Here’s what you need to know today

• Australia’s share market fell 2% yesterday and is now down 7% in a little over a month. This is going to prompt some sensational headlines in the financial media, so keep in mind that market falls of 5%, 10%, 20% are not unusual. Stay focused on the long-term and keep dollar-cost averaging.
  
  

• Australia’s $261 billion Future Fund is shifting its investment philosophy. A key change is refocusing on active equity fund managers it believes will be “better rewarded in an environment where higher inflation and geopolitical risk make market returns less certain”. It also plans to buy $1 billion in gold. (AFR | Future Fund)
  
  

• Australia is short 141,000 infrastructure workers, which could balloon to a 300,000 person shortage by 2027. This is the latest forecast from Infrastructure Australia, which presents as a major impediment to Australia’s $242 billion pipeline of major projects including housing, energy transmission and transport infrastructure. This is the largest the project pipeline has been since tracking started 5 years ago. (Infrastructure Australia)
  
  

• Commonwealth Bank CEO Matt Comyn faced a Senate inquiry with relish yesterday, acknowledging “I probably enjoy this more than I should”. And he didn’t stick to the investor relations talking points. Comyn argued that multinationals like Mastercard, Visa, Apple and Google should pay more tax. He suggested cutting net migration from 260,000 this year to 180,000 to ease housing pressure. And he threw his support behind a regional banking levy that would see Big Banks subsidise services in remote areas, even though his bank will be the largest contributor. (Capital Brief)
  
  

• Obesity in America is falling thanks to GLP-1 drugs like Ozempic. Gallup’s latest National Health and Wellbeing Index shows U.S. adult obesity falling to 37% from its 2022 peak of 39.9%. This is about 7.6 million fewer obese American adults. The timing aligns with the explosion of GLP-1 usage across America. At the start of 2024, less than 6% of Americans were taking drugs such as Ozempic, Wegovy, Mounjaro, and Zepbound. It is now more than 12%. (Gallup)
  
  

• Weight-loss drug maker Novo Nordisk announced it would slash prices of its GLP-1 drugs in a bid to take back market share from Eli Lilly. Novo will cut the price of Wegovy by 30% for existing customers and to $199 a month for new patients. Despite the increasing use of GLP-1 drugs, Novo’s share price is down 51% this year while Eli Lilly’s is up 31%. (Reuters)
  
  

• Amazon founder Jeff Bezos has announced his next venture, Project Prometheus. Bezos will serve as co-CEO of the company that will focus on applying AI to engineering and manufacturing. The company has already hired almost 100 employees from firms such as OpenAI, Deep Mind and Meta. (NY Times)
  
  

• Speaking of Amazon, the world’s largest eCommerce platform is getting into used cars. Ford will be the second carmaker, after Hyundai, to start selling certified used cars through the platform. Don’t expect Amazon to deliver to your door however, buyers must pick up the car from a participating dealership. (Reuters)
  
  

• Nvidia is due to report quarterly earnings after the market closes on Wednesday (Thursday morning in Australia). The world’s most valuable company is down 8% so far in November as some investors take profit. An analysis of 909 quarterly filings from hedge funds by Bloomberg found that 161 bought Nvidia and 160 sold Nvidia in the latest quarter, resulting in a near-even split in investor sentiment. Thursday’s earnings will be telling. (Bloomberg)
  
  

• China currently controls 98% of global gallium supply. Australian startup Gega Elements is looking to challenge China’s dominance for this critical mineral used in semiconductors, AI infrastructure, electric vehicles and space technology. It has raised just shy of $1 million to build refining capacity here in Australia. (Capital Brief)
  
  

• Bitcoin continued falling, briefly falling below US$90,000 for the first time since April. This has been a broad based crypto selloff with all major cryptocurrencies dropping in the past week, led by Bitcoin (down 15%), Ethereum (16%), Ripple (13%), BNB (8%) and Solana (18%). (Forbes)

What the…?

Turkish football has decided to kick its gambling problem. The Turkish Football Federation (TFF) has banned 102 players as part of a massive betting and match-fixing investigation. This comes in addition to 149 referees who were banned earlier this month for betting on matches. One referee had bet over 18,000 times and 42 referees had bet on more than 1,000 matches each.

Eight people have been arrested and over 1,000 players have been suspended in what the TFF President described as a “moral crisis in Turkish football”. The Turkish sports betting market is estimated to be worth US$584 million, with football betting making up the vast majority of the market. (Reuters | Grand View Research)

Investing is a lifelong journey

Here’s what you can learn today

Nike v Adidas: Battle of the Brands

This is an insight from our conversation with Alan Pullen, Portfolio Manager of the Magellan Global Opportunities Fund (Apple | Spotify | YouTube Music)

In the world of sportswear and athletic apparel, the Nike vs. Adidas debate is contentious. From an investment perspective, Alan Pullen of Magellan Investment Partners is Team Adidas:

“Nike will be back at some point, but they are in the midst of a turnaround … Adidas has kind of been a beneficiary of Nike being out of the game for a little while … we like them both, but Adidas is just in the better part of the cycle at the moment”

He put his money where his mouth is: Magellan’s Global Opportunities ETF recently invested in Adidas, which now makes up a little over 2% of the ETF’s holdings.

So what happened to Nike? Alan blames a series of bad strategic decisions, including underinvestment in products and poor wholesale channel management. Reducing sales to major retailers like Urban Outfitters, Macy’s, and Foot Locker reduced revenues, which Nike responded to by cutting 2% of their workforce.

These were costly missteps: Employees and investors alike lost faith in the company, leading to a US$24 billion drop in market cap. Nike’s stock is down nearly 50% since peaking in late-2021, and CEO John Donahoe stepped down in September of last year.

Adidas also has the edge when it comes to “the beautiful game”, as Alan highlights that Adidas has leading market shares in global markets where football is the dominant game.

However, Adidas has been negatively impacted by American tariffs, with retailers stocking smaller inventories due to turbulent tariff regimes.

Alan also raises that Adidas had internal issues of its own, namely its failed partnership with controversial rapper Kanye West. After cutting ties with Kanye and ending the Yeezy brand, Adidas held US$1.3 billion of inventory of Yeezy merchandise. Adidas elected to sell the merchandise at-cost and donate considerable amounts of the sales to charities, an act that led to financial losses but provided a positive end to the public relations headache.

Whichever team you’re on, both companies provide AI-skeptical investors with exposure that is increasingly sought after: Large-cap non-tech consumer goods. With the Magnificent 7 making up over a third of the S&P 500, consumer goods provide a counterbalance for investors looking to decrease their exposure to technology. Adidas has the added diversification bonus of being listed outside the US, trading on Germany’s Frankfurt Stock Exchange.

Want to hear the full Nike vs. Adidas discussion and find out more about the potential AI bubble? You can find the full episode below:

A message from Pimco

The PIMCO Short Term Active Yield Active ETF (ticker: EARN) is tailored to meet the needs of a diversified Australian portfolio. Designed to deliver monthly distributions and aiming to outperform cash and term deposits, EARN is managed with the same disciplined approach as PIMCO’s institutional client mandates while offering the flexibility, transparency and daily liquidity of an ETF. 

Investors should obtain a copy of the Product Disclosure Statement (PDS) relating to the product and consider the PDS before making any decision about whether to acquire an interest in any PIMCO fund mentioned in this publication. PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246 862 has determined the target market for this product which is set out in the target market determination (TMD) published on our website. The current PDS and TMD can be obtained via www.pimco.com/au/ 

Want more Equity Mates?