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Speaker 1: Now, the US market may be up almost sixteen percent

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Speaker 1: on the year, but get a load of this. Well

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Speaker 1: known household names like Nike and Lulu Lemon and Starbucks

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Speaker 1: had a much tougher time. The entire consumer discretionary sector

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Speaker 1: is up only four percent, with a growing number of

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Speaker 1: so called fallen angels. Stephanie Bachelor is from Milford Asset Management. Hey, Stephanie, Hi, Heather,

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Speaker 1: What exactly is a fallen angel?

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Speaker 2: So the term fallen angel was traditionally used to describe

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Speaker 2: a bond that used to be investment grade but has

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Speaker 2: since been reduced to essentially junk bond status, but you

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Speaker 2: can also apply it to stocks. A company that has

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Speaker 2: historically been seen as really high quality, usually with a

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Speaker 2: share price that continues to reach all time highs, but

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Speaker 2: has since fallen significantly and is now out of favor.

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Speaker 2: Was invested.

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Speaker 1: Okay, So I've listed a number there that that are

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Speaker 1: obviously examples. Why have they performed so poorly?

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Speaker 2: Yeah? So there are lots of examples. A couple that

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Speaker 2: you mentioned the ath leisure companies like Nike and Lululemon.

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Speaker 2: They've fallen significantly on concerns that they aren't innovating enough.

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Speaker 2: And losing market share to newer competitors. So from peak

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Speaker 2: to trough, Nike's share price has fallen about sixty percent

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Speaker 2: and Lululemon's about fifty percent. Then in the beauty space,

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Speaker 2: este Lord is down about seventy five percent, primarily due

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Speaker 2: to very weak sales in China, and Starbucks is another

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Speaker 2: brand struggling in China and its share price had fallen

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Speaker 2: about forty percent.

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Speaker 1: I mean, it's quite astounding how big those falls are

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Speaker 1: given that they are household brands. What's next for these companies?

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Speaker 2: Now?

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Speaker 1: How do they get the investors to love them again?

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Speaker 2: Yeah, So, usually we see one of two things. Either

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Speaker 2: an activist shareholder gets involved. These are investors that buy

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Speaker 2: a sizable stake in the company and then put pressure

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Speaker 2: on management to make changes. So a recent example of

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Speaker 2: this is Bill Ackman taking a stake in Nike. Or

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Speaker 2: CEOs leave or get replaced, and we saw a remarkable

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Speaker 2: share price reaction to one of these situations. Recently, it

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Speaker 2: was announced that the CEO of Starbucks would be leaving

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Speaker 2: and would be replaced by the CEO of Chipotle. This's

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Speaker 2: the Mexican food chain that's done extremely well and so

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Speaker 2: on the day that this was announced, Starbucks shares went

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Speaker 2: up twenty five percent and CHIPOTLEO shares went down eight percent,

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Speaker 2: So that market move was effectively a twenty seven billion

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Speaker 2: dollar slap in the face for the Starbucks CEO and

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Speaker 2: a twenty seven billion dollar pad on the back of

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Speaker 2: the Chipotlo sea.

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Speaker 1: Interesting. Okay, so in Video right, this is something we've

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Speaker 1: been talking about just in the last few days. What's

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Speaker 1: going on here? And also is this an example potentially

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Speaker 1: of something that's becoming a fallen angel.

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Speaker 2: Yes, it's been a rocky few days for in Video.

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Speaker 2: Over four days of trading, shares are down about fifteen percent,

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Speaker 2: and that's wiped out about five hundred billion dollars of value.

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Speaker 2: That's almost the entire value of McDonald's, Disney, and Uber combined.

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Speaker 2: So it's a huge move. But shares are still up

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Speaker 2: about one hundred and twenty percent over the last year,

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Speaker 2: so certainly not a fallen angel. And there are a

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Speaker 2: few things behind this move. So it started at the

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Speaker 2: end of last week when in Video reported quarterly results.

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Speaker 2: It was a strong result, but shares actually fell six percent,

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Speaker 2: shows how stretched investor expectations had become. Apparently there were

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Speaker 2: even Bars in New York live streaming the result, So

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Speaker 2: that's almost the definition of a viral stock. And then overnight,

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Speaker 2: in Video was down another ten percent as part of

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Speaker 2: a broader stock market sell off which had a number

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Speaker 2: of factors at play, one of which was some weaker

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Speaker 2: manufacturing data that tapped into investor fears around a growth

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Speaker 2: slowdown in the US. And Nvidia actually fell a little

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Speaker 2: bit more after hours on some news that the DOJ

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Speaker 2: has issued a subpoena to in Vidia relating to an

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Speaker 2: anti trust investigation. So lot's going on. But the last

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Speaker 2: thing I'd call out is while the two percent moved

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Speaker 2: down in the S and P five hundred overnight is significant,

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Speaker 2: you have to put it into the context of the

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Speaker 2: increased market volatility that we saw in August, with big

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Speaker 2: swings both down and up. So last night's move is

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Speaker 2: really just a continuation of that volatility.

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Speaker 1: Stephanie, thank you. I really appreciate your time. That Stephanie Bachelor,

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Speaker 1: Milford Asset Management. For more from Heather Duplicylan Drive, listen

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Speaker 1: live to News Took said Be from four pm weekdays,

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Speaker 1: or follow the podcast on iHeartRadio.