Money with a dash of Funny: Buffett

Showing posts with label Buffett. Show all posts

Monday, 8 May 2017

The Caffeine Bean

"Now that the numbers are out of the way, there are two key areas that management spoke about. An area of concern, which was the opening point from the new CEO Kevin Johnson is the state of US malls. Foot traffic to malls is slowing and a number of malls are closing."

To market to market to buy a fat pig OK, first things first, Macron won and the new French president will be the youngest ever in the history of their democracy. Even though, as we stand now, this is the French Fifth Republic, that dates back to 1958. A time when Charles de Gaulle was large and in charge. In fact, this version is the second longest of all their republics since the abolishment of the monarchy, back in 1789. France has a semi-presidential system, which means that the president and the prime minister and cabinet work together. At least that is the way that I understand it.

Whatever the system of government, the important thing here was the French have a pro business and a pro European president, and I think in light of the anti-establishment votes from last year, this is a good thing for integration, free trade and it also tells you that people rebuffed the idea of isolation and what is plain racism, masked as "nationalism". Another fact, before we shelve this as "good news", the first French president was Louis-Napoleon Bonaparte, or just the nephew of THE Napoleon, to you and I. And he (nephew of Napoleon) then staged a coup in 1851, probably not enjoying the idea of democracy so much. From 1871 onwards however, France has had a president, with regular elections, interrupted by the Second World War. As you can quickly tell, it is difficult to have economic continuity with all these political disruptions. Many people will not invest when governments flip and flop.

That is why I borrow that line from Warren Buffett, when he says something along the lines that the US has had 250 years of uninterrupted economic growth and prosperity. Sure, there have been wars (a big civil one too), the program has been to keep it on the straight and narrow. That is why it works, and will continue to work over the next few decades that we have to look forward to as an investor. France, as you can see, has had too many interruptions. Hopefully this is the start of a long and bright future for Europe, notwithstanding many naysayers. If one thinks about it, the UK used their own currency and had border controls, had their own central banks, the rest of Europe did not. Which is why, in my mind, the longer the European "experiment" proceeds, the more likely it is going to be more and more difficult to unpick in the modern era.

To market quick sticks. Here in Jozi, Jozi on Friday, stocks rose around one-third of a percent. Resources rose over a percent and a half, Anglo, South32 at the top of the leaderboards, with Bidcorp also gaining major traction, up two and a half percent on the day. I suspect that the stronger Pound has something to do with it. At the other end of the spectrum and suffering from a very weak oil price, was MTN. I suspect that their trading update in which they suggested that more capex in all of their territories was less of a "concern", it is rather trading as a proxy for the oil price (Nigeria and Iran) is the reason the price has been weak.

Over the seas and across the oceans, in New York, New York, stocks ended the day in the green. It was jobs Friday - The Employment Situation Summary. The numbers were all generally "good" and moving in the right direction. I just get the sense that it may not get much better than where we are right now, it may be a steady 150 to 200 thousand jobs addition, and the unemployment rate flat. The Dow added one-quarter of a percent to top 21 thousand (again), whilst the S&P 500 touched an all time high, crossing 2400 points for the first time. The nerds of NASDAQ "got close". Apple inc. touched an all time high, I guess the biggest stock in the biggest market both reaching all time highs is not a coincidence.

It was Buffett time again over the weekend, the annual general meeting of Berkshire took place Saturday and the masses that come in their droves to Omaha must both please and irritate the locals. Pleasing, as it creates employment and awareness and irritating, as it must feel like the wildebeest migration for the locals, and they are simple river birds minding their own business. There were more than a few nuggets, including Buffett underestimating the brilliance of Jeff Bezos of Amazon and Munger being sorry about not investing in Google. And saying that he got IBM wrong and was glad that they (Berkshire) had bought Apple recently. Apple being more a consumer company (with wonderful products).

