BI Weekend: 50 Companies to Watch, Ford Charges, McKinsey Cuts

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1:32Low-quality stocks driving this short-term rally. Bloomberg Intelligence. With Scarlett Foo and Paul Sweeney. On Bloomberg Radio, YouTube, and Bloomberg Originals. On today's Bloomberg Intelligence show, we dig inside the big business stories impacting Wall Street and the global markets. Each and every week, we provide in-depth research and data on some of the 2 ,000 companies and 130 industries our analysts cover worldwide. Today, we'll look at how the automaker Ford is being impacted by its struggling EV business. Plus, we'll dive into why the food and beverage giant Kraft Heinz is replacing its CEO.

2:01But first, we begin with research Bloomberg Intelligence recently put out on companies to watch for in the new year. It's titled 50 Companies to Watch in 2026. We are joined by Tim Craighead, Bloomberg Intelligence Global Chief Content Officer. We first asked Tim to break down this research. Put a little bit of context. This group of 50 are all part of what we call focus ideas. It's a broader group of about 100. These are all high conviction ideas. They have high conviction ideas where we see something very different from what we think is embedded in market expectations. And there's catalysts ahead to change the market mindset.

2:42There's catalysts coming up in 2026, and that's where these 50 come into. And across the group this year, the biggest bucket are two. One is just simply new product innovation that is being ramped out into 2026. The other, no surprise, AI-related. And some of it's the tech companies. Some of it are companies that are feeding into the process. Happy to get into some of those or other topics as well, such as cyclical pressures and competitive concerns on the negative side. And there's a couple of other things as well. So on the new products, give us an example of a new product that you guys think might really be important for a company and a stock.

3:27Yeah, so it's interesting because some of these can be quite technical, Paul. You think Anilin Pharma or Bridge Bio are two biotech companies that have new products coming. One of them relates to heart issues. Another relates to dwarfism. But it's new products that will expand the market and drive, we think, significantly better revenue and earnings. On the other hand, there's some good old-fashioned names that you know and you love. Canada Goose has new product flow coming through that we think reinvigorates the top line. Brinker, Think Chili's, the restaurant, are going through a whole new upgrade of their menu and upselling clients with good stuff like margaritas with Patron.

4:20And so the new product idea can expand across a whole number of different segments. It's quite interesting. Yeah, I'm looking at Decker's as one of the new products companies you highlight, and their UGG is introducing styles to stay relevant beyond the winter months. Let's talk a little bit about AI, because that's going to continue to be a big theme, even as investors are starting to make distinctions between companies that are in it for good and those that may be kind of faddish. What are some new names that surprised you in terms of their making the list? Yeah, it's interesting. I'll give you the new names and the ones that aren't on here.

4:58And I'll do the latter first. There's none of the big LLMs this year that are on our list or NVIDIA that's not on the list. What you find are other either enabling technologies. So think Lamb Research. It's a semi-cap equipment company that makes gear that you make the semiconductors with that's quite well positioned. TSMC, the world's largest foundry that's making the AI accelerator chips that feed into the LLMs. or even back up in the channel of how do you build out AI constellation, which is the U.S.'s largest nuclear utility that's quite important if you're going to generate the electricity to drive the data centers to drive AI.

5:47ACS, interestingly, European construction company, they own Turner, which is the U.S.'s largest construction company. They've got the biggest order book for building out data centers. So there's a host of different kinds of ways you can think about leveraging AI beyond just simply the big LLMs like Google or OpenAI or things along those lines that you hear about. Tim, on this list, you and the BI analysts also highlight stocks that might have pressure on the downside, whether it's cyclical pressure, competition, M &A, project delay. Give us a name or two that might have some downside risk this year.

