👁️ The Culprit of the Global Outage

MARKET UPDATE

Good Morning Investor! Shares of SunPower (SPWR) plunged over 40% this week to nearly $1, and nearly 90% in the past year after the company halted new leases, installations, and shipments due to weakened cash flow and balance sheet issues. Meanwhile on Friday, shares of Intuitive Surgical ($ISRG) surged 9% off the back reporting better-than-expected second-quarter financial results.

TODAY’S BIG HEADLINES

The Culprit of the Global Outage

Bud Light’s Popularity Has Fallen Further

The New $600 million Zyn Factory

CYBERSECURITY

The Culprit of the Global Outage👁️

Heard of Code Reviews?: While Microsoft ($MSFT) was initially fingered as the culprit behind Friday's worldwide IT outage, leaving users feeling blue (screen of death), the true perpetrator was cybersecurity firm Crowdstrike ($CRWD). Their ill-fated software update resulted in 21,000 grounded planes, halted businesses, and generally caused more chaos than a bull in a china shop.

• For a cybersecurity firm's software to effectively ward off digital ne'er-do-wells, it needs "root" access in the software it's protecting. In this case, that software happened to be Microsoft's Windows operating system - one of the world's most heavily relied upon platforms, second only to caffeine for keeping office workers functional.

Like the Plot to an Action Film: Software updates can be as welcome as a root canal even on good days. But when they cause Microsoft devices to throw in the towel faster than a boxer facing Mike Tyson, shutting down airlines, banks, grocery checkouts, and logistics worldwide, that's taking "disruptive technology" a bit too literally. This update caused the notorious "blue screen of death," proving that Crowdstrike's attempt to play doctor ended up flatlining the patient instead.

• On a brighter note, the outage was merely caused by a software update gone awry, not a massive cyber attack. So, at least we're dealing with incompetence rather than malevolence - small comfort to those stuck in airports or unable to buy their Friday night wine. Unsurprisingly, Crowdstrike's shares plummeted over 10% on Friday, faster than a skydiver without a parachute. After all, someone's got to pay for this digital dumpster fire, and it's not looking good for Crowdstrike's piggy bank.

• If there's one lesson to be gleaned from last week's fiasco, it's that diversification is key. With tech stocks already being offloaded like hot potatoes due to AI overspending concerns, tariff threats, and looming semiconductor export restrictions, it seems the tech sector is playing a high-stakes game of Jenga, and Crowdstrike just pulled out the wrong block.

ALCOHOL & CONSUMER DISCRETIONARIES

Bud Light’s Popularity Has Fallen Further🍺

Backlash Brewing: After beverage behemoth Anheuser-Busch ($ABI) made the eyebrow-raising decision earlier this year to make transgender influencer Dylan Mulvaney the face of their marketing campaign, the company found itself in hotter water than a lobster at a seafood festival. Nationwide boycotts ensued, leaving their crown jewel, Bud Light, dethroned. The new king of beers? Modelo - which, in an ironic twist, is also owned by Anheuser-Busch.

• Things have continued to go downhill for the formerly beloved beer brand, with Bud Light now trailing behind Michelob Ultra - the beer for folks who want to feel virtuous while getting sloshed. Michelob Ultra has firmly planted its flag as the second-best-selling beer in the US, proving that Americans prefer their beer like they prefer their politicians: light and with a false sense of health benefits.

Voting with Dollars: So why are Americans turning their backs on a brew that was once as American as apple pie and questionable foreign policy decisions? Simply put, the company placed itself smack in the middle of the ongoing culture war, a battlefield more treacherous than a minefield made of Legos. Who would have guessed that the beer beloved by predominantly straight males would alienate its customer base by attempting to change its identity? It's almost as if they forgot the cardinal rule of marketing: know your audience.

• New research from Bump Williams Consulting reveals that Bud Light now holds a mere 6.5% of beer sales in US stores, compared to Michelob Ultra's 7.3%. Meanwhile, Modelo Especial is living la vida loca with 9.7% of the market. Even more worryingly for Anheuser-Busch, Bud Light is now careening towards the #4 spot currently held by Coors Light, proving that sometimes, even the Rockies can't save you.

• The nationwide boycotts have been ongoing since April of last year, after the political right pounced on the controversy like a cat on a laser pointer. And just like that, Bud Light's top spot became as extinct as the dodo, leaving executives at Anheuser-Busch drowning their sorrows in... well, probably not Bud Light.

NICOTINE & SIN STOCKS

The New $600 million Zyn Factory🏗️

The Zyn Scramble: After an unprecedented surge in demand for Zyn, the nicotine pouch that's been giving users more buzz, Philip Morris ($PM) has been scrambling faster than eggs at a diner to ramp up production. They're not just aiming to meet the growing demand, but also to maintain their market dominance in a space where competitors like Velo are nipping at their heels like overeager chihuahuas, thanks to the Great Zyn Shortage of '23.

More Zyn, More Money: The Zyn maestros at Philip Morris have just unveiled their latest plan to solve this crisis — a new $600 million facility in Aurora, Colorado, dedicated solely to producing these popular pouches.

• This grand announcement comes just weeks after Philip Morris had to pull the plug on online sales, thanks to Zyn's runaway success. It turns out, going viral isn't always a good thing, especially when your product is flying off the shelves faster than toilet paper in a pandemic. Sales skyrocketed in the past year, riding a wave of enthusiasm from online creators (affectionately dubbed "Zynfluencers") who've been expressing their loyalty with the fervor of religious converts. Add in mentions from popular podcasters like Joe Rogan and the Nelk Boys, and you've got a recipe for a nicotine gold rush that would make the Klondike jealous.

Regulatory Bliss: The insatiable demand for a tobacco-free nicotine alternative is overwhelmingly positive for Americans. As it turns out, when you take the smoke out of smoking, you also take out a lot of the dying. Data clearly shows that as the tobacco-smoking population in America has dwindled like a politician's promises post-election, so too has the total number of deaths caused by lung cancer.

• One thing has become crystal clear: Zyn is a healthier alternative that will face significantly less regulatory scrutiny than its smoky predecessors. This regulatory leniency explains why Philip Morris is shifting its focus faster than a chameleon in a bag of Skittles. After all, when you can satisfy your customers' cravings and keep the regulatory watchdogs at bay, that's what we call a win-win in the addiction business.

MORE NEWS

Additional market-moving events🌎

OpenAI Ditches Nvidia: OpenAI cozied up to Broadcom for a fresh supply chain connection to reduce its reliance on Nvidia. (FT)

Launch Aborted: “Fly Me to the Moon,” an Apollo 11-inspired rom-com starring ScarJo and Channing Tatum, failed to blast off at the box office. It reportedly pulled in $10M in its opening weekend on a $100M budget. (Variety)

FDA Permits E-cigs: The FDA authorized tobacco-flavored Vuse Alto e-cigarettes, owned by Reynolds American ($BTI), to remain on the market. Vuse Alto products represent about 40% of U.S. e-cig sales. (WSJ)

Meta Wants to Own it: Meta Platforms ($META) is in discussions to acquire a 5% stake in EssilorLuxottica ($ESLOY), the eyewear company Meta partners with for Ray-Ban smart glasses. (WSJ)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500. Then on the 13th of June we released our next stock selection.

Here’s how the three stocks have performed since:

• Evolution AB: 1,066.50 SEK (📉-18.70%)

• Hims & Hers Health: $19.42 (📈+34.21%)

• PayPal: $59.33 (📉-3.59%)

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