If historical patterns hold true, the recent Ozempic storyline on South Park could potentially signal a temporary peak in the stock prices of obesity drug manufacturers. It has been observed that companies prominently featured in the animated comedy often experience a decline in their stock performance the following year. According to Spectra Markets, the median stock underperforms the S&P 500 by 7% one year after appearing on South Park.
In this latest South Park episode, titled “The End of Obesity,” the show takes a humorous approach to the growing market for weight loss drugs such as Ozempic and Mounjaro. The special explores Eric Cartman’s pursuit of these popular weight-loss medications.
However, based on past experiences, investors might want to take note of the potential implications. It has been observed that stocks of companies featured on South Park tend to sell off shortly after their appearance on the show. Therefore, the joke might be on investors who fail to consider this historical trend.
According to an analysis conducted by Spectra Markets, it has been observed that when a publicly traded US company is prominently featured in an episode of the popular TV show South Park, it often coincides with a short-term peak for the company’s stock.
Spectra Markets President, Brent Donnelly, stated that one year after appearing on South Park, the median stock underperforms the S&P 500 by approximately 7%.
The reasoning behind this trend is that when a company is featured on South Park, it is likely to have already gained significant popularity. This is similar to the contrarian magazine cover indicator, where a stock’s peak performance is often followed by a decline.
Donnelly emphasized that South Park has a long history of capturing the cultural zeitgeist, and it is undeniable that anything lampooned on the show is already reflected in the stock price. He further explained that when a company is featured on South Park, it becomes well-known and is at risk of mean reversion after experiencing a period of substantial outperformance.
For instance, stocks of Novo Nordisk and Eli Lilly have seen remarkable outperformance in recent years, as investors recognized the potential of their GLP-1 weight loss drugs, which is estimated to be a $100 billion market opportunity.
Since the beginning of 2023, the stock prices of Eli Lilly and Novo Nordisk have surged by 121% and 97% respectively, far surpassing the S&P 500’s gain of 40% during the same period.
Several companies that were previously featured on South Park, however, experienced underperformance in the stock market in the following year. These include cannabis companies MedMen and Tilray, social media giants Twitter and Meta Platforms, and consumer companies Starbucks and Walmart.
Nevertheless, there were exceptions to this trend, as Microsoft, Yelp, and Netflix managed to defy the odds and maintain strong stock prices after being featured on the show.
Regardless, the study highlights that when a company is showcased on South Park, it is highly likely that the potential for positive stock performance in the short term has already been factored into the price. Therefore, investors should not be surprised if these stocks underperform relative to the S&P 500.
In conclusion, it may be wise to reduce exposure to the GLP-1 basket at this time, as the study suggests that all the potential upside has already been priced in.