What is so very refreshing is that Buffett and Munger speak about learning all of the time, the fact that they continue to make mistakes, rectify those and then look at themselves long and hard in the mirror. I love that about these two, I love that the company can continue to evolve as they enter their last few years of investing. In the next ten years I suspect that both of them will be gone, at least from an investment point of view.

Even if Charlie makes it beyond 100 and has all the experience in the world, he may not be able to attend these types of meetings. We will continue through the week to bring you some Charlie and Warren time! See the Bloomberg piece - Buffett Confronts Search for Next Big Thing After Missed Chances.

Company corner

At the end of April we had Q2 numbers from Starbucks which missed what the market was hoping for. The result was a 1% drop in the share price, so not a huge miss. Having a look YTD, Starbucks is up 10% when the broader market is up a little over 7% so the company is still doing better than the average. Onto the numbers!

Revenues were up 6%, with Global and US comparable sales up 3% and Chinese comparable sales up 7%. For the US based stores the average ticket price was up 4% but transactions were down 2%, which seems to be inline with the change in the rewards program where value is now rewarded instead of transaction numbers. The number that matters to me is what do margins look like? They managed to grow their operating margin by 40 bps to 17.7%. Thanks to the margin increase they increased operating profit by 8.2%, when this fell to the bottom line, net Income came in higher by 13.5% at $653 million.

Now that the numbers are out of the way, there are two key areas that management spoke about. An area of concern, which was the opening point from the new CEO Kevin Johnson is the state of US malls. Foot traffic to malls is slowing and a number of malls are closing. If people are shopping more online, they are not stopping at Starbucks to get a caffein dose to keep their shopping spree going. On this point Kevin noted that they aren't seeing any significant impact on Starbucks branded stores because the stores are designed to be "destination stores/ experiences". Interesting to note that Teavana (Tea company), which they bought in 2012 is really feeling the heat of the mall slow down. With store upgrades the stores should come right.

To increase the destination offering they are opening up ultra premium stores called their reserve stores, where a coffee sells for around $12. There are only 5 stores currently with another being built in Chicago. Paul did some investigating when he was in Seattle at the end of last year, he said the experience was amazing and that the store is becoming a tourist attraction itself.

The next big theme is their growth in China, where management say you need to actually see what is happening to believe how popular the brand is. Currently they are opening up a new store every 15 hours. China is important because this is where most of the growth is going to come from over the next decade. On a margin basis, China increased margins by 380bps in comparison to the Americas where margins dropped by 130 bps.

Another company that we own, Tencent, has partnered with Starbucks in China. Currently 29% of all transactions are paid with WeChat pay. The easier that you make it for people to pay and for people to gift Starbucks to others, the more orders come through. In the US, including gift cards, 44% of all transactions are prepaid.

Given the huge growth potential in China and the moat created by their premium brand status, Starbucks trades on a premium to other food chains. In our opinion a deserved pricing. Don't expect fireworks from the share price but expect this company to be worth more in 10 years time with a whole lot less shares in issue.

The Amgen share price has been under pressure since Friday the 13th of March this year. Well, let me rephrase that. The Amgen share price took a knock on that day as a result of a fairly innocuous release: Repatha (Evolocumab) Demonstrates Reduced Need For Apheresis In Patients With High LDL Cholesterol In Phase 3 Study. Let us just say that the outcome was not what people expected.

This has seen investors dial back their future revenue calculations (in light of expectations falling on Repatha sales), hence the price coming back to 160 odd Dollars from 180. Mind you, in the lead up to the US presidential election conclusion, Clinton being the likely candidate was going to come down heavy on these businesses. Trump himself has had a bit to say about the pricing of their therapies. The truth is that the company spends double digit amounts in revenues to come up with life saving therapies. I know first hand how emotive the decisions around these therapies can be, they deplete savings at a pace. I can understand that there is a certain responsibility of these businesses to deliver cheap life saving therapies, they cannot do that in perpetuity unless they have the early adopters.

