Iran says Hormuz reopening depends on U.S. meeting its conditions
Market Scorecard
Welcome back! Social media is calling this year 2020 2.0; basically a reset of 2020. The JSE All-share managed to eke out a small gain for the year, the index closed up 4% for 2020. Inflation is only at 3.2% at the moment, meaning your money grew by 0.8% in real terms. At least it is a gain? The JSE has been a tough place to invest over the last few years. The poor returns effectively started with Nene-Gate at the end of 2015, since then local stocks have limped from year to year.
Turning to the US, their market was on fire, lead by technology stocks. The S&P 500 and Nasdaq were up 15.4% and 43.2% respectively. Wow! Some of the major movers were Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT), up 82%, 73% and 43% respectively. It wasn't all plain sailing though - the energy sector was down 33%. The market is telling you where it thinks future profits will come from.
With interest rates at very low levels, it means investors need to pay even more attention to future profits. Investors are mostly concerned with the next two or three years of profits in a high interest rate environment because future profits when discounted back to today are not worth much. However, in a low interest rate environment, future profits discounted back to today are worth a lot more. The outworking is that money will flow into future orientated companies and flow out of legacy sectors.
On Friday the JSE All-share closed up 0.76%, the S&P 500 closed up 0.55%, and the Nasdaq closed up 1.03%.
Michael's Musings
So where to for 2021? The main focus will be on the containment of Covid and the pace of vaccination distribution. Different markets and economies will probably recover at different speeds, based on their government's organisational ability to procure and then distribute vaccines. We have already seen some nations lock in more than enough vaccines for their population, where other nations don't have any.
Another theme will probably be technology stocks and regulation. Will governments take the decision that certain companies are too big and have too much influence or will they decide to allow the market to decide which company deserves to be the alpha? Lastly, how will Biden's agenda impact global politics and trade? Biden is more of a globalist than Trump was, meaning that global companies should do better. All Vestact holdings are multinational companies, so they should have some tailwind from reductions in trade barriers.
Trying to forecast what the market will do in 2021 is impossible though. When looking back, most major market moving events are unknowable. Last year this time, a global pandemic was not on anyone's radar. Further still, if someone had forecast a pandemic, they probably assumed massive market drawdowns, not a market surge. Over the long run, humanity will continue to improve and get more efficient. By extension, the stock market will always have a bias to go higher.
Byron's Beats
Every year Wall Street Legend Byron Wien writes a list called the top 10 surprises for the year. I really enjoy his thinking, maybe because he is optimistic about the future. That is a nice breath of fresh air for an 89 year old man. If you don't know who Byron Wien is, here is a brief explanation.
Wien is currently the Vice Chairman of Blacktsone. He has had an Illustrious Wall Street career which includes 21 years as Chief Strategist of Morgan Stanley (NYSE:MS). He has also written numerous best seller books about investing.
This year's list did not disappoint. It includes a Trump television show, better trade relations with China, 5-10 successful vaccines and Tesla acquiring a big auto manufacturer. Enjoy!
Bright's Banter
The online video-game company Roblox came out with an updated prospectus saying that it wants to come to the public markets through a direct listing in February. Direct listings were popularised by Google (NASDAQ:GOOGL) when it did the reverse Dutch auction in 2004, other companies that have done direct listings include Slack, Asana, Spotify, and most recently Palantir.
Recap: Roblox is a game where players can create and interact in immersive 3D worlds. You can create your own games using the Roblox Studio or play in other players worlds. Two-thirds of all US kids 9 to 12 years old play the game. But on the streaming platform Switch it's actually very popular across all ages and it directly competes with Minecraft.
Roblox was supposed to list in December 2020 by raising $1 billion in the IPO. The new prospectus shows that the gaming company raised $520 million in a private book-build ahead of the direct listing which will allow early investors and employees to sell shares to new investors right away without any lockup periods.
When I wrote about Roblox in the end of November 2020, I said:
According to Crunchbase, in the last fund-raising in February 2020, Roblox raised $150 million at a $3.9 billion valuation. The company says it had over 31 million daily active users in the first nine months of 2020, up 82% year-on-year. Engagement time doubled to 22 billion hours, as compared to last year.
In the latest funding round (book-build), Roblox was valued at a mind-blowing $29.5 billion, which has most likely being helped by the December IPO valuations from Airbnb and DoorDash. Roblox will trade under the share code RBLX. It will be fun to see how the direct listing goes in February!
Signing Off
Asian markets are mixed this morning but Tencent (HK:0700) is up 4%, good news for Naspers (JO:NPNJn) and Prosus (JO:PRXJn). This afternoon we get a look at new vehicle sales figures for December, it seems dealers are struggling to get stock of new vehicles but the second hand market is flying. After sliding last week, the Rand has found a home in the mid 15's, it is currently trading at $/R15.39.
