BROKERS’ NOTES: Buy weight loss, sell booze and cigarettes

David Shapiro, portfolio manager: Sasfin Securities 

Buy: Eli Lilly

We are going to go into a good year and rates are going to come down and all the themes we’ve been talking about are going to materialise, such as AI as everyone tries to upskill their businesses. But the one theme that will dominate is weight-loss drugs. At the moment I still favour Eli Lilly. I know Novo Nordisk led the way and others are going to muscle in, but it’s not too late to buy this share even though it’s had a very strong run. It’s still going to be one of the front-runners as more and more people want to pick up on this theme. This is a real issue and it has real benefits. 

Sell: BAT and Diageo

On the negative side, there’s a fear among the brewers that these weight-loss drugs are going to stop people drinking beer, though I don’t think that’s an issue. But as for the British American Tobaccos of the world, smoking is a dying industry. We saw what BAT wrote off with its Reynolds assets. As far as the drinks companies are concerned, we’ve seen a big battle for shelf space for players like Diageo, in particular against Indian manufacturers. If you’re a big brand and going into India, you’re competing against home industries. So I think it will be more difficult for the incumbents. Though they might not fall in a heap, I don’t think they are going to go anywhere, and it’s time to give up on that theme.