The Lovechild of Tinder & Ticketmaster😍

MARKET UPDATE

Good Morning Investor! On Thursday, shares of the largest supermarket operator in the US, Kroger ($) popped 6% after the company posted mixed quarterly results but raised its forward looking guidance.

Meanwhile, shares of US pharmaceuticals giant Moderna ($MRNA) collapsed 12% after announcing a $1.2 billion cost-cutting plan in its research and development department.

Additionally, shares of Warner Bros Discovery ($WBD) rallied over 8% after the media company renewed its distribution deal with Charter Communications ahead of schedule. The move gives a boost to Warner Discovery as it prepares for life without the NBA.

TODAY’S BIG HEADLINES

The New Lovechild of Tinder & Ticketmaster

Europe Has a New Investment Product, and Investors are Grinning Ear to Ear

Gym Group Finally Achieves Post-Covid Profitability

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DATING APPS & EVENTS

The New Lovechild of Tinder & Ticketmaster😍

Old-School Courtship Gets a High-Tech Facelift: Whoever conjured up this brainchild deserves not just a pay rise, but a statue in their honor. A new dating app in New York called The League is strutting onto the scene with more swagger than a peacock at a disco. Their grand plan? Getting people to shell out cold, hard cash for the privilege of "meetups" or events where there's a sliver of hope they might bump into their soulmate. In other words, they're reinventing the wheel of romance and calling it innovation. It's like selling ice to Eskimos, but with cocktails and small talk.

Where Desperation Meets Overpriced Drinks: Instead of mindlessly swiping on an app like a bored hamster on a wheel, The League wants to create "experiences" such as happy hours and gatherings. It's a noble attempt to bring strangers together and hopefully lead to in-person matches, or at the very least, some awkward conversations and regrettable decisions. You might be scratching your head, wondering what value these dating apps are really offering by charging you for a chance at participating in how your parents probably met – at a bar, slightly tipsy, and with lower standards. But apparently, The League is finding some willing buyers.

• They’ve already tested the waters with swanky events in the Hamptons and the U.S. Open, and they’re planning more.

• While these events are reportedly free for users (how generous!), joining the app will still cost you an arm, a leg, and possibly your dignity. Memberships range from $300 to $2,500 a month — not exactly pocket change for the average Joe looking for average Jane.

When Swiping Right Feels Oh So Wrong: A lot of users in their 20s and 30s are reporting burnout and frustration with dating apps – shocking, I know. A whopping 46% of users report negative experiences, which is about as surprising as finding out water is wet. Bumble, Hinge, and Tinder are scrambling to win back fed-up users faster than you can ghost a bad date. Meanwhile, The League says the future of dating apps involves AI to "optimize" matches. Because nothing says romance quite like an algorithm deciding your love life, right? You have to wonder if that could further contribute to burnout and feelings of inauthenticity and randomness. Ultimately, AI can't replicate chemistry – or replace a good old-fashioned vodka soda in boosting your courage.

• Dating apps might be a prime example of how optimizing for monetization and efficiency leads to a worse product. At the end of the day, these companies are making money off the fact you’re single—so don’t expect them to rush you off the app anytime soon. I mean, if everyone finds love, who’s going to pay $2,500 a month for happy hours?

INTERNATIONAL MARKETS

Europe Has a New Investment Product, and Investors are Grinning Ear to Ear👀

Collateralized Resurgence: After years of regulatory red tape thicker than a bodybuilder's neck, Europe's first-ever exchange-traded fund (ETF) for collateralized loan obligations (CLOs) has finally dropped this week, leaving investors salivating like Pavlov's dogs at a dinner bell.

Blending Debt into a Tasty Treat: Think of CLOs as a sort of smoothie – not to be confused with CDOs which were a prominent element of the 2008 financial crisis. Banks, playing the role of overzealous bartenders, whip together a mix of different loans, portion them into batches with varying levels of financial alcohol content (risk levels), and serve them up to thirsty investors looking for a buzz. The loans are often issued to private equity-backed companies with less-than-perfect credit ratings. And they typically have a "floating" rate, where the interest those companies pay bobbles up and down like a cork in the economic ocean — based on what rates are doing in the overall economy.

• Now, ETFs based on CLOs have been storming the US: already this year, they’ve attracted five times the investment they saw in all of 2022. But because Europe has stricter regulations than a boarding school run by nuns, the Fair Oaks AAA CLO ETF (FAAA) – known for its high-quality risk ratings that would make a helicopter parent proud – was only just deemed worthy of becoming the region's first CLO fund.

