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The UK cracks down | Mmm, Danone |

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Hi Reader, here's what you need to know for February 22nd in 3:15 minutes.

⚖️ The more balanced a business, the better that business performs. So head to our Investing in Women event on Thursday, and find out how to pinpoint the companies that take the promise of equality and fairness seriously. Get your free ticket

Today's big stories

  1. Uber lost a UK court case that could put a serious dent in the ride-hailing giant’s profit ambitions
  2. Our analyst's laid out a few industries and regions that could do especially well as bond yields rise – Read Now
  3. Danone’s earnings matched analysts’ estimates, but the French food giant’s stock surged at the prospect of a shake-up

Raters Gonna Rate

Raters Gonna Rate

What’s Going On Here?

Uber lost a major UK Supreme Court ruling on Friday, which isn’t the sort of service the ride-hailing giant’s grown accustomed to.

What Does This Mean?

Uber famously treats its drivers as freelancers, but this court ruling – which has been in the works for the last five years – means there’s no wiggle room any more: it’ll have to treat the 25 who brought the case as employees. See, Uber already dictates its drivers’ contract terms, remuneration, and ability to work, so the court figured it was only right they were given a regular salary, not to mention vacation time and sick pay.

Uber will now face a tribunal to decide how much it'll have to pay those drivers. And given there are around 1,000 others with identical complaints, it’s likely that the floodgates holding back similar settlements will open – though, for now, the company doesn’t have to reclassify all its British drivers.

Why Should I Care?

For markets: The costs might outweigh future opportunities.
Uber’s food delivery platform has benefited from the pandemic, sure, but its ride-hailing business has suffered. Investors, for their part, might’ve hoped its earnings would get a boost when economies reopened and cautious customers opted for private Ubers over public transport. But between these newly elevated costs in the UK – Europe’s largest ride-hailing market – and looming problems in California, profit could be a long way away – which might be why Uber’s stock dropped on Friday.

The bigger picture: This ruling is an issue for the entire gig economy.
The Uber case could also come back to bite other businesses reliant on gig economy workers. Take Deliveroo: the global food delivery service – whose biggest market is the UK – relies on freelancers to deliver its takeout, and it might face extra costs that could derail the profit it’s promised investors. Talk about bad timing: it’s reportedly planning an initial public offering before the end of March.

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2. Analyst Take

How To Profit From Economists’ New Favorite Trend

What’s Going On Here?

After grinding steadily lower for literally four decades, yields on US government bonds – the world’s most important market – have been breaking higher recently.

So what? You might shrug. Bonds are boring, right?

Not quite: rising bond yields will quickly ripple through to different parts of the stock market in different ways.

In other words, a rising bond yield is very good for some industries, and very bad for others.

And it’s not just certain sectors that could benefit: geography’s important too, with three regions historically gaining the most in a time of rising bond yields.

So that’s today’s Insight: what the “reflation trade” is, and which countries and industries could do well out of it.

Read or listen to the Insight here

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Everybody Gurts

Everybody Gurts

What’s Going On Here?

Danone’s earnings met analysts’ estimates on Friday, after the world’s biggest yogurt maker did a good job of meeting the world’s bacterially fermented needs.

What Does This Mean?

Covid’s side effects go way beyond loss of smell and shortness of breath: lower birth rates and widespread lockdowns are high on the list too, and they’ve hit Danone’s baby food business and bottled water sales hard. That led to the company’s first annual sales drop in three decades, even as rivals Nestlé and Unilever managed to grow their sales last year.

That might explain why there was a lot more talk about Danone’s turnaround plan than there was last quarter’s numbers at the earnings update. And that apparent willingness to make the necessary changes – along with the company’s promise to give more details on its “return to growth strategy” next month – seemed to do the trick: its stock initially surged after the announcement.

Why Should I Care?

For markets: Activist investors step in when things aren’t working.
Danone has been trying to offset slower growth in its dairy segment in the last few years by diversifying into fast-growing segments like probiotics and plant-based ingredients. But investors aren’t convinced the change has been happening quickly enough, and Danone’s share price has slipped to its lowest in seven years. So now, a growing number of activist shareholders have been putting pressure on the company for a complete overhaul – from changing its management to splitting up its businesses (tweet this).

The bigger picture: It works wonders when firms focus on things that matter. 
Nestlé’s investors have already been there and done that, putting the Swiss food giant under similar pressure back in 2017. Since then, it’s restructured almost a fifth of its businesses by selling off underperforming ones so it can focus on fast-growth areas. And the move seems to have paid off: Nestlé’s shares are up 25% in the last five years – outperforming Danone’s by 45%.

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💬 Quote of the day

“Never give up and never face the facts.”

– Ruth Gordon (an American actress, screenwriter, and playwright)
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🌎 Finimize Community

👨🏻 Can’t stop these investing trends now

Freddie Mercury had it right: there are some things you just can’t stop. That’s especially true of the investing trends you’ll hear about at our Unstoppable Investing Trends event on Wednesday. And yes, we have it on good authority that you can’t stop them because they’re having a good time.

🎮 The Boom in eSports ETFs: 6pm UK Time, February 22nd
♻️ The Path to Carbon Neutrality: 6pm UK Time, February 23rd
🚀 Unstoppable Investing Trends: 6.30pm UK Time, February 24th
🤔 How to Diversify your Portfolio: 6pm India Time, February 24th
🌱 The Science Of Sustainable Investing: 4pm UK Time, February 25th
🙋 Investing in Women: 6pm UK Time, February 25th
🌈 Financial Planning for the LGBTQ Community: 2pm New York Time, February 26th
💪 Q&A with Finimize CEO, Max Rofagha: 1.30pm UK Time, February 26th
🔥 The Easy-Does-It Wealth-Building Strategy: 7pm Singapore Time, February 26th
💥 The 2020s: Boom Or Bust?: 1pm UK Time, March 2nd
💪 The Power Of Thematic Investing: 6pm UK Time, March 2nd
🌍 Investing In Biodiversity: 6pm UK Time, March 3rd

📚 What we're reading

  • Jeff Bezos: spaceman (Futurism)
  • News organizations’ “dismal results” (NBC News)
  • This is where the magic happens (Jezebel)
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