"What happened in the past and relating it to staring at charts to presume to know what is going to happen in the future, I am not too sure that holds much water, in my world at least. Read the past to get the background on the businesses, the deals that mattered and shaped the businesses and cultures of today, that is important. Get a feel for the track record of the businesses that you hold, to know that there is consistency and accountability in each and every way, to ensure that the culture continues into the future. However, past performance means nothing, and does not guarantee future returns."
To market, to market to buy a fat pig. The chances of a Greek default loom large, this time the Europeans are getting much tougher on their Greek counterparts, that is at least the senses that I am getting. The chances of an actual Greek default in reality (I would think) is something that will not happen. The Greeks and their creditors will meet halfway, even if the Greek people get a deal that they think is not fair. Life is not fair, if you win the ovarian lottery, as Warren Buffett calls it, you still have to work fairly hard in order to "get there". The Greek finance minister (the fellow who was attacked in a restaurant last week), is on his way to meet with his French counterpart today. The French have lent a friendly ear to the Greek "problems", lately, well, not so much.
The size and scale of the Greek issues have been contextualised by Mr. Market, I think. Meaning that whilst this is a serious and sizeable problem, it is not the be all and end all of the rest of Europe. The weaker Euro has been pretty good for the export driven economies of Europe. Remember, if you have a portfolio of stocks, diversified by sectors, nature of business, geographically, your portfolio is always going to be impacted by geopolitical events. Be it the slowing Chinese economy, be it the economic travails of Greece. Be it the anxiety of when the Fed is going to raise rates next, be it the worries around the strong Dollar. There is always something going on that is cause for concern, something to give you a reason to stay out of the market so to speak.
That garbage line of sell in May and go away. History, at least stock market history is fun. No, it is wildly entertaining to recall scenarios and what happened back then. What happened in the past and relating it to staring at charts to presume to know what is going to happen in the future, I am not too sure that holds much water, in my world at least. Read the past to get the background on the businesses, the deals that mattered and shaped the businesses and cultures of today, that is important. Get a feel for the track record of the businesses that you hold, to know that there is consistency and accountability in each and every way, to ensure that the culture continues into the future. However, past performance means nothing, and does not guarantee future returns. That is true of companies too. I am more interested in what your view is of the next 5 months, the next 5 years and beyond. Give me your fives.
Session end in Jozi the market closed nearly four tenths of a percent higher, resources had another power day, up nearly three percent as a collective. In the end the market closed at 54,640 points, about a percent off the all time highs. So, notwithstanding the fact that last week was a little average for equity investors, the overall levels have improved significantly as a result of the resource stocks turning up the bunsen burner.
Across the seas in New York, stocks closed around one quarter of a percent better on the day, around half a percent off the early session highs. There was great excitement with the annual Berkshire AGM having closed and the sage of Omaha available for ordinary investors to hear his views on all things that matter, education, the state of the economy and so forth. It was also a pretty rare opportunity to get a glimpse of Charlie Munger, he usually is not that available for these types of lengthy pieces.
If you are looking for all the interviews, separated, then here they are (quickly follow the links, they get stale): CNBC US video. The starting point is this video, I guess if you are only going to watch one, make it this: Berkshire & Buffett celebrate 50 years. Nice, good to see a corporate champion taking their social responsibility seriously.
Company corner
Oh. A pretty small announcement, a little after the market closed here last evening. An announcement from Naspers that The Capital Group Companies (on behalf of their clients) had acquired a stake in Naspers of 5.017 percent of the company. Who? Who are they, The Capital Group Companies? It is a worldwide investment house, headquartered in the US, Los Angeles to be exact. Assets under management, according to their website were 1.25 trillion Dollars as at the end of 2013. I suspect that they did well in 2014 and that number has grown. I presume also that this investment will be inside the Capital Group Screened Emerging Markets Equity Fund, which is domiciled in Luxembourg (I think). The fund has a 3.3 percent weighting towards South Africa, it is relatively small by global standards and was founded only in August of 2011. 86 million Dollars of assets under management. 5 percent of Naspers is around 39 billion Rand. Simple calc suggests that this cannot be the fund that houses all of the Naspers stake, around 3.2 billion Dollars worth.
