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Market Scorecard
Markets globally are bumbling along waiting for the next big piece of news to give direction. For the US market the focus currently is on Fed minutes to be released tonight; what has been said about a possible drop in rates? Then there is also the ever-present threat to a change in trade war rhetoric. Moving closer to home, eyes are now on the cabinet to be announced early next week. The elections where a positive but that will mean nothing if the correct people are not in place to implement that change that is needed.
Yesterday the JSE All-share closed down 0.17%, the S&P 500 closed up 0.85%, and the Nasdaq closed up 1.08%.
Our 10c Worth
One thing, from Paul
Apple is our second most widely held stock in Vestact portfolios in New York, so it's worth checking in on it often. It's an interesting investment, because it's one of the world's most valuable companies by market capitalisation, and it is also absurdly cheap.
At its current share price of $186.60 it trades on a laughably low 15.7 times historic earnings, below the market average (as I discussed yesterday in this newsletter, the current number of the S&P 500 is around 18 times). The latest negative rumour going around is that the Chinese government might ban iPhone sales in China, to retaliate against Trump's ban on Huawei. I doubt that will happen.
Here are the top reasons why Apple is a strong buy right now: Firstly, the iPhone is not dead, it's just in the middle of a replacement cycle. In other words, the iPhone Xs looks too much like the iPhone X, but the next one, the iPhone 11 (I guess?) will see a sales surge. More than 90% of Apple's iPhone customers re-purchase an iPhone. iPhone sales are driven by seasonality and product lifespans, not competition.
Horace Dediu at Asymco points out that the iPhone is the most successful product of all time. Over 1.6 billion have been sold. Including the iOS products it spun off, the total is over 2.2 billion. Of those 2.2 billion sold, 1.5 billion are still in use. There are about 1 billion iPhone users. Economically speaking, iPhone sales have exceeded one trillion dollars.
Secondly, Apple is all about services now. Again, Dediu points out that in 2006, the year before the iPhone launched, Apple customers spent $3.3 billion on iTunes, Software and Services. By 2018 the spending rate was $80.5 billion per year. That number will be over $100 billion soon. What Apple is selling is a phone, plus all the apps on it, make it such a wonderful life accessory.
One final point about valuation, that I have made here before, but is worth pointing out again: Apple has done lots and lots of share buybacks. In recent times the number of shares in issue has declined by a third. In other words, all the juicy profits to come are going to be shared amongst a much reduced club of loyal capital providers. I like it, a lot!
Michael's Musings
The official definition of a kilogram shifted from having a rock sitting in Paris being the reference point to an equation in quantum mechanics. The problem with having a rock as the reference point is that it changes weight ever so slightly as time goes by. It has lost around 50 micrograms since 1889. That is the weight of an eyelash, but still has massive ripple effects for places that need exact measurements.
In this article, it also talks about how the official measurement of a meter changed to being linked to the speed of light. Taking something that is constant in nature is a brilliant idea. All we have to do now is get the US to drop the imperial system and adopt the metric system!
You can read the article here: The new kilogram just debuted. It's a massive achievement.
Bright's Banter
The 2019 edition of the Kantar Brand Footprint Report that ranks FMCGs is out. Believe it or not, Coca Cola is still the most chosen FMCG brand in the world for the seventh year straight.
The report measures how often consumers choose an item from a certain brand. Coca Cola products were picked from the shelves 5.97 billion times last year, reaching more than 40% of households around the world.
- "17 global brands were chosen from the shelves over one billion times in 2018 and are part of a 'billionaire club' along with 14 local brands from China and India. Colgate is the second most chosen brand globally and is the only brand picked by more than half of all global households - with 60,5% penetration globally."
The infographic below shows the world's most popular consumer brands based on consumer reach points, a metric that measures how many households around the world are buying a brand and how often, providing a good representation of global shopper choice.
You will find more infographics at Statista
Linkfest, Lap it Up
Every bit helps. Technology is helping to make the planet a better place - Scientists Say They've Cooked Up an Endlessly Recyclable Plastic
What did astronauts do before streaming to keep themselves busy during downtime? (Even Astronauts Binge-Watch TV While in Space)
Vestact Out and About
Signing off
The JSE All-share is lower this morning. There was a trading update from Sasol this morning saying that they forecast their Lake Charles investment to now costs $1 billion more than expected, Sasol is down 11% on the news. There is South African CPI out at 10:00 this morning, with the expectation of inflation at 4.5%; right in the middle of the SARB's target range. There is also CPI from the UK today and then the latest meeting minutes from the US Fed tonight.
Sent to you by Team Vestact.