And what that means is that having made their therapies available (which have to get through miles of tests and scrutiny before fit for consumption) to the masses, at least those covered by medical insurance or rich enough to take the therapies. It may be as simple as supply and demand, remembering that competitors and those waiting for the therapies to come off patent will benefit from the cheaper therapies. This company has nearly 4 decades of experience in biotech medicine, their current blockbusters are as per below, growing fast are Kyprolis, Repatha and Prolia.

The guidance for the full year was tweaked, the noticeable difference was upgrading their guidance in non-gaap earnings per share to the range 12.00 to 12.60, 12.30 Dollars at the mid point. The previous mid point was 12.20, a marginal update. There is a good dividend underpin approaching three percent (before tax), pharma stocks are always pretty generous. We continue to accumulate at what we think is a very attractive opportunity, it is cheap and there is a good pipeline to add to existing therapies.

Home again, home again, jiggety-jog. Stocks across Asia are mixed to higher, Hong Kong is up, Japanese markets are up two and one-third of a percent. Cheer the mid road in France. What I find most interesting is that the party that Emmanuel Macron formed is all of 13 months old. The next election in France is in the next few months, this is for the National Assembly. This could be another big moment in French politics.

Sent to you by Sasha, Byron and Michael on behalf of team Vestact.

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Tuesday, 28 February 2017

Buffett piles into sticky Apple

"... essentially going out and finding out as much as you can about how people feel about the products that they ... it's just asking questions, basically. And Apple strikes me as having quite a sticky product and enormously useful product that people would use, and not that I do."

To market to market to buy a fat pig A mixed bag back home here, stocks slipped in the last two hours of trade, down a little over one-quarter by the close of business. Financials were the biggest laggards, the currency was pretty steady post the budget speech and has found "a level" now. New 12 month highs for Adcock and Clicks, people getting their meds and vitamins? Hair products and deodorant? All good there people? The strong(er) Rand dragged much of the top dual listed stocks with it, Intu, Hammerson sliding with banks. At the other end of the spectrum, in a rather sparsely populated #winners board, there was the likes of Kumba, Steinhoff and South32, as well as Sasol post their results.

MTN was also there, after they released an updated trading statement ahead of results due on Thursday. I tried to answer a few questions for a journalist, this is what I wrote about the rather ugly looking trading statement: "It has been a "very difficult" time for MTN. They are throwing the kitchen sink here at this point, the new chiefs will be inherited a house that is structurally sound, in bad need of a repair. Remember that they (MTN) pay the Nigerian fine in Naira. They don't have to bring the money here, they do have to report it here, get that? I would say, wait for the numbers. I suspect that in six months time (from now), you will get a very clear idea of strategy with the new team be that banking and payments, music and internet, entertainment and streaming, etc. Predictions are too hard to make, best left for other people."

In short, let us wait to see what the results reveal, and then revisit in six months time, to see what the strategy says. The stock added 0.8 percent on the day. Meaning that basically there was nothing new in here that the market was not expecting. Rob Shuter would have had his second day on the job in two weeks from today. There were also results from Hulamin, I passed the CEO in the halls of the JSE, the CNBC producer said I had been rude about their business on the box (I was just before him), which I had not, I was a little unsure of what to say. Play the reel, I should have shouted. Bidvest also had results, as you well know, we prefer the food part of the business, BidFood/Bidcorp. The Bidvest share price was down a bit, over a percent. Both stocks have done "decently" in the run up to the unbundling and beyond.

12 in a Row. "Make that a dozen" is what I hear Mike Haysman say in the background. The Dow Jones continued the winning streak to a dozen sessions in a row, the longest streak since 1987 (The US stock market is on the verge of making history). When Three men and a baby was the highest grossing film. Zero academy award nominations by the way. In 1987 Michael Douglas won best actor for his portrayal of Gordon Gekko in Wall Street. According to Wikipedia, on the 9th of January that year "Police raid English-language newspapers, seizing documents related to an advertisement calling for the legalising of the African National Congress." Do you remember the incident? Govan Mbeki was released from Robben Island prison that year. Do you remember that? It was sure a long time ago.