6:30Yeah, it's interesting on that. Think about what's going on from the standpoint of you were just talking about airlines. From a European vantage point, we've got wage pressures that are rising. And for Air France KLM, a big chunk of their business is the transatlantic market, which is getting more and more competitive. And with both of those factors, we think that there's risks to estimates. China Railway Group, it's a big state-owned enterprise in China. It's one of the big four engineering companies. And to the degree that China is shifting towards more technology and innovation driven investment and less away from bridges and roads and railroads and things along those lines, China Railway Group, we think, has downside risk.

7:26A couple little companies that are unusual but intriguing. um dino polska which you've never heard of i'm sure is a polish supermarket company but they've got two big european competitors that are coming into the polish market again downside risk to earnings and the same thing can be said about uh join labs we talked about a couple of positive health care companies this is one of the contract research companies that helps a pharmaceutical do their drug development. And China is now looking to go broad and global with approvals on new pharmaceutical products. Join who focuses in on China is losing some of their business.

8:12There's lots of ways we can think about this. Our thanks to Tim Craighead, Bloomberg Intelligence Chief Content Officer. We recently focused on a Bloomberg Big Take story entitled Saudi Sisters Wield$50 Billion Fortune as Global Power Brokers. You can find it on Bloomberg.com and the terminal. The story looks at the Olyan Group, a Saudi empire led by sisters that has grown in influence. It has a nearly$13 billion stock portfolio in the U.S., as well as stakes in companies like BlackRock and JPMorgan Chase. For more, Scarlett and I were joined by Devin Pendleton, Bloomberg wealth reporter. We first asked Devin to explain what the Olyan is and who the sisters are behind it.

8:47So it is Lubna and her sister Hutham, Olyan. They're both in their early 70s, and they have been at the helm of this family enterprise for decades, for more than 40 years. Wow. And they have fairly low profiles, too. That's the thing that is striking. They have these low profiles, but they are known as steely negotiators. Tell us what they've done. Yeah, they've done an incredible job building this family business, which was started by their father, who was a really, you know, unbelievable character. He basically worked his way up from nothing. You know, he's not a royal, was not connected to the royals at a young age, but he built an oil servicing company, which he grew striking deals with all sorts of consumer brand companies in the U.S., bringing them to Saudi Arabia, everything from Coca-Cola to Cheez-Its to Oreos.

9:39And he came over to the U.S. in the early 1960s, was very inspired by what he saw and bought some bank stocks. And basically his daughters took over that business, which was sprawling. I mean, it was in all sorts of sectors, real estate, oil field services, consumer goods, and hung on to those equity stakes, those banking stakes. So now they have this incredible portfolio of investments in the US on Wall Street, as well as this, you know, booming multi-sector business in Saudi Arabia. So, but people in power know these two sisters. They were at the White House recently. Tell us about that. How do they subtly wield their influence?

10:22They are not noisy people. I think it's one thing to do business and thrive in Saudi Arabia is you have to really sort of be be quiet, be forceful, sort of know, be a little bit deferential to, you know, who's really in charge, which would be the government and the king and the crown prince. But they have had long term ties with the US. I mean, you really saw that at the White House dinner, you mentioned, Paul, she was sitting right next to Elon Musk, but, you know, arguably one of the most important people in the room because she has these connections on Wall Street through their long term equity investments.

10:57It's really important right now, especially because the kingdom is trying to bring in a lot of inbound investment to transform their economy past oil. It's a big deal for them to be bringing in money. And these Olaian sisters have had these connections for a long, long time. So they're more important than ever. So they have the connections with the right people in Saudi Arabia. How does their, I mean, when I think about prominent investors in the kingdom, I think about Prince Abolid bin Talal and how he's been very vocal about his positions. He's, you know, often seen on media networks. You don't hear about these Olaian sisters at all.