What is interesting is two things. This is a massive company holding over one and one quarter of a trillion Dollars worth of assets under management. They report to have more experienced and steady management than any other business of its kind, many funds have multiple managers with decades of experience. Decades, that is a long time. To take a stab at Naspers is certainly an endorsement. Then again, perhaps I have not been watching this as closely as everyone else, perhaps they have built their stake up over time.
McDonald's is a stock that we used to own. We sold it. The chief, Steve Easterbrook (new), delivered a 23 minute message to stakeholders, franchise owners and employees (stakeholders, medium rare) in presenting the turnaround plan yesterday. If you are interested in watching, here goes: McDonald's turnaround plan. The crowd did not roar with excitement, the stock was a noticeable loser on the day. The long and the short of it all is that you would not need to present a plan if the current one was not working. McDonald's has been a loser on the technology front (Easterbrook cites a lack of innovation as a reason they have lagged).
You would have to say that if you were chasing yield, this is not a bad place to park money, a 3.5 percent yield before tax in the current environment is good, the shareholders when comparing their returns to the competition want more. A burger is just not a burger. There are gourmet burgers, carb free burgers. I suspect however that the business is better owned when the going gets tough (says Billy Ocean), when the economy is going through a tough patch and hungry folks shop down to affordable quality. As the economy turns, people look for less reliable and more exotic. A burger will always be a burger, the company will always be around, and in the end the menu will adapt to suit the needs of the consumer, albeit at a slow pace. At current growth rates that yield would have to be in the region of 5 percent pre tax to entice me.
Another company changing their ways is Cisco. Although, judging by the muted reaction in the stock price, it seems the market is not too impressed. The announcement came yesterday, pre market: Cisco Board Names Chuck Robbins as Next CEO. More importantly, John Chambers is on his way out as CEO, he does however stay on as Executive Chairman. Sigh. The man should go, that is the opinion of us here at Vestact, although in fairness to Mr. Chambers, Bill Gates had only good words to say about him yesterday. Gates was flanked by Charlie Munger and Warren Buffett in a CNBC exclusive, post the Berkshire AGM. So then I said, well what do we know if Gates gives him that sort of endorsement?
Things that we are reading
Facebook let rip with a pretty astounding fact, two out of three people do not have internet connectivity worldwide. Now whilst I agree with Bill Gates that there are bigger problems than not having the internet (like having electricity to power the connection device up), I do think that the internet has the ability to change the world from an education point of view. So, big up to the Zuck and the rest of the folks at Facebook as they embark on their project of trying to get everyone online: THE MORE WE CONNECT, THE BETTER IT GETS.
When Bill Gross was at Pimco, they were the biggest bond fund in the world. Since his high profile departure, there have been fund outflows, so much so that the mantle of the largest bond fund in the world has been passed to Vanguard, see the WSJ article (subscription only, you can get a few free methinks): Fund overtakes Pimco's Total Return.
I suppose this is a pretty good question: Are There Too Many Buffett Disciples? The Woodstock of Capitalism. I am not too sure if there can be too many disciples of Buffett, the guy is a good role model, the friendly and pragmatic billionaire investor next door. He still collects and pays for his McDonald's, he suggested yesterday. They even know my name, said Buffett in an interview, yeah, I am pretty sure that they do!!!
Elton John sung that sorry seemed to be the hardest word, there is another word, however. No. If you are looking to be a leader, it turns out you may have to use that word more often: A Successful Businessperson Has to Learn to Say No. Practice it in a "nice" way, ok?
Home again, home again, jiggety-jog. Commodity prices seem to be up, I guess from where they were yesterday, this bodes well for the rest of the market is my best guess. The Australians have cut the benchmark index to a record low 2 percent. More importantly, Chinese stocks are getting absolutely smoked, down 4 percent in Shanghai and one and a half percent in Hong Kong. Like we mentioned yesterday, stocks in that part of the world have rallied hard, yet they are less than half of the lofty valuations of 2007. As usual, expect the many I-told-you-so's to turn up. When those types say that, irritate them by asking for some more predictions of the future. Ha Ha!
Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.
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