Spandex, jelly shoes, parachute pants, aerobics, the rise of athletic wear, Doc Martens, punk wear. Yip, that was the last time that the Dow Jones had 12 winning days in a row. Dig out those old photos (they would be physical), have a large laugh at the lot. You are not cool now. At session end the Dow Jones had grabbed another 15 points to the good (0.08 percent higher), the broader market S&P 500 added one-tenth of a percent, whilst the nerds of NASDAQ added 0.28 percent on the session. All record highs for all the major indices. And of course, this all comes ahead of the Trump address to congress. Bloomberg says - Trillions of Dollars Are at Stake When Trump Speaks to Congress. YUGE. Incredible. You're going to love it.

It was Warren time part II on the box yesterday, the 10th year that CNBC (and Becky Quick I think) have interviewed Buffett after his annual letter. It is always in Omaha, it is always in a store of some sort that Berkshire owns or has a stake. That is the way that Warren rolls. He is as sharp as a pointy HB pencil (some people have sharpening skills), he is witty and practical. That is what everyone loves about him, the old man investor. The billionaire next door. Lucky for us, in the age of the internet, there are transcripts, this one is "unofficial".

I do not agree with everything he says. For instance, to say that there was nothing in America 240 years ago, that is wrong. History is written by the victors. Most people will answer 1492 if you ask them "when was America discovered" in the same way that they will answer David Livingstone "discovered" Vic falls. It was there all along and there were many people living in North America before the early settlers arrived. I know what he means though. What was quite interesting to me is how he describes current valuations in stocks. Here is a copy and paste of the whole piece:

"And we are not in a bubble territory or anything of the sort. Now, if interest rates were 7 or 8 percent then these prices would look exceptionally high. But you have to measure, you know, you measure everything against: interest rates, basically, and interest rates act like gravity on valuation. So when interest rates were 15 percent in 1982 they'd pull down the value of any asset. So, what's the sense of buying a farm on a 4 percent yield basis if you can get 15 percent in government's? But measured against interest rates, stocks actually are on the cheap side compared to historic valuations. But the risk always is, is that - that interest rates go up a lot, and that brings stocks down. But I would say this, if the ten-year stays at 230, and they would stay there for ten years, you would regret very much not having bought stocks now."

He is comparing all asset classes here, and referencing them to one another. The risk free rate (230 is the number of basis points that the ten year treasury yields) is low, then stocks are cheap if the yield is right. And Buffett reckons that rates are not moving much higher any time soon, remembering the Fed dots that look like a bunch of flying saucers in formation. The long term rate is below 4 percent. On a relative basis, stocks are cheap is what he is saying regardless of where rates go. He suggested to Becky Quick (my guess is that she is around my age, 40, an internet search reveals she is 44) that in her lifetime, the Dow Jones would approach 100,000 points and "that just requires the American system continuing to function pretty much as it has."

Berkshire has bought around 20 billion Dollars worth of stock since the election, including a rather large stake in Apple Inc. Before the results (and perhaps shortly after), they had bought 133 million shares, Buffett himself 123 million, the balance going to Ted or Todd, the professionals that they have hired. That is around 2.2 percent of the company. When asked why, quite simply he said, "'cause I like it". Buffett continues:

".... going out and finding out as much as you can about how people feel about the products that they ... it's just asking questions, basically. And Apple strikes me as having quite a sticky product and enormously useful product that people would use, and not that I do. Tim Cook's always kidding me about that. But it's a decision-based ... but again, it gets down to the future earning power of Apple when you get right down to it. And I think Tim has done a terrific job, I think he's been very intelligent about capital deployment. And I don't know what goes on inside their research labs or anything of the sort. I do know what goes on in their customers' minds because I spend a lot of time talking to 'em."

