Gold holds near $4,500 as Treasury buybacks, Fed minutes shape rate outlook
Market Scorecard
Locally, SA Inc shares continue to fly. Discovery, for example, is up 16% over the last week! The strength of local companies has not fully translated into gains for the JSE All-share though. On the opposite side of the spectrum, precious metal miners and Naspers (JO:NPNJn), have been struggling. Gold Fields is down around 18% this week alone. The biggest weight to the JSE All-share's balloon has been Naspers and Prosus, who have been pulled down by Tencent.
Big Chinese Tech companies, Tencent and Alibaba have been on a steady slide lower due to pressure coming from the Chinese government around monopolistic behaviour. Yesterday, both companies were down over 7% at one point. At this stage, Alibaba is probably more in focus than Tencent due to comments from Jack Ma seemingly triggering all this extra attention. Jack is the founder of Alibaba - if you are looking for a book to read in December, "Alibaba: The House That Jack Ma Built" is a very interesting read.
Tencent has also had its time with the regulators. Back in 2018, the government froze all new game launches from Tencent until they tweaked the business model to make games less addictive and to try to reduce the number of hours that children play. After a tough day yesterday, Tencent is up over 5% this morning. Is it signalling that traders might have overreacted earlier this week?
Yesterday the JSE All-share closed down 0.11%, the S&P 500 closed up 0.77%, and the Nasdaq closed up 2.01%.
Byron's Beats
Adapt or die is often the case in the world of making money. Print media has been under severe threat from online platforms since the internet went mainstream. Some media houses have adapted, others have disappeared.
Last week the New York Times brought in more revenue from their digital subscribers than their print business for the first time ever. In 2011 the newspaper decided to charge for online content. When you do that you need to make sure your journalism is quality, otherwise people will just go to free sites.
They do thank the controversial elections, Donald Trump and Coronavirus for the heightened interest in the news. It sure has been an interesting year. The company added 393 000 new subscribers in the last three months to bring their total up to 6 million.
Some may argue that paying for quality media means that only people who can afford it have access to good journalism. That, in turn, will widen the knowledge and wealth gap. That is a debate for another time I would say.
Michael's Musings
This Moneyweb article below caught my eye yesterday. The listings boom pre-dates my time on the market, but it was a significant period in the Vestact history books. It was a period where everyone wanted to be invested in the market, running out to open investment accounts. It was an exciting time!
Most of the listings back then were of small-cap stocks. Management teams were drawn into the hype of how much their company would be worth if listed. Why not though, investors were willing to put money into all of these newly listed small-cap companies.
Based on Moneyweb's numbers, less than 40% of the companies that listed during that boom are still around today. It is probably much lower than that because many of the companies still listed have hardly any trading volume, and are worth less than a nice house in Camps Bay.
The lesson for me is that it is incredibly difficult to make money out of investing in small-cap companies. Yes, if you pick the one winner in the pack you will do really well, but that is very tough to do due to all the losers in the pack too. For Vestact, we would rather stick with large industry leading companies.
Read it here - How many listings from the 2006/7 boom remain?
Bright's Banter
The maker of video games such as Grand Theft Auto and the basketball franchise NBA 2K, Take-Two Interactive Software, is said to be in talks to acquire a British game developer Codemasters Group for $956 million. Codemasters' popular titles include the F1 racing games, Colin McRae's video game series, Grid, Dirt etc.
This deal makes sense for Take-Two as they have good rails for global distribution from which more Codemasters games could be sold. The gaming industry remains one of the most interesting industries based on its sheer size thanks to the eyeballs and customers willingness to spend on old and new games.
It is estimated that the video gaming industry is worth north of $162 billion in 2020, $77 billion of this is generated through mobile gaming. That makes gaming bigger than Hollywood and the Music industry combined! The US alone is estimated to generate over $60.4 billion this year with $11.6 billion made in the second quarter of 2020.
Leading gaming companies are Tencent, Sony, and Apple. They are going to enjoy massive growth as the industry is expected to cross the $200 billion mark as soon as 2023. Here at Vestact we will remain keen holders of businesses like Tencent, Apple and Nvidia, which develop games and provide a pathway for distribution of these games, as well as tools to be able to play these games.
Signing Off
Looking to the day ahead, there is mining data from South Africa and then speeches from different members of the ECB this evening. Asian markets are mixed this morning, but Tencent is up nicely, which is what matters most to us here down South. The Rand seems to have stabilised around the $/R 15.70 mark.
