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Buy, hold, forget

Published 2024/01/24, 13:26

Market scorecard

US markets closed in the green as earnings season picks up momentum. The S&P 500 and Nasdaq 100 closed at all-time highs for a second straight day, thanks to a lift in big tech. The winners were RTX Industries (+5.3%) Procter & Gamble (NYSE:PG) (+4.1%), and Verizon (NYSE:VZ) (+6.7%).

In company news, Netflix (NASDAQ:NFLX) jumped more than 8.6% in after-hours trade thanks to their quarterly update indicating subscriber growth ahead of estimates. Elsewhere, Alibaba (NYSE:BABA) rose over 4.2% in Asia following a report that founder Jack Ma bought more stock in the company. Lastly, Texas Instruments (NASDAQ:TXN) tumbled 4.5% after hours on a disappointing revenue forecast.

At the closing bell, the JSE All-share closed up 1.36%, the S&P 500 rose 0.29%, and the Nasdaq was 0.43% higher.

Michael's musings

Yesterday, Johnson & Johnson (NYSE:JNJ) posted results before the US market opened. The company reported better revenue and profit than analysts were expecting, thanks to stronger growth from both the pharmaceutical and medical devices divisions. There isn't a consumer division anymore due to the spin-off of Kenvue in the middle of last year.

The medical devices division grew at 13.3%, partially driven by the unwinding of pent-up demand during Covid lockdowns. This trend is good news for Stryker (NYSE:SYK), our other medical devices holding.

On the pharmaceutical side, sales only grew at 4.2%. The company forecasts that sales will grow 5% to 7% through to 2030. The increases will be fuelled by the launching of at least 20 new therapies. The R&D team is working hard! Management is also optimistic that 10 or more of those therapies can reach peak sales of around $5 billion per year.

The J&J share price won't shoot the lights out, but it is very stable and pays a great and reliable dividend. We also expect to see a healthy re-rating higher of the share price once the talc powder court cases have been settled. At the moment, the legal challenges are a dark cloud over the company, with the possibility that they have to settle for some ridiculous amount. Buy, hold and forget.

Byron's beats

The graph below compares the 10-year performance of Chinese tech versus US tech. Over that period, the Technology Select Sector ETF is up 510% while the Invest China Tech ETF is down 11%. Paul joked in the office yesterday that it's really shocking that investors got whacked in a country that's a communist dictatorship.

We, as South Africans, work very hard for our money in a tough economy with badly enforced regulations. There is no reason to go and invest those savings in other places that also have wonk policies and ideologies. Your developing market exposure is more than enough through the South African connection. Send the rest to the US and let us grow it for you in Dollars.

One thing, from Paul

Byron's article above about preferring US companies to Chinese ones, reminded me of a meme I'd seen which made me laugh. It made the same point in visual form. Since I'm on a plane right now to visit our US broker, here it is, that's all I got.

Bright's banter

Reddit is set to launch its long-anticipated initial public offering (IPO) by the end of March, following a public filing expected in late February.

This IPO is highly anticipated, as Reddit's user base, known for fuelling meme stock rallies, could play a significant role in the company's stock market debut.

Valued at $10 billion in 2021, Reddit plans to sell 10% of its shares as it competes with other social media platforms like TikTok and Facebook for user attention and advertising revenue.

Signing off

Markets are all mixed up this morning in Asia. Benchmarks rose in India and Hong Kong, while Japan, mainland China, and South Korea are in the red. Japanese bonds also tumbled after its central bank governor, Kazuo Ueda, struck a hawkish tone.

US equity futures are in the green pre-market. This evening after the market closes, Tesla (NASDAQ:TSLA) will report results. Given the recent weakness in share price, these numbers hold more significance than usual. Elon Musk will probably have some spicy takes.

The Rand is trading around R19.04 to the US Dollar.

You have made it to the halfway point of the year's first full week of work. Have a great day.

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