Berkshire have doubled the number of shares that they own of Apple since the beginning of the year. My daughters asked at dinner last evening, why so "late"? i.e. Could he not have owned them years ago? The answer is yes, Buffett wasn't convinced yet. It took 50 years of reading IBM annual reports before he a bought a share. He tells a story of taking his great-grandkids to Dairy Queen and they bring their friends along sometimes. As far as I can tell, there are plenty of spots in Omaha to go for an ice cream of this sort. If you want to meet Warren, hang out at the various Dairy Queen outlets over the weekend. He explains, and it is pretty simple:

"They've all got a iPhone and, you know, I ask 'em what they do with it and how ... whether they could live without it, and when they trade it in what they're gonna do with it. And of course, I see when they come to the furniture mart that people have this incredible stickiness of - with the product. I mean, if they bring in an iPhone, they buy a new iPhone. I mean, they're ... it just has that quality. It gets built into their lives. Now, that doesn't mean something can't come along that will disrupt it. But the continuity of the product is huge, and the degree to which their lives center around it is huge. And it's a pretty nice, it's a pretty nice franchise to have with a consumer product."

The long and the short of it all is that even the most successful investor in the world did some of his own low level research before he dipped his head deep into the financials. At the end of the day, a business sells products and services that customers interact with. And if consumers want more of it, and think that the product is amazing, as long as that remains that way, people will want new iPhones and get locked into the ecosystem deeper and deeper with all the new services that you do not yet know about. Great interview as ever. Stocks are going to be fine, politics and markets don't mix, as long as America stays the course, everything is going to be OK. The biggest worry that he (Buffett) has is nuclear war. Really. Read it. Listen to it, it is part of the knowledge accumulation. For the record, Apple traded near the intraday all time high. Own it (Apple). Until something changes. Pay attention.

Linkfest, lap it up

Want to go to the moon, the far side of the moon? It is closer than you think, Elon Musk suggests next year - SpaceX to Fly Passengers On Private Trip Around the Moon in 2018.

You are going to need to store it somewhere. The article talks about the driverless car revolution - The race for autonomous cars is over. Silicon Valley lost. - "Last year in the U.S. market alone Chevrolet collected 4,220 terabytes of data from customer's cars." Stay long Amazon and NVIDIA as winners in the cloud wars?

The difference between IFRS and GAAP? Or how did PWC mix up two different movies? Here - It seems like we now know how the wrong Oscar envelope got into Warren Beatty's hands. Poor Brian Cullinan was simply starstruck. What is more of a mix up, and we were talking about it yesterday, was the difference between the Oscar winning movie gross at the box office, and the best grossing film of the year. Which begs the question, who really won what? Courtesy Statista: Critical Acclaim vs. Commercial Appeal.

Home again, home again, jiggety-jog. Stocks have started about flat to begin with. Stocks across Asia are mixed to higher. US Futures are marginally lower. C'mon, 13 in a row!

Sent to you by Sasha, Byron and Michael on behalf of team Vestact.

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Monday, 27 February 2017

Buffy the naysayer slayer

"Ever-present naysayers may prosper by marketing their gloomy forecasts. But heaven help them if they act on the nonsense they peddle."

To market to market to buy a fat pig Let us keep this section short and sharp, there is much to do on the companies front. Friday saw another steep drawdown in the commodities section, down over three percent on the session. That brought with it the rest of the market, down over a percent by the end. Bidcorp had another dig day, the stock was up over four and one-third of a percent by the close. Reinet and BATS also rallied hard, Hammerson and Amplats added over a percent.

