Market scorecard
Yesterday, US markets hardly budged after regulators seized ailing lender First Republic Bank and auctioned off the bulk of its operations to JP Morgan. Naturally, regional banks were among the day's worst performers. Oil companies also did badly, but stocks in the pharmaceutical sector rose.
In company news, Norwegian Cruise Lines steamed 8.9% higher after it said first-quarter revenue tripled and forward bookings rose to a record level. The Miami-based corporation says it expects the current period to be its first profitable one since the pandemic. Elsewhere, our favourite medical technology company Stryker was down 4.6% in after-hours trade despite reporting really good revenues and profits and raising forward guidance. Maybe the management team said something off-colour on the earnings call?
On Friday, the JSE All-share closed up 0.12%, and yesterday the S&P 500 fell 0.04%, and the Nasdaq was only 0.11% lower.
One thing, from Paul
Of the large-cap tech stocks in Vestact's portfolio, Amazon has been the worst performer since the market highs at the end of 2021.
Whereas Apple, Microsoft and Nvidia are trading back near their all-time highs, Amazon is still down 44% from its peak. That's awful, especially for the people that bought them at the top!
The first quarter results out from Amazon last week were very good. They are on track to rack up half a trillion dollars in annual revenue. Operating income jumped 30% from a year earlier to $4.8 billion, smashing the $3.1 billion expected by analysts.
The share price has softened in recent days though, probably because their profitable cloud business AWS is growing at a reduced rate. In addition, the retailing operation has lost money for the past six quarters. We believe that the management team is about to turn that around, after many steps to right-size their workforce and distribution centre set-up.
The highlight of the results was the excellent growth of the Amazon Ads business. That will bring in $40 billion of revenue and generate at least $25 billion of free cash flow in 2023. They are building tools for third-party resellers to increase sales on the Amazon platform, and other systems for companies that don't even sell on Amazon, like car and health insurers.
We are very happy to accumulate more Amazon shares at this price. Under CEO Andy Jassy, they are set to prosper. We expect the remaining two-thirds of this decade to suit them very well.
Byron's beats
The majority of Vestact clients have investments in American stocks held in US Dollars. Besides owning global companies, there is the benefit of holding assets in the dominant global currency.
However, every now and then articles do the rounds about the demise of the US Dollar. The most recent flurry of anti-USD articles focuses on the idea that a few developing nations have inked deals to trade in their own currencies. They hope to avoid converting their own currencies into USD first and then back into the trading partner's currency. But does that mean the Dollar is finished? Far from it. I have seen these stories come and go for years and they are still rubbish.
The USD and US treasuries are safe-haven assets. We saw this last year when things got rough in global markets. It will remain that way until there is a better alternative.
Tim Cohen explores this topic in his usual entertaining way, including a historical review. If you are concerned about the US Dollar, please give this a read.
Michael's musings
Last week Biden officially entered the 2024 US presidential race. Biden and Trump are now the current front runners to contest the election. What!? How is it even possible that either of these two men could be the 'leader of the free world' again? In my opinion, no one over 70 should be allowed to run for the highest office in the land. There's a lower age limit of 35, and there should be one at the top end too.
Technology has been a central theme of the last two US elections, and will be again next year. In 2016, the world came to fully appreciate the power of social media to drive a political agenda when Cambridge Analytica used Facebook to drum up votes for Trump based on a user's psychological profile. In 2020, false allegations of voting machine fraud resulted in a distrust of technology.
Due to technological advancements, it is now possible to create very realistic fake videos through AI. The first of many videos, from both sides, has been launched - Republicans launch eerie AI-generated attack ad on Biden. In the video's top left corner, it notes that it was created by AI technology.
I expect things to get spicy in South Africa too as the ANC faces the real possibility of dropping below 50% in our next national election. 2024 will be a big year in politics.
Bright's banter
According to the IFPI's latest Global Music Report, industry revenues grew by 9% in 2022, thanks to continuing growth in streaming subscriptions. This marked the eighth consecutive year of growth, after declining revenues for 15 years.
Streaming accounted for 67% of global recorded music revenues in 2022, as the number of users of paid streaming subscriptions like Spotify and Apple Music continued to soar.
Although growth rates were not as high as in previous years, 66 million people joined the streaming bandwagon in 2022, bringing the total number of global users to 589 million.
Over the past decade, the number of users of paid music subscriptions has grown relentlessly, starting at 8 million in 2010, passing 100 million in 2016, and growing almost five-fold again over the next five years.
You will find more infographics at Statista
Linkfest, lap it up
In 1970, South Africa set the record for the most gold mined by a country in a year. Now we only manage 11% of that amount - 200 years of global gold production by country.
Preserving genetic diversity is hard. Conservationists focus on breeding cycles - How to save an endangered species.
Signing off
Asian markets are up this morning. Benchmarks in Hong Kong, Japan, and South Korea rose, sending the MSCI Asia-Pacific Index higher. Chinese markets are shut today and will only reopen on Thursday after a five-day Golden Week holiday. The good news is that in this period we're seeing strong travel, shopping and casino spending.
This is another big week of earnings in the US, with results out from Starbucks tonight and Apple on Thursday. More importantly, the Fed's next interest rate setting meeting is tomorrow, with the market expecting another 25 basis points hike.
US equity futures are flat this morning. The Rand is trading at around R18.40 against the US Dollar.
Have a good week. It feels like a Monday today, but it's actually Tuesday.
Keep winning!
Sent to you by Team Vestact.
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