Ferraris, Advil and AI Chips: 10 Companies to Watch Right Now

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0:47Tim Craighead:When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, that isn't always easy. Risk can touch multiple parts of an organization at the same time, often in ways that aren't immediately obvious. It might involve property, liability, or cyber. It could stem from regulatory requirements or challenges tied to a specific industry or the scale of an operation. At that level, managing risk becomes an ongoing discipline, not a one-time decision. At The Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive.

1:21Tim Craighead:That means working with companies to identify where they're exposed, decide what matters most, and put practical standards in place so risk is managed as part of day-to-day operations. And when losses do happen, the Hartford can pair that risk control work with insurance coverage grounded in underwriting, risk engineering, and claims experience developed over time. Learn more at thehartford.com slash risk mitigation. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Our Bloomberg Intelligence team is amazing.

2:03You hear from them on our program almost every day. They're all over the world. They're out in the field. They talk to executives and customers. They crunch numbers. They're in the Excel docs. They're listening to those earnings calls. They're doing everything. They're writing research. You've got to see their research. You're a gift man to us every day. Yeah, if you're not new to our program, then you know that each January, the team produces this list of 50 companies to watch at the beginning of the year. Tim Craighead is the man behind that list. Usually, he's up late. He's joining us from London.

2:28Today, though, we get him when it's still light outside. He's in town. He's in town. He's here. We're so happy to have him. Tim Craighead, Bloomberg Intelligence Senior European Strategist. He's Director of Research Content. He joins us here in the Bloomberg Interactive Brokers Studio. Welcome. Nice to have you here. Pleasure to be here. Okay. The headline is so good. Ferraris, Advil, and AI chips. 10 companies to watch right now. The big question that I think everybody has is how do you whittle - It's like our life in a nutshell. Well, how do you whittle down? How do you whittle down? Yeah. Yeah, that's except for the Ferraris.

2:59Yeah, well, okay. That's a minor thing. Everything else, yes. How do you whittle this down, not just from the 50 companies in January, but from the universe of companies that your team follows? Yeah. So we cover 2 ,500 plus companies, so it's a lot of companies. And we have a list of ideas we call focus ideas that are high conviction, fundamental calls. We think revenue is going here, margins are going there, that is against consensus in some way. Market thinks differently. And there are catalysts ahead that we think could be triggers to change the market mentality. We've got about 125 of those currently.

3:40We zero in on the 50 for the year ahead because there's catalysts coming up in the new year. And these 10 are just a subset. It's a different 10. None of these were on the 50. But 10 companies that have got second quarter specific catalysts ahead that we think are important. So do you come to these names, Tim, by doing some, I don't know, algorithm or something? Or discussion or a combination of both? It's a really good question. These are bottom-up analyst ideas. So, you know, you say Ferrari. You have to talk about Ferrari. Mike Dean is our senior European autos analyst. He has the good fortune of covering everything from Porsche to Ferrari to, you know, Lamborghini within VW.

4:30But he sees a new product-driven story in Ferrari, has thought about what the implications are for its revenue and its profitability. And that's what's, I'm sorry, this is terrible, but driving the idea. Speeding to the idea. I love it. No, but you think about it, right? Because the car sector, it's kind of interesting. We've spent so much time talking EVs and other things, but this is certainly higher end. And, you know, so it's product innovation, models, but it's also like we've got wealthier consumers out there who have money to spend. Well, they do. Or is that part of it? It is. It's interesting because, not to go too much down a rabbit hole, but the European auto sector in particular, which you think, you've got Mercedes and BMW and Porsche and Ferrari, among others.

5:19They had a really great idea coming into 2025 that ended up being a car crash. Sorry, all these puns. Yeah. Because the world was moving EVs and lots of investment in it and then not. Yeah. And China was a big customer, and then it wasn't. And all of that hit in 2025. Looking here now, we've got an awful lot of costs that have been taken out. The franchisors are still quite good. People still buy Beamers. People still buy Ferraris. And those who can buy a Ferrari aren't really impacted by some of the things going on in the world of geoeconomics these days. and they've got a three-year wait list on stuff that costs a lot of money.

