Week 22.07 - 28.07: Luxury Sector Stumbles, Tesla Struggles, CrowdStrike Outage and more...
Weekly Investor Digest
Key Stats of the Week
💰 $1.7T - Size of the private credit market as Hayfin Capital nears a buyout deal
📉 5% - Approximate drop in share prices for luxury goods companies LVMH, Prada, and Kering
📈 58% - Revenue surge in BNP Paribas' equity-trading arm
💼 $24B - Size of India's job creation budget
💱 4.5% - New policy rate set by the Bank of Canada after recent cut
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Chart Of The Week
The Magnificent 7 Stocks in 2024
This chart shows how the top 7 tech stocks have been doing each day in 2024. Here's what it tells us:
💡Nvidia is the star: Those big blue circles mean Nvidia's stock has been growing a lot, often outperforming the others. This is likely due to all the AI hype.
💡Google (Alphabet) is a wild ride: Lots of big blue and red circles show Google's stock has been up and down a lot. This means more risk, but also potential for big gains.
💡Tesla's tough times: Tesla started okay (small circles), but those recent big red circles mean it's been losing value lately. Something to watch out for.
💡Steady giants: Apple, Microsoft, and Amazon have tiny circles. This means their stock prices aren't changing much day-to-day. They're stable but not growing as fast as Nvidia or Google right now.
💡Meta in the middle: Facebook's parent company shows a mix of growth and losses, but nothing too extreme. It's not as exciting as Nvidia, but not as risky as Google either.
Key Takeaways:
AI is driving big gains for some tech stocks (especially Nvidia)
The biggest tech names aren't always the fastest-growing
Daily stock movements can vary a lot between companies, even in the same sector
Stable stocks might be "boring" but can be less stressful to own
Weekly Sector Performance
🤝 M&A Roundup
🛒 Consumer Goods: Reckitt and Unilever are joining other consumer giants in slimming down, focusing on 'power brands' and considering divestitures.
💰 Private Credit: European credit group Hayfin Capital is nearing a buyout deal, as acquisitions in the $1.7 trillion private credit market heat up.
📦 Logistics: Apollo Global Management has struck a £2.7 billion deal to acquire UK parcel group Evri, amid a shake-up in the UK parcel market.
✈️ Airlines: IAG's takeover of Air Europa is in jeopardy as EU officials signal concerns, with proposed remedies still not enough to assuage competition worries.
📊 Business Intelligence: Informa has agreed to buy Cannes Lions owner Ascential for almost £1.2 billion after several approaches in recent months.
🛢️ Energy: KKR is in talks to buy a stake of up to 25% in Eni's biofuel business, as the Italian group aims to fund diversification from oil and gas to renewable energy.
This Week in Short
Luxury Goods Market Stumbles
Shares of LVMH, Prada, and Kering dropped ~5% on Chinese demand concerns - this led to hefty discounts in Chinese stores.
The luxury sector's reliance on Chinese consumers is proving to be somewhat risky.
Although this isn’t a major concern at all (some exposure to China via luxury brands is pretty good actually), investors should seek luxury brands with diverse geographic revenue streams to mitigate risks associated with dependency on a single market.
It’s important to also keep monitoring consumer sentiment and spending patterns in key markets to anticipate shifts in demand.
CrowdStrike Outage Fallout
A botched CrowdStrike update caused massive IT disruptions worldwide - leading to flight cancellations, hospital delays, and bank trading halts.
Insurers braced for billions in losses - the incident underscored the critical importance of cybersecurity and the far-reaching impacts of IT failures.
For investors, this serves as a reminder to properly evaluate companies' IT infrastructure and disaster recovery plans. Look into cybersecurity spending trends and the robustness of IT governance in portfolio companies.
It might be worth looking into firms providing top-tier cybersecurity solutions - as demand for their services is likely to surge following such high-profile failures.
Aviation Industry Turbulence
British Airways' Air Europa takeover faced EU regulatory hurdles, Ryanair expected continued low fares through summer, and Airbus and Boeing plane shortages concerned industry executives.
These challenges pressured airline profits and growth plans.
Investors should consider diversifying investments across different aviation segments.
For example, low-cost carriers like Ryanair that can benefit from sustained demand for budget travel seem pretty attractive.
Additionally, aircraft manufacturers might face supply chain constraints - which suggests potential opportunities in companies specialising in aviation technology and maintenance.
Central Bank Actions
China surprised markets with interest rate cuts.
The Bank of Canada lowered its policy rate to 4.5%.
These central bank moves signal concerns about economic growth.
The thing is - rate cuts generally boost economic activity but can also signal underlying economic concerns.
Consider looking into sectors set to benefit from lower borrowing costs, such as real estate and consumer discretionary.
Tech Earnings Mixed Bag
Alphabet's revenue was up 14%, allaying AI competition fears, while Netflix added 8M subscribers - boosting earnings per share by 48%.
However, Tesla missed profit expectations and delayed its self-driving taxi launch.
So while the tech sector generally shows resilience, individual companies are facing challenges.
Young professionals should focus on companies showing robust growth and innovation, like Alphabet and Netflix.
Their ability to outperform expectations despite industry challenges indicates strong fundamentals.
Banking Sector Developments
Deutsche Bank halted share buybacks due to litigation costs, while BNP Paribas' equity-trading arm saw a 58% revenue surge.
Banks are clearly facing both challenges and opportunities in the current climate.
It’s particularly important to focus on banks with the ability to adapt to interest rate changes and manage litigation risks.
Banks with diversified income streams and robust risk management frameworks are likely to navigate market volatility more effectively.
Global Economic Moves
India unveiled a $24B job creation budget and raised capital gains taxes, while Ukraine struck a $20B debt restructuring deal with bondholders.
The British pound also reached its strongest level since the 2016 Brexit vote.
Overall, emerging markets like India present significant investment opportunities, especially in sectors benefiting from government stimulus.
The strengthening British pound suggests confidence in the UK's economic prospects post-Brexit - which is likely to benefit UK-based investments and currency trades.
Keep an eye on this.
Cryptocurrency ETF Approval
The SEC approved the first Ether ETFs, following earlier approval of Bitcoin ETF.
These are just more signs of the growing mainstream acceptance of cryptocurrencies - ignoring this sector today would be a mistake I believe.
I also have plans to cover this asset type in further detail soon - the opportunities for young professionals are just too big to ignore.
Stocks - Performance Recap
📈WINNERS:
SAP SE (SAP, +8.23%)
ServiceNow (NOW, +10.17%)
Thermo Fisher Scientific (TMO, 13.62%)
RTX Corp (RTX, +10.84%)
HCA Healthcare (HCA, +10.13%)
📉LOSERS:
Alphabet Inc (GOOG, -5.97%)
CrowdStrike Holdings (CRWD, -16.00%)
Tesla (TSLA, -8.11%)
Advanced Micro Devices (AMD, -7.65%)
NVIDIA Corp (NVDA, -4.13%)
Lilly & Co (LLY, -6.16%)
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Great visualization of up/down days that I haven’t seen before!