Market scorecard
Global markets rebounded yesterday, led by Japan's Nikkei, which closed up 10.2%. There's a lot of macroeconomic uncertainty at the moment, and the financial media have been fanning the flames. One good day after a tough month doesn't mean this bout of volatility is over, so you should probably ignore the headlines for a while longer.
In company news, Kenvue (NYSE:KVUE), the recently spun-off retail division of J&J, closed up 15% after posting strong numbers. Elsewhere, Uber (NYSE:UBER) jumped 11% thanks to strong revenue growth and continued profitability. Lastly, Zoetis (NYSE:ZTS), the animal health company also reported strong numbers, and the stock closed up 6%.
In summary, the JSE All-share lost 0.19%, but the S&P 500 rallied by 1.04%, and the Nasdaq closed 1.03% higher. Phew!
Michael's musings
Last week, medical device maker Stryker (NYSE:SYK) released results which were mostly what the market was expecting. Revenue was $5.4 billion (in-line with forecasts), earnings were $2.79 per share (a marginal beat) and forward guidance was on the mark. The market is a funny thing, matching expectations isn't exciting enough so Stryker's share price dropped slightly the next day.
These earnings feel almost irrelevant a week later, given all that has happened in the market in the last couple of days. Interestingly, Stryker has been up since Tuesday last week, highlighting the importance of having a diversified portfolio.
Looking at the results, the bulk of the 8.5% revenue growth came from sales volume increases, with price increases contributing a small amount. For Stryker, operating in a strong market, solid sales volume growth is a good sign. They are investing in the future, holding their research and development spending at around 7% of revenue. Medical innovation requires continuous investment in future technologies.
Stryker has a massive opportunity to push harder into the global market. At the moment, $4 billion of the $5.4 billion in sales per quarter comes from the US.
In summary, Stryker reported a set of pretty boring numbers, which in the current volatile climate is a good thing. We are happy shareholders. Steady as we go.
One thing, from Paul
After a dismal day on Monday, stocks rallied nicely on Tuesday. So much for an epoch-defining crash that market bears were yelling about.
How long will it take before the market is making new highs again? I don't know, but it will, as it always does.
Most of us hit a peak portfolio value at the start of July, and the four weeks since then have been very nasty. Our model portfolio lost about 13% of its value in 30 days. That sounds dreadful, and it is, but we are still up 14.5% year-to-date (YTD).
For reference purposes, the S&P 500 is only up 10.5% in the same 7-month period, so we have our noses in front of the overall index, which is our investment benchmark.
These swings are the price we pay for being in the best asset class, by far. Keep your eyes on the prize: long-term investment gains from your high-quality, low-turnover equity portfolio.
Byron's beats
In a balanced ecosystem a drought is a necessary evil. It's considered a time of cleansing that weans out the weaker genes amongst both animals and plant life. Stronger genes means that animals are healthier and less susceptible to disease. A drought also alleviates long-term pressures on food sources because weaker plant eaters die out. Who would have thought that a drought actually saves the trees.
Why am I telling you this in a newsletter about investing? Because market corrections are also very necessary cleansing events. The investors that get spooked will sell shares to the patient buyers who have the willpower and fortitude to ride out the volatility. If shares just went up a little every day, everyone would just buy in and do nothing, and there would be no abnormal results. Equity returns would be similar to low-yielding, risk-free products like money market funds.
I know this sounds counterintuitive but we should appreciate these shakeouts because they are a very necessary part of the journey to financial freedom through equity investing.
Signing off
Asian markets are all in the green this morning, with the Nikkei up another 3%. The Bank of Japan reassured markets that it won't raise rates again if there is market instability.
In local company news, Sasfin (JO:SFNJ) fell 9% on the news that the SARB has fined them R210 million for breaching local exchange control rules in its now-closed foreign exchange business. Sasfin is in the process of delisting from the JSE and fighting a R4.6 billion tax claim from SARS.
US futures are pointing to another strong day, and the Rand is staging a bit of a comeback, currently at $/R18.41. Today, significant companies posting results include Novo Nordisk (CSE:NOVOb), Disney (NYSE:DIS) and Softbank (TYO:9984).
Two more days until the long weekend, enjoy the moderate weather across South Africa today.