6:06Yeah, it's pretty amazing. Even though the average price has jumped 24 % in the past five years, Ferrari remains sold out through 2027. Not bad. Serious pricing power. Yeah, and the F80, which is the new supercar that's starting to ramp, and the Lux, the new electric, are two of 20 new models coming over the course of the next couple of years. It's an ongoing flow. Where do you want to go next? I want to go to Broadcom. Okay, good. I'm glad because we talk a lot about this space. About AI. Yeah. Yeah, this one's kind of cool. We've got a few different focus ideas that are different flavors of what this one specifically is, and it's about chips.

6:50You know, who is the big chip company that everybody focuses on? You know, NVIDIA, of course. You know, and it makes the graphic processors that are powering the LLMs. What Broadcom has found that it has are customized what are called ASICs. They're specialized chips that don't train the big LLMs, but they are very task-specific and are great and a lot cheaper at doing the same thing over and over again. So when you start doing the inferencing or the using of AI for specific tasks, you use their XPU, and it's growing like weeds. Which is really fascinating because the AI conversation, if you think about it, are we in our third or fourth year of having it and just how it's evolved?

7:38And the inferencing is something that we're hearing more and more. Yeah, the shift from training to inferencing as companies are actually starting to use this stuff in real business. But like Ferrari, there's a new product with this. So there's like a theme. It's the ongoing development and use of XPUs as inferencing takes off. And that is the new product story. The other, not to totally jump if you don't want to, but the other new product one that's interesting is Dexcom, which is probably a company that most of your listeners aren't familiar with. Medical devices, they make glucose monitors for diabetes.

8:16And it's wearable, which is great. They've had a 10-day model out. So you're talking not pricking your fingers. It's a vast change in quality. I know folks who have these monitors. They're game changers. And the new one that's now ramping is a 15-day, not a 10-day. And so it extends it, and it's more profitable for the company. And, of course, if you have a 10-day, that gives you a reason to buy that 15-day. The 10-day has changed your life. Yeah, yeah. 50 % more time without having to prick your finger. You stay with it. And there is insurance coverage of these monitors. So you think about that in terms of the marketplace.

8:54Elizabeth reminding us we had the Dexcom president and CEO, Jake Leach, on. We did. Back in January. We did. So if you missed that conversation, check it out. And it was kind of cool. All right, where do we want to go? So that's new product innovation. You do have major themes. You have competition, financials. You want to do competition? What do you want to do? I kind of feel like we should do financials only because we have banks coming up. We'll do competition after. We have time. So talk to us because you do have several financials. Deutsche Bank, Japan Exchanges, Magellan. So tell us a little bit about the financial space.

9:24So Deutsche Bank, so these are broad ranging for sure. Touch on various different elements. But one of the things with banks is it's a finger on the pulse of the economy. And Deutsche Bank sits in Germany. You know, the big stimulus driver for Europe is the German stimulus package to drive both defense and renewed infrastructure investment. That drives local lending, local business. And it's a good thing for Deutsche Bank. Spreads are also quite wide. Its capital structure is quite strong. And we think all of this will flow through into earnings and buybacks that are going to surprise. nice. The Japanese exchange is totally different.

10:10This is the equivalent of the New York Stock Exchange, the London Stock Exchange. And the Japanese stock market has been on fire, much more attention shifting from a global investment perspective in Japan, as you all probably talk about from time to time. And as trading activity ramps, these guys just benefit. At the same time, interest rates are actually ratcheting up in Japan. It's a long-term critical story for Japan. That plays into these guys because as you trade more, there is a cash cushion that's part of the collateral when you're investing. They earn interest on that cash. And so as trading goes up and the cash expands and interest rates go up, they get a double benefit.

10:57So it's kind of cool. It does feel like in the last year or two, Japan has just been the story. On fire. The corporate governance story behind Japanese corporates have definitely been driving that bus. But it was a long time. Yes. And a great reminder, too, like I said, the team is all over the world, and the ideas in here are truly global. Magellan is also on that list. Talk about how that fits in. Yeah, so that's an asset manager. You all were talking about Invesco earlier today. Totally different story. He listens to us. Well, he was stuck here. I know, you are. That's right. But Magellan Financial is an asset manager.

