Oracle's Larry Ellison, the 2nd Richest Man Alive

MARKET UPDATE

Good Morning Investor! On Friday, shares of ecommerce platform Etsy ($ETSY) surged over 7% off the back of news that the Biden administration plans to restrict the use of a trade exemption that has helped Chinese e-commerce firms such as Temu and Shein ship packages to US customers duty-free. Shares of Temu owner PDD Holdings ($PDD) also ended up plummetting 2.40%.

TODAY’S BIG HEADLINES

Oracle Makes Larry Ellison the Second Richest Man Alive

Christie’s Adds Classic Car Auction House to Its Luxury Portfolio

Utilities Have Led the S&P 500 in Both Returns & Earnings Growth

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CLOUD INFRASTRUCTURE & SAAS

Oracle Makes Larry Ellison the Second Richest Man Alive⚔️

When Wall Street Plays Favorites: Tech titans Adobe ($ADBE) and Oracle ($ORCL) just had a "Tale of Two Earnings" moment that would make Charles Dickens spin in his grave. After both companies dropped their quarterly numbers, the market decided to play a game of "Who Wants to Be a Millionaire?" with Oracle, while sending Adobe to financial detention. Oracle's stock partied like it was 1999 with a 13% rally, while Adobe got a financial wedgie, plummeting 9% faster than a skydiver without a parachute.

Adobe’s Dirty Crystal Ball: Creative software giant Adobe, the company that lets you photoshop your ex out of family photos, reported better-than-expected 3rd quarter earnings on Thursday. But apparently, "better than expected" is the new "meh" on Wall Street. Adobe delivered $5.4 billion in revenue, up 11% from last year, and expanded its operating margins from 34.7% to 36.8%. You'd think they'd be popping champagne, right? Wrong! The company had the audacity to guide for ~10% growth in the 4th quarter for its largest segment (Digital Media Revenue), which implies a slight slowdown. Cue the panic!

• As a reminder, the “beat by a penny, miss by a penny” reactions can often crowd out the long-term reality for many businesses. Realistically, the recurring nature of Adobe's revenue makes this one of the most stable and predictable businesses on the market.

Oracle's Crystal Ball is Shinier: Meanwhile, shares of leading database operator Oracle jumped more than 13% this week, proving that in tech, it's not what you know, it's what you promise you might know someday. Oracle surpassed its quarterly estimates and offered some optimistic long-term projections that would make even Nostradamus blush. During the company's annual meeting (aka "The We're Awesome Show"), Oracle executives stated they forecast $104 billion in revenue for 2029, which is nearly double their current revenue base. And Wall Street ate it up like free donuts at a police station. In powering these assumptions, Larry Ellison stated, "our cloud partnerships with AWS and Microsoft and Google will turbocharge the growth of our database business for years to come." Because nothing says "trust us" like pinning your hopes on your biggest competitors.

• With this week's stock price jump, Oracle's largest shareholder Larry Ellison officially surpassed Jeff Bezos as the 2nd richest person in the world. Now, if you'll excuse me, I'm off to photoshop myself into Oracle's boardroom. Maybe then my bank account will get the message.

AUTOMARKET & ALTERNATIVE INVESTMENTS

Christie’s Adds Classic Car Auction House to Its Luxury Portfolio🚘

When Selling Picassos Just Doesn't Cut It Anymore: Christie's, the luxury auction house that's been peddling overpriced paint splatters to the uber-rich for centuries, is apparently feeling the pinch. With the art market running on fumes like a '72 Pinto, Christie's is shifting gears and turning to cars. On Thursday, the high-end auction house announced it's buying Gooding and Company, a classic auto auction house. Because when you can't sell them another Monet, why not flog them a Mustang?

• Meanwhile, in the world of us mere mortals, McDonald's, Baja Fresh, Wetzel's Pretzels, General Mills, and Kraft Heinz — purveyors of fine dining for the unwashed masses — all reported this year that consumers have finally said "No más!" to inflation and are pinching pennies harder than your grandma at a yard sale.

• But don't think the caviar-and-champagne crowd is immune. Christie's reported auction sales fell 22% in the first half of this year compared to 2023. Rival Sotheby's saw a 25% drop. Looks like even the 1% are feeling the squeeze. Quick, someone alert the violinists!

When Your Armani Can't Save You from the Apocalypse: When the weight of the world is on your shoulders, it doesn't matter whether they're draped in off-the-rack Calvin Klein or fitted Armani - crushing existential dread feels the same in any outfit. With their cash cow of overpriced art and luxury trinkets running dry, Christie's decided to take a gamble on new customers. CEO Guillaume Cerutti told the Financial Times, "People who collect art or other luxury items ... also collect cars." Wow, Guillaume, did you figure that out all by yourself? It's almost as if rich people like expensive things. Who knew? Still, this is an avenue that Christie's turned away from when it left the vintage auto market in 2007.

