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Market Scorecard
Yesterday the Chinese stock market had its best day since 2015, the Nasdaq closed at a record high, and Amazon topped $3 000 a share. It was a rather big day! During the panic in March, Amazon dropped to a low of $1 626 a share but even before the overall market bottomed out on the 23 March, it had already started to rebound. As countries started to lockdown, more consumer spending started to shift online, and Amazon started to hire a couple hundred thousand more people. Many consumers who were not customers last year have now seen how easy and efficient online shopping can be, and they have become customers for life. Technology companies are now significantly more relevant to society than they were a few months ago, and their share prices reflect this shift.
Yesterday the JSE All-share closed up 0.59%, the S&P 500 closed up 1.59%, and the Nasdaq closed up 2.21%.
Our 10c Worth
One thing, from Paul
A modest number of Vestact clients own Uber shares in New York portfolios. I have liked the prospects for the company for many years, and got very excited when they listed on the New York Stock Exchange in May 2019. I rounded up a few risk tolerant customers and we were ready with our money on listing day. The opening price on day one when we jumped in was $42 per share.
Since then, the stock price performance of Uber has stunk, which is embarrassing. Initially the problem was insider selling. By February 2020 that had run its course and the shares were back at $41, so we were close to breakeven. But Covid-19 was a disaster for ride-sharing companies, because of the lockdowns. Yeah, of course, we all had to stay at home! The stock price fell by half to $21.
Since hard lockdowns ended, ride traffic has picked up a bit because people who can afford to do so would rather use an Uber than take the bus, or crowd into an underground train.
Restaurants were closed for eat-in meals but open for takeaway, so in recent months food delivery has taken off, which is good. Uber Eats has been growing in leaps and bounds.
Today's news is that Uber is acquiring delivery-app operator Postmates, for $2.65 billion in an all-stock takeover. That will help Uber to gain ground against privately-held DoorDash, which is the current market leader in US food delivery. Postmates has a strong market share in Los Angeles and the American Southwest.
The move for Postmates comes on the heels of Uber's failed bid to acquire publicly traded GrubHub, which was scooped up by Europe's Just Eat Takeaway.com for $7.3 billion a few weeks back. With fewer players in the market, margins should improve. Uber's share price is up nicely today, to $32.50. Current shareholders should hang in there.
Here is some more detail on this deal from tech website ArsTechnica: Uber plans to gobble up delivery rival Postmates in $2.6 billion deal.
Byron's Beats
If you are interested in what the future will look like, it is often best to look at what is happening in San Francisco, the innovative hub of our time. I really enjoyed this New Yorker article titled Our Ghost Kitchen Future which talks about multi-purpose trailers that sit in parking lots.
A company called Reef Technology likes to think of themselves as a physical App Store. Their trailers are multi-purpose, mobile units that service the on-demand economy - dark kitchens, mobile restaurants, beer gardens, retail pop-ups, and mini distribution centres for online sales. The units have endless functionality in a digital world.
At this stage, with food delivery soaring, dark kitchens have taken centre stage. In case you forgot what a dark kitchen is, here is a reminder. They are kitchens set up purely for online delivery. No sit down areas, no waiters, no counters and certainly no expensive location. This allows the kitchen to be far more competitive on price than your average restaurant doing online delivery.
The article is a fun read, I suggest you give it a go.
Michael's Musings
Globally we see muted inflation levels thanks to technology making our lives cheaper. Think about how much cheaper data is now compared to 10 or 15 years ago. What about all the devices that are obsolete now that you own a smartphone? How about the cheap entertainment from Netflix. Technology makes life cheaper.
One study forecasts that humanity is only just starting to see the effects of technology. It forecasts that renewable energy costs will continue to plummet, with the implication that our electricity bills each month will also come down. Next, it forecasts that cars will then run on that cheap electricity, meaning that transportation costs plummet too.
For many families, their food budget is a significant expense each month. This study forecasts that lab-grown meat alternatives will also become much cheaper over time, and reach the point where it is so cheap to eat lab-grown produce, that we will no longer eat traditional meats.
As things get cheaper, inflation levels stay low. If this study is correct in what we are about to see an energy, transport and food transformation, it means that interest rates will stay at around zero for at least the next decade. Effectively ending cash as an asset class.
You can read about it here - The case for optimism: By 2030, everything will be so cheap that we'll be able to end poverty.
Bright's Banter
Warren Buffett has decided to spend some of his company's $137 billion cash pile in a $9.7 billion deal to acquire Dominion Energy's natural gas transmission and storage business. Berkshire Hathaway Energy is going to pay about $4 billion in cash and take on $5.7 billion of Dominion's existing debt.
This is going to be a bolt-on acquisition as it will add 12 400km of pipelines and 900 billion cubic feet of storage to Berkshire's existing infrastructure. Buying a natural gas pipeline and storage facilities right now is a contrarian move considering the fact that natural gas futures are at a 25-year low, meaning these assets are being bought at a discount.
This deal also signals that Buffett may be open to do more deals in the near future as the Covid catalysed consolidations begin. This deal is the largest deal that Berkshire has done since 2016 when it acquired Precision Castparts for $37.2 billion.
Linkfest, Lap it Up
Tesla has released a limited edition set of short shorts, with the word S3XY on the back, which are the symbols for its four cars. The shorts are a shot at shortsellers, after the share price has gone from $230 to around $1 320 a share over the last 12 months - Tesla mocks shortsellers with sale of red satin shorts.
A mixture of Brexit, Covid and restructuring has meant that many firms are moving out of their high-end London offices - Banks Are Ditching London Offices and Not Just Because of Covid-19.
Signing off
There is a JOLTs number out of the US this afternoon. The data shows how many employers have open jobs and is an indication of how many unemployed people could be absorbed by the market. The Rand is holding steady around the $/R 17.00 level.
Sent to you by Team Vestact