It was unfortunately the negative end of the scoreboard that outpaced the "winners" over two to one, Glencore, Anglo and Kumba all down over 5 percent. Some concerns that the rally in commodity prices is waning a little. The stronger Rand (relative) also brought with it most of the dual listed stocks lower on the day. Speculation still continues to swirl on the appointment of a new finance minister, the rumour mill is talking about a deputy shuffle to Mr You-know-who. Time will tell sportslovers.

Across the oceans and seas vast, stocks in New York, New York managed to just eke out a gain by the time the closing bell was rung (pushed) on the floor. That is very much a ceremonial process these days, in reality the floor is not really needed and is a shadow of the former self. More efficient in the age of the machines no doubt. We still read books where there are Kindles and e-books, I meet many people who tell me that they enjoy reading in physical format, the smell of the book and the feel. Not the fact that you may lose your place, not that. I read nowadays exclusively on my phone, I prefer that to reading on my Kindle, really .... that is me.

Stocks rallied into the close (after a weak looking futures market) and the Dow Jones managed another positive session, albeit only 0.05 percent to the good by the close, 11 days in a row now. The broader market S&P 500 managed three times that, still, a modest gain of 0.15 percent on the session. The nerds of NASDAQ added a little more than that. We are coming to the end of the last quarters earnings season, so far, I suspect that Mr. Market liked what they saw, within reason really. It looked like big banks and energy were trumped by big pharma and industrials on Friday.

It was Warren time again over the weekend, you can download and read his annual letter, it is ALWAYS worth a read. The Berkshire Hathaway website looks like it was made in 1996 and the format has been stuck with since. I guess that is Charlie and Warren's style, keep it very simple. That has worked for them over the years.

The 2016 letter can be found amongst all the others, dating back to 1977. For anyone in investing, looking for insight from a great investor, it is all available there for you. All you need is an internet connection (not free) and a piece of hardware (not free either). I commented to Michael this morning that I thought Super Rugby was dead, I started reading the letter rather than watch the Lions squeak through against the Currie Cup champs. Nerd, I guess. I had watched the cricket earlier.

There were a few favourites inside the office, Bright liked this:

" .... every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it's imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do"

What Warren means is that when the times get tough, they (Berkshire) must definitely NOT be meek, they must capture the opportunities with both hands. i.e. When stock prices are depressed, scoop them up with aplomb. And these opportunities do not come around all of the time, they definitely do not. Often, in my experience, retail investors get scared off when good companies have lower share prices. It happens. The "right" thing to do, is to buy more. Of course, not all of us have the liquidity that Berkshire has.

Michael quite liked the fact that Buffett recommended the Phil Knight (Nike founder) book, Shoe Dog, as the best book he read last year. Agreed, it was pretty epic, read it if you have not had a chance. Michael also liked in particular the second part of this paragraph:

"American business - and consequently a basket of stocks - is virtually certain to be worth far more in the years ahead. Innovation, productivity gains, entrepreneurial spirit and an abundance of capital will see to that. Ever-present naysayers may prosper by marketing their gloomy forecasts. But heaven help them if they act on the nonsense they peddle."

Exactly. The point is brilliantly made. What he suggests is that there are always people telling you that the world is going to end, the outlook is terrible and so on ..... if they had to short the market in perpetuity, lucky for them they would wipe out quickly (the pain would be swift). The short answer is to stay long "forever". Don't necessarily resign yourself to never selling shares, just know that quality trumps all.

And then my favourite piece of the letter:

"Charlie and I cringe when we hear analysts talk admiringly about managements who always "make the numbers." In truth, business is too unpredictable for the numbers always to be met. Inevitably, surprises occur. When they do, a CEO whose focus is centered on Wall Street will be tempted to make up the numbers."

It goes to the core of one of our previous messages, from just over a month ago titled Expect Analysts to Expect. It is not our job to get excited or disappointed about the immediate results. That is for the balance of the markets. Sure, it "feels nice" when the company executes relative to the market expectations in a hurry and "feels nice" when the share price pops after results. Equally, it feels awful when the opposite happens. You should though temper your emotions to only change your mind if you think that the opportunity is too good to pass (buy more shares) or if you think something has changed fundamentally and the business is in terminal decline (then sell it).

