Market Scorecard
Yesterday, global markets slipped on concerns that the Covid-19 Delta variant might hinder the ongoing economic recovery. All three major US indices suffered their worst daily performance in three weeks, with no sector left unscathed. We are still close to all-time highs though. Remember that volatility is normal, markets don't go up all the time.
In company news, Nigeria's revenue service told bankers to freeze all of Multichoice's accounts in that country, in order to recover $4.4 billion in its latest tax dispute with a South African company. Multichoice denied that they were doing anything wrong. We are used to this sort of thing from the Nigerian authorities, they are ridiculous. Elsewhere, Apple (NASDAQ:AAPL) is said to be interested in buying Reese Witherspoon's media company, currently valued at $1 billion.
All-in-all, the JSE All-share closed down 2.34%, the S&P 500 closed down 0.86%, and the Nasdaq closed down 0.72%.
One Thing, From Paul
Apple is trading near an all-time high of $143 a share, which is nice. It's our largest holding, our clients own over $52 million of those. That's almost R750 million worth, for those who are counting.
The reason that Apple is thriving is not hard to figure out. The company keeps inventing, perfecting and selling wonderful devices.
Consider their wearables division. According to some, Apple has a 10-year lead in this area. Their latest innovation is called AssistiveTouch, and it allows users to control their Apple Watch without having to touch the screen. Instead, you can pinch and clench your hand or roll your wrist to activate apps. Sounds freaky!
This year, Apple is on pace to sell more than 100 million wearable units, including the Watch, AirPods, and Beats headphones. They will probably rake in $30 billion in revenue from this division, and some forecast that it will be $50 billion soon.
Apple's entry-level AirPods and Watch are both under $200. It's able to sell amazing devices at these price points because they share key parts made in huge numbers for their iPhones.
What a company! Apple stock is still a good buy at current levels.
Byron's Beats
In my very humble opinion, the primary use-case for cryptocurrencies will be to make transacting easier. Not to speculate, trade and hopefully become rich. That is why we prefer to hold companies like Visa (NYSE:V) and PayPal that make the movement of money more efficient.
Both Visa and PayPal have opened up their networks to crypto transactions. Yesterday Visa gave us some updates on how that is going. In the first half of 2021 over $1 billion worth of cryptocurrency was transacted on Visa cards.
Visa are also partnering with over 50 crypto firms, including Coinbase, to allow users to convert and spend their crypto holdings. As Paul said to our team, this will enable merchants to immediately convert crypto to fiat after a transaction, which is the most sensible thing to do. Imagine selling your product in crypto then the currency drops 10% the next day.
Based on risk tolerance and the understanding of an investment, our thesis remains the same. The world of payments will be shaken up, but it's best to buy Visa and PayPal if you want to benefit from that.
Michael's Musings
Nedbank (JO:NEDJ) has officially announced that a maximum of 60% of their staff will never return to an office at one time. Many corporates still have their employees working from home, but some managers I speak to are itching to have their staff back in the office. Companies are now making the shift to a hybrid working setup permanent.
It's interesting to note that Nedbank was already working towards a more flexible work system, Covid just sped up their plans. Since 2016 the bank has been reducing its corporate real-estate floor space.
In seismic industry shifts like this, significant money is made and lost. I think Joburg property will be under pressure for the short term. People are moving to the Cape, or moving out of the city. Without the need to go into the office daily, people can live further away. Also, fewer people on the roads means less traffic and less of a need to live close to work.
As more companies announce official policy changes, we will see employees implementing more permanent lifestyle changes.
Bright's Banter
Yesterday JSE-listed Imperial (JO:IPLJ) Logistics announced that they are selling out to DP World for R12.7 billion. The Dubai-based port operator is offering a 39.5% premium to Wednesday's closing price. Imperial closed up 33.7% on the news.
DP World owns marine ports, inland cargo terminals from London to Antwerp, hubs in Africa, the Americas, India, and Russia. Imperial has gone through its own transformation as it disposed of a lot of its capital-heavy non-core assets to focus more on being the go-to for delivering goods in Africa.
DP World has been on an acquisition spree as it attempts to diversify across the value chain. The company's most recent purchase was the US-based supply chain solutions provider Synchreon Holdings which it bought out for $1.2 billion in a deal that closed last week.
This deal comes as no surprise as many South African industrial businesses are trading at very attractive levels relative to their underlying value. There are prospective suitors out there with deep pockets.
Signing Off
Asian markets are on a down trend this morning, and the MSCI Asia-Pacific index is at its lowest level since mid-May. US futures are slightly positive. The Rand is currently trading at around R14.30 to the US Dollar.
G20 finance ministers and central bankers will meet in Venice today. Have a good weekend. Be grateful. Unlike some people, you are not in jail.
