"The price is important, this is by no means small fry for Visa, they would probably have to stop buying back that many shares, they need the cash to pay these banks. A good outcome I think for all concerned. The only sticking point? The price it seems could vary from 14 to 21 billion Dollars, that is a huge difference for both parties. Visa has a market capitalisation of 170 billion Dollars, the difference is significant. This does represent many opportunities for Visa, I saw an analyst report that estimated that as much as 80 percent of all spend in Western Europe takes place in cold hard cash."
To market, to market to buy a fat pig. Welcome back Michael. He is back from Honeymoon, he went to Asia to do some market research, visiting Starbucks, the Apple store (he fiddled with an Apple Watch) and testing global consumer retail in general. Travel makes us wiser and opens our eyes to the rest of the world. It makes us better at seeing "things" from a global perspective. We see the world through new eyes. I encourage travel! Nice to have you back with that shiny new ring on your finger. Why is the wedding ring put on that finger? The Romans believed that there was a vein directly to your heart, from that finger, the "Vena Amoris". The ring completes the loop. Plus it is also pretty hard to fit anything else comfortably onto that finger if it isn't round, or ring shaped.
Markets. No fat pigs being bought by me, for one I do not eat bacon (my daughters have waved bacon in my face to tell me it is delicious) and secondly I have not been out to an informal market for a while, I do not see hipsters sampling craft beer and organic coffee. The closest I get to organic is Woolies. Snob. I do try and price everything and anything, just to get a sense of where it is, what it used to be and by global standards (for the quality of produce) whether it is cheap or not. Talking organic and cheap, the disruptors of the organic produce market, Whole Foods in the US, has been having another tough time of it lately. The company have announced a chain of smaller and cheaper chain stores, that will carry the same organic goodness as the flagship stores. No new name. Sales are however slowing, the stock has been volatile, the company still demands a premium at 26 times earnings. The price we pay for health? No price really, which is why I think this company has legs into the future, I welcome the Whole Foods announcement. Tell me, personally, does it make a difference to you whether or not your food is organic or not?
US markets opened strongly and closed strongly, thanks to a fairly strong US labour market. The monthly Employment Situation, the most watched, highly anticipated and quickly forgotten report, referred to as "the jobs report" beat expectations. The headline number is all that counts in my experience, nobody else cares about the deeper stuff at the beginning, i.e. the number of jobs created. The unemployment rate, the hourly earnings, the participation rate (number of people actively employed), marginally attached workers and so on. It is all there, including the teenage unemployment rate (i.e. those not busy with X-Box), different ethnic groups, those with and without post graduate degrees and diplomas. I think that this should be something that all students look at globally, just to give them a reason to not be in all of the bottom categories.
Locally we snapped a losing streak, stocks ending the session off a percent better, financials were the main winners. It was pretty broad based, the rally. This morning over in Asia there is a broad based rally, the People's Bank of China being the central bank in China lowered interest rates over the weekend. Stock markets are on fire in China, the suggestion is that this is the first round of cuts, there is plenty of fat on the bone. Our only direct interest in this is TenCent, which forms the rump of Naspers' valuation. Even though, as we know, Naspers has multiple businesses across the globe. Including the amazing satellite television offering here, DSTV is a great product and whilst you may argue that it is expensive, I always say, relative to what? What can you get for that amount of entertainment for that price? Ten visits to the movies a month, and that is without the popcorn and sweeties. Add that in, and it is just two or three visits. I can watch countless movies and series (and more importantly sport) in HD from the comfort of my couch for 60 odd Dollars a month. Less than a ticket to a Rugby test. Makes you think, not so?
Thanks! Another set of observations from "the good doctor" about how life has improved significantly over his time. This is from a medical doctor who knows that we think that healthcare in general will be a very profitable investment over the coming years. I have had this discussion with him many times, thanks for sharing.
"There are so many tech advancements that have an incredible effect in our daily lives. A litmus test is to remove it from our lives and check if we are still functional without it. The Internet, motor cars (or other forms of transport), electricity, the Apple products, water borne sewerage. However, still billions live without these utilities and continue to live relatively happily.
My vote is on chemical substances that we ingest on a daily basis: food and medicine. Technology has allowed food to be produced in massive relatively cheap quantities that today is the equivalent of 2900 calories per capita; however, the average person requires about 2500 calories. So in fact there is a surplus of about four hundreds calorie per capita. Unfortunately, there are still 850 million who starve, and 1 billion are obese; 2 billion with micronutrient deficiency.
