Week 05.07 - 11.08: Big Market Swings, Mars Wants to Buy Pringles, Elon vs OpenAI (again), and more...
Weekly Financial Digest
Key Stats of the Week
📈 12% - Single-day plunge in Japan's Topix index, its worst loss since 1987
🍎 500M+ - Worth of Apple shares sold by Berkshire Hathaway as part of its strategy shift
💻 26% - Drop in Intel's stock price following job cuts and reduced spending announcement
🛢️ $124B - Saudi Aramco's announced shareholder dividend
📺 $9.1B - Write-down of legacy TV channels by Warner Bros Discovery
🍫 $22B - Potential acquisition price of Kellanova (Pringles maker) by Mars
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Weekly Sector Performance
🤝 M&A Roundup
🇬🇧 Telecom: Indian billionaire Sunil Bharti Mittal's conglomerate is set to acquire a 24.5% stake in BT Group from Altice - this marks a significant shift in the UK telecom landscape.
💻 Investment Platform: Hargreaves Lansdown, the UK's largest retail investment site, has agreed to a £5.4bn takeover offer from a consortium of private equity groups - valuing the company at £11.40 per share.
🎨 Art Market: Abu Dhabi's ADQ has purchased a stake in Sotheby's for $1bn, providing a cash injection as owner Patrick Drahi's telco empire grapples with debt issues.
🏙️ Real Estate: Bill Ackman's Pershing Square is considering taking property group Howard Hughes private, following a recent unsuccessful attempt to take the US entity public.
🍫 Snacks: Mars is in talks to acquire Pringles maker Kellanova for $22bn, potentially marking one of the largest deals of the year in the snacks industry.
💄 Beauty: L'Oréal has returned to the anti-wrinkle injectables market by acquiring a 10% stake in newly listed dermatology company Galderma.
🏦 Banking: Société Générale is selling its UK and Swiss private bank units to Union Bancaire Privée for €900mn - as part of CEO Slawomir Krupa's strategy to refocus the French lender.
📊 PR Firm: KKR is nearing an $800mn deal to acquire corporate PR firm FGS Global from WPP - valuing the company at about $1.6bn.
Chart Of The Week
Rate Cuts and Sector Performance: What Young Investors Should Know
This chart gives us valuable insights into how different sectors of the U.S. stock market react after the Federal Reserve starts cutting interest rates. Let's break it down:
What We're Looking At:
The table shows different sectors of the U.S. stock market.
The numbers represent how each sector performs compared to the overall market.
The time frames range from 1 month to 12 months after rate cuts begin.
Green cells indicate outperformance, red cells indicate underperformance.
Key Takeaways:
💡Consumer is King: Both Consumer Non-Cyclicals and Cyclicals are top performers over 12 months. This suggests people tend to spend more when rates drop.
💡Tech's Comeback Story: Technology struggles initially but becomes a strong performer by the 12-month mark. Patience can pay off in this sector.
💡Healthcare's Steady Rise: Healthcare shows consistent gains across all time frames, making it a potentially stable choice.
💡Finance Feels the Pinch: The Finance sector tends to underperform, especially in the long term. Lower rates can squeeze bank profits.
💡Timing Matters: Some sectors (like Utilities) perform well initially but lose steam over time. Others (like Technology) need time to shine.
💡Diversification is Key: Different sectors peak at different times, highlighting the importance of a diverse portfolio.
As a young investor, this chart doesn't tell you exactly what will happen next, but it provides valuable historical context.
If you believe rate cuts are coming, consider how you might adjust your portfolio based on these trends.
This Week in Short
Global Market Volatility Spike
Markets experienced extreme turbulence this week:
VIX hit highest level since COVID-19 pandemic start
S&P 500 fell sharply, Nasdaq entered correction territory
The trigger? slow U.S. job growth which fuelled recession fears
This volatility reveals market sensitivity to economic indicators.