11:30And I wonder how much of that is part of their success story. Totally. It's so, so important. I think they are extremely discreet. They are, like I said, they really know their role in the kingdom. They're important. They step in and help when they need to. For example, in Saudi Aramco IPO back in 2019, the kingdom was having trouble kind of getting people excited and really getting the investors they needed early to backstop this IPO. they ask some influential families and the alliance were one that you know they really showed up um that matters for the kingdom and it also gives them you know license to to really expand their business as much as they need to um and to be in a position of power to help out um but also you know have favors in return and the bloomberg the rich go function uh lists their wealth of the family at approximately 50 billion dollars u.s right yes 50 billion dollars u.s but i can guarantee you that that is a conservative estimate.

12:30Is that right? Now, I understand that they, while they keep a low profile, these sisters, they have good relationships with some of the big folks on Wall Street, like Larry Fink of BlackRock and things like that. So that's got to be useful. Yeah, absolutely. I mean, just through one portfolio alone, they have their big investors in BlackRock. The equity investors, they have a$1.5 billion stake in BlackRock. They own an almost$1 billion stake in JP Morgan. It's actually where Libna Olaian first got her start. She was initially working as a low-level banker at J.P. Morgan right after college. So they're really worldly, very well-traveled, and just tough in this sort of very meaningful business sense, like negotiators.

13:15They're very involved in their investments. Our thanks to Devin Pendleton, Bloomberg Wealth Reporter. Coming up, we'll move to the biotech sector and why myeloma patients are failing to get the treatment they need. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries. You can access Bloomberg Intelligence via B.I. Go on the terminal. I'm Scarlett Foo. And I'm Paul Sweeney, and this is Bloomberg.

13:41This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio. We move now to news in the auto sector. This week, automaker Ford announced it will take$19.5 billion in charges tied to an overhaul of its EV business. And this comes after years of Ford struggling to make its electric vehicle business profitable. For more, we're joined by Stephen Mann, Bloomberg Intelligence Global Autos and Industrials Research Analyst. We began by asking Steve for his reaction to the$19.5 billion charge. Yeah, it is a very big number. It pretty much backed up the truck on these charges. but the important thing is it's clearing the deck for next year right there is a number a couple of earnings tailwind for Ford and actually to the their competitors in Detroit as well so the biggest I think the biggest write down two biggest write down is the writing down the losses on their Mustang Mach-E.

14:43You know, they've been losing around$25 ,000 on the EBIT line per vehicle. So it's massive. The other is the charge is really on the joint venture with their battery supplier in Korea. So, you know, they're going to repurpose one of those plants for energy storage. So again, it's really clearing the deck. There's a couple of tailwinds for 2026, which includes, you know, Trump's loosening the MPG miles per gallon rule. Yeah, absolutely. Does that reflect, Steve, investors want these auto companies to kind of back away or proceed more cautiously towards their move towards EVs? Yeah, definitely, especially in the U.S.

15:29And look, Ford is, you know, not just pivoting in the U.S., but they're also pivoting in Europe. They just announced a joint venture with Renault to develop EVs over in Europe. And Ford doesn't really have a big presence in Europe, so they're taking that approach of partnership. GM is doing the same thing. Remember, they took a$1.6 billion charge, much more modest than the$19 billion that Ford is taking. But GM is dialing back, but keeping one foot on the EVs. I think they I believe they still think that they're you know, they still can succeed, especially when they introduce the Chevy Bolt in the new year.

16:13So, Steve, you know, we're many years into this transition to EVs. And, you know, I know there are many there are European countries, Scandinavian countries, where it's almost 100 percent of their fleets are their new car sales are EVs. But that ain't the case here in the U.S. With some hindsight here, why haven't EVs taken a better hold here in this U.S. market? Yeah, it definitely needs more, you know, regulatory support for EV to grow because, you know, EV, there's three hurdles, right, that consumers have to get over, which is the price, the range, and the convenience, right, of charging infrastructure.

16:58You know, without government support to actually build that out, it's going to take some time for this electrification transition. I think a lot of people in the industry still feels that electrification, battery EV, maybe hybrids in between is the way to go in the future. but I think there's a huge paradigm shift that consumers' hair have to get over, and it's really challenging to do that without government support here. Our thanks to Steve Mann, Bloomberg Intelligence Global Autos and Industrials Research Analyst. We move next to some news in the food and beverage industry. This week, Kraft Heinz announced it would be replacing its CEO with former Calanova CEO Steve Cahillain on January 1st.

