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jeudi 19 novembre 2020

🔑 Tesla joins the S&P 500 Club

...and the pandemic diaper connection
November 19th
Disclosures
 

Elon getting ready to attend the S&P 500 Ball

 
 
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Hey Snackers,

A former Amazon engineer is working on an app to translate your cats' meows. Can't wait to hear: "Serve me, silly human." Love you too, Floofy.

Stocks dipped again yesterday as the market's recent rally to new records paused. Meanwhile, Pfizer one-upped Moderna, saying its COVID-19 vaccine was 95% effective in final data. It could ask for FDA approval in a few days.

Welcome

Tesla is joining the S&P 500 Club — we're looking at what it means for investors

Elon time coming... Tesla will join the S&P 500 index on December 21st, after posting five consecutive profitable quarters. Tesla became eligible to join the famous index in July, after notching four straight profitable quarters for the first time in its 17-year history.

  • The S&P 500 tracks the stocks of the 500 most valuable US public companies. People use it as an indicator for how the overall market is doing and can invest in S&P-tracking funds.
  • Tesla's set to become the most valuable company to ever join, and will likely be the 7th largest S&P company by market value, right above Walmart (whoa).

Welcome to Club 500... Over $11T is invested in mutual funds and ETFs that track the S&P 500. These funds are kind of like investment "smoothies," made up of a blend of different stocks instead of fruit (though Apple works both ways). Fund managers will now have to buy Tesla stock for their S&P smoothie, so shares have jumped 19% on the news. But these joining rallies (if they even happen) don't necessarily last long.

THE TAKEAWAY

Tesla could shake up the S&P... The bigger a company's market value, the more weight it carries in the Club. That's why Apple, Microsoft, Amazon, Google, and Facebook make up a whopping ~26% of the index. Tesla's market value is double Toyota's, even though Toyota delivered 30X more cars last year. Some analysts point to Tesla's profit-streak and record 140K deliveries last quarter as signs of maturity. But skeptics say the historically volatile stock could bring risk to the entire index.

Bust

With a pandemic Baby Bust looming, Huggies and Pampers go fancy-pantsy

Hmmmm... You'd think eight months of being cooped up at home would lead to a baby boom, but experts are actually predicting a baby bust. They think the corona-conomy will lead to majorly declining birth rates.

  • Brookings estimates US births could shrink by as much as 500K next year, more than 10X last year's drop (and they're already at record lows).
  • That's bad news for Gerber-owner Nestlé, Pampers-owner Procter & Gamble, and Huggies owner Kimberly-Clark (yes, the TP dispenser one).

Designer Diapér... We're nine months out from the first lockdowns, so baby businesses are strategizing. As births have slowed in the US and China over the years, consumer giants have shifted focus to premium baby items. Parents are having fewer kids, but they're spending more on them.

  • Kimberly-Clark intro'd plant-based, paraben-free Huggies that cost 5X more than the cheapest diaper (#fashion).
  • P&G is selling pricier Pampers that fit like pants (the khakis of diapers). It also partnered with Google for app-connected smart diapers.
  • Nestlé launched a fancy infant milk powder in June (basically oat milk).
THE TAKEAWAY

When the pie shrinks, raise the price... The baby market is shrinking, so companies are testing how much remaining customers are willing to pay. To make up for sales drops, they're raising prices — like Apple did with the $1,450 iPhone in 2019. How do they justify that? By upscaling products with fancier features. No one needs a four-eyed phone or a cloud-connected diaper. But companies don't care, as long as people will pay.

What else we're Snackin'
  • Slice: Apple will cut its App Store commission fee (aka: "Apple Tax") from 30% to 15% for small developers.
  • Grande: Starbucks raises pay for its baristas as restaurants brace for higher minimum wages when Biden takes office.
  • Chipper: Chipmaker Nvidia saw record sales and profit last quarter — sales jumped 57% on gaming and data demand.
  • Greenlit: The FAA gives Boeing's beleaguered 737 MAX planes clearance to fly again — they've been grounded since March 2019.
  • Bullseye: Target's sales jumped over 20% for a second-straight quarter, despite stimulus benefits running out.

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The Snacks Daily Podcast

Felicidades! Complimenti! 축하합니다! (bonus points for the last one.)

Language learning app Duolingo just raised $35M to hit a $2.4B valuation. But only 4% of its language learners are paying — and they make up 85% of its sales.

Now Duolingo's trying to reach the Spotify-standard of freemium conversion success... but can it?

Thursday

Disclosure: Authors of this Snacks own shares of Tesla, Apple, and Starbucks

ID: 1419227

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