• The FAAA fund only holds “AAA-rated” loan obligations – the type that haven’t seen a default since they debuted in 1999, making them more reliable than your grandma's secret recipe. And while the riskier CLOs hand out the thickest returns, the safer ones still seem to have an edge over rival assets. So far this year, European AAA CLOs have delivered returns of 3.6%, compared to a measly 0.6% from investment-grade bonds.

CLOs vs CDOs - A Tale of Two Financial Beasts: So how to CLOs differ from collateralised debt obligations (CDOs)? Well, unlike CDOs, which were about as stable as a Jenga tower in an earthquake, a CLO, or a collateralised loan obligation, is effectively a pool of diversified senior secured corporate loans. You’re talking about 200-300 loans across multiple issuers and multiple industries. So it’s not all in real estate, for instance. CDOs, on the other hand, were a diversified vehicle for mortgage-backed securities, which by 2006 had become dominated by high-risk – or sub-prime – mortgages. It was like filling a pinata with grenades and hoping for the best. CLOs are underpinned by different products and are more transparent.

• If you look at history, in terms of those debt tranches and the levels of defaults that they’ve experienced, especially in the investment grade side of things, the levels of defaults you’ve experienced in CLOs have been quite minor especially compared to CDOs.

• The worst 12-month rolling default rate for CLOs was through the GCF, and it was 0.3%. If you look at CDOs over the same time period, the worst 12-month rolling default rate was about 30% in investment-grade CDOs. So it’s a very, very different experience.

SPORTS & LEISURE

Gym Group Finally Achieves Post-Covid Profitability💪

Financial Muscles Flexing: London-based gym chain The Gym Group ($GYM) announced on Wednesday that in the first six months of this year, it swung back to a profit for the first time since 2019. Crucially, the company was able to raise prices and gym bunnies were willing to pony up, even as life became less affordable overall given that the UK is currently experiencing a “cost of living crisis”. Talk about sweating the small stuff! This positive news has sent the stock soaring faster than a gym bro's ego after leg day, up a jaw-dropping 50% year-to-date.

When Even the Gyms Needed a Spotter: Remember when gyms took a beating harder than a punching bag during those pesky pandemic lockdowns? Not only were they forced to shut their iron-pumping paradises, but their loyal customers started building home gyms. However, the tide has turned quicker than a HIIT workout, leaving at-home fitness brands like Peloton pedaling backward faster than Lance Armstrong's reputation.

• The Gym Group, specializing in low-budget gyms, proved that even when wallets are tighter than yoga pants, fitness enthusiasts will still find a way to flex. Both The Gym Group and PureGym – its biggest budget rival in the UK – raised prices, but remained the cheapest options for cash-strapped consumers. It's like they're the McDonald's of the fitness world.

Pumping Iron and Profits: According to a PwC report, the actual penetration of gyms and fitness clubs in the UK hasn't quite bench-pressed its way back to pre-2020 levels. However, the size of the market is bigger than ever, thanks to gyms raising membership prices faster than your heart rate during a spin class to offset inflation. The same report said the low-cost end of the gym spectrum had more than doubled its market share in the last 10 years, now accounting for 19%. This surge is likely due to the massive uptake in healthy living amongst younger generations, who seem to think avocado toast tastes better when you've earned it through burpees.

• A McKinsey report from the beginning of this year suggests that gyms can cash in on the younger generations. Millennials and Gen Z spend more on fitness and value it more highly than their elders, with in-person fitness classes and personal training being significant growth areas for the fitness sector.

MORE NEWS

Additional market-moving events🌎

EU Cuts Rates Again: The European Central Bank cut interest rates on Thursday by 25 basis points to 3.5%, as widely expected, pointing to a slowdown in inflation. This marks the Eurozone’s second interest rate cut this year. (ShareCast)

Space Fund Launches: Airbus Ventures launches $155 million fund focused on deep tech, including space. Airbus Ventures currently has $465 million under management, with Fund-Y marking its fourth fund to date. (CNBC)

PwC Cost-Cutting: PwC plans to cut 1,800 jobs. The layoffs, its first in 15 years, will be accompanied by a restructuring of PwC’s technology group amid slowing demand for its advisory services. (PYMNTS)

Sony Unveils $700 PS5 Pro: Sony’s ($SONY) upgraded console boasts a larger GPU, advanced ray tracing, and AI upscaling. It promises 45% faster rendering and improved frame rates without sacrificing visual fidelity. (The Verge)

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Our selections performance👾

On Monday the 11th of March, we released our “superperformers” stock pick which we believe will provide significant outperformance compared to the S&P 500. Then on the 14th of June we released our next stock selection. Lastly, on August 6th, we initiated a position in Celsius holdings.

Here’s how the stocks have performed since:

• Hims & Hers Health: $16.06 (📈+10.99%)

• PayPal: $70.05 (📈+15.52%)

• Celsius: $33.12 (📉-17.98%)