All in all, once again a riveting piece, worth the read for investors of the professional and novice kind. Being able to articulate your investment style and get that through in the easiest possible way is an art in itself. He may not be able to serve up a cordon bleu dish, or day trade forex, he certainly knows a lot about investing in real businesses over decades. So listen to him. And keep on keeping on.

It is also Oscar time. I always think that the "winners" are those who get the most at the box office, that means all the people who watched (and bought a ticket) thought that was the best film. For instance, during 2015, 5 of the top 11 biggest grossing films of all time were released. From the Furious 7 to Minions, Star Wars: The Force Awakens, to Jurassic World and Avengers: Age of Ultron. I have only watched Minions. Not one of these films was nominated for best film, yet the "fans" all bought more tickets to see these over Spotlight, The Big Short, Mad Max and the Revenant, as well as Room, bridge of Spies and Brooklyn. I have seen most of those, the nominated films, and thought they were all excellent.

My only question is this .... like with the Trump win as president for the US and with the Brexit vote (72 percent voter turnout), are the Hollywood elite out of touch with the wishes of the masses? If entertainment is chosen by the masses and they choose to watch movies about dinosaurs coming to life, people shooting lasers at each other in a far-far away planetary make-believe land, or movies about good looking people and fast cars (or little yellow creatures wandering the world, looking for a new master), should one view these awards as an "artist perspective"?

Isn't it the same as saying to the Olympians, look, I know you jump the furthest and run the fastest, I think that in terms of technique, you are not quite good enough, we are going to give the gold medal to the person in 10th place, they had a superb jumping and running technique. Or am I wrong? I know it is about the art and the enjoyment, surely all those buying tickets are "voting" for best movie, whether I prefer Tom Hanks to Vin Diesel or not. For the record, on a highest grossing films of all time, adjusted for inflation, Gone with the Wind is in first place. Avatar and the original Star Wars in second and third place respectively. Art is subjective, box office numbers don't lie. Even if the wrong envelope for best picture was given out.

Company corner

Bidcorp reported results for their first half to end December last week Thursday. Since the results, the stock price is up around 15 percent, in just two trading sessions. In fairness, the stock price was trading near (about four percent above) an all time low before their rally. Before you saw "WHAT?", remember that the company was unbundled from Bidvest less than a year ago, so their unbundling has been less than 12 months. So perhaps it is more fair to say that they were trading at a 12 month low.

The stronger Rand does not help the group, they are no longer just a South African business, as they were in the past. We prefer the foods business over the services business, both are "good", we prefer the expansion plans and geographical reach, as well as the margins. Bidcorp (or BidFood as we like to call them, they are rolling that brand out internationally) has a market cap of 90 billion Rand, relative to the services business Bidvest, which has a market capitalisation of 55 billion.

So let us peek at the numbers. Headline earnings per share increased 20 percent to just over 600 cents for the first half of the 2017 financial year, on revenues that were essentially flat (pro forma). The distribution was/is 250 cents per share, the group was really chuffed that they had managed to also pay down net debt by 2.6 billion Rand and slash it to 1.7 billion Rand. Trading margins also improved substantially, from 3.6 to 4.2 percent. As you can tell from their size and scale, they are relatively un-geared.

I suspect that the market likes this too, the fact that they may be in a position to continue to acquire businesses here and there, which has always been the style. As they noted during the six months, whilst there were no material acquisitions, they bought nearly 500 million Rands worth of other businesses in Australia, Brazil, Belgium, Italy and Fresh UK. Fresh UK? Bidvest Fresh UK - Campbell Brothers, Oliver Kay, Hensons. They are always "busy".

