Five interesting things that Hodges Capital research analysts discovered this week...
#1 Dodgeball in Washington: This week, government software contracts came under scrutiny by DOGE. In an X post, DOGE-reviewed contracts revealed that agencies often hold more software licenses than they have employees, with many licenses sitting idle or not installed on any computers. For example, the GSA has 13,000 employees but holds 37,000 WinZip licenses and 19,000 training software licenses. The Social Security Administration has 10,000 UI Path licenses but uses only 5,000, and 20,600 Tableau licenses but utilizes just 11,560. A spokesperson stated that "fixes are actively in work."
#2 Up & Down: Hims & Hers Health, a telehealth company providing a range of healthcare services and OTC products directly to consumers, was a top performer in the Russell 2000 index year to date. However, the stock has recently suffered two consecutive days of declines exceeding 20% following the FDA’s announcement that semaglutide GLP-1 drugs, such as Ozempic and Wegovy, are no longer in short supply. This shift means Hims & Hers can no longer sell compounded versions of these drugs at a lower cost than the branded alternatives.
#3 Pills: Last week, President Donald Trump warned drugmakers in a private meeting that tariffs are coming and urged companies to move overseas manufacturing to the U.S. In response, Lilly announced plans to open four new U.S. manufacturing "mega sites" over the next five years, aiming to reduce reliance on overseas suppliers and gain greater control over its supply chain. CEO David Ricks noted that U.S. corporate tax rates have become competitive for investment and speculated that if the FDA expedited its permitting process, construction timelines could be shortened by up to two years. Lilly's products include the blockbuster injectable GLP-1 drugs Mounjaro and Zepbound.
#4 Streaming: “Severance” has proven to be a major hit for Apple TV+, surpassing viewership of the popular show Ted Lasso and driving a 126% increase in new subscribers.
#5 Fire and Ice: Cold weather and recent wildfires in Los Angeles have significantly impacted restaurant sales. Severe weather conditions often discourage dining out and, in some cases, force restaurant closures, leading to decreased customer traffic. Stock performance in the sector has been polarized year to date. Sweetgreen hasn’t lived up to its name, and Krispy Kreme hasn’t been crisp—both are down more than 25%. On the upside, it’s been all about hot dogs and hot coffee, with Portillo’s and Dutch Bros both up more than 40%.
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