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"A service where a locked-in contract means that you benefit from better hardware, i.e. the hardware updates and you don't have to pay for it, it is "virtual". As internet speeds have improved, it has become possible to store data anywhere to be accessible at any time. And unfortunately, many businesses just cannot compete with Amazon and their insatiable appetite to spend on their business for future gains."
To market to market to buy a fat pig Stocks in Jozi sank, partly as a result of the Rand being stronger (a weaker Dollar), resources stocks sank nearly a percent and a half, dragging the overall market down just over a percent. There were new 12 month highs for the likes of Capitec and Clicks. In the "winners" column the likes of Intu, Hammerson and Woolies were a lonely bunch, everything else in the ALSI 40 was down. Most heavily were the likes of Aspen, Shoprite and Nedbank, as well as MTN and Old Mutual.
There is not too much on the local corporate front, news is a little slim for the time being. There was news that Steinhoff had raised a whole heap of money for the repayment of debt and for general corporate purposes, what makes this debt issuance unique is that it is a first in Europe. The company managed to raise 800 million Euros, the term is 7.5 years and the annual coupon is an attractive 1.875 percent. I say attractive for two reasons, one, for Steinhoff this is a good market to raise funds in (far lower than here for instance) and secondly the bond issuance was upped above the top end of the range AND oversubscribed. Good for them, good for shareholders to have a cheaper funding option.
Shoprite released an operational update, this is for the 52 weeks to end 2 July this year. The prior financial year actually had 53 weeks, retailers end their financial year on a day of the week, rather than on a day of the month. Turnover increased 8.2 percent (52 compared to the 53 weeks), the second half was a little tougher than the first, understandably so. Their non-ZA business has been hampered by the devaluation of certain currencies, commodity rich countries that have come under pressure, Angola, Nigeria, Zambia and Mozambique (likely to miss another bond payment on the so-called "tuna" bonds). The actual results themselves are likely to be released 22 August, in a little over a month from now. The stock certainly turned tail after the announcement, sinking two and nearly three-quarters of a percent by the close. The stock settled at 200 Rand exactly, a Leopard!
This morning there is an operational update from BHP Billiton, the stock is down a little over a percent in Australia and will no doubt have some bearing on how the day unfolds.
Stocks in New York, New York steadied through the session to close near the highs of the day, Goldman Sachs share price (down 2.6 percent) weighed on the Dow Industrials, which closed up shop off one-quarter of a percent. Goldman had earlier reported results that at face value looked "ok", their worst trading quarter since 2015 weighed on the market. The broader market S&P 500 gained a smidgen, the nerds of NASDAQ added nearly half a percent on the day, with broad based gains amongst the majors. Facebook, Amazon and Alphabet all rose sharply, the stock that was however basking in the limelight was Netflix, up thirteen and a half percent on the day!
Why? They business had reported numbers post the market close Monday evening, the number of subscribers crested 100 million for the first time, in the quarter they managed to add around 5 million subscribers. Revenues grew by over 35 percent, the international streaming is where the growth is coming from. Funny that, we said in the office, there is a world outside of North America. It can be somewhat of a problem, where US based analysts and investors don't seem to recognise the other consumers (other than their 320 odd million).
More importantly, the company suggests that there is likely to be a positive contribution in terms of profits from their international business. Nice. They have to spend like crazy, content is the most important thing to their customers. What is pretty remarkable is that this business is a mere 20 years old and has managed to evolve with the changing times, from a DVD post and return to a streaming service. We will review these results in due course.
JNJ, Johnson & Johnson, also reported results, this time pre the market open. The company reported numbers on the revenue front that was slightly below market consensus, their earnings were marginally above consensus. I guess that this is both a beat and miss, their guidance was above market consensus, sending the stock up one and three-quarters of a percent, marginally away from the record highs achieved last month in late June. Again, we will have a look at this one and have a detailed view.
