Market Scorecard

Yesterday, US stocks fell for the first time in five days. Sadly, hopes faded for an immediate de-escalation in the war in Ukraine, and Russian shelling escalated. Scandalous! With a day to go, stocks remain on track to have the first up month in 2022, with the S&P 500 stronger by 5.2% for the month of March.

In company news, local food group Famous Brands acquired a 51% stake in plant-based restaurant operator Lexi's Healthy Eatery. Elsewhere, Lululemon closed up 10% after the company posted higher revenue and profit for the quarter. More about this top company in Bright's Banter below.

In short, the JSE All-share closed up 0.87%, the S&P 500 lost 0.63%, and the Nasdaq fell 1.21%.

Our 10c Worth

One Thing, From Paul

Here's a fun article in the Wall Street Journal about Nvidia, written by Dan Gallagher. The headline is Nvidia's Trillion Dollar Dreams.

This comes after an investor briefing at which Nvidia said its total addressable market could grow to $1 trillion. On top of chips for video gaming, artificial intelligence and the automotive sector, the data centre market is ramping up fast.

Nvidia's new Grace CPU was also unveiled at the event (see picture below). It's the first Arm-based processor for data centres. Other tech giants such as Amazon, Microsoft, Google and Facebook are accelerating capital spending on their cloud computing and network infrastructure, so orders will be strong.

With a market capitalisation of $700 billion, Nvidia towers over the rest of the semiconductor industry. We love this one. You must own them!

Byron's Beats

The share prices of many "lockdown darlings" have been absolutely crushed as the world opens up. There are two lessons I can take from this.

As a long term investor, you need to look past both negative and positive short term factors. If a company faces tough headwinds, we expect them to knuckle down and overcome those obstacles. But when the environment is favourable, shareholders can get caught up in the glory as the share price rockets higher. FOMO kicks in, and the company's valuation can lose touch with reality. Remember that the very good times and the very bad times never last. Pick companies that can manage both scenarios appropriately.

The second lesson is that markets overreact, and individual stocks do so even more. In hindsight, the lockdown darlings went up too much. In my opinion, they have now fallen too hard. Zoom, Shopify, Netflix and PayPal are all back at pre-lockdown levels. Yet their businesses are much stronger than they were two years ago. Despite people getting out and about, behaviour will never be the same as in 2019. These companies have signed up millions of new subscribers that will remain loyal customers for years to come.

Anyway, we should not complain when stocks overreact, because that's where the opportunities lie.

Michael's Musings

The US housing market has been surging for the last few years due, in part, to a shortage of new houses coming onto the market. News publications have pictures of people queuing down the street outside show day houses. Imagine if that was the case in Joburg on Sundays!

The housing market was so competitive in 2020 that 63% of buyers made offers without visiting the house first. I suppose that's partly due to lockdown provisions. I can't imagine buying a house after only looking at some pictures.

How's this for a stat: "now that the dust has settled, about 75% of recent buyers say they have regrets". Ouch! Having buyers remorse for something like a pair of jeans is one thing, but it's a whole new level when it is a house.

At some point the US housing market should level out, as over-inflated prices entice more people to sell. Here in South Africa, the average price of residential property has been flat since 2009, in real terms. In other words, after taking inflation into account, South African property prices haven't changed. Surely they will move up at some point?

Bright's Banter

Lululemon posted strong earnings for the fourth quarter, becoming one of the few apparel brands to grow despite supply chain bottlenecks.

The Vancouver-based athleisure company reported fourth-quarter revenues of $2.1 billion, catapulting total revenues for the 2021 year to more than $6.3 billion, up 42%. Revenues at company-operated stores rose by 70% and its online business now accounts for half of all sales.

The company just launched its first collection of footwear, bringing the Blissful women's running shoe to certain stores. The plan is to expand the brand with additional styles through 2023, including men's shoes. They plan to open 70 more company-owned stores this year, the current tally sits at 574 stores.

Lululemon expects 2022 revenue to rise by just over 20%. I've always been a fan of the yoga-inspired, technical cashmere apparel company and I'm more impressed by how management navigated 2021. I'm still very bullish on humans getting healthier or looking healthier, especially rich people. This is a good stock to own, alongside Nike.

Linkfest, Lap It Up

LeBron James continues to etch his name into the history books. The LA Lakers star scored 39 points against the Pelicans to cross 37 000 career points; he's the second and youngest player to achieve this milestone - LeBron James the GOAT.

Knight Frank publishes an annual global property review. It shows how many square metres you can buy with $1 million in different cities; Cape Town looks rather reasonable - The Most Expensive m2 of Prime Property in the World.

Signing Off

Shares have fallen across Asia this morning. Stocks in mainland China and Hong Kong are down after a report was released showing a contraction in Chinese manufacturing.

Oil was trading higher earlier, but dropped after reports that the Biden administration is considering the release of a million barrels of crude oil a day from US reserves to combat inflation.

US equity futures are slightly higher in early trade. The Rand is unchanged, trading around the R14.50 mark against the US Dollar.

That's it, one quarter of 2022 is done.

Sent to you by Team Vestact.