Deere John

Market scorecard

US markets were directionless yesterday. The S&P 500 lost ground while the Nasdaq held on to some of the gains seen earlier on in the trading day. One day ahead of their important earnings announcement, Nvidia (NASDAQ:NVDA) briefly touched a new all-time high before losing its mojo and closing 2.8% lower. Banking stocks dropped after ratings agency S&P Global joined Moody's in downgrading some regional lenders.

In company specific news, Baidu (NASDAQ:BIDU) is up 4.4% after saying that its revenue rose the most in over a year. The shocker of the day was Dick's Sporting Goods which tumbled 24% because of grumpy comments from the retailer about marauding gangs of stock thieves. Yikes!

In summary, the JSE All-share closed down 0.65%, the S&P 500 fell 0.28%, but the mighty Nasdaq was 0.06% higher.

One thing, from Paul

I enjoyed this guide to what company management teams mean when they use jargon at their quarterly results presentations. It was written by Brian Feroldi.

"Colour" = To provide more details on a subject.
"Churn" = Customers who stopped buying from us.
"Elongated Sales Cycle" = Demand is weak.
"Green Shoots" = We've invested a lot but have not seen much return yet.
"Investing in our people" = Employee costs are rising fast.
"Investing in Price" = Competitive pressures forced us to lower prices.
"Streamline" = We fired a bunch of employees.
"We'll take this offline" = I haven't scripted an answer to your question.

As a general rule, you can assume that CEOs massage their numbers and add spin to their results commentary.

Byron's beats

When Google (aka. Alphabet) released its latest results, a lot was said about the strong advertising revenues at YouTube. The numbers coming from the video-sharing platform were just staggering.

For example, the recently launched YouTube Shorts (brief clips similar to those on Instagram Reels and TikTok) had more than 2 billion monthly viewers. That is up 500 million from last year. The YouTube Premium offering now has 80 million paying subscribers. I'm one of them.

They recently reached an agreement with Warner to offer a Max-NFL Sunday ticket bundle on YouTube TV.

The potential for YouTube is underestimated in my opinion and I expect the platform to become more and more important for the Google group.

Michael's musings

We've had an interesting 12 months on the stock market. At the end of last year, interest rates were rising fast and it seemed almost certain that the world economy would enter a recession in 2023. The market was plunging.

Come January 2023 it appeared that traders had decided that green is better than red. Despite the negativity, the Nasdaq is up 30% year to date. The US economy has been surprisingly strong and the chances of a recession now seem very slim.

Unfortunately, August has been bad so far, so we are receiving emails from clients asking if this is the time to sell before the next big crash. Fear and negativity get lots of eyeballs on news sites, so they publish more of them. After a few down days people are fed these anxiety-inducing headlines, and they think that the end of the world is near.

We don't know when the next market correction will happen. Long-term investors will see many corrections over their time in the market. Vestact will steer you towards companies with strong balance sheets and loyal customers, that can survive tough periods. It's better for your health and wealth to be an optimist.

Bright's banter

Deere & Co just reported numbers that came in ahead of expectations and they raised their yearly profit forecast. The stock dropped around 5% on the day, which is disappointing, but that can happen.

The big farm equipment company has been able to up its production thanks to improved supply chains, helping to boost its profit by 60% in this quarter. Deere had earnings of around $3 billion for the three months.

Overall sales rose by a solid 12% to $15.8 billion. The construction and forestry equipment division did particularly well, up about 14%, thanks to some big infrastructure builds in the US.

The market wasn't super thrilled because Deere's management said that they might sell fewer machines in the last part of this year, which could spill over into weak demand in 2024. This is due to a growing pile of used equipment for sale in secondary markets.

Deere sales are a leading indicator when it comes to figuring out how well the global economy is doing. Even though the world has been a bit shaky recently, they still managed to make good money by selling to farmers who need new gear and parts to keep their older machines going.

Management said that North American farmers have placed orders to keep the company busy for the rest of the year. Deere's share price is down 9% year-to-date, lagging the S&P 500. It's been a very good performer over a longer period, but can be rather cyclical.

Signing off

Asian markets are looking a bit better this morning. Benchmarks rose in Hong Kong, Japan and India.

US equity futures are also higher in early trade. The Rand is holding firm at around R18.75 to the US Dollar.

Buckle up because Nvidia will release its results today after trading closes. This will be a huge one, as the market is expecting massive sales growth from the AI chip maker.

All the best!

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