vestact posted: " Market Scorecard US markets finished the month of October at record highs thanks to strong company earnings. The S&P 500 and the Nasdaq Composite posted their best monthly performance (up 6.9% and 7.3% respectively) since November 2020. That's"
US markets finished the month of October at record highs thanks to strong company earnings. The S&P 500 and the Nasdaq Composite posted their best monthly performance (up 6.9% and 7.3% respectively) since November 2020. That's remarkable!
In company news, Novavax shares jumped 16% higher after submitting their Covid-19 vaccine to Canada's health regulator for authorisation. On Friday, Microsoft reclaimed the title as the world's biggest company, but on Monday Apple took the title back. Microsoft is currently worth $2.47 billion and Apple is worth $2.48 trillion.
The JSE All-share was down 0.44% on Friday, but did not trade yesterday. Last night in New York, the S&P 500 was up 0.18%, and the Nasdaq was up 0.63%.
Our 10c Worth
One Thing, From Paul
Starbucks is a Vestact-recommended stock, because people like caffeinated drinks. We've owned this company since February 2013, when we advised clients to sell Coca-Cola and buy Starbucks instead.
When we started buying them they traded at a (split-adjusted) level of $28.32 and now, eight-and-a-half years later, they are at $109.80 per share. For the record, they have outperformed Coca-Cola by a country mile since 2013, so it was a good switch.
Starbucks reported third-quarter numbers late last week, which were slightly disappointing. The stock is off by about 3% since then but I'm not going to dwell on that, because it's not important. They'll rebound in the next quarter, I'm sure.
More interesting is that Starbucks is 50 years old this month. It was started in Seattle in 1981. Howard Schultz joined the company in 1982 and then bought out the founders in 1987. They went national in 1991, focusing initially on the cities of Chicago and Los Angeles. They listed on the Nasdaq in 1992.
Today the US has more than 37 000 coffeehouses, with Starbucks accounting for about 15 000. They are also massive in Europe and China. The stores are designed to look and smell inviting, and to be a "third place" where people can meet and socialise, between home and work. See the quote from Schultz in the image below.
The company emphasises efficiency in ordering and paying via its mobile app. More than 20 million loyalty programme customers have an aggregate of over $1.6 billion loaded on their apps or loyalty cards.
Another noteworthy development is that Starbucks has recently increased the wages of its baristas in the US to $17 an hour. They hire better people, who make a big effort to spell your name correctly when you order in-store.
We rate Starbucks as a buy. It has a dividend yield of 1.85% per annum, and great prospects.
Byron's Beats
Last week Amazon reported third-quarter results which were slightly disappointing compared to expectations. Sales grew 15% to $110.8 billion versus estimates of $111.5 billion. This was because e-commerce sales only grew 3%. I suppose that makes sense because many businesses are struggling to produce enough stock to sell, due to logistics challenges. Amazon's in-house and third-party retailers are probably dealing with the same problems.
Amazon's services businesses are growing super-fast. AWS increased sales by 39%. Vestact is a proud AWS customer.
This was also Andy Jassy's first full-quarter as CEO. He had the following to say. "We've always said that when confronted with the choice between optimising for short-term profits versus what's best for customers over the long term, we will choose the latter - and you can see that during every phase of this pandemic."
Since the pandemic, AWS have doubled the size of their installed server capacity, at massive cost. As shareholders we fully endorse these capital investments for future growth.
The Amazon share price is still hovering at around $3 300. We think this is a good opportunity to buy shares in a great company.
Michael's Musings
Last week, Bloomberg reported that the Chinese authorities are pressurising Hui Ka-yan, the founder and Chairman of floundering property company Evergrande, to use his own money to bail them out. He's worth $8 billion, apparently.
Should a founder have to use their own money to bail out their company? If so, how much of their wealth should be on the line? It is an interesting question, and different societies would have varying answers.
In the West, most would argue that his money should be completely separate from that of the company. The people lending Evergrande money are adults, and many of them are investment professionals. Why do they need bailouts or hand-holding?
On the other hand, it seems wrong that someone should get so rich by building a company that is fragile and over-indebted. Evergrande's business model was to borrow as much money as they could and then to throw up buildings as quickly as possible. Chinese property prices were flying and it didn't matter that the group's debt was piling up. Hui looked like a hero while it was working, but it became a massive problem once the property market cooled off.
It remains to be seen if Hui Ka-yan will dip into his own pockets. The Chinese authorities have also told Evergrande that they can't use client property deposits to pay off their corporate debts (those can only be used for building new client apartments, which seems fair enough).
Bright's Banter
Meta, the company previously known as Facebook, bought VR headset maker Oculus for $2 billion back in 2014. This was their first venture into the world of virtual reality. Last year, they released a fresh set of VR headsets called the Oculus Quest 2 to compete with Sony, their biggest rival.
According to new data from Counterpoint Research, the new goggles helped Meta gain a 75% market share of all new extended reality (XR) product shipments in the first quarter of 2021, up from just 34% in the first quarter of 2020. The infographic below shows which company dominates the XR headset race.
Virtual reality is a very small market at this stage as it doesn't serve a big purpose yet, but does have a lot of potential. Time will tell whether Meta was ahead of its time or if they got it just right. I like what I am seeing so far, maybe the metaverse is the place to be.
The number of cigarettes sold in the US increased last year. You might think that fear of a virus that attacks the respiratory system would lead to less smoking, but it seems that lockdowns caused stress, resulting in the opposite outcome - Cigarette sales went up last year for the first time in 20 years.
Asian markets are mostly up this morning. Hong Kong and South Korean bourses outperformed thanks to a bounce in technology companies, but Japan and mainland China are down.
It's going to be a busy week on the economic news front with a Fed meeting taking place and the October US jobs report coming out on Friday.
US futures are very slightly lower in early trade, which is not too bad after hitting fresh new highs last night. The Rand is looking hungover after too much phuza (long weekend), now trading at R15.46 against the US Dollar.
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