
Stock markets fell again on Tuesday, wiping out the last vestiges of 2018’s once-meteoric rise. Some investors may be selling their best-performing stocks, like tech, hoping to lock in profit. Others might be taking advice from the Goldman Sachs analysts who advised clients on Tuesday to put more money into predictable sectors like utilities, or to take it out of stocks altogether. And with some US investors on their Thanksgiving holidays, fewer would-be buyers to match sellers could’ve exacerbated Tuesday’s declines.

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More Than A Feeling

What’s Going On Here?

On Tuesday, Boston Scientific – the $50 billion American maker of medical devices – agreed to buy British healthcare firm BTG for $4.2 billion.

What Does This Mean?

Boston Scientific makes medical essentials like stents, which hold open damaged blood vessels. It wants to buy BTG in order to expand into (depressingly) high-growth areas of medicine like cancer and blood clots. Among other things, BTG makes tiny products that doctors insert into patients’ bodies during minimally invasive surgery. BoSci believes that buying BTG will bring new, complementary areas of expertise to the combined company.

Why Should I Care?

For markets: Papering over expensive cracks?
Boston Scientific is no stranger to acquisitions – the company has cut more than 20 deals in the last five years – but BTG is its biggest since 2005. And while BTG’s share price jumped 34% on Tuesday, close to the deal price, the buyer’s fell 7%. Boston Scientific’s in the midst of a restructuring intended to shave $100 million off costs, in part by cutting jobs. Adding BTG’s 1,600 employees to its existing 29,000 probably means even more job losses are likely in the future. After all, the very existence of a restructuring plan may suggest the company’s struggled to deliver the “synergies” promised by its previous acquisitions.

The bigger picture: More M&A on the way?
A third of BTG’s sales currently comes from pharmaceutical products – including antidotes for drug overdoses and rattlesnake venom. That doesn’t really gel with Boston Scientific’s hardware-focused business – and the company hasn’t yet decided what it’ll do with that part of BTG. If BoSci decides to sell, it could find a buyer in the guise of European pharma companies, which spent the first half of 2018 chopping and changing their businesses to focus more on dismayingly trendy areas like tumor-treating oncology – and are perhaps keen to take advantage of lower valuations of UK pharma companies compared to global rivals.

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💬 Quote of the day

"Most people would succeed in small things if they were not troubled with great ambitions."

- Henry Wadsworth Longfellow (an American poet and educator)

"When does a startup stop being a startup?" - Bradley from North Carolina, USA

"When it’s a grownup, naturally 😉 There’s no hard-and-fast rule on exactly when that is, but it’s probably when a company’s able to run independently – that is, without needing further financial support from others. Many startups raise money from venture capital investors and then go on to lose money for a while before eventually (hopefully!) turning a profit. Much like a person, once it no longer requires external cash to keep going, a company might be seen as independent – and therefore a grownup. ‘Going public’ is often a milestone for calling a startup a grownup too, since it thereafter has a permanent source of capital through stock markets."

🧐 What We're Reading
  • Michael Bloomberg gave $1.8 billion to his alma mater (Washington Post)
  • Why 536 was the worst year to be alive (Science)
  • The story of a hack – told by the hacker (Threader)

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Image credits: stocksolutions - Shutterstock | vchal - Shutterstock