Ants in my Wallet

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Yesterday the University of Oxford's candidate for a Covid-19 vaccine passed phase 1&2 tests. To us on the street, that means they have shown that the vaccine is safe and that it generates the appropriate immune system response. These tests are only performed on very few people and doesn't include people in high-risk categories like the elderly. The study has now moved onto phase 3, where large scale testing is performed in countries with high infection rates. The silver lining of this global second wave is that it makes it easier to test these vaccines.

If all goes according to plan, the vaccine will be given the green light at the end of the year and then large-scale manufacturing will start. Note that there are many examples of drugs passing phase 1&2 and then failing phase 3 trials. According to the New York Times Coronavirus Vaccine Tracker, there are four vaccines in phase 3, and a further 12 in phase 2. Humanity will find an effective solution, and 2020 will be relegated to the history books.

Yesterday the JSE All-share closed up 0.63%, the S&P 500 closed up 0.84%, and the Nasdaq closed up 2.51%.

One Thing, From Paul

I was asked yesterday by an old client who is considering reactivating her account, whether it was too late to buy back into the "FANG" stocks. That acronym stands for Facebook / Amazon / Netflix / Google , but broadly she was asking about all technology stocks that have done well in recent years. Here is my reply.

The coronavirus crisis has been interesting. Companies which have suffered from severe revenue and profit losses, like the US airlines, retailers and banks, have been thrashed in 2020.

Conversely, those companies that have enjoyed more sales as a result of the shift to working from home and business moving online have gone up. Their second quarter results, out soon, will be good. This is why they trade at elevated levels, because they are the "safe havens" of the moment. They are growing at a time when more boring assets like bonds and cash offer very low yields.

I'd say that the share prices of these stocks will go even higher in the years ahead. That's what happens when companies grow sales strongly at good margins. So no, it's not too late to buy these stocks, or add to those positions if you own them already.

Byron's Beats

Last week Tuesday a small fintech company called nCino listed on the Nasdaq. The price exploded from it's IPO level of $31 to $91 a share at one stage. Last night it closed at $74 a share, with a market cap of $6.7bn. Why am I telling you this? Because the CEO and co-founder is a South African named Pierre Naude.

The company was founded in Wilmington North Carolina. It provides cloud services for banks and specialises in commercial banking, portfolio analytics, small business banking and deposit account opening. Some of its clients include TD Bank, Santander , Barclays and Bank of America amongst 1100 others. The company has annual revenues of $138m.

Moneyweb covers the story in this article titled Another Saffer makes it big in the US. It includes a summarised interview with Naude who hails from a wine farm in the Boland. He seems very keen to sign up some South African banks so that he can come back here more often. Well done to him and his team.

Michael's Musings

Thanks to 'green' incentives, coupled with Covid related subsidies, the price of electric vehicles in Europe have become really cheap. According to Bloomberg, electric-car subsidies have made a Renault model, free in Germany. Nice! Who doesn't want to get a car for free?

It also shows that Tesla can't build their Gigafactory in Germany fast enough. Here is a video showing construction progress earlier this month - Giga Berlin, First pillars - Timelapse.

The beauty of these subsidies for electric car makers is that it helps spur demand, which then drives volumes, which reduces costs. As manufacturing costs come down, and as technology improves, subsidy values lower. The result is that electric vehicles should be a mature industry by the time these subsidies expire. Great news for Tesla , it means the customers will continue to line up for a chance to buy a freshly made Model 3.

Bright's Banter

The South East Asian financial services and payments behemoth controlled by Jack Ma is finally doing the necessary admin needed to list on the Shanghai and Hong Kong stock exchange. Ant Financial Group, the operator of Alipay, a wallet that is used by 1.3 billion users in Alibaba's e-commerce networks could be worth as much as $200 billion.

If Ant Group is successful in its initial public offering, it will be one of the largest IPOs in years. China's richest man Jack Ma controls around 50% of the voting rights in Ant Group, while Alibaba has around 33% of the equity. This is after a restructuring that occurred last year September, leading to a profit-sharing agreement between the two businesses.

The biggest losers in this IPO has to be the New York Stock Exchange and the Nasdaq . Ant Group had aspirations to list in the US, but the US-China tensions over trade is mudding the waters for Chinese entrepreneurs who run big businesses. We will be watching this listing with keen interest as it will help determine the value of a lot of unlisted payments businesses like PayU.

Signing Off

Markets are upbeat this morning thanks to EU leaders agreeing on a massive relief package for the block. Countries that are struggling will be able to access EUR 750 billion in stimulus. The JSE All-share is off to a strong start this morning and the Rand is sitting at $/R16.61.

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