💎 Anti-obesity,Qatar & Disney (27th November, 2022)

This week we talk about the following in our Expert Take section:

1. Qatar & The World Cup
2. Pharma & Anti Obesity medicines
3. Disney & its CEO position

Also, in our Investment Insights section, we explain the green bonds.

Expert Take

EXPERT TAKE #1 - 45 sec read ⏱

Qatar & the World Cup

What comes to your mind when you hear "Qatar" these days? We know, the answer is FIFA and all the humongous spending it has done so far to host it. But it wasn't a big deal for the country to afford it. Why?

Well, because Qatar tops the list of the richest countries in the world. If we look at the per-person income, it earns $128,647- which is twice that of the USA.

Why so rich?

One of the reasons is the small population, with only 29 lacs citizens residing in the country. Another major reason is the income it makes through its natural oil reserves. Oil contributes to around 60% of the country's GDP.

But also, they had to bear the brunt of it, when oil prices collapsed during Covid. They incurred losses of $2 billion in 2020.

Resorting to tourism

Qatar has spent around $200 billion to host the world cup. By far, the 2018 edition was the most expensive edition when Russia shelled out close to $14 billion. And this might be a little obvious if we look at what they are trying to achieve.

With the volatility in oil prices, which is not in their control due to pandemic breakouts, and geopolitical tensions, they are now trying to diversify their income sources. Currently, tourism contributes about 6-7% of the GDP, which they want to take up to 12% by 2030.

Our take📝

Be it a stock or a country, investment has to be weighed against the returns expected. Hosting a World cup is an investment that does not give you immediate returns. And a lot depends upon how smoothly the World cup is hosted: the experience of the visitors. Because that's how the word of mouth will spread in today's digital age.

Qatar already deployed $200 billion to build the infrastructure and host the World cup. What remains to be seen is how happily the tourist visitors are walking out of the country.

EXPERT TAKE #2 - 40 sec read ⏱

Pharma & Anti-obesity medicines

Heard of Elon Musk losing weight through medications? Yes, these anti-obesity drugs have become the talk of the pharma town. And many are betting that this could be the 1980s repeat moment in pharma history when there was a breakthrough achieved for the treatment of blood pressure.

The US pharma company Novo Nordisk launched a weight loss drug Wegovy last year, which currently is seeing a supply crunch due to an unexpected surge in demand.

Making a case for anti-obesity drugs

Unlike earlier, when obesity was treated as a consequence of lifestyle choices- what you eat, how much you workout. Now, doctors, patients, and policymakers see the need to treat obesity directly, as the upstream cause of many serious illnesses.

Plus there are studies to show that anti-obesity medicines reduce the risk of heart attacks, strokes, and cardiovascular deaths.

The big pharma bet

Analysts forecast obesity medication is the next blockbuster pharma category. With pricing assumptions, it is believed that global obesity sales can reach more than $50bn in 2030. This would lift obesity from a $2.4bn category to a top-12 therapy area by global spending.

The first-mover advantage in the space will help the players to capture the market share, which in turn would benefit the stock prices of these companies in the long run. The S&P Pharmaceuticals ETF has fallen 8% this year, but shares of Novo Nordisk have gained 3%.

Our take📝

The anti-obesity and weight management market is on the verge of booming, investors should keep a tab on the established large-cap pharmaceutical companies that have new medicines in trials.

Also, watch out for pharma companies with approved treatments for cardiometabolic diseases like heart attacks and diabetes. As these companies may seek to develop their own weight-management drugs.

EXPERT TAKE #3 - 50 sec read ⏱

Disney & its CEO position

Disney lost more than a third of its value over the past 3-year period when the market increased by nearly a third. And a lot of it got attributed to Bob Chapek, the CEO then (and the ex-CEO).

Many investors raised their voices to oust him and get back Bob Iger. And it happened too last week!

What happened with Chapek?

The Covid-19 pandemic started almost immediately after Chapek's appointment. And since then there he took decisions that were unpopular with the staff- layoffs, taking away the authority from business heads and others. The consequence was the company went into losses.

In its latest earnings disclosure, the company reported a $1.47 billion loss in its direct-to-consumer business, led by the Disney+ streaming service. The following stock sell-off was Disney’s worst in two decades.

Bob Iger: an obvious choice

It was under Iger's leadership that Disney acquired Pixar, Marvel, Lucasfilm, and 21st Century Fox. It also opened its first theme park in China - the Shanghai Disney Resort - and launched the Disney+ and ESPN+ streaming services.

During Iger's tenure, Disney produced a number of record-setting films including Marvel's "Avengers: Endgame," the highest-grossing film of all time. He increased the company's market capitalization by 5 times during his tenure.

Our take📝

Good that Iger is back but yeah he is back to different circumstances than when he left- The company is bleeding losses, the staff is losing confidence, and post-Covid there is a change in the entire streaming industry.

The investors will have to keep in mind that there might not be any quick fixes and they will have to watch for how the transition goes when he picks up the role. Additionally, he has signed a contract until 2024, so another task that remains is to scout a successor in the meantime and groom the person so that the past mistake of hiring a misfit for CEO role is not repeated.

Investment Insights

INVESTMENT INSIGHTS - 60 sec read ⏱

Green Bonds

You can now do good for the environment and also earn money in the process! How? By investing in Green Bonds issued by the Indian government! Let’s look at them today!

What are green bonds?

Through Green bonds, you can make fixed income investments, which in turn will be used by the issuer for specific environmental or climate change projects like renewable energy, pollution prevention, energy control etc. Already valued at $433 Billion, the global green bond market is predicted to grow rapidly, with governments in 18 countries issuing sovereign green bonds.

While the growth of green bonds has been phenomenal in developed countries like the US, China, France and Germany, middle-income countries are yet to catch up. Africa, for example, while most vulnerable to climate change, has only 0.2% of its bond market in green bonds, compared to Eurozone (~2%) and China (~1%). The reason could be: leadership’s focus on sustainability, which is more in developed countries than the middle-income, developing ones.

India’s Sovereign Green Bond

While green bonds aren’t a new phenomenon in India (companies have already been issuing them since 2015), we’ll soon have our own government-issued sovereign green bonds too! The credit rating of these green bonds will be similar to India’s sovereign rating: BBB-.

This could be a work in progress for India to improve our credit worthiness and get more investors: domestic or foreign to improve our credit worthiness. Also, unlike some green bonds issued in other countries, ours are unlikely to offer any tax benefits to investors.

Our take📝

Green bonds are a great way to do good for the environment and earn some money in the process. Since the usage of funds is restricted and closely monitored, these bonds are one of the most transparent investment options.

However, from a financial perspective, studies have shown that returns from green bonds could be lower than returns of their non-green counterparts. So while institutional investors with an environmental focus may be well off investing in them, it might be prudent for Indian retail investors to wait for some time till this category matures and we have some more data.