Market scorecard
US markets were mostly higher yesterday. The Nasdaq 100 added 0.4% to extend this year's surge to 31%. Nvidia traded high enough to give the company a $1 trillion market cap, becoming the 9th company and 1st chip creator in the world to achieve this rare valuation. Energy stocks were the worst-performing sector in the S&P 500 again as oil experienced its biggest decline in four weeks due to softer demand from China.
In company news, rival chip makers Intel and Qualcomm also increased 3.4% and 5.1%, respectively. Netflix and Tesla, the other two big tech stocks that have dominated the market in recent years, each added more than 3% too. Elsewhere, Tuesday's laggards included Target and AB InBev, which shed 3.7% and 4.7%, respectively.
In short, the JSE All-share was down 0.88%, the S&P 500 was unchanged, and the Nasdaq was 0.32% higher.
Our 10c worth
One thing, from Paul
I've always been a fan of technology because I studied engineering at university. I automatically assume that new electronic devices and online tools are good for humanity.
As a result, Vestact-recommended portfolios have been overweight technology stocks from the start. That was a winning formula for a decade and a half up to the end of 2021, but it counted against us in 2022. The US Federal Reserve hiked rates from zero to 5% last year, so stocks with high growth expectations were punished.
We did not change course during that tough year, because we believed that the spike in US inflation would prove to be temporary. We are still waiting, still believing.
More importantly, we still feel that our sectoral focus is appropriate, and own most of the leading large-cap tech stocks. Thanks to companies like Nvidia, Apple and Microsoft, our portfolios have enjoyed a strong recovery in 2023. We are up about 31% year-to-date, versus the S&P 500 which is only up 9.5%.
Byron's beats
It is tough doing business in SA at the moment, there is no doubt about it. Rising costs, loadshedding, a fluctuating Rand and a lack of skilled workers are just a few challenges faced by local companies. But these shortcomings also create many opportunities. The best businesses solve problems and we certainly have loads of those.
I have noticed amongst our client base and my peers that smaller, nimbler businesses have been doing very well lately. Of course, not all of them, but the general trend has been positive. The more adaptable you are, the more you can adjust and then thrive in the changing environment.
Sadly big business in SA is a different story. These slow-moving juggernauts have been really struggling against the falling tide. I guess the bigger you are, the harder it is to avoid the general flow of the water. Tiger Brands and Pepkor both fell horribly yesterday after releasing numbers.
That is why we say, take risks, start a business here or reinvest in your existing business. But once that starts to make hard-earned profits, invest it offshore, more specifically with Vestact.
Michael's musings
The best way to know what is happening in the economy is to read company results. Two very 'SA Inc' companies reported terrible numbers yesterday. Tiger Brands shares closed down 17% and Pepkor Holding shares were down 11%. Their results highlighted that South African consumers are in more pain than expected. Rubbing salt into the wound, both companies spent (burnt) over R70 million each to run generators.
In Tiger Brands' case, the company raised prices 16%, to try to recoup internal inflation of 17%. Even though they cut their profit margins, they still sold fewer items.
Pep is seeing customers shift their spending to shopping malls with generators, even if it required longer travel time and higher transport costs. Spending more on transport meant less available for shopping.
Any asset exposed to South Africa is going to struggle, including the local property market. These periods highlight the need to have international diversification in your portfolio. It is hard out there, luckily South African's are bred tough.
Bright's banter
Porsche AG, the luxury carmaker, had a strong first quarter, reporting an operating profit of EUR1.84 billion and revenue of EUR10.1 billion, up 25.5% year-on-year. A significant increase from when the industry faced supply chain disruptions.
Porsche's strong financial performance is good news for the automotive industry as carmakers are still benefiting from pent-up demand after supply chain disruptions in the previous year.
Tesla's decision to reduce prices on its electric vehicle lineup has created a drag on mid-segment electric models, increasing the pressure on luxury carmakers like Porsche. Investors are closely watching whether Porsche can raise prices more to offset higher input costs.
Porsche is targeting upmarket models to compete with Ferrari. The German company is planning an all-electric high-performance SUV above its battery Cayenne, which is expected to be released around 2026.
In conclusion, Porsche's financial performance in the first quarter is impressive and a positive sign for the automotive industry. However, uncertainties remain about global demand, and pressure on carmakers continues. I still have my eye on that 911.
Linkfest, lap it up
Ever wondered what people in finance do? Here is what Hollywood thinks happens in finance, some of it is accurate - The 11 best finance films.
Science keeps pushing humanity forward. Doctors are finding ways to fix spinal cord injuries - Brain implants help paralysed man to walk again.
Signing off
Asian markets are mostly down as China's economic mire reverberated beyond its shores. Benchmarks in Hong Kong, Japan, mainland China and South Korea dropped, leading the MSCI Asia-Pacific to its lowest close in more than two months. The catalyst was China's softest reading in its purchasing managers' index since December.
After the market closes tonight, CrowdStrike will release results. Analysts are expecting strong growth for the cybersecurity company. US equity futures contracts are lower in early trade. The Rand is bumbling around R19.76 to the US Dollar.
Stay warm as temperatures drop across the country. There is snow on the mountains as they always say when it gets cold on the highveld.
Sent to you by Team Vestact.
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