Market Scorecard
US markets rode out yesterday's batch of corporate earnings to finish near-flat. The S&P eked out a tiny gain while the Nasdaq fell by a smidgen.
On the earnings front, Netflix retreated slightly after the bell as its subscriber growth and revenue outlook missed projections, but profit margins improved. Elsewhere, Western Alliance Bancorp surged over 16% in late trade after it beat earnings estimates and said deposits recovered after the collapse of three US regional banks. Finally, Goldman Sachs fell as its results showed that the bank failed to capitalise on the fixed-income boom, which led to revenue trailing estimates.
At the end of the day, the JSE All-share closed up 0.73%, the S&P 500 rose 0.09%, and the Nasdaq lost 0.04%.
Our 10c Worth
Byron's Beats
Yesterday, Johnson & Johnson kicked off earnings season for Vestact stocks on a decent note. Revenues came in at $24.7 billion, well above the consensus of $23.6 billion. Earnings per share also had a nice beat, posting $2.68 versus $2.49 expected.
Pharmaceuticals sales exceeded estimates by 7%, with multiple myeloma drug Darzalex hitting big numbers. Revenue in the medical devices business was 3% higher than expected, growing 6.4% from this time last year. The consumer products division is going to be spun out soon so that's of limited interest, but did manage to grow sales by 11.3%.
Most importantly, J&J raised their generous dividend by a further 5.3%. Amazingly, this is the 60th year of consecutively increasing dividends. What an incredible record!
J&J is a slow and steady investment, and that is what we like about it. It adds balance to our portfolios and the 3% dividend yield is very welcome.
One Thing, From Paul
Vestact has private clients; actual individual investors. A few customers invest with us via companies or family trusts. All clients need to go through a background check to ensure they aren't on any global 'red lists'.
We do not target institutional investors, like pension schemes, insurance companies or sovereign wealth funds because they have all sorts of burdensome rules and reporting requirements.
I enjoyed reading this column by Toby Nangle (pictured below), which is called Why asset managers should refuse bad clients. Toby was previously the head of asset allocation at Columbia Threadneedle EMEA, but quit last year to focus on improving the ethics of the asset management industry.
This is his hard-hitting opening paragraph:
"Investment management is a great profession to be in. In terms of mental stimulation, it's off the charts. And it doesn't pay badly either. At its core, the job consists of working to help make your clients wealthier. Some use this enhanced wealth to send their children to college. Some use it to honour pension promises made to their employees. And some use it to murder journalists, crush internal dissent and conduct genocide on a minority population."
Michael's Musings
The global business community is still finding a balance between working from home and the office. About 80% of workers in the EU are back in the office, but in the US only 50% have returned. I'm not sure what the number is for South Africa, but we've previously noted that a growing number of locals are working remotely for foreign companies.
Last week JP Morgan asked its managing directors to go back to the office for five days a week. The bank owns a lot of very expensive office space so it's biased, but it did give some very valid reasons for the request:
"Our leaders play a critical role in reinforcing our culture and running our businesses. They have to be visible on the floor, they must meet with clients, they need to teach and advise, and they should always be accessible for immediate feedback and impromptu meetings."
That makes sense. It is much easier to be an effective leader when you are physically present and fully engaged.
Bright's Banter
LVMH, the world's biggest luxury company, reported better-than-expected first quarter sales growth of 17% on an organic basis, reaching EUR 21 billion as China rebounded sharply after Covid lockdowns. Analysts had only pencilled in 8% growth.
The company's sales of fashion and leather goods (dominated by Louis Vuitton and Dior) rose by 18% in the quarter, while perfumes (Maison Francis Kurdjian) and cosmetics (Fenty Beauty), as well as watches (Hublot) and jewellery (Bulgari), increased by 11%.
The figures offer the first snapshot of the scale of the Chinese recovery. Revenues grew by 14% in Asia, excluding Japan, compared with an 8% decline in the final quarter of 2022, and LVMH expects China to drive growth in 2023.
However, the picture was more mixed in the US, where the strong demand that boosted European fashion houses last year is showing signs of waning.
The group describes its strategy with the following buzzwords: "innovation, investment, and quality in products, distribution, and desirability". What a solid start to the year from one of my favourite brand houses.
Linkfest, Lap It Up
Should young people save less and spend more? Humans are living and working longer - If you are getting old, this debate is endlessly interesting.
Insects have emotions, dreams, and experience PTSD This raises complex ethical questions - Bees are sentient.
Signing Off
Asian markets are mostly down this morning, pushing the MSCI Asia-Pacific gauge lower by more than half a percent. The Japanese Nikkei, Hong Kong's Hang Seng and the Shanghai Composite are all in the red, but the South Korean KOSPI bucked the trend.
On the economic front, today we'll see the release of Eurozone CPI and the Fed's Beige Book. We also await results from Tesla, ASML, Abbott Labs, Morgan Stanley, IBM, and more.
US equity futures are lower in early trade. The Rand is at R18.15 against the US Dollar.
Late last night, news broke that Fox News has agreed to pay $787.5 million to Dominion Voting Systems to settle a defamation lawsuit claiming on-air lies about the 2020 election. Nice to see that there's a price to be paid for broadcasting bullsh1t, just because it suits your politics or the preferences of your crazy viewers. Take that Rupert Murdoch.
Have a nice day. We'll write to you again tomorrow.
Sent to you by Team Vestact.
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