Forty per cent of all food produced is wasted. Get the economics and politics right, there is enough food for all. Thanks to technology from seed to table. Technology that will improve yield across the planet include mobile phones, GPS, cameras to pick up disease very quickly before the human eye, and robotics. Controversially, of course, it is the Monsanto's and Syngenta's of the world making a major dent with their seeds and pesticides.
Secondly, the other kind of "food" is pharmaceuticals. Billions are kept alive and in relative good health by technological advancements by pharmaceutical r&d, and manufacture: ARVs for aids, anti hypertensives, insulin for diabetes, and thousands more, and of course anaesthetics for life saving operations. Witness the massive m&a activity in the biotech/pharma arena. Locally, Aspen, Adcock Ingram, Clicks, Dischem, Cipla, .... Manufacturing, distributing, wholesaling, retailing medicines.
Of course, the best metric is improved longevity, which is on the rise across the planet. ARVs have now made HIV/AIDS a chronic illness. Due to Meds, primarily; lifestyle choices still a poor second. Technology has developed chemical substances to work its stuff intricately with complex biochemical pathways.
Alzheimer's is the next frontier. Maybe Biogen will advance the cause with ADU.
The next challenge is to improve the quality of food, better distribution, get us to move more naturally, ...
Not only add years to our lives, but adding life to our years."
Your observations are spot on, and once again food, medicine and technology come to the fore, as far as investments and technology is concerned. We remain heavily invested in these themes, consumer based investments too.
Company corner
Visa Europe could now belong to Visa as a whole, that is the news doing the rounds. Just to remind you, when Visa listed, the banks in Europe did not take the Visa shares straight away, they basically gave themselves time to think about it and they could at any point exercise a put. When we say European banks, Bloomberg reminds us in the article (Visa Said in Talks to Buy Visa Europe for Up to $20 Billion), that as many as 3000 upwards have a stake. If the companies are collectively looking to cash in, this sounds like a good time. European banks no doubt need the money to remain well capitalised in what is still a tough environment, Visa would love to own all of Visa Europe.
The price is important, this is by no means small fry for Visa, they would probably have to stop buying back that many shares, they need the cash to pay these banks. A good outcome I think for all concerned. The only sticking point? The price it seems could vary from 14 to 21 billion Dollars, that is a huge difference for both parties. Visa has a market capitalisation of 170 billion Dollars, the difference is significant. This does represent many opportunities for Visa, I saw an analyst report that estimated that as much as 80 percent of all spend in Western Europe takes place in cold hard cash. Why? It is astonishing to think that this still happens, as a rule I carry as little, or no cash whatsoever. All of the time. It seems that I am really in the minority. If Visa could get all of the European market, and the price was right, this certainly represents a huge opportunity, a growth one in Europe. How about that? Growth in Europe and opportunities, how often do we think that those two do not belong in the same sentence. At the same time the ability for online retail expansion across the continent continues to grow. We maintain our buy rating on Visa.
Things that we are reading
Echoing what we have said all along, the fact that people a) do not like the current recovery (they have been too defensive) and b) are constantly bringing us articles on how the world is ending. Cullen Roche in this post nails it: The Economic Recovery that Can't Get Any Respect. These two lines say it all: "If I wanted to be the most popular kid in the financial blogosphere I'd write dramatic articles every day about how the world is ending and what the next crisis is going to be. That's 10X more exciting (and useless) than a post like this."
Here is an example of the stock market not being efficient in the short term - During One Hour Every Day, China's Stock Rally Falls Apart. Now that the trend has been discovered you can be fairly sure that it wont continue.
This article highlights how stats can often be wrong/manipulated. The article also points to where eating habits may move - Why what we think about eating is so often wrong.
The internet was a big change in the models of retailers, drones may be the next big shift in retail - Amazon wants an army of drones to chase you down to get you your package.
Home again, home again, jiggety-jog. Mixed here at the start, resources are heading in the right direction, as a collective they are nearly above the rest of the market gains for the year. The overall market is back above 54 thousand again for the week. Ahead we have European GDP and CPI, the Greeks have an obligation to meet the IMF tomorrow. I am guessing everyone will look at that as the main point and place to pay attention seemingly. Keep buying and holding quality, that is our mantra.
Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.
Follow Sasha, Byron and Michael on Twitter
087 985 0939
No comments:
Post a Comment