Musings from the trading floor (Independence Day Edition)
Names in play this week: £PRSR, $TRIP, £NESF
4th July 2025
Musings from the trading floor (Independence Day Edition)
Names in play this week: £PRSR, $TRIP, £NESF
Equities: UKX -0.07%, Eurostoxx -0.76%, ASX: 1.04%, SPX: 2.25%
Credit: IG, flat, XO 2bps wider
Interest Rates: flat, 10Yr 2bps higher
Thursday Close Data
Geo-Macro Mania
US: Tariffs and the big beautiful bill. ADP data vs NFP and unemployment rates really outlined the divergence in data points.
UK: Reeves.. a la Truss..
All Paths Lead to the Fed..But there are more risks on the radar?
Catalyst 1: Equity Valuations & Earnings..
o Generally equity valuations look toppy (S&P 500 forward earnings way above historical avg) and credit looks expensive, of course there are amazing pockets a la UK market, infra and real assets specifically.
o Europe might be good value, its certainly done well this year, but what about trade tariffs?
Catalyst 2: Geo-politics
o We have seen just how quickly the market can turn, with last months skirmish in the middle east, and the potential for material supply chain / shipping disruption. Shipping rates for crude tankers almost increased 50% for a point in time.. it could have been worse.
Catalyst 3: Trade Tariffs
o This weekend could be an interesting one, set notifications for Truth Social! The UK should be a beneficiary, but it’s the risk-off sentiment that often leads rather than who the beneficiaries are.
Catalyst 4: Fiscal Credibility and the Fed Chair Succession
o This is our number one. We see two scenarios here, 1) a puppet chair, weak monetary policy, coupled with tax cuts etc and we end up in a 10x Truss-like market scenario, 2) a dovish chair, but with toned down trade and fiscal police sabre rattling. In this instance we think, it sets the path for real rally across asset classes.
More Activism
Activism in public markets has increasingly drifted into the intangible and the esoteric, tech restructurings, software spin-offs, or pushing ESG frameworks. But this week brought a reminder that real-world platforms still matter. Starboard Value has disclosed a 9% stake in Tripadvisor (TRIP: US), triggering an 18% pop in the stock. Their plan? Engage with management on ways to unlock value at a company that, despite recent earnings beats, is grappling with competitive pressures and softening travel trends. For those of us running activist strategies focused on listed real assets, this is notable for two reasons: 1) Tangible businesses are back on the activist radar. Tripadvisor may be digital, but it sits atop an ecosystem of hotels, flights, and physical experiences — a real asset play by proxy and 2) Strategic reviews are in the air. The board already formed a special committee to evaluate takeover interest (Apollo being among the rumoured bidders). Activists smell optionality and inefficiency — and so do we.
We’re paying attention. When real assets, whether it's infrastructure, property platforms, or hard-backed service providers — trade at persistent discounts, it creates fertile ground for value creation.
Actual Musings
PRS REIT (PRSR: LN): Shareholders feel like they have a bit of a dilemma on their hands. Take the c.115p if it is made firm or hold. At a fundamental level, the stock doesn’t look that appealing, long-term residential capital values grow by 2-3% per annum, with the stock yielding c.3.9%, implies a sub gilt yield return from a cash yield perspective (10yr gilt yield 4.5%), but with a total return hovering around a 6% handle – that might be enough for holders, but its hard to make the case for an institutional bidder to pay up. If you had to refinance the long-term debt, you would probably be looking at spread G+100-150bps range (maybe cheaper all-in if using bank debt given the swap spread). One to watch, looks like arbs aren’t convinced on the trade yet given the share price.
Next Energy Solar Fund (NESF: LN): Anyone else not able to reconcile the dividend cover calculations? Answers on a post card, as the IM/Company didn’t want to answer..
No new coffees this week.
On annual leave now for most of July, will be writing the musings (albeit a sleepier version) and will be blue dot!
Espressos Consumed SB: 1633