What McD's $5 Meal, an L.A. Court Hack and Demand for Perfume Tell Us
We scanned the news for insights into our portfolio holdings so you don't have to.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
This week we look at news of shifts in America's aging population, AI in video game making, big computer hacks, a costly desire to smell good and consumers' tightening wallets for insights into our portfolio holdings. Let’s dig in:
Aging of the Population
We have more reports showing this aging demographic will have a strong influence on the economy and services that cater to them.
“With people in the U.S. aging better and living longer, older adults are one of the fastest-growing groups in the country. In fact, by 2030, all Baby Boomers will be age 65+ and by 2040 roughly 78.3 million Americans will fall within that age group.” Read more here from the National Council on Aging.
Artificial Intelligence
Amid questions of use cases for AI that were raised this week, here is one, and we suspect we will be hearing about more of them.
“A WIRED investigation finds that major players like Activision Blizzard, which recently laid off scores of workers, are using generative AI for game development.” Read more here from Wired.
“ServiceNow Inc. reported better-than-expected sales and bookings in the second quarter, signaling strong customer demand for its broad suite of software tools…In an interview, Chief Executive Officer Bill McDermott said that adoption of the company’s generative AI-oriented products is helping boost earnings. “I doubt you could have had these extraordinary results without generative AI,” he said.” Read more here from Bloomberg.
“Google’s cloud division hit $10 billion for the first time while also achieving $1 billion in operating profit. During an earnings call on Tuesday, Google CEO Sundar Pichai said the company’s generative AI solutions for Cloud customers “already generated billions in revenues and are being used by more than 2 million developers.” Read more here from The Verge.
“SAP has promoted its cloud business by bundling it with AI tools to incentivize customers to make the shift, moving users to the more lucrative subscription model and away from on-premise licenses. Its current cloud backlog, an indication of future revenue, grew by 28% to €14.8 billion last quarter.” Read more here from Bloomberg.
Artificial Intelligence, Digital Lifestyle
This one speaks to the AI on device upgrade cycle, which we see benefiting Apple AAPL and Qualcomm QCOM, and indirectly Universal Display OLED.
“Samsung is focusing on AI as the future of mobile devices – we’ve already seen the software with the recent Galaxy AI features, but the hardware “may turn out to be radically different from Samsung’s existing phones,” according to TM Roh, the President of Samsung’s Mobile Experience unit (MX).” Read more here from GSMArena.
Cash Strapped Consumer
To us, the revelation this week that uber discretionary spending-related company Polaris Industries PII was cutting production levels due to bloated dealer inventories was one sign of consumers continuing to be selective in their spending. But it wasn’t the only one.
“Burger chain McDonald's (MCD.N), opens new tab $5 value meal offer will be extended to August at most U.S. locations after about 93% of its restaurants voted in favor of the plan, according to a memo seen by Reuters… The $5 meal has helped bring back traffic into McDonald's restaurants, the memo noted, after higher fast-food prices had driven budget-conscious customers to limit eating out and switch to cheaper home-cooked meals.” Read more here from Reuters.
“In an effort to court customers in a competitive market, online brands and retailers have increased the amount of promo codes they offer. That’s according to new data from AI-powered promo code platform SimplyCodes, which examined nearly 400,000 retailers on the platform from January to June 2024. They found that, on average, retailers issued nine unique codes — an increase of 31% compared to the same period in 2023.” Read more from Chain Storage Age.
Cybersecurity
Plain and simple, cybersecurity remains on a growth vector, especially as more companies are reminded about the need to continually shore up their defenses from attackers and hacktivists.
“The largest trial court in the United States, the Superior Court of Los Angeles County, closed all 36 courthouse locations on Monday to restore systems affected by a Friday ransomware attack. The attack, which has not yet been claimed by a ransomware operation, affected the entire network of the Los Angeles Superior Court. This includes external systems like the MyJuryDuty Portal and its website and internal systems like the case management systems.” Read more here from BleepingComputer.
“Threat actors are exploiting the massive business disruption from CrowdStrike's glitchy update on Friday to target companies with data wipers and remote access tools. As businesses are looking for assistance to fix affected Windows hosts, researchers and government agencies have spotted an increase in phishing emails trying to take advantage of the situation.” Read more here from BleepingComputer.
“In its latest State of Application Security Report, Cloudflare paints a sobering picture of the internet's threat landscape in 2024. How sobering? Try 6.8% of internet traffic is malicious, up a percentage point from last year's study.” Read more here from ZD Net.
Luxury Buying Boom
Parsing quarterly results from LVMH reveals that consumers continue to spend on fragrances and cosmetics, but much less so on other luxury goods. We see the dichotomy in LVMH’s results supporting our rationale for owning Coty COTY in the Portfolio.
“Luxury goods giant LVMH’s latest earnings showed resilience with 2% organic growth in the first half of 2024, but the market leader fell short of analyst estimates and last year’s revenue amid a slowdown in luxury fashion… Fashion and leather goods, as well as perfumes and cosmetics businesses, grew 1% and 4% in the second quarter, respectively, thanks to Dior’s Sauvage and J’adore perfumes’ ongoing success.” Read more here from Forbes.
Safety & Security
More support for increasing defense spending outside of the US is a positive for our shares of Lockheed Martin LMT.
“Canada will increase defense spending to the NATO target of 2% of gross domestic product by 2032, Prime Minister Justin Trudeau said on Thursday, making a commitment for the first time on when the government would meet the goal as pressure from the United States mounts.” Read more here from Reuters.
“India has announced a 2024–25 defence budget of INR6.22 trillion (USD74.3 billion). The expenditure represents a 4.8% increase compared with the original defence budget for 2023–24.” Read more here from Janes.
"Stunned and alarmed by the Russian invasion of Ukraine, European members of NATO have been making significant increases to their defense budgets. In 2024, an estimated 23 NATO members will spend at least 2% of gross domestic product (GDP) on defense. Poland, on the front line with Belarus and Ukraine, is estimated to spend 4% of GDP this year and has called for NATO to raise its defense-spending minimum target to 3%." Read more here from Fidelity.
The portfolio is long AAPL, QCOM, OLED, COTY, LMT.
