E Statistics Lesson

I did graduate work on statistics and therefore know exactly what went wrong with some of the FAANG stocks. Blame The Law Of Large Numbers which applies to Netflix, Facebook, and now Twitter and Intel.

The law of large numbers, in probability and statistics, states that as a sample size grows, its mean gets closer to the average of the whole population. In a financial context, the law of large numbers indicates that a large entity that is growing rapidly cannot maintain that growth pace forever.


We got our first unaudited results from Veoneer in the sidelines today as VNE, its active electronic safety systems arm only was spun off by Autoliv in late May. It reported "unexpectedly strong order intake" with 5 orders in that period and hinted that it may have to raise its 2022 sales target above the $4 billion set then. However its 4.1% rise in operating profits was below forecasts and operating losses came in at $48 million, quadruple what it was in Q1, because of rising costs, but did greatly beat the Reuters consensus forecast of minus $31.6 million. It said its organic sales dropped 4.5%, double the forecast but that it still expects to hit its close-2018 target of 3% organic, The issue is the phase-out of some contracts. It expects to reverse the sales drop by the end of next year. This is a lumpy industry and we are seeing ballet moves between the EU and the US over tariffs on automobiles, which is where VNE systems go. The conference call  told that VNE components mostly come from Canada. But the share nonetheless gained 5% to 433 Swedish krone in Stockholm trading.

Former parent Autoliv, maker of passive safety devices, also reported lower organic growth post-spinoff because of auto industry confusion and "headwinds" from tariffs on raw materials. It expected that raw materials (including steel and aluminum) will incur increased tariffs of $30 million this year vs an earlier estimate of a $16 million increase, near double.

It is much bigger and much more integrated globally. In Q2 ALV sales grew 11.5% from prior year to $2.212 billion, of which organic growth was up 7.3%, a sharp rise from last year. For the full year it now expects organic growth at 8%, down from prior estimates. It also expects growth below earlier forecasts next year.

Happily, it had major new markets, starting with China which grew 18% y/y plus India, ASEAN, and Latin America which now account 24% of sales up from 21% a year ago. The main rise was in seat belts rather than airbags. Operating margin was 10.4%.and operating income jumped 4.2% to $229.1 million. Diluted EPS from continuing operations rose 48 % to $2.22 from a restated $1.50 in Q1 (to remove VNE). CEO Mikael Bratt cited continued "strong order intake" thanks to "a 72% rise in new product launches". He also promised to be :fully focused on occupant safety products and delivering value to our shareholders." Apart from costlier inputs ALV also ran into higher than expected launch costs, However Mr. Bratt stressed that global auto demand is growing despite "NAFTA renegotiations and various trade barriers on raw material and automotive parts."

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David Reynolds 2 years ago Member's comment

Good read.

Vivian Lewis 2 years ago Author's comment

do I want to share a page with Dough Casey? I am the child of immigrants of a different language, religion and culture to that of the US mainstream. Of course had they not left Nazi Germany when they did my parents would have been killed and I wouldn't be here. But to limit migration to people called Casey who want to better themselves would also exclude religious refugees like my mom and dad; people who had helped the USA in Vietnam who feared being killed by the Communist takeover; Cuban refugees from Castroland; Russian amd East European Jews banned from studies or jobs under Stalin and his allies. If you only allow Christians with white skin who speak English already, who can find jobs or start companies now, are you going to ask the offspring of these other groups to return to their ancestors" homelands? What will Mr Casey do about the native Americans who were here before the Caseys disembarked?

BreakingBad News 2 years ago Member's comment

Was this response to a question I'm not seeing?

Vivian Lewis 2 years ago Author's comment

ad for Casey posted on talkmarkets letter to me yesterday so I reacted

BreakingBad News 2 years ago Member's comment

Thanks for clarifying, I had no idea Casey had such views.

Vivian Lewis 2 years ago Author's comment

me neither. but the book is out