Market Scorecard
After a wobbly morning, US markets powered higher in the final hour of trading. That's a pleasing sign for market bulls, such as ourselves. The longer this goes on, the more confidence will build. If you have been considering adding to your portfolio, take note please.
In company corner, Google shares dropped 2.7% after a report saying that Samsung might make Microsoft's Bing the default search engine on their phones, instead of Google. Elsewhere, M&T Bank rose 7.8% after its earnings announcement, making it the top gainer in the S&P 500 for the day. Not all banks are killing it though - State Street fell 9.2% after dropping a weak operating update.
Izolo, the JSE All-share closed down 0.19%, but the S&P 500 rose 0.33%, and the Nasdaq gained 0.28%.
Our 10c Worth
One Thing, From Paul
We write and send out a Vestact newsletter every working day. The process starts early in the morning with us sending in our individual contributions, which get edited carefully, then distributed at around 10 am SA time, to over 6 300 subscribers.
We've been doing this for two decades. Why do we do it? There are a few reasons.
Firstly, it's how we signal to you that we take our business and your money very seriously. We like to keep our Vestact brand under your nose every day! Most new customers were newsletter readers first.
Secondly, it's a good discipline for each of us. To write well you have to read a lot, think, make notes, and then churn out some intelligent thoughts. It's how we get to know ourselves.
Thirdly, it encourages us to be concise. Each part of the newsletter needs to be short and punchy, with only one central point. The end product is a good read, that won't take you too long to get through.
Finally, it's allowed us to build up a great archive of comments about our portfolio companies. As an example, here's the one for Microsoft.
We take ourselves seriously. Getting something started is not so hard, but keeping it up for many years is rare. We'll keep writing, if you keep reading. We are proud of what we have achieved.
Byron's Beats
McDonald's shares recently hit all-time highs, now trading at $290 a share. It hasn't been smooth sailing; there've been some big up and downs. The simple return over 5 years has been 82%, which is decent but not spectacular.
The reason I am mentioning this is because while a cheap food producer is a defensive investment, this "flight to safety" stock is now looking expensive. McDonald's trades at a higher price-to-sales ratio than Amazon, Google, Meta, Apple and even Tesla. Its price to earnings ratio of 35 times is well above the S&P 500 average of around 22.
I think the flight to safety trade has been overdone. The best buying opportunity right now is to re-enter quality companies that took a beating last year, especially in the established tech area.
Michael's Musings
I recently wrote about the poor returns from property investing in South Africa. To recap, between 2010 and 2022 property prices, on average, have gone backwards when you consider inflation. If you convert those numbers into USD, the only real way to measure wealth, then local property has significantly dropped in value.
A reader replied making the observation that lower prices mean that property is now more affordable in South Africa. Lower house prices are great news for first-time home buyers and the growing South African middle class.
Unfortunately, as long as local GDP growth continues to stumble along, we are unlikely to see future real appreciation in property values. When will we see a resurgence in South African economic growth? I don't know.
Not surprisingly, Cape Town has far outpaced the rest of the country. Limited space, coupled with many wealthy 'Vaalies' semigrating, has meant prices need to go higher to balance the market. See the graphs released by Stats SA last week.
Bright's Banter
French Champagne makers are celebrating strong sales in the US, according to the Comité Champagne, a joint trade association for the industry. US drinkers spent almost $1 billion on Champagne in 2022, making this the biggest global market by value and volume.
Despite competition from other sparkling wines like Prosecco and Cava, the number of Champagne bottles shipped worldwide increased by 1.5% year-over-year, resulting in record sales of $6.6 billion.
The Comité's lawyers work to uphold the Champagne label's integrity, which can only be used for bottles produced in the Champagne region of France. In 2022, the US imported 33.7 million bottles of Champagne, up 31% from 2019.
Champagne sales in France itself are also incredible, reaching 138.4 million bottles in 2022. This translates to about two bottles per person per year, almost 20 times the per capita consumption in the US. Santé!
Linkfest, Lap It Up
Would you take a ride in a robotaxi? Maybe not in Joburg - Robotaxi designers lay on peace-inducing diversions.
Johannesburg is a very young city. 80 years ago you could buy a 12 000 square metre stand in Bryanston, and Homestead Avenue was a dirt road - Memories of growing up in Joburg.
Signing Off
China's economy grew at 4.5% in the first quarter, the fastest pace in a year. Retail sales jumped 10.6% in March as online sales of physical goods picked up. The Shanghai market is up today, but Hong Kong is down.
Today we'll see first-quarter numbers from Johnson & Johnson, Bank of America and Netflix amongst others.
US equity futures are flat in early trade. The Rand has been rather volatile this week, and is now trading back at R18.32 to the US Dollar.
In Mumbai, excitement is building as Apple is opening its first store in India. Elsewhere, the Italian coast guard found 400 million Euros worth of cocaine floating east of Sicily.
Have a good day, wherever you are.
Sent to you by Team Vestact.
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