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Market scorecard

US markets ended flat yesterday, after the Federal Reserve raised interest rates , yet again, to the highest level since 2001. Somehow, the Dow gained for the 13th day in a row, its longest winning run since 1987. The last time the Dow did this was when Paul Volcker was finishing his own battle with inflation as Fed Chair, yesterday was Jerome Powell's turn.

In company news, Meta Platforms (NASDAQ: META ) (Facebook) climbed 6.8% in late trade after projecting revenue that beat estimates. eBay (NASDAQ: EBAY ) fell 4.3% on a disappointing profit outlook for the financial year, but Samsung (KS: 005930 ) rose 2% on solid numbers. Finally, Boeing (NYSE: BA ) was the best performer in the S&P 500, jumping 8.7% as orders for new jets flocked in.

At the end of a busy day, the JSE All-share closed up a tiny 0.03%, the S&P 500 was flat, actually off just 0.02%, and the Nasdaq was 0.12% lower.

Byron's beats

Google (NASDAQ: GOOGL ) reported earnings on Tuesday evening which pleased the market. The share price closed up a handsome 5.8% on Wednesday. Revenues came in better than expected, especially from YouTube and Search. Their Cloud business is also showing good form, growing 27% to $8 billion in sales for the quarter.

This business is in great shape. EBIT margins grew 1.4% in the quarter to 29.3% after they restructured their personnel (fired some people). So far this year they have bought back a whopping $29.5 billion worth of shares. As a long term shareholder, this means that every year you own more of the company without doing a thing.

Good advertising revenue on YouTube and Search is a sign the US economy is thriving. Companies tend to cut back on advertising spend when times are tough. Advertising online is very effective.

Of course, the AI theme came through strongly in the results commentary. At least 80% of Google ads now use an AI tool to enhance the experience for both the advertiser and the consumer targeted. 70% of generative AI unicorns are Google Cloud customers.

Rock star CFO Ruth Porat will change roles at the end of this year to Chief Investment Officer, that should be interesting.

We rate Google a strong buy at these levels. It only trades at 15 times expected earnings in 2025 and continues to show solid growth within their portfolio of products.

One thing, from Paul

Our goal, as your portfolio manager, is to position you now so that you will own the world's most valuable companies in the next decade. Our best guess is that a good number of the current top performers will remain there.

The five largest corporations by market cap today are Apple (NASDAQ: AAPL ), Microsoft (NASDAQ: MSFT ), Google (NASDAQ: GOOG ), Amazon (NASDAQ: AMZN ) and Nvidia (NASDAQ: NVDA ). We own all of those in Vestact portfolios, and have enjoyed their rise to the top. We also own a number of stocks that are smaller, but very promising.

We remain alert, and if any of the market leaders lose momentum, we will "hop off the bus". To illustrate how important it is to be flexible, in March 2000 the hottest companies on the market were also large cap tech stocks. This was during the original dot-com boom. The big five back then were Cisco (NASDAQ: CSCO ), Microsoft, Nokia (HE: NOKIA ), Oracle (NYSE: ORCL ) and Sun Microsystems. Not all of those remain relevant today.

As a matter of interest, Microsoft had a market cap back then of just $503 billion. Now it's $2 486 billion.

Michael's musings

Investing in stocks is tough. You need mental fortitude to sit on your hands while 30% of your investment goes up in smoke. That is what happened last year, when equity markets got crushed. To make matters worse, there were a few 'fake' rallies along the way, giving investors hope that the worst was over, only for the market to drop further again. Thankfully, the market did bottom in October 2022 and has been heading higher since then.

We are not sure what the next six months will hold. The Fed looks to be done with interest rate hikes and company earnings are coming through strong, so our best guess is that the market will keep going higher. Remember that we care more about share prices in 10 years' time, and less about what will happen six months from now.

To hunker down with confidence during turbulent periods is only possible if you own high-quality companies. Knowing that you are a shareholder in world-leading businesses, with billions in cash on their balance sheet, makes it easier to tune out some of the noise.

If investing in stocks was easy, everyone would be doing it. So pat yourself on the back for taking the plunge into the stock market, and then having the courage to sit tight while the world seems to be on fire around you.

Bright's banter

LVMH (EPA: LVMH ) reported strong numbers in its second-quarter as consumers in Asia and Europe fuelled its sales growth. The US luxury market slowed, the LVMH chief financial officer said the following: "aspirational customers are not shopping as much as they used to."

Group revenue was EUR 42.2 billion up 17% for the first half as fashion and leather goods saw organic revenue increase by 20%, while profits in the segment shot up 14%. This was all thanks to remarkable performance by the Christian Dior and Louis Vuitton brands.

Even though profits in America fell 1%, high-end goods from LVMH's priciest brands remain strong. Very wealthy individuals are less affected by economic factors like inflation and student debt.

The wine and spirits segment, particularly Cognac, took the biggest hit, after facing inventory challenges during the pandemic. The depletion of stimulus payments amid Covid-19 also contributed to the poor sales of US entry-level items.

Meanwhile, European sales increased 18% in the second quarter, driven in part by tourists (of which half came from the US) purchasing luxury goods in cities such as Paris, Rome, and London. Japan grew by 29%, while Asia ex-Japan soared by 34%.

LVMH's business in China is booming, with sales rising 24% in the first half of the year thanks to leather goods and jewellery.

Lastly, LVMH was also hit with higher expenses, especially from that blowout Pharell Williams fashion show back in June. The stock price has had an epic run in the last five years, but softened a little after this update.

Signing off

Asian markets gained this morning. Benchmarks rose in Hong Kong, Tokyo, Shanghai and Seoul. Electric vehicle maker XPeng soared more than 30%, the best performer in the MSCI Asia Pacific Index, thanks to news that Volkswagen (ETR: VOWG_p ) plans to invest $700 million in a JV. Peers like Nio and Li Auto also gained on the news.

US equity futures are in the green in early trade, let's hope we can hold on to these healthy gains. The Rand is trading at around R17.57 to the US Dollar.

There is a military coup going on in Niamey, the capital of Niger. I wonder if we have any readers there? Stay safe.

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