Market Scorecard
US markets rose again last night, adding to the handsome gains racked up in the month of January. Data out yesterday showed that wage costs were moderating, housing prices were cooling, and consumer confidence was trending lower. The Federal Reserve is expected to notice these developments and go easy on further interest rate hikes. The Nasdaq recorded its strongest start to the year since 2001.
In company news, our Stryker shares rose 4.4% in after-hours trade after releasing good results. They are up 24% in the last three months, and Michael writes about their numbers below. Conversely, Snap Inc shares flopped by 14% in late trade despite a good take-up for its Snap+ subscription service. Finally, Spotify leaped 12% higher after its earnings beat analysts' expectations and showed solid user growth.
In summary, the JSE All-share closed down 1.06%, the S&P 500 was up 1.46%, and the Nasdaq was 1.67% higher.
Our 10c Worth
Michael's Musings
After a tough 2022, this earnings season is a bit more tense than usual. Vestact-recommended medical device company Stryker reported numbers after the market's close last night, thankfully beating both top and bottom-line expectations. As mentioned above, the stock rose smartly in after-hours trading.
The business saw solid growth from its international division, but a stronger US Dollar nullified most of those gains. In constant currency terms, sales were up 11.7% outside the US, but when translated back to Dollars, it was only up 0.5%. As Byron wrote recently, these currency cycles turn and what is a headwind now, will become a tailwind later.
Stryker is a company that likes to make bolt-on acquisitions to complement its current product portfolio. The one upside of 2022 being a terrible year for asset prices is that it makes these acquisitions cheaper for Stryker. The company's primary plan is to pay down debt from previous acquisitions but likes the current prices they see in the market.
Management notes that they are finally back in a pre-Covid environment, in terms of elective surgeries. There had been a lot of pent-up demand, due to hospital lockdowns, that the company has worked through. Sales are now flowing smoothly, with strong growth forecast for the year ahead.
It is during the hard times that quality shines through. Stryker has shown that it is a top-notch business.
One Thing, From Paul
Starting wars with neighbouring countries is a very bad idea, as Vladimir Putin has discovered in the last 12 months. This article by Julia Ioffe at current affairs website Puck discusses The Putin Super Power Myth.
Putin assumed that the Ukrainians wouldn't fight, that the West would let the whole thing slide as it did with his earlier Crimean invasion, and that Europe could not survive a cold winter without Russian gas.
Now, Western arms are flooding into Ukraine and the tide is turning. The Russians have found themselves in a grinding war against a far superior economic and military bloc.
Russian oil has been subjected to a price cap of $60 per barrel, which seems to be sticking. The only countries actively buying Russian oil are China, India and Turkey.
The winter weather has been relatively mild and the Europeans have stockpiled gas from other sources. "Putin destroyed in a year an energy business that took three generations to build. As it turns out, Russia needed Europe far more than Europe needed Russia".
Russia takes itself very seriously, but is in long-term decline. It's no longer a superpower that can throw its weight around. Let's see how long Putin can take the pressure before he cracks.
Byron's Beats
Retail is a tough business - margins are thin and competition is rife. To gain market share you have to really impress fickle shoppers, time and time again. According to Shoprite's latest 6-month update, they have grown their share of the SA retail market for 46 straight months. That resulted in 15.6% sales growth for the period.
The big winner was Checkers which grew by 16.9%, very impressive for a grocer. Woolworths, watch your back. Sadly for the consumer, price inflation was 9.4%. Hopefully that is on the way down, in line with global trends. The group spent a frustrating R560 million on diesel for generators, which is just ridiculous.
All-in-all a very solid update from Shoprite despite the tough economic conditions in our country.
Bright's Banter
Brazilian cosmetics maker Natura & Co. owns the brand Aesop, which may list as a spinoff or be sold. They are being advised in this transaction by Bank of America and Morgan Stanley.
Natura stated in October that it was evaluating options for Aesop, which it says is worth more than $2 billion. Due to difficult market conditions for new listings in 2022, the company has shifted towards a stake sale, as part of a larger restructuring effort led by CEO Fabio Barbosa.
Aesop began in 1987 when founder Dennis Paphitis opened his Melbourne hair salon, Emeis, and started blending essential oils into hair products. Having started with four products, Aesop's range now comprises almost 100, with one Parsley Seed Anti-Oxidant Serum sold every four minutes, and a handwash and hand balm duo a staple in hipster restaurant toilets.
LVMH and L'Oreal are among the luxury consumer companies that are interested in the opportunity. Japanese beauty company Shiseido is also in the running.
Linkfest, Lap It Up
Successful people are not always happy. Many professionals struggle to enjoy their accomplishments - Overachievers may need to recalibrate their "enoughness gauge".
You are more likely to die from sunstroke than a bee sting. Driving is the cause of the most unnatural deaths - Visualizing the odds of dying from various accidents.
Signing Off
Asian markets ticked higher in the slipstream of gains on global markets. The MSCI Asia-Pacific index is up, with key indices rising in Hong Kong, mainland China, Japan and South Korea.
US equity futures are slightly lower in early trade. The Rand is trading at around R17.39 to the greenback.
This evening, Jay Powell will reveal the outcome of the latest meeting to deliberate interest rates in the US. The market expects a 0.25% hike. Anything other than that will result in fireworks. Later tonight we will be on the lookout for an important earnings report from Meta Platforms.
On this day in 1991 President FW de Klerk announced that all apartheid laws would be repealed. That was an exciting development! Aluta continua.
Sent to you by Team Vestact.
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