Market Scorecard
Global markets continue to move higher, being driven by 'stay-at-home' stocks like Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), Facebook (NASDAQ:FB) and Zoom. In the case of Zoom, it closed higher by 40% yesterday due to very strong results. Not all stocks have been having a good time though, 'reopening stocks' like property and oil companies have been struggling. It shows that simply being in the market has not been enough, you needed to be in the correct sectors.
Yesterday the JSE All-share closed up 0.81%, the S&P 500 closed up 0.75%, and the Nasdaq closed up 1.39%.
One Thing, From Paul
Prosus (JO:PRXJn) is set to enter the EuroSTOXX 50 index on September 18, having finally satisfied the criteria for inclusion at the end of August.
It is hoped that this will create more demand for the stock, and help close the deep discount that persists between the market value of Prosus and its holding in Tencent (HK:0700). The valuation gap is currently about 32%, according to Goldman Sachs (NYSE:GS). Remember, Naspers (JO:NPNJn) owns most of Prosus. You probably own both in your JSE portfolio.
Daily Maverick journalist Sasha Planting wrote a fresh update about this whole issue yesterday, and it's worth a read. She points out that Tencent has had a very good year, but Prosus and Naspers are lagging again. She notes that the other e-commerce assets in the Prosus stable are coming along, but rather slowly. The pressure is rising on management to take further steps to unlock value here.
Naspers, a year on and the problems are much the same.
Byron's Beats
Facebook (NASDAQ:FB) is trading at an all time high, just under $300 a share. That gives it a market cap of nearly $850bn. Not far to go to reach the $1 trillion club. After its recent rally you may think it trades at ridiculous valuations? Not really actually. It trades on a forward PE of less than 30, which is not bad in this low interest rate environment.
I personally believe that much of this has to do with their pivot into online retail. On the 25th of August they introduced Facebook Shop. Facebook Shop makes it easy to find businesses, discover new ones and buy their items. This comes shortly after Instagram Shop was launched in July.
The feature is now officially available to any eligible business to sell their products and add customisable features. There is also a messaging button which allows clients and merchants to connect via WhatsApp, Messenger or Instagram Direct. I expect a lot more to come from this Facebook feature.
Michael's Musings
In 2018 Tesla (NASDAQ:TSLA) came very close to running out of cash. If that had happened, all the shorts could have been right, and the stock would have imploded. Since then though, they have managed to open their Chinese factory, which only took 8-months to build and was 65% of the cost compared to their California plant. Having an extra factory has been a game-changer for the company. They are in the process of building a third Gigafactory in Germany, increasing their capacity even further.
In 2020, the Tesla share price is up over 500%! Musk and his team are taking advantage of the surge in share price to raise money to fund a new Gigafactory in Texas, and to pay down debt. In February, Tesla raised $2 billion from stock sales, and yesterday they announced a further $5 billion sale of stock. If Tesla had done this in 2018, they would have added an extra 10% in shares to the market. Thanks to the share price appreciation, this is only 1% now.
By raising this extra money and building more factories, Tesla has effectively guaranteed they won't go bust. Two years ago, Tesla was in a binary position, where it would go to zero or soar higher. Luckily for the planet and for investors, it was the latter.
Bright's Banter
I am often asked the question "what is your most popular podcast in The Art of Randomness?" Well, I went to check the podcast stats and the results were quite surprising. The podcast I did with JP Verster came up top notwithstanding the fact that I never posted about it on the Vestact daily message.
Jean-Pierre (JP) Verster is one of South Africa's renowned hedge fund managers, who over the course of his career has made some legendary trades. He is a CA, CFA and CAIA showing his passion for his specialised "Quantamental" investment strategy which he has built over 10-years.
We discuss his upbringing as well as his outstanding academic journey and his experience with 3rd-year accounting. We also discuss how he started off his career as an articles clerk, rotating through different roles in the Standard Bank (JO:SBKJ) CA Programme.
He also walks us through his first experience of investment management at Melville Douglas. His introduction and exposure to a hedge fund business when he become part of the award-winning team at 36ONE Asset Management.
He shares with us his reading habits, his ability to automate processes to save time and how he started his entrepreneurial journey by partnering with Fairtree Asset Management, and thereafter launching Protea Capital Management as a stand-alone investment management firm.
JP also shares some nuggets around personal finance, how to build a successful investment firm, some of his hobbies and where he sees South Africa going in the next few years.
Don't forget to hit the subscribe button and rate the podcast on iTunes, Spotify (NYSE:SPOT), Google (NASDAQ:GOOGL) Podcasts, PocketCast, and wherever you consume your podcasts.
Signing Off
Australian GDP came out this morning showing a decline of 6.3% over the last year, worse than the forecast of a decline of 5.3%. Other data out today includes ADP jobs figures from the US, which gives an indication of the official unemployment data released on Friday. The JSE All-share is higher this morning and the Rand is looking good at $/R 16.63.