Market Scorecard
Good news from both the US and China is pushing stocks higher this week. In the US, the number of people hospitalised is falling. The market interprets this as a very positive sign - it is taking the view that the worst is now behind us. Then economic data out of China is pointing towards continued economic strength for their economy. Having the globes two biggest economies moving in a positive direction is good news for all of us.
As you will know by now, there is always some form of dark cloud hanging around equity markets. The dark cloud on the horizon at the moment is the simmering tensions between the US and China. The key is to look past these dark clouds because the storm might never actually arrive. Remember, you are a long term investor. By the time you need to cash in your shares, the current political leaders will be a distant memory. If everything were sunshine and roses, equity investing would be easy, and you wouldn't get the superior returns.
On Friday the JSE All-share closed down 1.56%. Yesterday the S&P 500 closed up 0.27%, and the Nasdaq closed down 0.39%.
Michael's Musings
On Thursday night Illumina (NASDAQ:ILMN) reported their latest quarterly results. In August last year the share price was at $300 a share, and before the results it had managed to climb to $400 a share. Unfortunately, the numbers missed expectations and the stock dropped 11% to $355 a share.
The company's customers are adversely impacted by the lockdown, where many research labs were/are shut. Illumina reported sales of $633m, down 25% and EPS of $0.62, down 54%. The good news is that cash and debt levels remained around the same level as the previous quarter - they have $3.3 billion in cash on the balance sheet.
On top of the results, they also announced their NovaSeq 6000 v1.5 Reagent Kit. These test kits are cheaper, have a longer shelf life, are more reliable and are able to detect more in the genome. As the tests get better, the more people will use them, which means more Illumina machines will be sold.
The DNA sequencing industry is still in its infancy, its like the computer industry at the turn of the century when things were still rather bulky, slow and expensive. As technology improves, costs will come down and DNA sequencing will become more mainstream. Illumina is the leading company in this burgeoning industry. As such, the share price ride will be wild, but if you can handle all the volatility, it is worth having a small portion.
One Thing, From Paul
MacKenzie Scott is another interesting person with an unusual money story. She was born MacKenzie Scott Tuttle and is the ex-wife of Amazon (NASDAQ:AMZN) founder Jeff Bezos. She is currently worth about $60 billion.
Once her divorce settlement was finalised, she announced that she planned to give away almost all of her net worth. Last month she said that $1.7 billion had already gone out of the window. According to Axios, she has given $587 million to racial equity organisations, $46 million went to LGBTQ+ equity organisations and $133 million to gender equity organisations.
When Scott chooses a cause, she just gives them cash. No schedules, no promises, no strings. Also, no buildings or statues or other capital assets. They can decide how to use it.
Despite the recent grants, her net worth has shot up by at least $25 billion this year, thanks to the rise in Amazon's share price. She will have to speed up the giving process - she is 50 years old.
You can read the Medium post by Scott, explaining her plans: 116 Organizations Driving Change.
Byron's Beats
I promised I would keep clients updated when the stocks they own make moves or investments to help save the environment.
Visa has now joined the list - Recently Visa did a Green Bond sale. A Green Bond is when a company raises money with the intention of using it for sustainable investments. In the current low interest rate environment, bond sales to address social issues are booming.
Visa raised $500 million at a delicious rate of 0.75%, the first-ever green bond from a consumer finance business. The money will go towards renewable energy, green buildings, sustainable water and waste management projects.
In January Visa announced that they had reached their goal of 100% renewable electricity consumption for their business which includes 131 office in 76 countries. That is quite astounding. Now you can sleep well at night as a happy Visa shareholder making the world a better place.
Bright's Banter
E-CommerceDB is a database which profiles more than 20 000 online stores globally. According to this crowd, Amazon is by far the largest online store in the US with revenues of $73.8 billion, excluding third party sales in 2019. What stood out for me is that Amazon is very big, but not so much that they can earn themselves the title of monopoly.
E-commerceDB's data shows that the US is the second biggest e-commerce market globally with revenues of more than $343 billion in 2019. E-commerce penetration is one of the highest at 77% and online sales are still expected to grow steadily by 7% per year for the next five year. The top 5 stores accounted for almost one-third of the overall online shopping market.
Amazon has a unique value proposition thanks to its very diversified business. It features online retail, with grocery as a growth catalyst, online streaming, a growing cloud business, and a very loyal customer base etc. The infographic below shows the top 10 online stores by sales in the year 2019.
Infographic courtesy of: Statista
Signing Off
Global futures are pointing higher this morning, but the Rand is looking weak at $/R17.70. Thankfully the JSE All-share is green this morning. Data out today includes a local unemployment read and then manufacturing data.
