Market Scorecard
US markets rose across the board yesterday with all eleven sectors of the S&P 500 finishing in the green. These gains pushed the tech-heavy Nasdaq to its highest level since August last year. What's the reason? Well, more investors feel that the peak in interest rates are near and that bank turmoil will ease.
In company news, Intel surged 7.6% after announcing that new products for the lucrative server market will be launched sooner than expected. In Congress, former Starbucks CEO Howard Schultz gave Bernie Sanders a piece of his mind, despite being taken to task for the company's anti-union tactics. Locally, Steinhoff dropped 11% to a truly pathetic 24 cents a share as the odds of a liquidation grew after shareholders rejected a restructuring plan.
At the end of the day, the JSE All-share closed up 0.57%%, the S&P 500 romped 1.42% higher, and the Nasdaq shot up 1.79%. It was a happy day.
Our 10c Worth
One Thing, From Paul
I enjoyed yesterday's newsletter from the team at the Long-Term Mindset (three Brians - Feroldi, Stoffel and Withers). It was about how it's a mistake to reach a complex conclusion by focusing on a single metric.
For example "someone might have a healthy BMI, but what if they smoke and have digestive issues?" They argue that the "same is true when we look at companies to invest in. It sounds tempting to buy a company with a dividend yield of 6%. But what if that same company hasn't grown its sales for 15 years, carries a mountain of debt, and has underperformed the S&P 500 for a decade (hello, AT&T)."
"Cheap" companies can still decline by 80% (ask General Electric's shareholders). "Expensive" companies can still become a ten bagger (see Amazon).
You can read the whole thing here, and sign up for the weekly note.
Michael's Musings
There are rumours that Amazon is exploring a purchase of ailing cinema company AMC. Earlier in the week, the AMC share price was up 21% over two days in anticipation of an offer.
Why would Amazon want a clapped out movie house operator like AMC? Prime Video continues to ramp up, with the goal of releasing 10 to 15 movies a year. Owning a cinema chain would allow them to simultaneously launch new pictures on big screen, creating more buzz. Maybe Amazon plans to give Prime members cheap access to movies as another perk to signing up? Imagine going to the movies weekly to watch their Lord of the Rings series.
They could close unprofitable cinema locations and use them as distribution centres. How about placing an order on Amazon, going to watch a movie, and having your parcel waiting for you when you get out?
All of this is just loose speculation. Nothing materialised from similar rumours doing the rounds in 2021. Amazon would need to spend around $8 billion to buy AMC, which seems very expensive, given the current cost-cutting environment. Probably just wishful thinking by some AMC shareholders.
Bright's Banter
Lululemon reported strong sales for the 2022 holiday quarter. Wealthy shoppers are still buying their expensive athleisure products, despite rising prices for essential goods. Lululemon's shares rose about 16% following the report.
Revenue rose to $2.77 billion from $2.13 billion a year ago thanks to same-store sales soaring 27%. The company's fourth-quarter net income fell to $119.8 million, due to impairments and other charges related to the acquisition of Mirror.
Lululemon expects to make between $9.30 billion and $9.41 billion in revenue in fiscal 2023, higher than the $9.14 billion expected by analysts. The company's CFO was in top form on the earnings call. Lululemon will continue growing outside North America and the introduction of its men's line should carry on taking market share from competitors.
I'm still very bullish on rich people getting healthier and looking gorgeous in technical cashmere garments. If you like this sector and already own Nike, this is one to consider.
Linkfest, Lap It Up
Do you watch HBO's Succession? The series follows the media empire of the Roy family, and is inspired by the life of Rupert Murdoch - Former Google CEO, Eric Schmidt's $30million house is featured.
Having accurate time is central to how society functions. Imagine the confusion when two different time zones coexist in the same place - Lebanon backtracks on daylight saving delay.
Signing Off
The MSCI Asia-Pacific index drifted lower this morning as markets in Japan and mainland China fell, while South Korea eked out some decent gains. The initial rally in Hong Kong-listed tech companies fizzled. Alibaba shares turned down after CEO Daniel Zhang said the company would consider gradually giving up control of some of its main businesses.
Today we await US GDP and initial jobless claims. We erred yesterday, saying that the SARB was announcing an interest rate change. The committee met yesterday but will only announce the change this afternoon.
US equity futures are slightly higher in early trade. The Rand is trading around R18.14 against the US dollar.
King Charles of Great Britain and German President Steinmeier attended a full military parade at the Brandenburg Gate yesterday, the first such event since the Second World War. The two main protagonists of that brutal conflict 78 years ago have decided to put the past to rest. This is progress.
Sent to you by Team Vestact.
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