Steven Tananbaum: The Evolution of Credit Investing and AI Opportunities

Steven Tananbaum: The Evolution of Credit Investing and AI Opportunities – Goldman Sachs Exchanges

Market views

Bullish

TIP— 30-year TIPS at close to 3% offer compelling risk-reward with good absolute value and asymmetric upside if rates tighten, trading at historically attractive entry price relative to equities.
SOFTWARE— Software companies with high retention, growing revenue, and 2028-2029 maturities trading at 30 cents on the dollar for companies originally bought at a dollar represent provocative value.
CMCSA— Despite cable industry challenges, the debt-equity relationship in Comcast presents an interesting relative value opportunity.
BANKS— European banks theme generated $3B in profits as banks improved returns on equity from 9-10% to 14-15%, trading above book value after being correctly marked and benefiting from rising rates.
ENERGY— Oil service companies during COVID represented compelling value at 70% discount to earnings and 80-90% discount to replacement value, generating $1.5B in profits as the thesis played out.
ARGENTINA— Argentine province debt offers better risk-reward than sovereign debt with materially better recoveries in restructurings, cheaper pricing, and better downside protection while participating in upside.

Bearish

AIINFRA— AI as an economic driver is hard to accelerate from current levels, and deceleration could lead to downward revisions in economic growth assumptions, creating the biggest risk for credit markets.
CABLE— Cable industry is under siege from streaming threatening subscribers and broadband competition, representing a shrinking business requiring capital return rather than reinvention attempts.

Not investment advice.