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Market Scorecard
Within the JSE Top 40 index, 22 shares were down and 18 shares were up. Would you call that a mostly balanced day on the market? Thanks to Naspers being up 2.4%, the overall index finished higher on the day. Globally, markets didn't take much notice of the China GDP figure, even though financial journalists keep saying 'China has the worst growth rate in 27 years'. Sounds dire, which gets clicks and reads. How about a headline of 'China growth miracle has seen growth of over 6% for 27 years'? The second headline probably gets fewer clicks than the first, so it is not used.
Yesterday the JSE All-share closed up 0.45%, the S&P 500 closed up 0.02%, and the Nasdaq closed up 0.17%.
Our 10c Worth
One thing, from Paul
It's earnings season in America again, how exciting! This happens quarterly, and gives us an update on the revenue, earnings per share and forward guidance (estimate of next year's numbers) for all of our current and potential portfolio holdings.
We invest almost exclusively in large cap US stocks, and they are all closely covered by the financial community, so there are consensus numbers of what is expected. As you can imagine, weak revenues, an earnings miss and a guidance downgrade is the worst outcome, and typically results in a sharp share price selloff. We saw one of those a few days ago from Illumina. Note that even if one quarterly result announcement is disappointing, it will probably not change our positive view of a company. We play the long game here.
The first prize is a revenue and earnings beat, and a guidance raise. That is usually met by a solid jump in the stock price. Today we are expecting earnings news from JP Morgan with a consensus earnings forecast of $2.50 per share. Johnson & Johnson will also hit the wires at around the same time, with expected earnings of $2.42.
You can check here to see which companies are reporting when, on the Nasdaq Earnings Calendar.
The quarterly result that I am most excited about is Apple on 30 July, after the market close. The consensus earnings per share forecast is $2.12. I expect a sold gain over that though, and not because iPhone sales are expected to be very buoyant or because service revenues are growing all that fast. My main hope is that Apple's aggressive share buy backs since the start of the year will reduce the number of shares in issue, juicing earnings and the forward guidance.
According to data from S&P Global, Apple spent a new record $23.8 billion on buybacks in Q1, more than doubling its spend from Q4 in 2018. I suspect that they may have gone further in Q2. We shall see.
Byron's Beats
If you think South Africans are lying down, waiting for the economy to turn, think again. We certainly are a resilient bunch.
This very cool article goes through 25 of the Most Successful Business Ideas in South Africa. Remember, capitalism fixes problems. And our economy has many of those. The main trend of these ideas is to fill those gaps.
The businesses range from supplying an online platform for spaza shops to buy in bulk, education, space travel, recruitment, software, bringing wifi to low income households, renewable energy and cashless events.
These amazing businesses certainly make me feel better about our economy and South Africa in general. There is so much talent out there. We should support them when we can and hope the environment allows them to flourish.
Michael's Musings
The tourism industry in South Africa has the potential to boost GDP growth. A branch of tourism that we should explore further is medical tourism, where people travel to a different country to have medical procedures done.
Apart from our splendid natural beauty and good weather, we also have a world-class medical sector. This article has a look at how this form of tourism is on the rise - The rise of medical tourism.
- "In 2017, an estimated 1.4m Americans traveled internationally for medical care, with an estimated 14-16m medical tourists worldwide, a number expected to grow by 25% per year."
Bright's Banter
Yesterday I came across an article that was describing the challenges of doing business in this world of trade wars. Eclat Textile, a sportswear manufacturer and supplier to Nike and Lululemon had to move out of China and bulk up operations in Vietnam due to conditions that weren't ideal for manufacturing.
The bad news here is that Eclat had to find a new home once again in the name of diversification as Vietnam now contributes over 50% of their manufacturing capabilities, giving the company a lot of concentrated risk. This is all due to heightened and very disruptive trade tensions between the US and China!
This company has pivoted before so it shouldn't be hard to find new manufacturing facilities in countries like Cambodia, Indonesia, India, Taiwan, Bangladesh etc. Let's hope that Trump doesn't mess with the import duties from any of those countries or eventually all our favourite garments could cost us consumers much more going forward.
You can read the whole article here which also includes Eclat's Plan B and where the company has invested further in order diversify its risks.
Linkfest, Lap it Up
For people working from home sometimes 'getting dressed for work' can improve productivity. Being dressed up also helped the blogger swear less - I dressed up every day for a month to see if I'd feel smarter.
It is great to see innovation at work. Improving efficiencies and lower costs is good for everyone - These easy-to-build shelters are helping cities quickly provide cover to the homeless.
Vestact Out and About
Signing off
US earnings season continues with JP Morgan and Johnson and Johnson reporting today. Yesterday we incorrectly said J&J were reporting on Monday, what we had instead was the company reporting a 5% increase in their dividend. There is EU and US trade data out today, and then US retail sales figures. The JSE All-share is higher this morning.
Sent to you by Team Vestact.