• Among vehicles Gooding has sold this year are a 1933 Bugatti Type 43A roadster, which went for roughly £2.9 million ($3.8 million), and a 1938 Alfa Romeo 8C 2900B Lungo Spider, which went for $14 million. According to classic car magazine Magneto (yes, that's a real thing), 14 of the 50 most expensive vintage car auction sales were made through Gooding.

When You Need a Bailout, Buy a Car Lot: Previously, Christie’s had left the classic car market not long after an embarrassing episode in which it had to withdraw an incorrectly classified Auto Union D Type Grand Prix car. Oops! Nothing like trying to sell a Ford Pinto as a Ferrari to damage your credibility. Santa Monica-based Gooding's executive team will remain intact with the purchase, leaving its expertise in place to restart the auction house’s engine. Christie's didn't disclose the price tag for Gooding, only saying it was the auction house's priciest acquisition in 20 years. So, somewhere between "arm and a leg" and "firstborn child," then?

INDUSTRIALS & ENERGY

Utilities Have Led the S&P 500 in Both Returns & Earnings Growth🔌

When Boring Becomes the New Sexy: While the tech behemoths like Nvidia and Microsoft are hogging the spotlight with their AI dog and pony show, it's the unsexy underdogs of the stock market that are really lighting up portfolios. Who are these unlikely Cinderellas of Wall Street? Utilities, baby! Known for being about as exciting as watching paint dry during economic downturns, American utility stocks are quietly delivering returns that would make even the most jaded hedge fund manager blush. After all, someone needs to keep those AI data centers humming, and it ain't running on hopes and dreams, folks.

The New Black in Investment Fashion: Moving electricity, water, and gas from point A to point B might not be the stuff of Hollywood blockbusters, but for investors seeking stability, it's hotter than a power line in a heat wave. The Utilities Select Sector SPDR Fund ($XLU) is currently strutting down the catwalk as the best-performing sector ETF based on the S&P 500 — leaving even the muscular returns of tech and communication services in its dust. This surge comes despite economic jitters that would normally have investors reaching for their heartburn medication. Instead, they're gobbling up utilities, backed by solid earnings and the aforementioned AI-driven interest in power.

• FactSet reports that essential service providers have led S&P 500 earnings growth, rising 21% year-over-year (YoY). Investors looking for safety during market downturns are flocking to utilities like seagulls to a dropped ice cream cone, alongside traditional defensive picks like real estate, consumer staples, and gold. Because nothing says "I'm adulting" quite like investing in water treatment plants.

• The stellar performance of the XLU fund shouldn't shock anyone more than touching a live wire. Its largest holdings — Next Era Energy ($NEE), Southern Company ($SO), and Constellation Energy ($CEG) — are up 36%, 26%, and 70% year-to-date respectively.

When Robots Need a Power Nap: While economic conditions have played a big role in investors' buying decisions (because who doesn't love a good recession scare?), the growing power needs of the tech sector are also juicing up utilities. NextEra Energy CEO John Ketchum expects renewable energy demand to "triple" in the coming years, fueled by AI demand — sparking a new electricity bull market.

• FactSet notes that independent power and renewable energy producers — now more popular with cognitive computing companies than avocado toast is with millennials — saw the largest year-over-year earnings growth at 45%.

MORE NEWS

Additional market-moving events🌎

McDonald’s Extends $5 Value Meal: Mcdonald’s ($MCD) will continue its $5 value meal in about 80% of US markets through December. The deal, aimed at attracting budget-conscious consumers, includes a sandwich, fries, nuggets, and a drink. (CNBC)

HIV Vaccine Results: Gilead's ($GILD) twice-yearly shot, lenacapavir, reduced HIV infections by 96% in a phase-three trial, setting the stage for potential FDA approval. The shot was 89% more effective than Gilead's daily pill. Shares rose 1% following the news. (CNBC)

General Mills Divests Yogurt Business: General Mills ($GIS) will sell its North American yogurt operations, including Yoplait, to French firms Lactalis and Sodiaal in a $2.1 billion deal that's expected to close in 2025. (CNN)

New OpenAI Model: OpenAI has introduced its o1 model, optimized for advanced reasoning tasks like coding and problem-solving, though it is more expensive and lacks certain features that GPT-4o has. (The Verge)

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