Consider defensive strategies, but watch for potential bargains in quality stocks (and as we are already seeing now, the market seems to be recovering well :) )
Buffett's Apple Strategy Shift
Berkshire Hathaway halved its Apple stake - selling around 500+ million worth of shares:
It was part of move from equities to short-term bonds
Apple still posted solid growth, despite China sales decline
Buffett's move could signal caution about tech valuations or broader market conditions.
It might be a wise time to just check once more your high-flying tech stocks in your portfolio.
Musk vs. OpenAI Round Two
Elon Musk launched yet another new lawsuit against OpenAI and Sam Altman:
Claims investors misled by "fake humanitarian mission"
OpenAI co-founder John Schulman left for rival Anthropic
The AI ethics debate is heating up - with potential legal and talent implications.
Us investors need to watch how this affects AI development and public perception of AI companies.
Japanese Market Whiplash
Topix (index for the Tokyo Stock Exchange in Japan) plummeted 12% in a day,.
That’s its worst loss since 1987 - so why did this happen?
Yen strengthened rapidly
Investors were betting on deeper Fed rate cuts
BOJ rate hike made yen carry trades less attractive
Investors should watch for ripple effects in other export-dependent economies.
AI Stock Reality Check
The tech sector as well was hit - this time by AI-related concerns:
Intel down 26% after job cuts and reduced spending announcement
Nvidia fell 6% amid broader tech sell-off
Elliott Management called AI "overhyped" and Nvidia shares in "bubble land"
The AI narrative is shifting from hype to reality checks.
Look for companies with solid AI applications, not just promises.
Energy Sector Pragmatism
Glencore is keeping coal assets after shareholder feedback:
Saudi Aramco announced $124 billion shareholder dividend
Oil demand remains strong, according to Aramco CEO
Traditional energy are showing to still offer significant returns despite ESG pressures.
Google's Antitrust Setback
U.S. Justice Department won its lawsuit over Google's search monopoly:
The lawsuit focused on payments for default search engine status
Google is appealing - a separate antitrust trial on ads business is upcoming
This could reshape the search engine and digital advertising landscape - and might leave room for emerging competitors and potential regulatory actions against other tech giants.
We’ll keep an eye on this for you.
Chevron's California Exit
Chevron is moving headquarters to Texas after 145 years.
Here's why:
They’re facing increasing climate-change lawsuits in California
Its part of a broader corporate exodus from the state
→ More growing tensions between energy companies and climate policies.
Media Industry Disruption
Warner Bros Discovery wrote down legacy TV channels by $9.1 billion.
This reflects rapid changes in broadcasting since recent merger - the traditional TV model is under increasing pressure.
Companies that haven’t or aren’t successfully pivoting to streaming and digital content delivery won’t survive long.
Wine Industry Premiumisation
Treasury Wine Estates are shifting to higher-priced brands:
They’re selling off cheaper labels like Blossom Hill and Wolf Blass
Consumers are also drinking less wine but spending more per bottle
This "less but better" trend could benefit premium brands across alcohol categories.
Look for companies positioned to capture this changing consumption pattern - I’m thinking Pernod Ricard, Diageo and LVMH.
Worth having a closer look at them if you ask me.
Stocks - Performance Recap
📈 WINNERS:
Taiwan Semiconductor Manufacturing Co Ltd (TSM, +13.44%)
Uber Technologies Inc (UBER, +17.51%)
Eli Lilly and Co (LLY, +14.96%)
Palo Alto Networks Inc (PANW, +11.68%)
NVIDIA Corporation (NVDA, +9.28%)
Meta Platforms Inc (META, +8.30%)
Advanced Micro Devices Inc (AMD, +5.47%)
McDonald's Corp (MCD, +5.71%)
📉 LOSERS:
Intel Corporation (INTC, -3.88%)
Pfizer Inc (PFE, -4.34%)
Tesla Inc (TSLA, -1.06%)
Chevron Corporation (CVX, -0.28%)
NextEra Energy Inc (NEE, -0.40%)
Walt Disney Co (DIS, -1.42%)
Medtronic PLC (MDT, -1.50%)
GSK plc (GSK, -1.53%)
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This was superb. Enjoyed it. Waiting for more such newsletters. Attaching links to the source of these news would be great