17:45This comes as the company plans to split into two separate publicly traded companies. One will sell condiments and boxed meals, while the other will include its slower growing grocery products like Lunchables. For more, Scarlett and I were joined by Christina Peterson, Bloomberg Food Industry Reporter. We first asked Christina to break down the CEO change. We had expected in September that the current CEO would lead one of the two new companies, specifically the one that is the grocery staples. staples. They actually don't have official names yet, but that was a collection of the least profitable or less profitable food items there, including things like Lunchables and Oscar Mayer deli meats.

18:25The surprise came this morning that he is in fact not going to lead that company, and instead they are bringing in Steve Cahillane from Kelanova to lead the second company after the split has gone through that is being called the Global Taste Elevation company. And that's going to have Heinz ketchup, Kraft mac and cheese, some of those beloved iconic products. So that's the fast growing part of the company. And the other one is kind of the, you know, the equivalent of CNN, TNT, and, you know, the leave it behind assets that, you know, are, you're managing a decline in. What can you tell us about Steve Cowling, the former Calanova CEO?

19:04What is his approach, his philosophy? Well, I just spoke with him and he said that he's going to be focused on bringing organic growth to the company. We talked a little bit about focusing on some of the health and wellness trends that consumers are looking for, increasing offerings with protein, with fiber, with shorter ingredient lists, you know, the so-called cleaner labels. So they'll definitely be leaning into that, it sounds like, a little bit more. He also led Kellogg through its split. The Kellogg company split into WK Kellogg and then Kelanova. Both of those companies were then separately acquired.

19:39I asked him if he thought that could be a path here, and he said it's hard to predict the future. So not ruling it out. So what's been the challenge for Kraft Heinz over the last number of years? I mean, in general, the food companies are all struggling with this shift as consumers move towards healthier, less processed food. The company says that they just had too many brands and that splitting into two will help them focus on each component. I think that there is some analyst chatter that that's what companies say when they just need to, you know, spin off some of their less profitable items.

20:16But they will tell you that they expect both companies will have better value when there's an ability to focus more on the condiments and boxed meals and then on some of the other foods. Put this all into context for us. When Paul talks about how, you know, this group has been kind of struggling overall. We also saw that with PepsiCo, with Coca-Cola. I mean, they have had to rethink their strategy completely. Yeah, there's just been a lot of movement in the food industry right now. PepsiCo announced some pretty dramatic changes. They're going to reduce the number of products they sell by 20 % and lower prices in some of their key brands as part of an agreement with activist investor Elliott Investment Management.

20:55Coke has a new CEO. I think Coke is in pretty solid shape. They've been doing, their shares have been doing really well compared to some of the other business companies. But yeah, in general, the companies that I think are really tapping into this health and wellness interest in consumers are often the smaller startup brands. And the big companies are playing catch up not only with them, but some of the private label companies, too, that are really nimble and able to get some of these new products to market really fast. Our thanks to Christina Peterson, Bloomberg Food Industry Reporter. We move next to the biotech sector.

21:28Bloomberg Intelligence recently came out with research which gives an overview of the blood cancer myeloma. According to Bloomberg Intelligence, multiple myeloma patient numbers are rising globally due to the aging population. And despite an evolved treatment landscape that's leveraged the FDA's accelerated drug approval, there's still unmet need. For more on this and the latest in the biotech sector, we were joined by Sam Fazelli, Bloomberg Intelligence, Director of Research for Global Industries and Senior Pharmaceuticals Analyst. We began by asking Sam where we are in terms of treating myeloma.

