This week’s theme focuses on success and regress over the past week within corporate and country specific contexts. Ironically, we feature the Tesla share price as a loser, although we continue to support the profound innovation and global disruption emanating from the company itself. Conversely, traditional homegrown South African grocer Shoprite, delivered a most impressive result with the share price gaining 28.2% for the week. From a futuristic perspective, we have also included a short video clip of a Sky News interview with Fundsmith founder Terry Smith, who draws parallels between the economic aftermath of the 1918 – 1920 Spanish Flu pandemic, and the potential outcomes following the current Covid-19 crisis. His thesis is that the current recession could turn into a winning decade of growth.
Global News
- Loser – Tesla and Elon Musk. Tesla’s valuation fell by 21% after news was published on a possible partnership with competitors Nikola Corp. and General Motors Co. This added to the selloff that was already occurring after Telsa was snubbed from being included in the S&P 500 Index. In turn, Elon Musk’s net worth sank by $16.3 billion on Tuesday, this being the largest single-day reduction in the history of the Bloomberg Billionaires Index.
- Winner – Some of the World’s Wealthiest People get Richer. At least seven tycoons invested a combined $700 million into Jack Ma’s Ant Group, in which they could see a return of 50% based on Ant’s targeted valuation. This is according to a Bloomberg analysis of the firm’s IPO prospectus.
- Loser – AstraZeneca Plc. AstraZeneca has had to pause human trials of its Covid-19 vaccine after a patient developed an unknown illness. While it is normal for trials to have a pause, it may mean that hopes for a vaccine to be available before the end of the year are unlikely.
- Winner –Terry Smith, chief executive of Fundsmith, our top-performing global equity fund year-to-date. Smith sets out his views for a potential market recovery, comparing the end of Covid-19 to the end of the Spanish Flu which was followed by the boom of the roaring 20s. Follow this link for the clip.
- Loser – Tech Shares. Tech Shares continued to selloff over the week. Apple Inc., Microsoft Corp., and Facebook Inc. all faced a slumped as the Nasdaq 100 Index dropped by 3.7% since Monday, and 7.7% since the start of this month.
- Loser – Brexit, the UK, and Prime Minister Johnson. Brexit continues to be a thorn in the side of Britain and the European Union. The UK attempted to rewrite last year’s divorce deal – an action which would break international law. The plan to abandon the legally binding treaty was slammed by members of Johnson’s Conservative Party and the country’s most senior government lawyer, while the director-general at the Attorney General’s office resigned. As a result, concern is increasing of a ‘no deal’, messy Brexit.
Local News
- Loser – South Africa’s GDP. Domestic GDP contracted by 51% in the second quarter of 2020, primarily due to the impact of the Covid-19 hard lockdown. This now means that the SA economy has declined for four consecutive quarters. Over the year, analysts anticipate SA GDP to contract by 8.9%.
- Winner – Shoprite. Africa’s biggest grocer reported a 16.6% increase in adjusted headline earnings per share for the year ending 28 June 2020. Additionally, in a reversal of strategy, Shoprite has decided to quit Kenya and plans to pull all operations there by the end of December. The grocer is busy reviewing a long-term strategy of rolling out hundreds of stores in risky but lucrative markets such as Nigeria, Angola, and Zambia.
- Loser – Office Space Market. Commercial property companies have been reporting lower rental yields and higher vacancy rates since the Covid-19 lockdown. Retail and commercial properties are likely to continue to suffer from behavioural and structural changes in the aftermath of the pandemic. However certain sectors in the property industry, such as warehouses, may still offer a compelling investment case. For more on this, follow this link.
- Winner – Two South African wines receive a rare perfect score from a top UK wine critic. Tim Atkin awarded two perfect scores of 100 points to the 2018 Porseleinberg Syrah, and the 2019 Sadie Family Skurfberg Chenin Blanc. Atkin says that South Africa is currently making the best wines in its history – despite the problems it faces.
Sources: Dynasty, Reuters, Bloomberg Markets, The New York Times, Daily Maverick, and Moneyweb, etc