11:35This falls under the M &A category. They made a big acquisition. And it's boosting their assets under management quite well. And they've got an 80 % payout ratio that is part of how they manage their financials. that's not in analyst expectations yet from the standpoint of how the earnings from the new acquisition will flow through into these guys income and will feed through into dividends um we think there's upside accordingly is this at all related to fidelity magellan or no it's completely separate sorry this is an australian based speaking of being all over the world yeah um australian based asset manager all right let's go to i know he's waiting yeah i want to go to competition because you have some really interesting companies in here including one in the sports uh gambling indeed that has been do you all talk about prediction markets we do talk about prediction just today up actually the screen right in front of me is polymarket about when this war will end there you are you can actually access um on the terminal wsl predict yeah is a great shortcut yeah to the prediction market data and uh it's aggregated here and it's sort of by like what is most active in terms of contracts and like you said the most active carol trump announces the end of military operations against iran by question mark so yeah anyway sorry so draft kings yeah uh sports betting you've got the uh you've got the the the final tonight with the ncaa there's probably something on the prediction markets for that too you can find which is the issue for draft kings that it's on prediction markets well in exactly and it goes It goes back even to the Super Bowl period where you're going through the playoffs, and there are tons of downloads of Calci's prediction app.

13:27And that scared everybody that DraftKings and its sports betting stuff would suffer. True, the downloads were bigger on Calci, but if you look at the installed base, it's still far, far larger for DraftKings. It's businesses, we think, going fine. And they're also launching their own prediction app. they will be driving better business than everybody thinks is going to run into problems. So the team thinks that DraftKings will be able to hold a candle to the established prediction markets, Calci and Poly market, not publicly traded here in the U.S. Correct. Wow. So stock is down more than 30 % year to date.

14:09We know because of concerns about competition and threats. Yeah, because of all this concern of competition. And we would expect to see better than expected earnings coming up in the upcoming period as well as throughout this year. So quite interesting. It's been a fascinating market. We talk about it all the time. Where else should we go? We've made one. Yeah. So this is one that probably a lot of listeners aren't necessarily familiar with. Chinese company. They are the biggest food delivery company in China. So, you know, you think Uber Eats or, for me, in London, Deliveroo. So that's it. But they've also gotten into other businesses of everything from you order groceries and they'll deliver, just like Uber Eats.

15:01They'll also do travel-related stuff. So they've extended themselves, which on one hand is good, but there's also encroaching competition. Alibaba, which is the biggest of the e-commerce companies, is getting into this business, in particular when it's in that instant shopping stuff where you get 30-minute delivery. So like immediate delivery of groceries and things like that. But we think consensus is underestimating the costs that Meituan is going to be incurring to drive their business forward with increasing competition. No defense companies, huh? Not on this list. That was interesting. Against consensus, Carol.

15:43Against consensus. I know, I know, I know, I know. Yeah, yeah, yeah. Everybody loves defense right now. They really do, right? It's just kind of… which makes it interesting, especially living in Europe, where take a look at Ryan Mattel and some of these other defense-related contractors. They've been on fire. Before you go, just quickly, because you are over in London and watching this war, we obviously are covering it day to day. What is the view, the perspective from there in terms of the impact and what's going on? Yeah, I mean, I guess a couple things come to mind in a nutshell. Number one, this year was set up to be the good year.

16:24You actually started to see better economic statistics after a rather blah last year when the U.S. was doing better. There was the hope and expectation that interest rates were going to be coming down from both the BOE as well as the ECB. you had this stimulus initiative coming through and lots of discussion across other european governments to get behind some of the elements of infrastructure and defense spending domestically you know there's a lot of defense spending going on in europe because of you know what's happened with russia ukraine but the hope has been that some of that could be done in europe as opposed to buying from U.S.

17:06contractors. So all of these things were coming together, and now the Iran war takes place, and all of that's been thrown out the window. Europe is more exposed to the energy issue, and set aside the war, the focus is on how long is the constraint of commercial traffic through the Strait of Hormuz. And that's what the focus is on. And we shall see. Yeah, there's so many, we talk about so many different things in headlines, but it really just comes down to that. And we talk about, right, that's the main leverage for Iran. So you wonder about what kind of conditions they need or guarantees before that they open it up.

17:44So the story is not off the rail for Europe, but it's more sensitive and more exposed in many ways than what necessarily is the case here. That's why we often talk about comparison between Brent and WTI because the oil tax belt. But then again, look at the$5 gasoline prices here and, you know, it's not immune. Yeah, exactly. Tim Craighead, do not be a stranger. Come hang out with us in the Interactive Brokers Studio. Pleasure. Great to have you here. Tim Craighead, Senior European Strategist and Director of Research Content for Bloomberg Intelligence.

18:16Tim Craighead:When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation.

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