What snacks are in your cupboard?

Stocks had a mixed close yesterday with tech stocks coming up the winner. Treasury yields fell as the JOLTS report came up short, indicating that the labor market may be slackening.

Just a reminder. As I read through a myriad of news and analysis this morning, something caught my eye. No, it wasn’t some deep, mathematically rooted analysis of exactly where the market will be in 3 days at noon. It wasn’t another prediction or Fed rates. It had nothing to do with price of soybeans and El Niño. No, it was a small headline that said something like “Weight loss drug Wegovy being trialed to cure alcoholism.” Now, I am being honest when I tell you that I double-took and re-read it at least 2 more times. It was, after all, early, EARLY in the AM. I rubbed my eyes and sure enough, the headline did indeed hint to something of the sort. I clicked, because I was curious.

Now, in case you haven’t noticed, this new wave of weight loss miracle drugs has become a big deal. I wrote about it recently and joked that if you threw a stone from your front porch that it was likely going to land on a neighbor’s home who is currently using one of the several drugs to come out in the past two years. Oh, and to be clear, those drugs have been around for a while, used to treat high blood sugar. It wasn’t until someone realized they cause weight loss AND POSTED IT ON TIKTOK, FACEBOOK, INSTAGRAM, TWITTER (X), etc., that things really picked up. The sudden surge in demand pushed manufacturers to prioritize getting approvals for alternative indications. And here we are. Now everyone can look awesome… just like the people on social media! All, jousting aside, weight loss for those who struggle with it, is, indeed, a good thing and ultimately, will improve health.

I am sure that I don’t have to tell you that Novo Nordisk and Eli Lilly have experienced noticeable rises in their stocks as a result. I guess, in hindsight, it would have been nice to have anticipated the move which would have yielded you some +60% in the past year. In case you just got the message, I am sorry to inform you that it is probably too late because the market has already factored in the bonanza. Going back to the note I published recently I detailed the impact Ozempic and Wegovy has had on junk food providers. Indeed, someone had an investment thesis that the global demand for McDonald’s Big Macs and Coca-Cola will go down with so many folks now taking these appetite suppressing jabs. With that came noticeable underperformance in those stocks.

So, one has to ask the question (especially if one is a portfolio manager), are those stocks down for the right reason or for the wrong reason? Will we suddenly see boarded-up windows on McDonald’s around the globe? Will that beloved red Coca-Cola sign simply become a collectible? Moreover, will people on weight loss drugs stop drinking bottled water from Desani, Smartwater, Powerade, Gold Peak Iced Tea, or Aquarius water in Japan? Those are all Coca-Cola brands. How about… DIET Coke? I won’t answer those questions; I will let you decide.

It is clear that these new indications for proven medications are a windfall, and, at net, beneficial for society. Now you know what the first thing that came to my mind this morning when I saw that headline. Should I sell my shares in Constellation Brands? Will folks stop drinking Corona Beer or Modelo Beer because of Wegovy? I thought for a moment and then realized that Corona Light is pretty good… with less calories. I also thought, that, like Wegovy and Ozempic, that there was a time, not too long ago that alcohol itself was heralded as a wonder cure… for just about everything… as was Coca-Cola.

WHAT’S FIZZING IN THE PREMARKET

Campbell Soup Co (CPB) shares are higher by +1.54% in the premarket after the company announced that it beat EPS and Revenue estimates by +4.00% and +0.11% respectively. The company also gave full-year guidance above the median of analysts’ estimates. I guess folks are still eating Goldfish and Snyder’s pretzels (both CPB brands), despite the preponderance of Wegovy. Dividend yield: 3.66%. Potential average analyst target upside: +10.3%.

PayPal Holdings Inc (PYPL)  shares are lower by -1.0% on high volume in response to BofA cutting the companies recommendation to NEUTRAL from BUY citing growth challenges in the year ahead. Potential average analyst target upside: +28.7%.

YESTERDAY’S MARKETS

NEXT UP

• ADP Employment Change (Nov) is expected to show that new monthly hires were 130k, higher than last month’s reported 113k jobs.
• MBA Mortgage Applications (Dec 1) came in up +2.8% for the week, an improvement over last week’s +0.3% gain.