Week 12.07 - 18.08: UBS Strength, Starbucks' CEO Twist, NEVs in China, and more...
Your Weekly Financial Digest
Key Stats of the Week
🍫 $36B - The value of Mars' acquisition deal to buy Pringles maker Kellanova, at $83.50 per share.
🔥 4 - The number of CEO changes at Starbucks in just two years, signalling internal turbulence but also a potential for positive transformation.
🌍 51% - Proportion of new energy vehicles (NEVs) in total vehicle sales in China for July
💼 $1.1B - Net profit reported by UBS in Q2, double the expected amount
📉 2.9% - The annual inflation rate in the U.S. for July, its lowest since March 2021
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Weekly Sector Performance
🤝 M&A Roundup
🍫 Food & Beverage: Mars struck a massive $36bn deal to acquire Pringles maker Kellanova - paying $83.50 per share for the snack rival.
🎰 Gaming: Flutter Entertainment, owner of Paddy Power, entered talks to purchase Playtech's Italian business for £2bn - amid ongoing consolidation in Italy's online gaming market.
🏘️ Real Estate: UK housebuilder Bellway walked away from its takeover bid for Crest Nicholson, sending the latter's shares plummeting in another blow to the struggling developer.
🌬️ Energy: A Hong Kong consortium led by CK Infrastructure, controlled by Li Ka-shing's family, acquired UK wind farms for £350mn. The group also announced plans for a secondary listing in London.
💻 Tech: SoftBank and Intel discussed a potential AI chips partnership to rival Nvidia - though talks failed to progress. The Japanese group aims to position itself at the center of the artificial intelligence boom.
Chart Of The Week
Let's have a look at this chart which compares how different sectors of the S&P 500 performed under Trump and Biden.
First off, forget what you might have heard about Trump being better for stocks.
The overall S&P 500 actually did better under Biden (79% growth) compared to Trump (65.8%). Surprising, right?
Now, let's look at some standout sectors:
💡Energy: Despite Trump's "drill, baby, drill" approach, energy stocks absolutely soared under Biden (282.9% growth vs. -38.6% under Trump). This huge swing was likely due to post-pandemic recovery and global events like the Ukraine conflict.
💡Technology: Both presidents saw tech stocks boom, but Trump had a slight edge here (155.8% vs. 125.6%).
💡Financials: Another surprise – banks did better under Biden (97.4%) than Trump (31.7%), even though Trump was seen as more bank-friendly.
💡Consumer Discretionary: People spent more freely under Trump (94.3% growth) compared to Biden (33.4%).
The takeaway?
Presidential policies matter. But they're not the whole story.
For new investors, this data shows why it's smart to diversify across sectors.
It also highlights that the stock market doesn't always behave the way political rhetoric might lead you to expect.
This Week in Short
Mars' $36 Billion Kellanova Acquisition
Mars agreed to buy Kellanova in one of the largest snack industry takeovers.
The key details to the deal?
Mars is privately held → diversifying into cereals and snacks.
The deal combines iconic brands like M&M's, Pop Tarts, and Pringles.
The merger is a sign of the ongoing consolidation in the consumer goods sector, aiming for economies of scale and brand synergies.
Elliott Management Takes on Southwest Airlines
The activist hedge fund launched a proxy fight to replace most of Southwest's board.
Some notable points:
Elliott has an 8% stake in Southwest.
Southwest's profit margins lag behind competitors.
The airline adopted a poison-pill strategy to prevent further share accumulation.
The situation is proof of the power of activist investors in pushing for corporate change, especially in underperforming companies.
Ola Electric's Successful IPO in India
The electric scooter maker raised $732 million in India's largest IPO in over two years. Highlights:
Share price rose 20% on the first day of trading.
Ola doubled its scooter sales in the latest fiscal year.
Im planning on looking into emerging market opportunities in the EV sector bit more - particularly in high-growth markets like India.
I’ll cover this more in a later research article.
Starbucks' Surprise CEO Shake-up
Starbucks replaced CEO Laxman Narasimhan with Brian Niccol - the former Chipotle chief.
Here’s what you should remember:
Fourth CEO change in two years signals internal turmoil.
Pressure from activist investor Elliott Management likely influenced the decision.
Stock price surged on the news → indicating investor approval.
Generally speaking, us investors should watch for companies with frequent leadership changes - as it can indicate instability but also potential for positive change.
U.S. Inflation Cools, Rate Cut Expectations Rise
Annual inflation rate fell to 2.9% in July, the lowest since March 2021.
The implications?
Increased likelihood of a Federal Reserve interest rate cut in September.
Potential boost for growth stocks and real estate investments.
The thing is - declining inflation often leads to more accommodative monetary policy - which can stimulate economic growth and asset prices.
Global Market Recoveries
Japanese and U.S. stock markets recovered from recent volatility.
Topix and Nikkei 225 are nearly back to pre-rout levels.
S&P 500 and Nasdaq Composite also rallied.
The insight here? Don't panic-sell during market dips.
Instead - use these opportunities to reassess your portfolio and buy quality stocks at a discount.
China's Foreign Investment Decline
China's direct investment liabilities turned negative in Q2 - indicating foreign capital outflow.
Key points to this:
It’s only the second time this figure has been negative.
It’s part of a broader trend of declining foreign investment since 2021.
The lesson here? Be cautious with heavy exposure to Chinese markets.
Electric Vehicle Sales Milestone in China
New energy vehicles (NEVs) accounted for 51% of total vehicle sales in July.
This is significant because it:
Represents a rapid shift from just 7% three years ago.
Indicates strong government support and changing consumer preferences.
The EV market in China is maturing rapidly - for investor it is worth looking into investment opportunities not just in EV manufacturers, but also in the supply chain (like battery makers and charging infrastructure companies).
UBS Profit Surge Post-Credit Suisse Acquisition
UBS reported a net profit of $1.1 billion in Q2 - double analyst expectations.
What to take from this:
Investment bank revenues up 38% year-on-year.
First report since completing Credit Suisse acquisition.
The strong performance suggests UBS is successfully integrating Credit Suisse's operations.
Stocks - Performance Recap
📈 WINNERS:
NVIDIA Corporation (NVDA, +18.93%)
Advanced Micro Devices Inc (AMD, +10.64%)
Broadcom Inc (AVGO, +11.78%)
Amazon.com Inc (AMZN, +6.06%)
Tesla Inc (TSLA, +8.06%)
Alphabet Inc Class A (GOOGL, +5.18%)
Visa Inc (V, +2.93%)
Apple Inc (AAPL, +4.54%)
Microsoft Corporation (MSFT, +3.07%)
📉 LOSERS:
Pfizer Inc (PFE, -0.88%)
Johnson & Johnson (JNJ, -0.77%)
Verizon Communications Inc (VZ, -1.22%)
AT&T Inc (T, -0.77%)
Chevron Corporation (CVX, -0.57%)
Exxon Mobil Corporation (XOM, -0.57%)
Procter & Gamble Co (PG, -1.55%)
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You should read this about UBS https://justdario.com/2024/08/ubs-games-of-smoke-and-mirrors-to-hide-its-giant-problems/