Market scorecard
Yesterday, US markets struggled to find momentum, but bonds gained some ground. Election polls still show a tight race, and markets don't like uncertainty. The Mag7 was mostly unchanged, but the real estate and energy sectors were in the green.
In company news, data from Viking Therapeutics (NASDAQ:VKTX) and AstraZeneca (LON:AZN) hinted at growing competition in the obesity drug market, putting pressure on stocks in the weight-loss sector. On a brighter note, Peloton (NASDAQ:PTON) received a rare buy rating from Bank of America (NYSE:BAC), which upgraded the stock by two notches, citing a stronger profit outlook and positive expectations for the company under its new CEO.
At the close, the JSE All-share was up a tiny 0.03%, the S&P 500 fell 0.28%, and the Nasdaq was 0.33% lower.
Byron's beats
Last week, Apple (NASDAQ:AAPL) reported a decent-looking set of numbers, although sales missed in China. That is a common theme at the moment. Despite the miss, iPhone sales everywhere else are flying off the shelves after the iPhone 16 was launched in September. Total (EPA:TTEF) sales rose 6.1% to an eye-watering $94.4 billion. Check the image from App Economy Insights for a proper breakdown.
Apple has decided to leverage other big tech companies for their AI services. The new iPhone has the capability to process a huge amount of AI data, meaning customers need to upgrade their phones. The phones are very powerful and will link to OpenAI's services and probably Google (NASDAQ:GOOGL)'s in the future too. This means that Apple didn't spend billions of dollars on expensive GPUs like its rivals.
It is an interesting move. They are sticking to what they know best which is world-class hardware and a seamless platform that other developers are willing to pay to be a part of.
The Apple share price is up 20% year to date, which is in line with the market. We are very comfortable having this tech juggernaut as a core holding in our portfolio.
One thing, from Paul
According to new data from Standard and Poors, 57.3% of US large-cap equity fund managers underperformed the S&P 500 in the first six months of 2024. This is quite common; giant money funds usually do worse than the index.
The main reason this time round is that a handful of "magnificent" stocks have been driving market returns. Most fund managers can't bring themselves to stay focused, they like to own a bit of everything. They are inherently cautious, index huggers.
This has not been a problem for Vestact, where we have clients in direct equity portfolios that have focused positions in most of the market-leading shares. We are well ahead of the index.
To be fair, our larger portfolios have done the best, and some of our smaller accounts have missed out on some of the flyers. Owning Nvidia (NASDAQ:NVDA) is key because it's been a real rocket ship this year. Just under 70% of our customers own that one. It's a pity that not all our clients do.
Michael's musings
I recently listened to a podcast about Ford (NYSE:F)'s history. From humble beginnings, to making over 15 million Model T's, to making a B-24 bomber an hour during WW2, to creating the Mustang and muscle car culture, and now being one of many mainstream car choices around.
The late 60s was the heyday of Detroit and its car companies. In the 70s, spiking oil prices and a new focus on safety dented people's enthusiasm for driving. In the late 70s, Detroit's car manufacturers recalled more cars than they produced! The problem was poorly designed cars killing people. Ford, for example, had a model where its petrol tank was badly placed, resulting in the car bursting into flames if in an accident.
It emerged that Ford knew the cars were defective but ran the numbers and decided it would probably be cheaper to pay legal bills than to rectify the problems. Unfortunately, there are many companies out there with this flawed mentality.
When managers think cutting corners to grow profits is the best route, you can guarantee the company will be a bad long-term investment. Founders and quality leaders plant unseen seeds today, to bear fruit in decades to come. By comparison, 'management by spreadsheet' executives extract all the nutrients from the soil of their organisations, making it very hard for them to do anything special. For investors, the hard part is knowing when a company's culture is rotten.
Bright's banter
South African billionaire Patrice Motsepe and his companies - African Rainbow Minerals (JO:ARIJ), African Rainbow Capital (JO:AILJ), and ARCH Emerging Markets - are facing a hefty $195 million lawsuit in Tanzania.
The claim comes from local mining firm Pula Group, which accuses Motsepe's companies of breaching a non-compete agreement by investing in Australia's Evolution Energy Minerals, adjacent to Pula's graphite project.
Pula's chairman, Charles Stith, argues that this lawsuit reflects the potential losses they could face due to unfair competition. They claim a two-year non-compete contract was in effect during the negotiations with Evolution, which is why they're pursuing such a significant sum.
Motsepe's team has denied any wrongdoing, stating that they never moved forward with the investment in Pula's project and believe the allegations are unfounded. They've raised questions about the court's jurisdiction and have faced challenges with legal proceedings, including their legal team sometimes not showing up for court dates.
Signing off
Asian stocks climbed, driven by upbeat news from China that bolstered market sentiment. Chinese equity benchmarks led the region with a 2% gain, as data showed the country's services sector grew at its fastest rate since July.
In local company news, MTN (JO:MTNJ) had a solid nine months, with Ghana and Uganda showing strong growth across subscribers, revenue, and profits. MTN Ghana's revenue rose nearly 32%, thanks to an 18% rise in Mobile Money users. Over in Uganda, MTN saw a 19.6% jump in revenue, with profits up nearly 30%. Both markets highlight MTN's ability to grow user engagement in competitive environments.
US equity futures are marginally higher pre-market. The Rand is trading at around R17.51 to the US Dollar.
Today, Ferrari (NYSE:RACE) and Southeast Asian e-commerce giant Coupang (NYSE:CPNG) report earnings.
Have a good day. When we wake up tomorrow, we should have a good idea of where the US election is heading. Election madness is almost over.