We recently migrated our server infrastructure to Amazon Web Services(AWS), and I went to collect the physical "old" server from our service provider. I was struck by the emptying cabinets and unplugged machines. There literally were whole server racks that were completely empty. It suddenly struck me that there must have been multiple jobs that were sought after, as little as a decade ago, that are no longer required in an outsourcing environment. A virtual machine, see What is Cloud Computing?.
A service where a locked-in contract means that you benefit from better hardware, i.e. the hardware updates and you don't have to pay for it, it is "virtual". As internet speeds have improved, it has become possible to store data anywhere to be accessible at any time. And unfortunately, many businesses just cannot compete with Amazon and their insatiable appetite to spend on their business for future gains. Unfortunately for them .... fortunately for Amazon and their happy users, and their shareholders. Stay long Amazon. Cloud computing in the current form (Amazon, Google and Microsoft) may be a little over ten years old, it certainly continue to gain traction.
Tomorrow will mark the 48th anniversary of the moon landing. Some of you will remember the event, others were not born yet and only read about it in the history books, how a machine with the computing power of modern toasters managed to travel 384 thousand kilometres there and back, and put someone down (and get them back). Whilst 48 years seems like a very long time, humanity has evolved to a level never seen.
Household education levels have increased, human innovation has gotten better and better, global poverty levels have fallen, inter country trade has increased (to the displeasure of some), basic services and goods have become cheaper, there are more democracies, there is no more cold war, the list certainly goes on. Your grandparents used to talk about their Sunday Best, meaning that one set of clothes that made them look great for a single day a week. Nowadays we have fast fashion, the cheap(er) clothes are basically redundant (from a fashion point of view) in a season.
I am not suggesting that it is sunshine and lollipops, currently South Africa is in a period unprecedented in our young democracy. Globally, the world has taken many great steps forward though, as have we. There are always naysayers, there are always those who point to doom and gloom, there are always those telling you that x or y is about to blow the boat out of the water. Equity markets go up and down as a function of what people are willing to pay for that specific stock (and by extension the collective) on that specific day. Be more like the selector that picks a bunch and sticks with it forever, be less like the English cricket team (don't change a winning side) who now must throw everyone out because of 1 loss. Sigh .....
10 years ago there was no thought of AWS, or cloud computing. There were no smartphones (does Blackberry count?), no 4G/LTE, no tablet computing (at scale), the list really goes on and on. In ten years time, who knows what may transpire, what jobs thought of as having great career prospects that are no longer in demand. It really does pay to pay attention. At the same, one can be forgiven for being reactive, one can be forgiven for having been trying to analyse the next few years heavily. Never be spooked and never be caught up in the headlines. And most importantly, keep on keeping on.
Linkfest, lap it up!
The creators of self driving cars have made it very difficult to hack their systems and the cars, which makes sense. Researchers are now discovering that you don't need to hack a self-driving car to mess with it, you just need to alter the world around it slightly to cause havoc with their systems - Instead of hacking self-driving cars, researchers are trying to hack the world they see.
The war for India's e-commerce space is just getting started, the two main contenders are Flipkart and Amazon - India's Flipkart lifts bid for rival Snapdeal to up to $950 million: sources. Remember that Naspers is one of the main shareholders in Flipkart.
The value of sport teams has been soaring thanks to growing populations and the value linked to entertainment. Live sport has a strong moat over other forms of entertainment, given that you need to watch sport live - The World's Most Valuable Sports Teams 2017. Here is a look at the Forbes valuation of the Cowboys in 2007 when the global economy was still going strong - #1 Dallas Cowboys, $1.5 bil.
You will find more statistics at Statista
Home again, home again, jiggety-jog. Stocks across Asia are mostly higher, Tencent is chugging along, up over three percent as a result of Facebook's WhatsApp being dealt a blow in China (WhatsApp messages are being blocked in China). That move alone in the Tencent share price should see momentum for Naspers today, buying the overall market to levels not seen since May this year. That would make for a comfortable and positive change, right?
Sent to you by Sasha, Byron and Michael on behalf of team Vestact.