A Bull’s Case for Oil...Healthcare (Finally) Chases Consumers...Unlocking Value in Europe

Insights on markets, industries and the global economy [Goldman Sachs]( [BRIEFINGS] July 02, 2018 The Long & Short of It: A Bull's Case for Oil The investment case for oil remains intact through year-end amid rising trade tensions and shrinking global inventories, according to Goldman Sachs Research's Jeff Currie. "The pillars behind our bullish outlook remain the same," Currie says, noting that he expects prices to rise over $80/barrel this summer due to growing global demand, supply disruptions among key OPEC producers and constraints in US shale production. However, Currie remains committed to the New Oil Order -- the idea that shale is a technological revolution that will keep prices anchored longer-term. [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=The%20Long%20%26%20Short%20of%20It%3a%20A%20Bull%27s%20Case%20for%20Oil%20&body=http%3a%2f%2fwww.goldmansachs.com%2four-thinking%2fpages%2fbulls-case-for-oil.html%3fcid%3deml-np-briefings-briefings-textlink-201801--) Why Healthcare is (Finally) Chasing Consumers Above: Jake Siewert and Jo Natauri of Goldman Sachs After years of rising healthcare costs, consumers are pushing back, says Jo Natauri of Goldman Sachs on the latest episode of our podcast, Exchanges at Goldman Sachs. By demanding cheaper and more convenient medical options, consumers' influence in the industry is rising. In response, healthcare companies are expanding into other parts of the healthcare chain to get close to customers -- for example, reaching patients at their local pharmacies rather than just physicians' offices. "If you're a diabetic, you'll see your physician two times a year. You'll see your pharmacist 20 times a year," says Natauri. Leveraging the local pharmacy relationships is also a way for healthcare companies to potentially reduce the long-term costs of chronic diseases. "The influence of consumers is just going to be increasingly important." [Listen to podcast]( [Subscribe]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Why%20Healthcare%20is%20(Finally)%20Chasing%20Consumers&body=http%3a%2f%2fwww.goldmansachs.com%2four-thinking%2fpodcasts%2fepisodes%2f06-21-2018-jo-natauri.html%3fcid%3deml-np-briefings-briefings-textlink-201801--) What Happens When...a Goldman Sachs Analyst Plays eSports with the Pros? Above: Chris Merwin of Goldman Sachs As the lead video game sector analyst for Goldman Sachs Research, Chris Merwin's typical day involves analyzing the financials of US video game publishers and advising investors on market trends like the rapid rise of eSports. But on a recent business trip, he had a chance to spend time playing one of the hottest eSports titles with pro-team Florida Mayhem -- and what ensued could best be described as an epic beatdown. Fortunately for Team Mayhem, it was only a practice match and not their main event: a live tournament of the sort that has helped eSports build a global audience base of 170 million viewers monthly. Merwin sees growing prize pools for these events, improving infrastructure for pro leagues, the rise of live-streaming, and the broad appeal and accessibility of eSports expanding the audience base to over 250 million by 2021 and growing the associated revenue opportunities. [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=What%20Happens%20When...a%20Goldman%20Sachs%20Analyst%20Plays%20eSports%20with%20the%20Pros%3f&body=http%3a%2f%2fwww.goldmansachs.com%2fcareers%2fblog%2fposts%2fwhat-happens-when-esports.html%3fcid%3deml-np-briefings-briefings-textlink-201801--) Talks at GS with Darren Star: From Sex and the City to Younger -- Coming of Age on Television Above: Susie Scher of Goldman Sachs and television producer Darren Star From 90210 and Melrose Place, to Sex and the City and now Younger, television producer, writer and director Darren Star has created iconic shows that reflect -- and often challenge -- the generational and societal issues of their times. Melrose Place first premiered in 1992 and was groundbreaking for featuring an openly gay character on television -- a storyline that initially experienced pushback (and censorship) from the network. "People at that time...weren't really talking about...[their] sexuality," Star said to Goldman Sachs' Susie Scher during a recent Talks at GS session. "But it was very important to me to have a gay character...[whose sexuality wasn't an issue]...Before Melrose Place, [for] gay characters on TV, their sexuality was their issue." In Younger, now in its fifth season on TV Land, Star is focused on a different demographic -- Millennials. "The show has become very much an expression of the generation," he said. "[There is the] 40-something generation that did not grow up with social media, and the 20-something generation that is sort of...elevated to this...high level of achievement. And they're basically running the world because they know how to use Instagram." [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Talks%20at%20GS%20with%20Darren%20Star%3a%20From%20%3ci%3eSex%20and%20the%20City%3c%2fi%3e%20to%20%3ci%3eYounger%3c%2fi%3e%20--%20Coming%20of%20Age%20on%20Television&body=http%3a%2f%2fwww.goldmansachs.com%2four-thinking%2ftalks-at-gs%2fdarren-star.html%3fcid%3deml-np-briefings-briefings-textlink-201801--) Briefly...on Unlocking Value in Europe European companies are stepping up efforts to simplify their operations, with divestment and spin-off activity picking up markedly in recent quarters. What's behind the surge? According to Goldman Sachs Research, a confluence of factors including rising shareholder engagement and the increased valuation of growth assets. We spoke with Richard Manley, co-Director of Research in London, and Katherine Alexakis, head of European Tactical Research, about what's prompting management teams to reshape their portfolios -- and the nuances within the trend. What are some of the key catalysts for increased focus on corporate simplification in Europe? Katherine Alexakis: There are a lot of catalysts for action in our view. The increasing presence of private equity buyers and rising engagement by activist investors may be part of the motivation. New sources of competition may also play a role: in many emerging markets for example, domestic companies are becoming a more potent threat. In other areas, new competition is coming from non-traditional industries -- our Capital Goods team has written about the blurring line between software and hardware for example. These trends mean that management teams with diverse operations are having to defend themselves on an ever-greater number of fronts. Retrenching to their core competence may make sense in that context. How do business valuations feed into this trend to simplify? Richard Manley: Some of Europe's most exciting, fast-growing businesses are arguably hiding in plain sight, commingled with slower growing divisions in large, diversified companies. Right now, the premium that investors are willing to pay for superior growth has risen, so this could be an opportune time for businesses to carve out hidden gem assets whose value may be lost inside a conglomerate structure. It's important to note, however, that the method by which a split is undertaken -- an equity carve-out, a partial spin, etc. -- can affect the value that is ultimately realized. Is the decline in corporate returns across Europe in the past several years one of the drivers for radical action? KA: Yes and no. The continent's weak aggregate returns relative to other regions may well spur corporate restructuring -- Europe's returns meaningfully lag both those of the US and Asia ex-Japan even when we adjust for its relatively lower exposure to high-returns sectors like technology. However, our analysis also suggests that European returns have been deteriorating no more rapidly than those globally, so they are unlikely to have caused the particularly heightened corporate activity in the region. How easy is it to identify candidates for corporate reorganization? RM: There's no formula for singling out the companies that will ultimately reshape their businesses. One helpful starting point could be to identify companies that are both complex and have stagnant or declining returns -- for instance, we see this combination in pockets of the European industrials sector. Changes in management or shareholder structures can also prove a precursor to streamlining activity. For us, one of the easiest ways to see the opportunity is by comparing our analysts' sum-of-the-parts valuations with current share prices -- we see a lot of potential for further value to be unlocked on this basis. 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