Cover:
-Steak and hamburgers are experiencing a surge in prices, becoming luxury items rather than everyday staples. At a recent cattle auction in Texas, prices reached $1.30 per pound, which, although lower than premium cattle, is significantly higher than prices five years ago. The auction highlights the growing demand for quality breeding stock amidst a declining U.S. cattle population, now at a 75-year low, resulting in skyrocketing steak prices—up by 55% and ground beef by 69% over five years. Despite these high prices, demand for beef remains strong, driven by marketing shifts that have repositioned protein's value in dietary guidelines. Larger restaurant chains, like Texas Roadhouse and LongHorn Steakhouse, adapt by managing costs effectively, while smaller establishments, such as San Antonio's Barn Door steakhouse, are struggling to maintain competitiveness within a value-driven market. Contributing to the increasing price are factors such as cattle supply constraints, notably due to screwworm outbreaks affecting cattle exports and reduced US herd sizes.
Interview:
-No update
Tech Trader:
-As large technology companies prepare for fourth-quarter earnings, attention has shifted from sales growth to the significant capital expenditures (capex) on artificial intelligence (AI) data centers. In 2025, Amazon, Microsoft, Alphabet, and Meta Platforms collectively spent over $400 B, approximately equivalent to Pakistan's GDP. Projections indicate that this expenditure will rise sharply in 2026, with Amazon forecasting $200 B in capex, followed by $180 B for Alphabet and $125 B for Meta. Microsoft, on a different fiscal calendar, reported $72 B in the first half of 2026, suggesting a total capex of about $650 B for these four companies—comparable to Argentina's economy. This level of spending is expected to significantly impact the companies' financial statements. Capital expenditures are reflected in income statements through depreciation costs, which are spread over several years.
The Trader:
-Hasbro and Mattel, both reporting earnings on February 10, exhibited contrasting results. Hasbro's fourth-quarter earnings exceeded forecasts, resulting in a nearly 25% stock increase in 2026 and reaching a multiyear high. In contrast, Mattel's sales missed analyst expectations, leading to a 25% drop in its stock. Following Hasbro's earnings report, six Wall Street analysts raised their price targets, with ROTH's Eric Handler setting a target of $120, which is 17% higher than the current share price. He emphasized the growing popularity of role-playing games, noting an 86% sales surge in Hasbro's Wizards of the Coast and digital gaming sectors, which includes franchises like Magic and D&D. Hasbro's success extends to traditional toys, bolstered by its partnership with Disney, with key releases such as Toy Story 5 and Marvel movies expected to drive sales. Additionally, Hasbro announced licensing deals with HBO for Harry Potter toys and action figures for a live-action Voltron movie, set to stream on Prime Video later this year.
--As fourth-quarter Big Tech earnings reports emerged, the focus shifted from traditional sales growth and profits to the significant capital expenditures (capex) in artificial intelligence (AI) data centers. In 2025, Amazon, Microsoft, Alphabet, and Meta Platforms collectively spent over $400B, akin to Pakistan's GDP. Projections indicate this will escalate to approximately $650B in 2026, with Amazon forecasting $200B, followed by Alphabet and Meta at $180B and $125B, respectively. Microsoft, with a fiscal year ending in June, spent $72B in the first half of 2026. Such expansive spending is poised to alter the financial landscapes of these tech giants. On income statements, capex is reflected through depreciation over several years. For instance, Alphabet’s AI data center expenditures will allocate about $108B to servers, leading to annual depreciation costs of approximately $18B, which could double Alphabet's 2025 depreciation expense to nearly $42B by 2026, impacting gross margins.
Features:
-Stellantis experienced a significant decline of 24% in stock value following a management update on February 6, which revealed substantial one-time charges totaling EUR 22B (approximately $25.9B) due to electric-vehicle asset write-downs and warranty-related expenses. The forecast for operating profit for the second half of 2025 has also been revised to fall below previous guidance, along with the announcement of no dividends in 2026 and the sale of €5B in convertible debt intended to strengthen the balance sheet. Analysts, including Oxcap Analytics' Stuart Pearson, expressed concerns regarding the poor operational performance and ongoing cash generation issues, suggesting this could lead to a value trap characterized by continuous cash burn, dividend cuts, and the necessity for capital raises. Nevertheless, the fundamentals of the car business remain intact, and analysts predict that with improved product offerings and distribution, Stellantis could see its stock price rise by 50% from current lows. Notably, there appears to be a significant effort by new CEO Antonio Filosa, appointed in May after Carlos Tavares' departure, to address and rectify the company's financial challenges and set realistic expectations moving forward.