21:58Well, I've been telling you about these cancer treatments and these cancer areas where patient numbers in terms of those who live rather than those who die is fundamentally changing. Breast cancer has been one of them. Prostate cancer is another one. Melanoma is another one, which, of course, people are familiar with. And of course, myeloma has been one that we've also got there. There are patients who are alive today who were diagnosed in 1996, 1998. and there are and there have been people developments in that space that literally are changing completely the way that people end up living with their disease of course it's not for everybody that ends up like that but the average mortality or the average life expectancy of a patient with myeloma has significantly changed and what is it it's a cancer of the bone marrow which then, of course, translates to some changes in your blood.

22:53So it's a hematological cancer. And yet another major development in the last week or so that came out at Orlando, a conference that was held last week. What is the treatment landscape then for myeloma? Yeah, so given that it goes on for so long now, we've got first line, second line, third line, fourth line, fifth, etc. Right? There are so many patients. There are some patients that enter trials these days that have had eight lines of therapy. But that's, I would say, a good thing. That means we have drugs to treat people every time they fail a previous one. The most exciting recent development was this data that came out of Johnson & Johnson's trial called Majestic 3, which takes a special type of antibody, married it with a well-known accepted drug on the market today called Darzelex, also another J &J drug.

23:45And lo and behold, at 36 months post-therapy, 83 % of patients were alive. Versus the next big thing, best thing that we've just had, recently added to the armamentarium, at about 50%. So the massive shift in survival. I mean, these are things that we don't often see in oncology. When you see it, you get standing ovations and you get celebration. Because it makes a huge difference to patients. So that's what we've been seeing recently. Hey, Sam, here in the United States, the Trump administration has taken a real hard line against some federal funding of universities. And I know a lot of universities are saying that's really hitting their funding for their medical centers, for example, some of the medical research.

24:29Are you seeing that? Are you hearing that from the companies? Is the effects, are they being felt yet or is that something in the future? No, I would say that type of research funding is something that's going to translate into trouble in five to 10 years time. If indeed, it sticks. And if indeed, you really end up with people not being able to start a scientific career because they can't get money to do their research. Now, I had a conversation with somebody who said, actually, it's not as bad as it sounds. It's only some areas that are being cut. The budget hasn't been halved. And then others tell me something different.

25:05So let's see how this all pans out in 2026. But if it goes in the bad way that you were just referring to, you're going to end up with fewer scientists in five to 10 years time in U.S. universities developing these new ideas. And then, of course, where does that all go? China. and they are doing a fantastic job of getting their research funded and pushed. And that's where I think we all, US and Europe, need to watch because we lose the competitiveness angle. Our thanks to Sam Fezzelli, Bloomberg Intelligence, Director of Research for Global Industries and Senior Pharmaceuticals Analyst. Coming up, we'll look at why the global management consulting firm McKinsey is cutting headcount.

25:45You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries. You can access Bloomberg Intelligence through BI Go on the terminal. I'm Scarlett Foo. And I'm Paul Sweeney, and this is Bloomberg.

26:04This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio. We move next to some news at the global management consulting firm McKinsey & Company. This week, the firm announced its leadership is cutting about 10 % of headcount across non-client-facing departments. Could amount to a few thousand job cuts over 18 to 24 months. And this comes even as the firm marks its 100-year anniversary. McKinsey's revenue growth has flatlined in the last five years, leading to a reset after some rapid hiring over the prior decade. For more on all of this, we were joined by Sri Nadaranjan, Bloomberg News Chief Wall Street Correspondent.

26:40We began by asking Sri to break down why the firm's last five years have been so disappointing. Around 2021, McKinsey had revenue at the$15 billion mark. Here we are in 2024-25. By the time this year ends, we're going to be$16 billion, just a little bit over. So they've operated in this narrow band of$15 billion to$16 billion in annual revenue, which is great. Any other management consulting firm would absolutely love to post numbers like that. for McKinsey, it is a sense that their revenue has flatlined a little bit. And you did mention their 100-year celebrations, right, which 2026, that is when they will turn 100.