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Appetite for less

Published 2024/05/23, 11:17

Market scorecard

US markets cooled off yesterday after minutes of a recent Fed meeting revealed concerns about persistent inflation, casting doubt on when officials might cut interest rates. All major indices closed down, with energy and utilities leading the losses.

In company news, Nvidia (NASDAQ:NVDA) surged 6% after-hours thanks to blowout revenue numbers and a stronger-than-expected second-quarter outlook. The chipmaker also announced a 10-for-1 share split and a 150% increase in its dividend to 10 cents per share (still pathetic). Meanwhile, big-box retailer Target (NYSE:TGT) fell 8% after reporting its fourth straight quarter of declining sales.

In summary, the JSE All-share closed down 0.40%, the S&P 500 shed 0.27%, and the Nasdaq was 0.18% lower.

One thing, from Paul

A client wrote to me yesterday, saying he was very impressed by my immediate responses to his queries by email (even when overseas).

I told him that we like differentiating ourselves from our financial industry colleagues, and that it was a pleasure to exceed customer expectations.

This may sound like I'm just tooting our own horn, but it's a good sign that we enjoy the mundane parts of our work, that some other people find tortuous.

Byron's beats

We firmly believe that the recently approved and very effective GLP-1 weight-loss drugs will take the world by storm. One of the globe's biggest food producers, Nestle, seems to agree. They just launched a new frozen food brand aimed at people who are taking these drugs.

Nestle's Vital Pursuit meals are high in protein, fibre, and essential nutrients and will be sold for less than $5. The portion sizes are modest, which aligns with the usual appetites of people on the medication.

Research suggests that people using GLP-1s consume 20% fewer calories. These drugs may change the way people eat on a large scale, and the food manufacturers need to adjust accordingly.

Michael's musings

Have you heard of "hungry gut" before? It is when your body processes food through the stomach faster than the average person. Having an empty stomach sooner makes people feel hungry more often, which can lead to eating more calories than needed.

Unsurprisingly, a new study has found that people with hungry gut genetic markers find GLP-1 weight loss drugs much more effective than others. Participants in the study who tested positive for hungry gut traits lost an average of 19.5% of their body mass after a year on the Wegovy, compared with just 10% for people who tested negative.

Given the high price of GLP-1 medications, health insurers might require genetic testing to approve claims of those seeking the medication. I doubt it though. What excites me most about this study is the increased awareness that our genetics plays a role in medication effectiveness. A greater understanding of the human genome will result in medications being tweaked to be more effective for different types of people.

Bright's banter

Chanel's revenues climbed 16% to $19.7 billion in 2023, excluding currency shifts, driven largely by price increases which contributed around 9 percentage points, and higher volumes making up the rest, according to CFO Philippe Blondiaux.

The luxury brand saw strong demand for its quilted leather handbags, Swiss-made watches, and Bleu de Chanel fragrances, even as competitors experienced a slowdown.

Chanel reported double-digit growth across all categories, with a 14% increase in the final quarter of 2023. Operating profits rose 11% to $6.4 billion.

CEO Leena Nair attributed the record sales and profits to the desirability of Chanel's products and the company's investments in the brand, luxury experience, and employee development.

This would be more fun if Chanel were a listed company. All we can do for now is admire them from a distance.

Signing off

Asian markets are mixed this morning. Benchmarks rose in India, Japan, and South Korea, driven by gains in semiconductor manufacturers. However, markets declined in Hong Kong and mainland China. South Korea announced a $19 billion incentive package to boost its chip sector, benefiting SK Hynix and Samsung (KS:005930).

Locally, Anglo American (JO:AGLJ) has rejected BHP Group's (JO:BHPJ) third offer following the PIC's comment that "The offer on the table does not sufficiently reflect the embedded value or the future potential that BHP stands to inherit." Elsewhere, RFG Holdings (JO:RFGJ), known for brands like Bull Brand corned beef, Hinds spices, and Bisto gravies, reported a 20.7% increase in headline earnings for the six months ending March.

US equity futures have rallied in pre-market trading thanks to Nvidia. The Rand is trading at around R18.29 to the greenback.

Today, Intuit (NASDAQ:INTU), Medtronic (NYSE:MDT), Workday (NASDAQ:WDAY), NetEase (NASDAQ:NTES), and Autodesk (NASDAQ:ADSK) will report their earnings, in case you are interested.

Keep going. Next week's election is just around the corner.

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