-Energy stocks have significantly outperformed the broader market in 2023, surging 20% while the S&P 500 has only climbed 1.4%. Key factors driving this rise include geopolitical tensions, with US military interventions in Venezuela and potential actions in Iran, creating a favorable environment for energy investments. Additionally, as tech stocks face volatility and declines due to concerns over artificial intelligence impacting market shares, investors have sought refuge in energy, which remains largely insulated from such disruptions. This sector exhibits a low correlation to the overall market, as noted by Nicholas Colas of DataTrek. Furthermore, the resurgence of sectors that underperformed in the previous year, such as consumer staples (up approximately 13%), suggests a broader investor strategy dubbed a "dash for trash," where poorly performing assets recover. Analysts highlight that the shift towards hard assets, including commodities, has contributed to rising oil prices, with benchmarks currently increasing by about $9 to reach $69 per barrel.
Europe:
-Exor is a European investment company controlled by the Agnelli family of Italy, holding significant stakes in notable public and private firms, including approximately 20% of Ferrari and interests in Stellantis, CNH Industrial, and Philips. However, Exor has experienced a challenging period, with shares declining over 20% in the past year, paralleled by a 25% drop in Ferrari stock and struggles within Stellantis following a substantial write-down of its electric-vehicle business. Currently, Exor shares are priced at 72 euros ($85.75) on the Euronext exchange and about $86 for its American depositary receipts, reflecting a more than 50% discount to its estimated net asset value (NAV) of $190 based on its public and private holdings. CEO John Elkann, who has been at the helm since 2009, has demonstrated a robust track record with a nearly 18% growth in NAV, surpassing the MSCI World Index's 11%. Market analysts, like Ross Glotzbach from Southeastern Asset Management, express confidence that this significant discount is not sustainable and that Exor's portfolio companies could recover, potentially turning Exor into a favorable investment.
Emerging Markets:
-No update
Commodities:
-Signet Jewelers is positioned for growth with Valentine's Day spending anticipated to reach a record $29.1B, including a significant $7B allocated to jewelry. As the leading specialty jewelry retailer in the US, Signet operates approximately 2,600 stores under various brands such as Kay Jewelers and Zales. According to the National Retail Federation, jewelry is expected to comprise the largest share of Valentine's Day expenditures, with 25% of consumers planning to gift jewelry this year. This marks an increase from 22% in the previous year, translating to around $6.5B in jewelry purchases. Despite challenges in the jewelry industry, including declining demand for diamond jewelry and competition from lab-grown diamonds, Signet's stock has risen by 7.8% year-to-date and 69.5% over the past year. Meanwhile, Anglo American faces difficulties with its De Beers mining business, including significant write-downs.
Streetwise:
-In the context of the recent decline in software stocks, two significant points can be highlighted. Firstly, catchy phrases like “SaaSpocalypse” are prevalent, indicating a dramatic downturn for software-as-a-service firms. Other creative names did not fit as well, showing the pervasiveness of the sentiment. Secondly, while the software market crash appears to be over, analysts suggest there may still be further declines ahead. BTIG notes that capitulation was observed, but if stocks fall below recent lows, a deeper downturn might ensue. UBS also mentions that uncertainty hangs over the sector, primarily driven by fears of artificial intelligence potentially disrupting the market. This recognition suggests AI's capacity for profitability could benefit software at various operational levels. Deutsche Bank, while not as definitive, has a target list of undervalued software stocks to consider in light of this selloff. The author illustrates this landscape through a personal anecdote involving a podcast collaborator's shift to an industrial composting startup that incorporates software tools for waste management, showcasing the evolving applications within the sector.