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Market scorecard
US markets moved slightly higher yesterday, resuming their rally after Monday's brief pause. Stocks in the materials and real estate sectors advanced. Some of the biggest winners in the S&P 500 were UPS (+4.9%), Pfizer (+3.5%), Starbucks (+3.4%), and Nike (+2.9%). The biggest losers were Adobe (-3.7%), AMD (-3.65%), and Charter Communications (-4.4%).
In company news, cybersecurity firm Palantir popped 31% after reporting record earnings. Elsewhere, Eli Lilly delivered blockbuster quarterly numbers and initially moved 5.1% higher, but then gave up those gains to end flat. In Japan, Toyota continued yesterday's gains after the world's number 1 carmaker boosted its profit guidance for 2024.
At the close, the JSE All-share clocked a 0.71% gain, the S&P 500 rose by 0.23%, and the Nasdaq was a tiny 0.07% higher.
Our 10c worth
Michael's musings
It's been 20 years since Mark Zuckerberg founded Facebook in a Harvard dorm room. The holding company stock, now called Meta, also happened to rocket 20% higher after it posted stellar results last week. They were truly impressive numbers.
Revenue grew 25% for the quarter, and thanks to trimming a bloated workforce by a fifth, costs dropped by 8%. The result was an eye-popping operating profit margin of 41%, up from 'only' 20% the previous year. All the extra money meant that Meta's net profit increased by 201%. If that wasn't enough to excite shareholders, the company announced it would finally start paying a dividend! To top things off, the board authorised an extra $50 billion in share buybacks.
To generate annual revenue of $135 billion, Meta's family of apps had 4 billion monthly users, 3.2 billion of whom log in daily. That means 1 in 2 people on earth use one of Meta's products on a monthly basis. Simply amazing.
On a valuation basis, Meta and Google (another advertising business) both trade on forward PEs of about 22, which is relatively cheap for high-margin, fast-growing tech companies. Note that Apple, Microsoft, and Amazon are all much more expensive. The market applies a discount because it views advertisers as fickle, which they are. At the start of 2023, advertising revenue was under pressure because people were anticipating a global recession by the end of the year, that never happened.
It is great to see such strong numbers from one of our holdings, especially given how tough the last few years have been as a Meta shareholder. Well done if you rode the wave.
One thing, from Paul
Who are the richest people that ever lived? Inflation over centuries makes that hard to determine. A recent study by economic historians identified a new candidate, called Alain le Roux. Guido Alfani from Bocconi University in Milan just wrote a book called As Gods Among Men: A History of the Rich in the West.
Le Roux joined William of Normandy (his second cousin) in the invasion of what is now England, to fight the Saxons, in September of 1066. He was only the second son of a Breton count, but he distinguished himself as a commander at the Battle of Hastings.
After that victory, William crowned himself king, confiscated lands from the Saxon nobility, and doled out their vast estates to his pals. Cambridgeshire and parts of Yorkshire were given to Le Roux (who took on the name Alan Rufus).
The combined revenues from Le Roux's landholdings were more than 7% of England's entire national income at the time. In 2023 dollars, he'd be worth $242 billion today.
Here's the part of the story that I like the most. Nearly a thousand years after the Norman Conquest, the titled fortunes acquired in that campaign have long since been frittered away. Le Roux's lordship passed to his brother Stephen, and, 900-odd years later, to someone called Allan Le Roux, a South African with addresses in Paris and London.
Allan Le Roux is president of Premier Gold Investments, an asset management company that operates "by invitation only basis", frankly, looks a little sketchy.
Byron's beats
It's interesting to compare YouTube's revenue from advertising to Netflix's revenue from subscriber premiums. Take a look at the image below. In the latest numbers, YouTube ads brought in $9.2 billion and Netflix had revenues of $.8.8 billion. Very similar.
Netflix currently has a market cap of $243 billion. Bearing in mind that this comparison excludes YouTube's premium subscriber inflows, you could easily assume that if YouTube was separately listed, it would be a bigger business than Netflix.
I would say the $1.65 billion that Google paid for YouTube in 2006 was money well spent.
Bright's banter
In recent months, Adam Neumann has been actively pursuing the buyback of WeWork, the failed company he co-founded. According to reports from the NYTimes' DealBook, Neumann who has a new real estate startup called Flow, has partnered with Dan Loeb's Third Point hedge fund. The two of them have been engaged in discussions with WeWork to acquire the company out of bankruptcy since December.
Once valued at an impressive $47 billion, WeWork filed for bankruptcy in November 2023. Flow has reportedly secured $350 million from VC firm Andreessen Horowitz.
This isn't the first attempt by Neumann to reclaim his company since his departure following a failed IPO in 2019. In October 2022, his bid to arrange financing of approximately $1 billion was rebuffed by then-CEO Sandeep Mathrani.
Linkfest, lap it up
If you live in Jozi, you need an SUV to overcome our shocking roads. You don't need one in Paris though, especially given the narrow roads in the old city - Triple parking charges for cheese-eating SUV drivers.
This school banned smartphones and face-to-face interactions improved. Only "dumb" phones allowed - Teachers loved it (go figure).
Signing off
Asian markets are mostly up this morning, pushing the MSCI Asia Pacific Index to its highest in over a month. Benchmarks rose in India, mainland China, and South Korea while Hong Kong and Japan were muted thanks to a mixed bag of earnings. Beijing's forceful efforts to stabilise the markets may be working for now but it's probably not sustainable.
US equity futures are marginally higher in pre-market trading. Alibaba, Disney, Uber, Arm Holdings, and Roblox have earnings out today.
The Rand is trading around R18.83 to the US Dollar. Good luck to Bafana Bafana this evening!
Sent to you by Team Vestact.