In Monday’s top stories, Cathie Wood’s ARK buys Nvidia stock, Signify shares were trading higher after news the company may be bought by CVS, and PepsiCo has been boosted by recent M&A activity. In other headlines, the annual reshuffle of the Nikkei 225 has seen two new entrants and CNBC offers its defensive picks for September.
Cathie Wood sees value in Nvidia
Chipmaker Nvidia [NVDA] disappointed at the end of August when it lowered its third quarter sales forecast. The decision is the result of macroeconomic headwinds that have impacted consumer spending and lowered demand for its gaming and graphics cards. Yet this hasn’t deterred ARK Invest’s star stock picker Cathie Wood, who added 266,717 shares to the ARK Innovation ETF [ARKK] on 1 September, the same day the Nvidia share price recorded its 52-week low.
CVS to buy Signify for $8bn
Signify Health [SGFY] shares were up in early trading on Monday following news that pharmacy store owner CVS Health [CVS] is in advanced talks to acquire the in-home healthcare company for around $8bn, beating Amazon [AMZN] and UnitedHealth [UNH] earlier bids. As of 2 September, Signify’s market cap is $8.37bn with a share price of $28.77. UBS analyst Kevin Caliendo had expected a deal in the range of $23 to $39 per share, according to Seeking Alpha.
Nikkei 225’s annual reshuffle
The annual reshuffling of the Nikkei 225 Stock Average has seen electric motor manufacturer Nidec [6594.T] and electronic glasses manufacturer Hoya [7741.T] join. Fisheries firm Maruha Nichiro [1333.T] and textiles outfit Unitika [3103.T], whose weightings were minimal, were removed from the blue-chip stock gauge. Ryuta Otsuka, a strategist at Toyo Securities, told Bloomberg that these moves weren’t a surprise as they had already been expected.
Defensive picks for September
Expectations that the summer rally will fizzle out are mounting, given the month’s reputation for delivering underwhelming returns. Assuming history repeats itself, investors could take shelter in defensive stocks. CNBC screened utilities, healthcare and consumer non-cyclicals for equities with at least 10% upside from their average price target and dividend yields higher than 2%. Utility firm AES Corp [AES], energy firm Entergy [ETR] and pharmaceutical company AbbVie [ABBV] came out on top.
M&A activity boosts PepsiCo
Energy drinks firm Celsius [CELH] announced in August that PepsiCo [PEP] would be acquiring an 8.5% stake for $550m. PepsiCo’s growing portfolio of more than 500 brands has made it an attractive hedge against inflation, despite the fact that rising costs could weaken consumer spending. According to Seeking Alpha, Morgan Stanley analysts deem the beverages industry a preferred sector, with Monster Beverage Corporation [MNST] and Coca-Cola [KO] named as other top picks.
UiPath’s Q2 ARR to jump
The UiPath [PATH] share price might be down 62.7% year-to-date as of 2 September, but there’s reason to be bullish ahead of Q2 earnings on Tuesday. While revenue is expected to decline slightly year-over-year, annualised renewal run-rate is expected to be considerably higher. Cathie Wood has continued to add to her position because of “high conviction in UiPath’s ability to integrate robotic process automation into many business processes across large enterprises around the world”.
NIO’s Q2 costs to remain high
A combination of China’s slowing economy and inflation squeezing margins mean costs are likely to be high when NIO [NIO] reports second quarter earnings on Wednesday. Expenditures were 156.6% higher in Q1, with higher personnel costs and incremental research and development spending to blame. Soaring raw material prices mean expenditure is unlikely to have come down in Q2. CEO William Bin Li expects the gross margin to recover in Q3.
In focus –
Uranium powers up as more countries go nuclear
Russia’s invasion of Ukraine has sparked fear worldwide, especially regarding energy supplies. As countries explore whether a shift to nuclear energy is a viable alternative, the Global X Uranium ETF [URA] has turned around its fortunes in the last month.
Although the fund has fallen 2.2% year-to-date through 2 September, it has risen 16.6% over the past two months. Its rally from the end of June reflects the rise in the price of uranium — futures are up 20% in the year-to-date — as well as strong results from key holdings such as Cameco [CCO.CN].
This spike in demand for uranium has been most recently seen in Japan, where Prime Minister Fumio Kishida has rejuvenated the nation’s interest in nuclear energy, announcing plans on 24 August for the development and construction of next-generation power plants. Since his announcement, the Cameco share price has jumped 24.4%, while the Sprott Physical Uranium Trust is also up 15.7%.