Don't Be Shy of the High

Published 2025/01/15, 12:23

Market scorecard

Yesterday was a rather uneventful day for markets, as all three indices we track moved less than 0.5%. In the US, PPI came in at 0.2% month on month, which means production prices increased at half the speed Wall Street was expecting. Generally, low production costs leads to lower consumer prices in the coming months, so that's positive.


In company news, Eli Lilly (NYSE:LLY) fell 6.6% after they released Q4 guidance below market expectations. Analysts were expecting revenue of $13.95 billion, but the company thinks it will only achieve $13.5 billion, which is still 45% higher than last year. If a company has high expectations, even a small miss can spook traders. It is worth noting that the long-term growth forecasts are still on track. In the short term, supply chain and production delays have lead and lag impacts that are quite unpredictable.

In summary, the JSE All-share closed up 0.10%, the S&P 500 rose 0.11%, and the Nasdaq ended 0.23% lower.

One thing, from Paul

Stock picking is hard, because good-looking companies that are growing fast don't always maintain their advantage.

Sometimes, promising operators are outmaneuvered by a rival with a better product, like Nokia (HE:NOKIA), which fell by the wayside as Apple (NASDAQ:AAPL) steamed ahead, capturing the prime position in the smartphone industry.

Covid-19 stocks like Moderna (NASDAQ:MRNA), Zoom Communications and Peloton (NASDAQ:PTON) Interactive seemed like world-beaters at the time, but they also ran out of steam.

John Authers noted in his daily newsletter on Bloomberg yesterday that Moderna rose 20-fold after launching their best-selling vaccine. Some people are still taking Covid boosters, but as we noted yesterday, sales forecasts are plunging. Moderna now lags the overall S&P 500 over the five years since the start of the pandemic.

We are focused on identifying companies that tower over their industry peers and sell goods or services that will remain popular for decades.

Byron's beats

Johnson & Johnson (NYSE:JNJ) started the year with a bang after announcing a $14.6 billion buy-out of listed company Intra-Cellular Therapies. J&J is paying a 39% premium to Friday's closing price for the biotech company that specializes in products for the central nervous system.


Intra-Cellular owns a treatment for conditions such as bipolar and schizophrenia called Caplyta, which is also showing great results in treating depression. Caplyta recently won a patent settlement which has given the drug exclusivity until 2040. This is definitely the jewel in the crown that J&J is after.

J&J has been a very pedestrian stock over the last 5 years, let's hope the addition of potential blockbusters like Caplyta will give it a boost.

Michael's musings

The US market has done really well over the last two years. As a result, we are often asked if people should wait for a share price pull back before investing their money. Our answer is no, the market will probably continue to move higher, and might never be back at these current levels.


Just about all clients who try to time the market, would have been better off buying shares on the day their money was available.

According to Ben Carlson of Ritholtz Wealth, going back to 1950, on average, the market makes a new high every 14 trading days or so. In other words, they happen often and are a normal part of investing. It makes sense, society is advancing, so share prices should be going up too. In the short term, there is some volatility, but over the long term, the trend is firmly higher.

Don't overthink things, invest regularly, and then hold for the long term. Simple.

Signing off

Asian markets are flat this morning, with the MSCI Asia Pacific Index up only 0.2%. The People's Bank of China pumped a near-historic amount of short-term cash into its financial system this morning, continuing loose monetary policy to support their economy. Tencent (HK:0700) is up another 1.5% today.


In local company news, Reinet (JO:RNIJ) closed up 5% on the news that it had disposed of its entire holding in British American Tobacco (JO:SNHJ) (BAT (LON:BATS)). This is the end of an era, as the Rupert family who started their empire with tobacco in the 1940s, will no longer have any interest in the industry.

The Rand is flirting with R19 again, currently trading at $/R18.95. US futures are marginally higher, ahead of a big day for US markets. CPI data will be released this afternoon and earnings season kicks off. Before the market opens, Citigroup (NYSE:C), JPMorgan, Goldman Sachs, Wells Fargo (NYSE:WFC) and BlackRock all report their latest results.

It is Wednesday already and halfway through January. Have a great day.

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