📉 Crowdstrike, Starbucks, Investing in Japan: Opportunities and Trends 💹
In under 5 minutes, let us introduce you to the investing opportunities found in the latest market news. Grow your portfolio with knowledge.
Market Summary
Equities up.
Bonds mixed.
Oil flat. Gold stronger.
Bitcoin down.
Investing Unlocks: How to Capitalize on the Hot Topics From The Last 7 Days
We analyze recent trends and opportunities, offering strategic insights that help you manage risks and identify growth opportunities for your portfolio.
Global IT Outage
A recent update from cybersecurity firm Crowdstrike Holdings Inc CRWD 0.00%↑ caused a significant global outage affecting various businesses, including Microsoft Corp MSFT 0.00%↑. The CrowdStrike update specifically disrupted Windows systems worldwide, causing the notorious "blue screen of death" error on laptops.
The outage impacted multiple sectors, including airlines, broadcasters, telecom firms, and banks. Organizations such as the London Stock Exchange, Sky News, and global airports experienced technical difficulties and delays.
Why investors should care:
Business Interruption Risk: The global outage highlights the vulnerability of businesses to cybersecurity updates, which can lead to significant operational disruptions.
Impact on Earnings: Prolonged outages can result in financial losses for affected companies, potentially impacting their earnings reports and stock performance.
Reputation Damage: Companies involved, like CrowdStrike and Microsoft, may face reputational damage, affecting customer trust and long-term business relationships.
Sector-wide Effects: The outage affected multiple sectors, underscoring the interconnected nature of modern businesses and the widespread impact of cybersecurity issues.
Market Volatility: Such incidents can lead to increased market volatility, as investors react to news of operational disruptions and potential financial impacts.
Regulatory Scrutiny: Recurring issues may attract regulatory scrutiny, leading to potential fines or stricter compliance requirements for companies in the cybersecurity and tech sectors.
Confidence in Cybersecurity Firms: The incident could shake investor confidence in CrowdStrike and potentially the broader cybersecurity sector, as it highlights vulnerabilities even within companies specializing in security.
Market Reevaluation: Investors might reassess their portfolios, considering the reliability and risk management practices of cybersecurity firms, leading to potential shifts in market valuations.
Focus on Competitors: Other cybersecurity firms might gain attention as investors look for alternatives perceived to have stronger safeguards and more reliable track records.
Opportunity for Improvement: The incident could prompt cybersecurity firms to improve their technologies and practices, potentially leading to long-term gains despite short-term losses in investor confidence.
Elliott Targets Starbucks
Elliott Investment Management has taken a significant stake in Starbucks SBUX 0.00%↑ and is believed to be discussing ways to improve Starbucks' stock performance which has declined over 15% YTD. Elliott's move comes amid unionization efforts by Starbucks workers since 2021. The hedge fund, which managed $65.5 billion in assets by December, is known for its activist campaigns and has secured board seats at companies like ETSY 0.00%↑ and Phillips 66 PSX 0.00%↑.
Why investors should care:
Stock Performance Impact: Elliott's involvement has already led to a nearly 7% jump in Starbucks' stock price, indicating confidence in the hedge fund.
Operational Improvements: Elliott's track record of driving significant changes at other companies suggests it may successfully enhance Starbucks' operational efficiency and profitability.
Unionization Efforts: The ongoing unionization efforts and labor negotiations could impact Starbucks' labor costs and operational stability.
Market Challenges: Investors need to monitor Starbucks' performance in its key markets, the U.S. and China, which are experiencing weaker demand.
Future-Focused Innovation
Quantum technology is gaining practical traction and could bring early value to four key industries: chemicals, life sciences, finance, and mobility. These sectors could collectively benefit by up to $2 trillion by 2035, according to McKinsey.
Quantum computers, which can solve complex calculations beyond the capabilities of conventional machines, are prompting both academic and business exploration into practical applications. These include optimizing flight connections and advancing climate science and pharmaceuticals. Governments and businesses globally, especially in China, Europe, and the US, are heavily investing in developing stable and affordable quantum computers and software.
Public investments in quantum tech surged over 50% in 2022, accounting for almost a third of total investments in the field. Moreover, educational programs in quantum technology are expanding, with the EU leading in the number of graduates, contributing significantly to the field's research output.
Investing in Japan
The Japanese stock market has reached levels higher than the late 1980s bubble era. Unlike the past, current valuations are supported by strong earnings and sensible asset values. Key factors include corporate governance reforms, low valuations, inflation, a weak yen, and increased M&A activity.
The weak yen benefits exporters and internationally-focused businesses, making domestic companies less appealing to overseas investors.
Impact on Business Practices
There is a growing focus on shareholder returns through balance sheet reforms, higher dividends, and share buybacks. Shareholder-friendly policies and a financially motivated shareholder base are reshaping the business landscape. Larger companies have benefited more from governance reforms, leaving smaller companies behind.
Ultimately, the Japanese market appears to offer sustainable growth with strong earnings and sensible asset values, supported by corporate governance reforms that enhance transparency and accountability. Favorable economic conditions create growth opportunities.
Additionally, the Japanese market provides diversification benefits, acting as a buffer against regional economic downturns, and increased disclosure and transparency reduce investment risks.
Top Reads
👨💻 In economic terms, traditional machines enhanced worker productivity by assisting them in their tasks. In contrast, software directly replaces workers by automating those tasks entirely. How software is eating the world.
📊 US stocks may appear stable due to the S&P 500’s rally, but increased options-selling is compressing volatility, potentially masking underlying market fluctuations, according to Goldman Sachs' Brian Garrett. US stocks are more volatile than you think.
🍄 Australia has legalized the medical use of psychedelics like MDMA and psilocybin, spearheaded by an activist couple, but only under strict conditions for specific mental health treatments. Psychedelics Are Now Legal in Australia—With a Catch.