Gold up 1% as oil prices take a breather ahead of consequential Fed rate decision
Market scorecard
US markets had a good session yesterday. Tech stocks rose the most in two weeks as the idiotic chatter about a possible recession subsided. AI-driven stocks Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD) climbed 7.1% and 4.1% respectively.
In company news, PayPal (NASDAQ:PYPL) closed up a bit after naming Alex Chriss as its new CEO. He used to head up Intuit's QuickBooks business. Elsewhere, Tesla (NASDAQ:TSLA) slipped 1.2% on news of price cuts in China as well as two lower spec versions of its Model S and X in the US and Canada. Finally, US Steel surged 37% after the company got not one, but two takeover offers from industry rivals.
At the closing bell, the JSE All-share was down 1.06%, but the S&P 500 rose 0.58%, and the Nasdaq was 1.05% higher.
One thing, from Paul
Vestact manages direct equity portfolios, giving advice to clients on which stocks to own. We will tell you to buy Apple (NASDAQ:AAPL), not Exxon Mobil (NYSE:XOM). We'll recommend Visa (NYSE:V), not Silicon Valley Bank (OTC:SIVBQ). Microsoft (NASDAQ:MSFT), not Microstrategy (NASDAQ:MSTR). Nike (NYSE:NKE), not Foot Locker (NYSE:FL).
We try our best to prevent clients from buying rubbish. No dodgy small-caps or bombed turn-around stories. We steer them clear of fads and meme-stocks pushed by "apes" on chat-forums.
Our job is to watch out for horsesh1t wrapped in tin foil and sold as precious metal. The picture below is from Puck magazine and was published in 1901.
Byron's beats
When buying stocks, valuations are important. But one needs to have an open mind about what level of valuation is reasonable.
According to Robert Shiller who has looked at data back to 1871, the S&P 500 has traded at an average of 17.4 times the previous 10 years of inflation-adjusted earnings. This is known as the cyclically adjusted price-to-earnings (CAPE) ratio. But since 2010 the market has traded comfortably above that level, as you can see in the image below.
If you'd decided that the market was overvalued in 2010 and stayed in cash, you'd have missed out on an 11-year bull run. Ben Carlson says that stocks have been "overvalued" 95% of the time since 1990 yet the index is up more than 10% per annum since then.
As with all things in life, you need to pay up for quality. Highly liquid US mega caps are the crme-de-la-creme of investment options. Don't be too concerned about current market levels and rather look at the individual businesses you are buying. If they are growing top line revenue, their valuations will moderate over time.
Bright's Banter
Palantir Technologies (NYSE:PLTR) reported good numbers and raised its profit forecast for 2023. The company also initiated a $1 billion share buyback program.
In the second quarter, Palantir reported $533 million in revenue and adjusted operating income went up 25% to $135 million. They're profitable for the third consecutive quarter, which is a big deal for them.
Their artificial intelligence (AI) platform, launched recently, is being utilised by over 100 customers, and they're in talks with 300 more apparently.
The CEO, Alex Karp, expressed confidence in the company's potential to become a leading software company globally, citing the unprecedented demand for Palantir's AI offerings in the software security sector.
Palantir is aiming to be included in the S&P 500 index after a 146% rally so far in 2023. Not too bad if you ask me!
Signing off
Asian markets are a mixed bag this morning. Equity gauges rose in Japan while they fell in Hong Kong, mainland China and South Korea. Investors are still worried about credit stresses emerging from China's ailing property stocks. There are concerns that these issues will contaminate the shadow banking and unsecured lending sectors.
US equity futures are rather modestly higher in early trade. The Rand is trading at around R19.06 to the greenback.
On this day in 1620 the Mayflower set sail from Southampton with 102 pilgrims on board, heading for America. Those were brave individuals. Life today is much easier. Be Grateful.
