Market scorecard
US markets started the week on a quiet note, with major indices little changed yesterday. A solar eclipse across the middle of the US stole the limelight, and both the S&P 500 and the Nasdaq Composite went nowhere. US 10-year bond yields climbed to their highest level since November, at around 4.42%.
In company news, Tesla (NASDAQ:TSLA) closed up 4.9% after Elon Musk announced that a self-driving robotaxi would be unveiled on 8 August. Elsewhere, Paramount Global (NASDAQ:PARA) stock fell 7.6% as terms of the deal with Skydance Media were made public. Locally, Canal+ is one step closer to closing the buyout of Multichoice (JO:MCGJ), at the increased price of R125 per share. The French group already owns about 37% of Multichoice.
At the market close, the JSE All-share was up 0.75%, but the S&P 500 fell by a minuscule 0.04%, and the Nasdaq crept 0.03% higher.
One thing, from Paul
I read a good sell-side report from US broker Jefferies last week, about Meta Platforms (NASDAQ:META). They have a $585 per share target on the company (the current price is around $520).
Their core thesis is that Meta could capture 50% of incremental industry ad dollars in 2024, which would be its highest ever and well above its 33% in 2023. What's more, they believe that global ad revenues could grow more than 20% in 2024.
Meta lost significant ad market share in 2022 following the Apple iPhone iOS14.5 privacy changes, but have since used AI tools to bounce back fast.
From the report: "Their AI recommendation engine has continued to improve with Reels driving 25% growth in time spent watching video. Secondly, their Advantage+ suite of ad tools have driven significant improvements in advertiser returns, well beyond competitors."
They say that Meta is seeing impressive momentum with something called "click-to-message ads". Finally, "early tests of Gen AI ad tools like image expansion, text variations, and background generation are driving meaningful improvements in click-through rates".
Byron's beats
The Johnson & Johnson (NYSE:JNJ) share price has been a disappointment over the last 18 months, basically flat while the market has soared. I was encouraged to see them announcing a deal last week to buy Shockwave Medical for $13 billion.
Shockwave specialises in cardiac medical devices which use waves to break down calcified plaque in heart vessels. This acquisition will fit nicely into J&J's existing cardiac health division which includes heart pump-maker Abiomed which they bought for $17 billion in 2022.
Over the years, we have watched Stryker (NYSE:SYK) successfully build their medical devices business through bolt-on deals. If you have good relationships with hospitals and doctors, world-class sales, service and distribution teams then acquisition-led growth can work well.
J&J is a sleeping giant which will hopefully awaken soon. Sizable deals like this should get investors' hearts pumping, so to speak.
Michael's musings
The US is going through the early stages of the largest generational wealth transfer in its history. The Silent Generation and Baby Boomers hold 62% of US wealth, which is busy passing to their beneficiaries. Over the next 20 to 30 years, around $72 trillion will be inherited.
Some heirs are getting their inheritance early because they are still living off of their parents. According to a study on 1 000 families with adult children, 47% of parents are still financially supporting their adult kids.
Increasingly, multiple generations are living with each other, as is common in other parts of the world. 61% of adult children living with their parents did not contribute towards any household expenses, including rent. It sounds like a good deal; free home-cooked meals, coupled with a good laundry service.
The study found that payments by parents to their offspring total $1 384 per month, on average. That was more than double the additions parents were making to their own retirement savings, of only $609 per month.
If you have adult children and they are financially independent, well done, it seems that this scenario isn't a foregone conclusion anymore.
Bright's banter
Shein has reported a big surge in profits, more than doubling to over $2 billion. Sales reached $45 billion last year, and a listing is in the offing.
Shein is emerging as one of the most profitable fashion companies globally, surpassing industry giants like H&M, Primark, and Next. Although Inditex (BME:ITX), the owner of Zara, maintains higher profits at EUR6.9 billion, Shein's remarkable growth trajectory is undeniable.
Word on the street is that Shein is favouring a London listing due to perceived challenges in securing approval from the US Securities and Exchange Commission for an IPO there. If all goes well, this listing could be one of London's largest corporate debuts, with a valuation of up to $90 billion.
Shein's success is partly attributed to its direct-to-consumer model, shipping goods from China to customers globally. However, this approach has sparked controversy in many jurisdictions and calls for import taxes.
Founded by entrepreneur Chris Xu, Shein maintains its operations in China while catering to international markets. Shein's valuation reached $100 billion in a recent fundraising round, and the online fast fashion retailer has cemented its position as one of the world's most valuable startups.
Signing off
Asian markets are mostly in the green this morning. Benchmarks also rose in Australia, Hong Kong, India, and Japan, while they slipped in mainland China and South Korea.
US equity futures are unchanged pre-market. The Rand is trading around R18.65 to the US Dollar. Oil traded near a five-month high at $90.53 as tensions in the Middle East showed no signs of easing.
Economists forecast that tomorrow's US consumer price index will show some reduction in inflation levels, but the core gauge which excludes energy and food will probably be at around 3.7%, above the Fed's 2% target.
Have a good one. Stay dry.