Skip to Content

Power Sheet – June 29, 2016

-Should CEOs in the U.S., Japan, and Switzerland be looking to buy British and European companies now? It’s a question to take seriously as a new article on post-Brexit investing makes clear. The article unites two of my favorite experts on stock valuations, Fortune’s own Shawn Tully and Research Affiliates chief Rob Arnott. As Tully puts it, citing Arnott’s research, “British stocks are now a huge buy.” And if it’s true for individual investors, it could be true for corporate acquirers also.

The opportunity goes far beyond the U.K. While we’ve seen umpteen headlines about the rout in British stocks, the damage in European markets has been much worse yet less noticed outside their home countries. Arnott, whose firm oversees investment strategies for $160 billion in investment funds, says, “the danger of Brexit to the eurozone is a lot greater than the threat of Brexit to the U.K.”

Multiplying the opportunity for buyers in certain countries is the currency effect. The dollar, yen, and Swiss franc are much more valuable against the pound and the euro than they were a week ago. It’s even better for U.S. companies because they could also pay for acquisitions with their stock at a time when Arnott believes the U.S. market is badly overvalued.

Most CEOs will cringe at the very thought of buying a U.K. or continental company now – the uncertainty is overwhelming. But of course that’s what separates the great leaders from the rest. It’s the perfect moment to remember Warren Buffett’s advice to be greedy when others are fearful and fearful when others are greedy. Almost everyone is fearful now. We’ll see who has the courage to seize this moment.

-Succession done right. Last week we noted the blown succession at Softbank as Nikesh Arora, CEO Masayoshi Son’s publicly designated successor, resigned. Today we observe what I bet will be the opposite scenario. Honeywell announced that president Darius Adamczyk will succeed CEO David Cote on March 31. Cote will then be executive chairman until the end of April 2018.

With those dates far in the future, isn’t that a lot of time during which this could all go terribly wrong? Of course. But Cote’s outstanding record tells investors that it won’t. He’s one of America’s star CEOs, having run Honeywell for 14 years and delivered stock performance that beats the S&P by miles. He’s done it the hard way, running a diversified conglomerate when that structure is mostly out of favor and making dozens of acquisitions that have paid off for his shareholders, beating the odds on takeovers. In addition, he named Adamczyk president last April, signaling that he was the successor and now has specified exactly when it will happen. No surprises, no drama. Investors love that.

So far, this is the way it’s supposed to be done.

-Another reason for lawyers to get nervous. A Stanford student has created a free online chatbot to get your parking tickets thrown out, and it works surprisingly well. Just go to and enter basic information about your ticket; the software does the rest. No need to take photos of the location; the bot gets what it needs from Google Streetview. Joshua Browder, 19, created the chatbot after he got a ticket in London. The bot now handles parking tickets from London and New York and has succeeded in getting 160,000 out of 240,000 thrown out.

Surely this simple software doesn’t threaten real attorneys, some will say. But consider that it was written by a kid in his spare time. Giant companies are investing millions in highly sophisticated software that is already taking over higher level legal work. It’s one reason that thousands of U.S. law school graduates can’t find work, and the trend is accelerating.

You can share Power Sheet with friends and followers here.

What We’re Reading Today

41 dead, hundreds injured in suicide attack in Istanbul
Turkish Prime Minister Binali Yildirim said the three suicide bombers who infiltrated the Ataturk airport appear to be linked to ISIS. President Recep Tayyip Erdogan, in an attempt to rally allies against militant groups, added that the bombs “could have gone off at any airport in any city around the world.” The U.S. reiterated its support for Turkey in its fight against ISIS, though the group has yet to claim responsibility.  BBC

U.S. Attorney General: Important to look at VW individuals
Shortly after a $15.3-billion settlement with Volkswagen over emissions cheating was announced, Loretta Lynch said it will be important to go after the individuals responsible. Former CEO Martin Winterkorn already faces a German investigation into his role in the scandal.  Reuters

National Amusements fires sharp criticisms at Viacom board
National Amusements, the company through which Sumner Redstone controls Viacom, released a letter from its board to Viacom’s board. It calls Viacom’s allegations that Redstone is mentally incapacitated and being controlled by his daughter Shari “offensive” but asserted that even if they could be proven, they would have “no impact on the legitimacy of National’s actions.” National has sought to replace most of Viacom’s directors, including Chairman Philippe Dauman. Viacom responded that the issue of Redstone’s capacity and his daughters influence “matters a great deal” to shareholders.  Los Angeles Times

Energy Transfer Equity escapes from $33-billion deal with Williams Cos.
The two sides have been fighting almost since the deal was agreed to last year. Kelcy Warren‘s ETE discovered that the merger could come with a very large tax bill and wanted out. As energy prices rose, Alan Armstrong‘s Williams refused, but a judge ruled last week that ETE could end the agreement. Williams will appeal the ruling.  WSJ

Building a Better Leader

When trying to promote a strong leader…
…focus on what makes him or her passionate, not on skills that are lacking. SmartBrief

The cities with America’s worst commutes
Detroit wins another inauspicious distinction; surprisingly, Los Angeles isn’t in the top 10. Fortune

When a new job offer puts you at a career crossroad…
…evaluate the opportunity cost. If you didn’t take the new job, what would happen instead? 99U

Political Divides

E.U. says it wants a fast divorce from Britain
In a meeting with Prime Minister David Cameron, E.U. leaders said the U.K. can’t expect any special favors as it departs the group. Cameron is seeking market access for the U.K. similar to what it has now. German Chancellor Angela Merkel added that any hope the U.K. will reverse its decision is “wishful thinking.” Fortune

Benghazi investigation places little blame on Hillary Clinton
After a two-year probe, the 800-page report faults bureaucracy and a lack of resources in the deaths of Ambassador Chris Stevens and three colleagues in Libya. The report places plenty of blame on the Obama administration but says little about Hillary Clinton, who was then Secretary of State. It suggests she should have reacted faster to reports that an attack was possible; it did not provide evidence that she tried to cover up her actions. CNN

Donald Trump attacks trade deals, globalization
In a speech, Trump said he would reject the Trans-Pacific Partnership, renegotiate or withdraw from the North American Free Trade Agreement, and possibly impose tariffs on Chinese imports. He called globalization a way to make a few very wealthy that has “left millions of our workers with nothing.” One of the speech’s goals was to attract Bernie Sanders supporters USA Today

Up or Out

Honeywell CEO David Cote will step down in March and be succeeded by COO Darius Adamczyk. Cote will continue as executive chairman through April 2018.  WSJ

Fortune Reads and Videos

Google finds major security flaws in Symantec and Norton products
Those companies’ security products can’t stop hackers from compromising a computer through unopened email filled with malicious code, says Google’s Project Zero security team. Fortune

Homeland Security may ask visitors to the U.S. …
…to provide, voluntarily, access to their social media accounts in order to check for ties with terrorist groups. Fortune

Lyft memo to investors: Expect a June slowdown
It comes just 24 hours after rumors swirled that Lyft had hired a boutique investment bank known for selling tech companies. But the memo could just be part of Lyft’s effort to raise more funds. Fortune

The former CEO of Clif Bar has turned her attention to…
…an herbal juice. Sheryl O’Loughlin has become CEO of REBBL, a company that makes juice out of herbs and roots.  Fortune

On this day…

…in 2007, Apple released its first iPhone.  CNNMoney

Share Today’s Power Sheet:

Produced by Ryan Derousseau