Week 26.08 - 1.09: NFL Opens up to PE, PDD Struggles, Canadian Tariffs, and more...
Weekly Financial Digest
Key Stats of the Week
🏪 $6B - Value of Edgar Bronfman Jr.'s abandoned bid for Paramount
🏈 1st - Time the NFL has opened its doors to private equity investment
🛒 29% - Drop in PDD Holdings' share price following warnings of falling sales and profits
🚗 100% - Tariff rate imposed by Canadian government on Chinese electric vehicle imports
🏗️ 25% - Duty imposed by Canada on Chinese steel and aluminum imports
📈 122% - Year-on-year revenue increase for Nvidia, reaching $30B
🚀 8 months - Extended mission duration for astronauts due to NASA's decision not to use Boeing's Starliner
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Weekly Sector Performance
🤝 M&A Roundup
🏪 Retail: Canadian convenience store giant Couche-Tard made an unsolicited bid for Seven & i Holdings, owner of 7-Eleven. The Japanese company is exploring protected status to fend off the foreign takeover attempt.
🏈 Sports: The NFL opened its doors to private equity for the first time. Firms like Ares, Sixth Street, Blackstone, Carlyle, and CVC are now approved to bid for a slice of the American football market.
🎬 Entertainment: US billionaire Edgar Bronfman Jr. abandoned his $6bn Paramount bid - clearing the way for a potential Skydance merger with the Hollywood studio.
🏭 Engineering: John Wood Group sold businesses for $165mn after a collapsed takeover bid - they face pressure to mount a turnaround.
💊 Healthcare: Siemens Healthineers boosted its cancer imaging capabilities with a €200mn deal for Novartis's radioactive chemicals business.
📊 Accounting: Private equity firms Carlyle, Blackstone, and Permira are eyeing a stake in mid-tier accountant Grant Thornton's UK business.
Chart Of The Week
This chart shows how different parts of the stock market perform during election years - with blue boxes for years when Democrats won and red for Republicans.
Here are the main points to take from this:
It's striking how some sectors seem to have political leanings.
Consumer Discretionary has consistently outperformed under Democratic presidencies, with Communication Services following a similar trend.
On the flip side, Republicans have their own market allies.
Financials has been a consistent strong performer during GOP administrations, with Energy often following suit.
What's fascinating is how some sectors are shifting allegiances over time.
Tech, once associated with Republican years, has been trending Democratic recently. Utilities, previously bipartisan in performance, now shows a Republican tilt.
Not all sectors play politics though. Materials and Industrials seem indifferent to which party takes office, maintaining consistent performance across administrations.
Real Estate stands out as an outlier, underperforming in most election years regardless of the winning party. It's an interesting anomaly in the data.
This Week in Short
Canada Imposes Tariffs on Chinese EVs and Steel
The Canadian government announced significant tariffs on Chinese imports.
Details to remember:
100% tariff on Chinese-made electric vehicles.
25% duty on Chinese steel and aluminum.
Similar to measures taken by the US and EU.
This move could lead to a reshaping of global supply chains.
North American EV and steel producers could see significant benefits from these protectionist measures - meaning I’ll be looking into increasing exposure to these sectors as they gain a competitive edge domestically.
Telegram CEO Faces Legal Trouble in France
French prosecutors issued preliminary charges against Pavel Durov, Telegram's boss.
Key points:
Charges relate to alleged failure in tackling criminal activity on the platform.
Its part of growing tension between governments and social media companies.
Similar issues are being faced by Meta and X (formerly Twitter) in other countries.
Watch for companies developing advanced content moderation technologies or those already implementing strong compliance measures.
These will likely gain favour as regulatory scrutiny intensifies globally.
Goldman Sachs Wins Stress Test Appeal
For the first time, a bank successfully challenged the Fed's stress test results.
The outcome being that:
Goldman can now hold slightly less capital.
This sets a precedent for other banks to challenge results.
It could also lead to increased profitability in the banking sector.
PDD Holdings Warns of Chinese Economic Slowdown Impact
The e-commerce giant's share price tumbled 29% on warnings of falling sales and profits.
Key takeaways:
PDD operates Pinduoduo and Temu sites.
$55bn were wiped off market value.
This Signals broader challenges in Chinese consumer market.
This serves as a reminder of the risks in emerging markets. I'm reassessing my exposure to Chinese consumer-focused stocks and looking into more diversified emerging market funds.
BYD Shows Resilience in Chinese EV Market
Despite price wars, BYD reported strong growth in the first half of 2024:
Revenue up 16% year-on-year.
Net profit increased by 24%.
They delivered 426,039 fully electric vehicles in Q2, up 21% from previous year.
BYD’s performance highlights the importance of strong cost management and pricing power.
Investors like us should focus on EV makers that not only innovate but also excel in operational efficiency → as they are more likely to withstand market pressures.
Nvidia's Earnings Show AI Boom Continues - But Expectations are Sky-High
Nvidia reported another impressive quarter, but fell short of previous growth rates.
Notable details:
Revenue up 122% year-on-year to $30bn.
Net profit increased by 168% to $16.6bn.
Share price tumbled despite strong results.
The AI sector remains hot, but the bar is set incredibly high.
I’d look into diversifying AI investments to include companies with solid fundamentals that aren't as dependent on sustained explosive growth - which can be difficult to maintain.
Boeing Faces Setback in Space Race
NASA decided not to use Boeing's Starliner for a return mission from the International Space Station.
Meaning:
SpaceX Dragon craft will be used instead.
Highlights ongoing technical issues with Starliner.
Extends astronauts' mission from 8 days to 8 months.
The competitive nature of the commercial space industry is clear.
Lego Reports Strong Growth Amid Toy Industry Challenges
The Danish toy maker saw significant increases in revenue and operating profit. Notable points:
Success attributed to innovative product lines.
Continued popularity of franchise-themed sets (Disney, Harry Potter).
Contrasts with declining sales reported by rivals.
Lego’s performance is an important reminder of the value of innovation and strong branding → even in traditional industries.
Companies that consistently adapt to changing consumer preferences while maintaining brand strength will be the winners of the future.
Stocks - Performance Recap
📈 WINNERS:
Berkshire Hathaway Inc (BRK-A, +5.14%)
General Electric Company (GE, +4.07%)
Visa Inc (V, +3.34%)
Mastercard Inc (MA, +3.62%)
NXP Semiconductors (NXPI, +7.30%)
Palo Alto Networks Inc (PANW, +3.41%)
Amgen Inc (AMGN, +1.53%)
Procter & Gamble Co (PG, +1.40%)
Coca-Cola Co (KO, +3.84%)
📉 LOSERS:
NVIDIA Corporation (NVDA, -7.73%)
Pinduoduo Inc (PDD, -31.29%)
Broadcom Inc (AVGO, -2.13%)
Tesla Inc (TSLA, -2.82%)
Adobe Inc (ADBE, -2.89%)
Advanced Micro Devices Inc (AMD, -4.14%)
Micron Technology Inc (MU, -6.43%)
Snap Inc (SNAP, -3.67%)
Albemarle Corporation (ALB, -3.87%)
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