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Market Scorecard
Chinese markets are flying this morning, thanks to Chinese authorities saying they will do what needs to be done to support their private sector. There might even be tax cuts on the cards to help offset the negative impacts of their trade war with the US. Of direct importance to us is that Tencent is up 4% today, and has been climbing every time I refresh my page.
Then on Friday afternoon, Aspen announced that Stephen Saad bought R94 million worth of Aspen shares and the CFO, Gus Attridge bought R15.6 million. To me, this is a clear sign that senior management thinks the shares have been oversold, and that they are positive about the future of Aspen.
The comment was made, Stephen already owns 12% of the shares what is another R94 million to him? There are only very few people on this planet who don't notice R94 million; I don't think Stephen is one of them. Remember that the bulk of his wealth is tied up in stock, it is not in cash. So he would definitely notice his cash reserves dropping by R94 million. I estimate that he received R165 million in the recent Aspen dividend, then he paid around R33 million to the tax man.
Saad and Attridge are putting more of their own money into the stock. They are not fortune tellers, the share price might still drop further. At least we know management think the share price is offering value.
On Friday the JSE All-share closed down 0.08%, the S&P 500 closed down 0.04%, and the Nasdaq closed down 0.48%.
Company Corner
Byron's Beats
As you know, we like the investment theme of travel. We are seeing a change where people are far more interested in investing in experiences and memories than materials and objects. Thanks to the internet, social media and easy access, more and more curious people are travelling. Unfortunately, that also means that many of the popular destinations around the world have become crowded and hectic. In today's world, we are seeing a trend where many of these travellers are seeking solitude and true wilderness, which is few and far between.
I recently got back from a four day stay in the Okavango Delta with Wilderness Safaris. This company, one that I have mentioned before, is a great example of a profit-seeking entity that has created so many positive side effects. Their behind the scenes operation in a small dusty town in Botswana called Maun, was truly a sight to see.
In the middle of nowhere was an airport bustling with foreign tourists all ready to experience one of the last truly wild places left on the planet. You could see hundreds of locally employed people, ushering the tourists and their bags from the airport and into their fleet of small planes, that fly you into the camps of the Delta. Some of the pilots of the bush planes were also locals, which was nice to see. These are quality jobs that now sustain this small desert town. Tourism is, of course, Botswana's second biggest industry after diamonds.
The camp we stayed at employed over 60 people, who all grew up in the area. They were full of smiles, proud and professional. The company trains and employs the locals, educating them about conservation and providing them with skills they will keep for life. The concession used to be a hunting area but because of the recent law changes in Botswana, the only shooting done now is with cameras. And the game in the area is doing incredibly well. We saw wild dog, cheetah and lion within 24 hours. The animals are clearly thriving under the new protection of Wilderness who are directly funded by the tourists.
This again is an investment theme I like to keep an eye on. Companies that make the world a better place are often supported by governments and private 'do gooders' a like. I have written about this before when Wilderness picked up a big private investment from the Rise Fund.
The idea of doing good is great for business in general. Tourists love to know that the money they spend is going to a good cause. To link this with exclusive game viewing and a luxury stay is their winning combination. When at the camp, one of the conservation managers was giving a talk about the area to a group of 12 American tourists and they were fascinated. This again gives me hope that Africa, for all its problems, has something the rest of the world wants to experience time and time again. Many of those staying were repeat guests.
As I am sure you can tell, I am passionate about wildlife. But I am also passionate about capitalism and all the problems it solves. Companies like Wilderness combined these 2 passions of mine (hence the blatant promotion). And hey, as South Africans you can go there at good discounts! Many people don't know that. Now you do, and a good portion of your money will go back to conservation. It's a win win. Check it out! Wilderness Safaris
Our 10c Worth
One thing, from Paul
Facebook stock has been quite weak lately. If you look at the two year chart below, you can see that it peaks at $210 a share in July 2018, and has slipped steadily since then, to $154 at the close last Friday. What gives?
Well, the overall market has been softer in recent weeks, but Facebook has also had company specific problems, mostly relating to data leaks, privacy concerns and regulatory challenges. Perhaps more importantly, some fear that its user engagement is slipping, and advertisers are deserting the platform? The pundits usually forget that the Facebook group has multiple platforms, and the secondary ones like Instagram and WhatsApp are booming.
The Goldman Sachs analyst who covers Facebook is Heather Bellini, and she has developed a system of "channel checks" with major advertisers, in order to predict revenues. The following text is a shortened version of a report she published this morning.
- Our checks point to a strong quarter - some advertisers accelerated spending while others slowed down. Despite the privacy and GDPR concerns, we continue to see strength in Facebook and Instagram spending .. both emerging and legacy companies are increasing their direct-to-consumer advertising spend, and Instagram Stories are gaining share as they are seeing better conversion and delivery rates. Multiple partners cited the strength in Instagram user growth as a key driver for incremental inventory, offsetting the deceleration partners are seeing in the core Facebook app.
Our European checks also underscored strong spending on both Facebook and Google, though one check noted user growth beginning to slow in the UK, similar to what has been seen in the US/Canada. Another partner saw no impact in the quarter from GDPR or engagement issues in Europe, and expects continued strength across EMEA.
Facebook results are out on October 30th, although we will probably have to wait until 2019 to see what is going on, especially with revenues over the key festive season period, when advertisers really get stuck in. For now, we hold, as usual.
Michael's Musings
Over the last few years there has been a growing movement, encouraging people to move away from meat to help the environment. Even Bloomberg is writing about it - A Radical Plan to Slow Climate Change: Eat Less Meat.
The graph above shows that to slow climate change, forget about driving a Tesla, instead change that burger for a veggie burger.
Bright's Banter
Paul was very happy to hear that Uber's plans of going public are finally coming to life. The ride-hailing company is said to be initiating plans to go public next year, and the Wall Street Journal reportedly think Uber could be worth $120 billion which is almost twice it's most recent funding round valuation of $72 billion. A valuation of $120 billion implies that Uber will be larger than General Motors, Fiat-Chrysler, and Ford combined.
According to the Wall Street Journal, Uber's valuation implies that the company is doing exceptionally well, notwithstanding all the controversy surrounding the company.
Uber's not so new CEO Dara Khosrowshahi said the IPO is being planned for the latter half of 2019, but speculators think this could happen as quickly as the second quarter of next year. Like many companies that we invest in, Uber could be a potential addition for the long-term but only at the correct price.
Linkfest, Lap it Up
Facebook has been making moves to get more eyeballs onto their platform through having sport and entertainment streaming. Here is their latest addition - MTV's Real World will be revived with interactivity on Facebook Watch
By making sure tickets don't sell out, scalpers can't make money reselling at a premium, which means scalpers don't buy tickets in the first place - Taylor Swift is Smart Enough to Not Let Her Shows Sell Out
Vestact Out and About
Signing off
Following in China's footsteps, our JSE All-share is higher this morning. It is a big week ahead, with our Medium Term budget speech on Wednesday. What will our budget deficit be? Where will funding be cut to support our new stimulus program? What is our growth forecast for the next 3-years? We also have Visa, Alphabet, and Stryker numbers out in the coming days. Stay tuned for all the info!
Sent to you by Team Vestact