Market Scorecard
US markets rebounded nicely yesterday, led by the industrial and technology sectors. In a quiet day for market news, traders seemed to lean towards the idea of a 'soft landing' despite the prospects of higher interest rates sticking around. As you know, humans can get used to anything.
In company news, Evergrande Group, a major real estate developer in China, is facing yet another funding crisis and has not yet reached an agreement with its major creditors on a debt restructuring plan. Elsewhere, Union Pacific popped 10% higher after the railroad company said it would succumb to pressure from an activist hedge fund and replace its CEO. Finally, Pfizer is reported to be in talks to buy biotech firm Seagen for more than $30 billion, the latter rose 10%.
Yesterday, the JSE All-share closed up 0.75%, the S&P 500 rose 0.31%, and the Nasdaq was 0.63% higher.
Our 10c Worth
One Thing, From Paul
I don't do many media interviews these days, because I prefer to sit at my desk and read, between dealing with customer queries.
I agreed to this one though, a video interview with an old acquaintance, Alishia Seckham, who is doing a series for Daily Investor. She asked about my career to date, how Vestact works, and what my best-ever investment was.
You can go straight to the 17-minute long video (contains no swearing): Smart Money - Vestact CEO Paul Theron reveals his best ever share investment.
Byron's Beats
2022 was a tough year for Vestact portfolios. Naturally, we get asked by clients if it is time to change the mix of our recommended portfolio, or even our investment philosophy.
My answer to a recent client was the following.
"Our investment style does slowly evolve over time, portfolios today look very different to portfolios 10 years ago. But we are also aware that to be successful in investing you cannot always try and follow the latest trend that might be working at the time. Sometimes your views will be contrarian but you need to stick to it and ride the ups and downs".
Here are some numbers to prove my point. Estee Lauder trades at 61 times earnings, Walmart 45, Kraft Heinz 41, Colgate-Palmolive 34, Mondelez 33, Pepsi 27, and Coca-Cola 26. Last year's dreadful markets caused a "flight to safety" preference for shares in the consumer staples sector, but those are now expensive relative to their underlying earnings.
Google currently trades at 20 times earnings, has profit margins that these companies could only dream of and has bucketloads of cash. Flipping to safety now would be a big mistake in my opinion. Stick to what you believe in and take the good times with the bad.
Michael's Musings
Life is unfair. An example is the principle of strength breeding strength, but weakness breeding more weakness. Is it fair that those people who are already ahead in life are easily able to get further ahead?
I was reminded of this yesterday while driving back from the Lowveld. Due to the abysmal failings of Transnet, the roads are full of trucks. Moving goods by truck is more expensive, results in more road fatalities, and destroys the road surface. It would be better for our nation if the government was building new roads instead of using the money to repair truck-damaged tar.
Companies that are able to afford generators can survive loadshedding and get more sales when the lights go out. Those that can't afford generators fall further behind.
Bright's Banter
Live Nation, the entertainment giant that owns Ticketmaster and Jay-Z's Roc Nation, has returned to profitability for the first time since 2019, reporting $16.7 billion in revenue for the full fiscal year in 2022, a 44% increase from 2019.
The company's concert business helped fuel this recovery, with over 121 million fans attending events in 2022, a 24% increase from 2019. I guess it's safe to say that most of the pandemic problems are over for them.
However, Live Nation now faces legal questions and regulatory pressures, including an investigation by the US Department of Justice, and a lawsuit by Taylor Swift fans who are accusing the company of deception, fraud, price fixing, and antitrust violations.
Additionally, there is growing pressure for ticketing reform, including all-inclusive pricing, and greater transparency in the ticketing industry. Any changes in regulation or legal rulings could have implications for Ticketmaster and its numerous sports partners.
Linkfest, Lap It Up
Sneaker prices are falling on StockX. Coveted items like Travis Scott Jordans, LV x Nike and Nike-Off-Whites can be snagged at lower prices - Sneakers are cool(ing).
Do you know the tallest buildings in South Africa? The updated list is out and 7 of the top 10 are in Johannesburg - SA's skyscrapers.
Signing Off
Stocks rose in Asia early today, tracking the gains we saw in western markets last night. The MSCI Asia-Pacific snapped a two-day drop, with South Korea leading the pack. The Hang Seng index climbed as Hong Kong dropped one of the longest mask mandates on record. The Nikkei was also in the green.
US equity futures are in positive territory but the moves are not entirely convincing. The Rand is trading at around R18.44 to the US Dollar. That's poor, and probably reflects some disappointment after South Africa's greylisting.
Have a good Tuesday.
Sent to you by Team Vestact.
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