The Gram Turns Ten

Published 2020/10/08, 09:45
Updated 2023/07/09, 12:32

Market Scorecard

The focus for markets on Tuesday was that Republicans had been instructed by Trump to pull out of the stimulus deal talks, which sent stocks tumbling. Once the market had closed, Trump fired off a few more tweets saying that he would sign individual stimulus deals if they came across his desk. Effectively stimulus is back on the menu. Democrats and Republicans seem to be on the same page when it comes to an air-line relief package, something that the markets interpreted as Congress' willingness to support the US economy. Markets now seem to be back in 'risk-on' mode.

Yesterday the JSE All-share closed up 1.01%, the S&P 500 closed up 1.74%, and the Nasdaq closed up 1.88%.

One Thing, From Paul

According to news reports, yesterday was Instagram's 10th birthday. In case you forgot, Instagram was acquired by the Facebook (NASDAQ:FB) group just two years after it was founded. So it's been in the fold for the last eight years.

According to the celebratory email sent to journalists, there are 900 million daily emoji reactions on Instagram, and 50% of users watch a video each day. I run one Instagram account, for a local running group, and you can see it here: Tyrone Harriers on Instagram.

As Byron reported here yesterday, a misguided committee of mostly Democrats at the US Congress has been working for years on a competition probe into the big tech companies, and has some half-baked proposals to break up Facebook. According to their crackpot plan, Instagram should be spun off.

Facebook hasn't disclosed how many people use Instagram since 2018, which is slightly annoying. Neither do they disclose Instagram's unique revenue, though it is rumoured to be the fastest-growing part of Facebook's advertising business, contributing about $20 billion in 2019.

Of course, it's because Facebook CEO Mark Zuckerberg wants Instagram to be seen as an indivisible part of the group, running on top of shared systems. They are merging messaging, shopping, and other operations.

In response to the Congressional committee the company said: "Facebook has built Instagram from a niche photo-sharing app with no monetization plans into the phenomenal success story that it is today?and which it never would have become without Facebook's investment of time, resources, and know-how". Quite so.

Byron's Beats

This Bloomberg article titled London's Largest Car-Charging Network Bought by French Oil Giant caught my attention. Firstly because this is an indication that electric vehicles are certainly going mainstream and secondly because it was an oil company who bought the network. Talk about hedging your bets.

Then I got thinking about the gap for this in the SA market. Electric vehicles are inevitable, someone should start building the infrastructure here. It reminds me of the rush to fibre dominance we are currently witnessing. Who will dominate the electric vehicle charging network?

Unfortunately, in SA there are other concerns you need to consider. Power supply is one of them. But as a friend pointed out to me who works in the fibre infrastructure world, crime is your biggest challenge. Charging stations are expensive pieces of equipment and will need lots of security. Maybe the solution is to set them up within guarded petrol stations? It is sad that these are the things we have to think about but that is the reality.

Anyone up for a big infrastructure challenge?

Michael's Musings

At Vestact, a central part of our job is to think long term to position your money - and our own money - into companies that will be relevant tomorrow. Visual Capitalist had a great graph showing how the Dow Jones composition has changed since October 1928. Not one company has stayed in the index from 1928 until today, which is not too surprising. The Dow is an index of only 30 companies which are meant to represent the broader US economy, so there is a constant fight for spaces.

With the significant rise of tech companies over the last few years, a popular narrative is for people to talk about how tomorrow's heroes won't be the same as today. The implication of the narrative is that investing in established tech companies now is too late. Looking at the infographic, I noticed that many companies hang around and stay relevant for many years. It is not a case of a company arriving on the scene, shooting the lights out and then disappearing into obscurity. Exxon (NYSE:XOM), which used to be Standard Oil was in the index from day one, and only got booted out this year. Procter & Gamble joined the index in 1932 and are still there. Looking at the current constituents, 17 out of the 30, have been part of the Dow for over 20 years.

Technology is the new consumer staple and I expect these companies to remain relevant for the foreseeable future. You can see the full infographic here - Every Company In and Out of the Dow Jones Industrial Average Since 1928.

Dow Jones Industrial Average Companies Since 1928

Infographic courtesy of: Visual Capitalist

Bright's Banter

Deliveroo, the food delivery app and UberEats competitor in Europe, is said to have started the admin process to file for IPO in 2021. The Amazon-backed unicorn has appointed its investment bankers, Goldman Sachs (NYSE:GS), to help float its shares which could value the business at over $2.6 billion.

Why do we like Deliveroo? Well Amazon (NASDAQ:AMZN) recently bought a 16% stake which got the thumbs up from UK's competition watchdog in August 2020. Amazon invested $575 million in the May 2019 funding round but the money was set aside over competition concerns after the likes of Domino's Pizza (NYSE:DPZ) lobbied against the deal.

Deliveroo was one of the beneficiaries of the lockdown which saw its sales soar as customers turned to food delivery services during the covid-19 pandemic. The food delivery company said that it hired 15 000 new contractors in September and was profitable through May and June of 2020.

Signing Off

It was the US vice-president debate last night, which was a lot more civilised than the Trump-Biden debate last week. The biggest talking point from the evening seems to be a giant fly landing on one candidates head. The Rand has been range bound over the last 24 hours, now trading at $/R16.60.

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