Navigating Market Twists Top Long-Term Stock Picks and Risks
Big Tech: Amazon, Microsoft, and Google
Current Events:
- Amazon: Announced it achieved 100% clean energy for its operations seven years ahead of schedule by investing in over 500 solar and wind projects worldwide. However, critics argue its reliance on renewable energy certificates (RECs) may inflate its environmental achievements.
- Microsoft: Aims to be carbon-negative by 2030 and signed a deal to buy 500,000 metric tonnes of carbon dioxide removal credits over six years.
- Google: Plans to power its Nevada data centers with geothermal energy and aims to operate data centers and office campuses on 24/7 carbon-free energy by 2030.
Stock Impact:
- Amazon: The move to 100% clean energy is positive for its sustainability image, which might attract ESG-focused investors. However, scrutiny over its use of RECs could lead to some volatility.
- Microsoft: The commitment to carbon-negative goals and investment in carbon removal credits is favorable for long-term sustainability but may face scrutiny regarding actual impact.
- Google: The ambitious plans for 24/7 carbon-free energy and innovative use of geothermal energy reflect strong environmental leadership, potentially attracting more ESG investments.
Action:
- Hold: Given the long-term commitments and potential scrutiny over environmental claims, maintaining current positions while monitoring developments is advisable.
Pharmaceutical Sector: Eli Lilly
Current Events:
- The Federal Trade Commission (FTC) released a critical report on Pharmacy Benefit Managers (PBMs) for price hikes and squeezing out local pharmacies.
- Eli Lilly announced its acquisition of Morphic Holding for $3.2 billion, which includes Morphic’s experimental medication for inflammatory bowel disease.
Stock Impact:
- Eli Lilly: The FTC report on PBMs might create some regulatory risk, but the acquisition of Morphic Holding indicates strong growth potential in new therapeutic areas.
Action:
- Buy or Hold: The acquisition and growth in new medication areas support a positive outlook. Regulatory risks from the FTC report should be monitored.
Electric Vehicles: Tesla
Current Events:
- Tesla’s EV market share in the US slipped below 50% for the first time in Q2, with competitors gaining traction.
- Despite the market share drop, Tesla’s stock price has gained roughly 52% in the past month.
Stock Impact:
- Tesla: The drop in market share signals increased competition in the EV market. However, the significant stock price gain suggests investor confidence in Tesla’s long-term growth.
Action:
- Hold or Slightly Reduce Exposure: Considering the increased competition, it might be wise to hold or slightly reduce exposure to manage risk.
Aerospace: Boeing
Current Events:
- Boeing is navigating talks with the US Department of Defense after agreeing to a guilty plea for a criminal fraud conspiracy charge related to the 737 MAX crashes.
Stock Impact:
- Boeing: The guilty plea and potential impact on government contracts present significant risks. The stock is down roughly 27% this year.
Action:
- Sell or Hold with Caution: Given the legal issues and stock decline, reducing exposure or holding with caution is recommended.
Summary Recommendations:
- Amazon, Microsoft, and Google: Hold due to strong sustainability commitments but monitor for potential scrutiny and regulatory changes.
- Eli Lilly: Buy or hold, given the positive growth potential from new acquisitions and strong market position.
- Tesla: Hold or slightly reduce exposure due to increased competition despite recent stock gains.
- Boeing: Sell or hold with caution due to ongoing legal issues and stock performance concerns.