Market scorecard
US markets pushed even higher on Friday as megacap tech stocks continued to rise. All three major indices enjoyed a fourth straight week of gains and the S&P 500 closed at an all-time high. Your portfolio balance should be looking good.
The US monthly jobs report for Friday showed a robust acceleration in hiring, surpassing economists' forecast. Employers added a seasonally-adjusted 353 000 jobs last month, which was the best in a year. Additionally, wage increases exceeded expectations, rising by 4.5% from the previous year.
In company news, Meta Platforms (NASDAQ:META) closed up an astonishing 20.3%, adding $204.5 billion to its market capitalisation, the biggest one-day move for any US company in history after the social media giant reported its largest quarterly sales increase in two years and declared its first-ever dividend. There were not many market losers on Friday, but telecom and cable company Charter Communications (NASDAQ:CHTR) managed to fall by 16.5% thanks to losses in its subscriber base.
On Friday, the JSE All-share closed down 0.12%, but more importantly, the S&P 500 rose 1.07%, and the Nasdaq zoomed another 1.74% higher.
Michael's musings
On Thursday evening, Apple (NASDAQ:AAPL) reported its earnings for the festive season quarter. The tech behemoth had revenue and profits that were higher than the street was expecting, posting sales of $120 billion for the quarter, a growth of 2.1% over a year earlier. The share price was little moved.
There was some concern last year amongst Apple analysts that the iPhone was losing its appeal. The good news is that is clearly not the case, with sales of iPhones up 6%. The very important services division showed revenue growth of 11%.
Tim Cook mentioned the magical two letters, "A + I" during the earnings call, saying that Apple would have their own products out later this year. Since 2017, Apple has bought 21 AI start-ups, showing that it is also a real contender in this world-changing technology.
Apple will most likely bring out its own version of ChatGPT and Bard, becoming an integral part of how the Apple ecosystem works. Think of asking Siri to plan your next holiday, she will access your Booking.com app, your calendar app, and Uber app to facilitate all of the planning.
What we know at the moment is that Apple is focusing on building AI services that work really well with its in-house chipsets on iPhones and Macs, running on the device instead of needing internet access. This a big advantage over its competitors. When the AI technology is ready, Apple will also be able to send it to their over 1 billion devices on the ecosystem by way of an operating system upgrade, putting it ahead of the competition.
True to form, Apple generally isn't first with new products, but when they do launch, they are miles ahead of everyone else. Let's see if it will be the same with AI.
One thing, from Paul
Banking sector analyst Dick Bove just retired after a 50 year career on Wall Street. In an interview with the FT, he described how equity analysts went from the very top of the industry in the late 1960s to the very bottom today.
In the 1970s, mutual funds were required by law to confirm that they'd done significant fundamental research on whatever they were putting into their funds, so analysts were hired to do that work. But at the end of that decade the market crashed and stocks fell anyway.
So, the rules were changed and equity analysts were demoted and put to work helping investment banking and corporate finance teams. They were told to write glowing reports about companies that were being listed by their colleagues on major markets.
In 2002 Henry Blodget, a high-profile analyst at Merrill Lynch, was revealed to have sent private emails in which he described companies as "junk," "crap," and "dogs" while having strong buy recommendations on them. That scandal resulted in a whole set of rules being created to prevent conflicts of interest. Analysts got demoted again.
Today, most equity analysts work as in-house aides for traders, who tend to be anti-intellectuals. As Bove puts it, "a lot of guys do really phenomenal work for many hours, but nobody gives a damn about what they write."
Byron's beats
Last week we mentioned that John Deere announced a strategic partnership with SpaceX to expand rural connectivity for farmers through their satellite network. I wanted to go into it in more detail because I find it really cool.
I've spoken to a number of farmers who complain that their Deere equipment is limited because of a lack of signal. Naturally many farms are situated in rural areas with little to no cell phone coverage. With Starlink beaming a signal straight to the tractor, this limitation has just been solved. All farmers have to do is install a small device onto their farming equipment along with a LTE modem and they are golden.
Now imagine how helpful this would be in South Africa? But alas ICASA continues to block Starlink in the country.
Bright's banter
Ferrari (NYSE:RACE) reported a solid set of numbers on Thursday with optimistic projections of continued revenue and core earnings growth throughout the year, driven by a robust order book extending into 2025.
Ferrari's shares surged 9.5%, approaching a record market value of $100 billion. Shipments rose by 3% in 2023, reaching 13 663 vehicles, thanks to the Purosangue model's introduction, their first SUV line.
Management also announced plans for their entry into the electric vehicle market by the final quarter of 2024. The company makes a lot of money on personalisation rates, a significant contributor to revenue, I wonder if this EV version will have lower margins as there is less to personalise?
Ferrari's strategic move to hire Lewis Hamilton for its Formula One team also garnered attention. The reported details of Lewis Hamilton's contract with Ferrari suggest an annual salary of EUR40 million for a two-season deal, with an option for a third year. Including bonuses, the seven-time world champion could potentially earn a total of EUR100 million throughout the agreement.
Ferrari's strong cash generation, exceeding EUR930 million, led to plans for an EUR800 million distribution to shareholders by way of dividends and share buybacks. Ferrari's guidance for 2024 includes adjusted profits of at least EUR 2.45 billion.
Ferrari's financial performance in the fourth quarter is impressive and a positive sign for high-end car manufacturers.
Signing off
Asian markets are mostly down this morning. Benchmarks fell in Hong Kong, South Korea, and mainland China, while India and Japan rose. Chinese markets led the losses with small caps down 8% intraday in another volatile session following last week's rout. Traders aren't convinced by the Politburo's pledge to stabilise the market. Funny that.
US equity futures are marginally lower, but there are many hours to go before Wall Street opens for business. The Rand is trading at R18.94 to the US Dollar.
We are looking forward to more earnings reports this week from the following companies: McDonald's (NYSE:MCD), Caterpillar (NYSE:CAT), Eli Lilly (NYSE:LLY), Amgen (NASDAQ:AMGN), Spotify (NYSE:SPOT), Enphase (NASDAQ:ENPH), Alibaba (NYSE:BABA), Disney (NYSE:DIS), Uber (NYSE:UBER), Unilever (LON:ULVR), Kenvue (NYSE:KVUE), and PepsiCo (NASDAQ:PEP).
Well done to Bafana Bafana over the weekend! Some super-human goalkeeping by Ronwen Williams. Make sure to wear your soccer jersey on Wednesday when we play Nigeria in the semi-finals.
It's sunny in Joburg. Have a great week.