Market Pulse
Friday, February 9, 2024
Welcome to this week’s Market Pulse, your 5 minute update on key market news and events, with takeaways and insights from the Sidekick Investment Team.
Our stories this week are:
It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.
You might be curious how hedge funds and non-alcoholic beer are related. Turns out, hedge funds across the Atlantic were the unexpected launch pads for a couple of booming non-alcoholic beer brands.[1][2].
Luke Boase left the hedge fund he was working for, Polar Capital, and founded Lucky Saint. His idea was to give those who wanted an alcohol free option the “beer they deserved”. Around the same time, Bill Shufelt left Point72 Asset Management, and set out to brew an alcohol free beer “that people actually wanted to drink”.
Both founders tapped into an emerging trend early on: the shift towards moderation. Millennials and Gen Z are drinking less alcohol than previous generations, a trend not necessarily about quitting alcohol but embracing moderation. Data suggests over 80% of non-alcoholic beer drinkers still enjoy a ‘regular’ beer from time to time[3].
The non-alcoholic beverage sector is on a rapid rise, with projections suggesting a 25% growth in volume between 2022 and 2026[4]. The world's largest beer company aims for its low and no-alcohol beers to account for 20% of its sales by 2025[5]. Meanwhile, Diageo, a giant in the alcohol industry, invested in the non-alcoholic startup Seedlip in 2019 and has since introduced non-alcoholic versions of well-known brands like Guinness, Captain Morgan Rum, and Tanqueray Gin[6].
This shift to a more sober culture will undoubtedly put pressure on some existing businesses but it also presents new opportunities for companies and brands to engage with, and expand, their audiences.
Note: Diageo is a holding in Sidekick's Flagship strategy.
Novo Nordisk and Eli Lilly, trailblazers in the weight loss game, have been stirring things up for a while, and they're not slowing down. Recently Eli Lilly’s market value zoomed past Tesla's, snagging a spot among the elite "Magnificent 7". This club was traditionally tech-only, but Eli Lilly, a pharma company, is adding a bit of diversification.
Both Tesla and Eli Lilly are pioneers in new markets brimming with potential. Just like Tesla did in the early days, Eli Lilly and Novo Nordisk are cruising without much credible competition near term, with their only speed bump being production capacity. To turbocharge their production, Novo Holdings recently shelled out $16.5 billion to buy Catalent, a heavyweight in pharma contract manufacturing[7].
The hunger for weight loss solutions is skyrocketing to the point where snack food CEOs seem to be running scared. The head of Novo Nordisk shared that he's been getting calls from some of these CEOs, curious about how these new drugs work and what impact they might have[8].
As weight loss treatments become more affordable and widespread, we're expecting a big potential shift in consumer habits over the coming years.
Note: Tesla and Novo Nordisk are holdings in Sidekick's Flagship strategy.
Tech companies have been on a job-cutting spree, letting go of over 260,000 roles in 2023, and, so far, 2024 hasn’t offered much relief with over 32,000 jobs already slashed[9]. However, this year's layoffs seem a bit more strategic compared to the cuts last year. Last year, companies were mostly trimming down to streamline operations after pandemic induced hiring sprees, but now there seems to be a focus on shifting gears towards artificial intelligence. Despite the broader tech layoffs, job ads for AI specific roles have jumped 13% from December 2023 to January 2024[10].
A recent survey highlighted that 37% of business leaders said AI replaced some jobs in 2023, and 44% anticipate more of the same for 2024[11]. One example is UPS, trimming down 12,000 positions, especially in their pricing department, where they say AI can do the same job. Another recent example is Duolingo, the language learning app, who is cutting down 10% of its contractors, betting on AI for content creation[12]. Sundar Pichai, Alphabet's CEO, put it plainly, saying that making room for increased investment in AI means having to make some tough calls[13].
It seems to us there is a real possibility that AI might shake up the job market sooner rather than later.
Note: Alphabet is a holding in Sidekick's Flagship strategy.
[1] https://luckysaint.co/pages/story
[2] https://www.wsj.com/business/retail/athletic-brewing-non-alcoholic-beer-864caa20
[3] https://www.wsj.com/business/retail/athletic-brewing-non-alcoholic-beer-864caa20
[7] https://www.ft.com/content/afa63517-457d-449d-a33b-159aa01d0723
[12] https://www.wsj.com/tech/tech-industry-layoffs-jobs-2024-44a0a9dd?st=j038r201par5wfp
[13] https://www.wsj.com/tech/tech-industry-layoffs-jobs-2024-44a0a9dd?st=j038r201par5wfp
Please remember, investing should be viewed as longer term. Your capital is at risk — the value of investments can go up and down, and you may get back less than you put in.
