Bulls for reindeers

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Market scorecard

US markets pushed higher again last night, as the Santa Claus rally continues. It's not even December yet, but we are feeling the festive season cheer! The S&P 500 closed at its highest level since August and the tech-heavy Nasdaq hit a 22-month high. Winners included Paramount Global (NASDAQ: PARA ) (+5.6%), Boeing (NYSE: BA ) (+4.7%) and Nvidia (NASDAQ: NVDA ) (+2.3%).

In company news, Microsoft (NASDAQ: MSFT ) rose to a new all-time closing high of $378.06 after it hired OpenAI's Sam Altman and Greg Brockman. Elsewhere, Zoom rose 2.9% on sales that were better than expected. Over in Europe, Frankfurt-listed Bayer (ETR: BAYGN ) shed 18% because it halted a trial for an experimental cardiovascular drug. Bristol Myers Squibb, which is working on a similar product fell by 3.8%.

At the closing bell, the JSE All-share was up 0.54%, the S&P 500 rose 0.74%, and the Nasdaq strode 1.13% higher.

One thing, from Paul

I'm happy to say that I'm not the only ber stock market bull out there, expecting the rest of this decade to be very good for equity investors.

Econoblogger, Noah Smith suggests that The Roaring 20s are back on track.

Here he is in a recent Substack post: "In 2020, one of the big ideas going around was that we were headed for a "Roaring 20s" decade. Productivity had soared during the pandemic, and companies were finally reshaping their business models around the internet. The success of MRNA vaccines, combined with the stunning drops in the cost of solar power and batteries, seemed like harbingers of a decade of rapid technological progress. And of course all of that was before the release of ChatGPT and the generative AI boom."

"In the years that followed, that burst of optimism was tempered by high inflation, sluggish productivity growth, and the reversal of some of the business innovations that had taken hold during the pandemic. Attention shifted to war, geopolitical tensions, culture wars, and other less pleasant stuff. But over the past year or so, the Roaring 20s have quietly been making a comeback."

He notes: (1) productivity is growing again, (2) inflation is coming down and wages are rising, (3) tech companies are innovating rapidly. In other words, the Roaring 20s are just getting started.

Byron's beats

Walmart (NYSE: WMT ) has been the US company with the largest revenues over the last 20 years. Retailing groceries and household goods is a high sales, low margin business.

Walmart's revenue was 305 times larger than Amazon (NASDAQ: AMZN )'s 25 years ago. Fast forward to 2013 and Walmart's revenue was still 7 times larger than Amazon's.

Since then, that gap has closed quickly. Based on the latest quarterly releases, Amazon's annual revenue is now at $554 billion while Walmart's is $630 billion. Due to Amazon's global expansion and diverse business offerings, I would imagine they'll be overtaking Walmart soon. Amazon's rise to retail domination has been nothing short of spectacular.

Michael's musings

Companies that make weight-loss drugs are attracting a lot of attention on Wall Street at the moment, and for good reason. Goldman Sachs estimates that these products will have sales of $100 billion by 2030.

Currently, only two companies are competing in the market, Eli Lilly (NYSE: LLY ) and Novo Nordisk (CSE: NOVOb ). If Goldman Sachs estimates are correct, both these companies have huge growth ahead. Amgen (NASDAQ: AMGN ) is planning to have its own drug available in 2027, assuming it passes all the regulatory tests and is effective.

Vestact has chosen to back Eli Lilly for a few reasons. (1) It is an American company, so it should have an easier time selling to a US audience (patients, doctors and funders). (2) Its drugs are currently cheaper. (3) Early trials point to their drug being more effective, 26% mean weight loss compared to Novo Nordisk's 16%. (4) Eli Lilly has a second horse in the race with retatrutide, a drug still in trials but also proving effective.

Eli Lilly currently has an annual revenue of just under $33 billion. If it can capture only a third of the weight loss market, its revenue will double. We think Eli Lilly will capture more than 50%, which means its revenue will most likely triple over the next 7 years.

The market is also pricing in some steep growth, with Eli Lilly currently trading on a PE of 100. Profit growth will push that PE lower in time, but it will probably be a wild ride along the way.

Read more here - How Ozempic, Wegovy, and Mounjaro compare on weight loss effectiveness.


Bright's banter

When Facebook bought WhatsApp for $19 billion almost a decade ago, Mark Zuckerberg promised not to interfere too much with the messaging app. There was a subtle shift in 2019, when parent company Meta Platforms (NASDAQ: META ) started tapping into WhatsApp's growth and business potential.

WhatsApp has now become more important to Meta, with more than half of Americans aged 18 to 35 who own a mobile phone having installed it. WhatsApp is now one of Meta's fastest-growing services in its most mature market.

WhatsApp is being used more and more by business users, who pay for the privilege. Ads on the Status section of WhatsApp may reach $10 billion in revenue this year. Meta uses WhatsApp to explore experimental and unproven products, and still has plans to develop it into a super app.

WhatsApp's momentum highlights that Meta is still fundamentally a business powered by its family of social apps, even though it invests heavily in the metaverse and artificial intelligence.

Signing off

Asian markets climbed again this morning. The MSCI Asia-Pacific index is headed for another solid close, its best in two months, as technology shares outperformed. Benchmarks rose in Hong Kong, mainland China, and South Korea, while Japan flatlined.

China's property developers are up close to 8% on news that regulators are drafting a list of 50 companies eligible for generous financing in the property development space.

US equity futures have also edged higher in early trade. The Rand is at R18.28 to the US Dollar as the greenback fell against the Group of 10 currencies.

After the market close in New York tonight, Nvidia will release its latest set of quarterly numbers. Their sales, profits and outlook will have to be very good, to justify that $1.245 trillion market capitalisation!

All the best.

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