Herewith a breakdown of their "global" business, all markets bar for the UK business firing on all cylinders:

Why own this business? I mean, what makes this business so very interesting? For starters as Paul always says when someone points out that cigarettes are addictive, food is more addictive. People are getting busier and richer, which means they are more likely to favour eating out or packaged food. The more handling of fresh food for the consumer and customers out there, the better for Bidcorp. The "prospects column" deliver you a little about the strategy in the coming years, and sums it up *nicely*:

"Our foodservice businesses worldwide are executing on the strategy of rebalancing the exposure between contract, national and independent customers in their respective markets. We see our future as a "foodservice" provider, as opposed to a "logistics" operator. Innovative technology-based solutions for customers and global procurement opportunities continue to gain traction as part of our value-add service to grow market share. Fresh produce, Meat categories and Value Add Processing continue to be areas of unexploited potential in many regions."

We continue to add to this wonderful business. We like the management team, we like the global reach across developed and developing markets. Did you know that this company is the largest listed Foodservice outside of the US? Great team, great trajectory and adding stability to your portfolio.

Linkfest, lap it up

No surprise seeing Brazil and Turkey on this list, political instability has resulted in poor economic performance which is a good reason to find "greener pastures". I suspect that a few terror attacks in France coupled with an unfriendly tax code is what is making people consider moving - Millionaire Migrants: Countries That Rich People Are Flocking To. As the internet makes the world a smaller place, it gets easier and easier to move countries. We live in a global village, governments need to realise this.

Investing isn't easy or everyone would do - I Survived The BULL Market of 2017.

"As fun and profitable as this boom has been for so many, it is not easy to make money investing. The hardest part of this last boom has been getting and staying invested. For those that did, you are smart, if even for just ignoring all the headlines that have scared most out along the way."

Home again, home again, jiggety-jog. It is Naas Botha and Graeme Pollock's birthdays today, that is pretty special that two of our favourite sporting sons share their special day today. I saw Pollock once as a kid, he was batting 4 for the "mean machine", made just less than 50 and smashed 10 fours, nothing in the air and no obvious chances. Obviously it was later in his career, which meant that running was only for youngsters. The scoreboard said "The Maestro", I recall it well. Naas? Nope, never live, only on the box on the weekends. Markets are lower across Europe and have opened mixed here today.

Sent to you by Sasha, Byron and Michael on behalf of team Vestact.

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Monday, 30 January 2017

JNJ Handling the Pressure

"JNJ suggests that this will add 35 to 40 cents EPS immediately. And it will "use" a lot of external US cash, this company is in Switzerland. The expectations are for growth rates to be 1.5 to 2 percent above the long term consensus. I think that this is good for JNJ, which is the only reason we really "care" to pay attention here, even though they paid a lot."

To market to market to buy a fat pig Stocks locally were sold off as a Bloomberg story permeated through the market, a cabinet reshuffle was on the cards again. Although little evidence, other than a strained relationship between the head of state (and cabinet) and some ministers who have not backed the head of the land, the market liked this news like a hole in the head. Sell it was the answer, and by it I mean mostly financials. The top five down in the ALSI 40 were Barclays Africa, FirstRand, RMI Holdings, RMB and Capitec. So what to do in times of uncertainty? The same thing as always I guess, nothing. We always tell you that you cannot change politics, the level of the exchange rate and nor can you change the central banks processes. So worry about the one thing that you can change, what you own and for how long. I plan to own stocks long after multiple dispensations have come and gone and have put their political stamp on matters.

At the bell, the all share index had fallen by four-fifths of a percent, resources were up nearly half a percent, benefitting from a weaker currency, as a result of the political rumour mill turning. Banks as a collective lost over three percent on the day. Liberty Holdings. Ooofff. That was a pretty bad trading update, and unfortunately the advantage of shareholders knowing would have been a better outcome. We were actually having a look at the shareholder base of Liberty Holdings, and around 90 percent is owned by institutions, the anchor shareholder of over 50 percent is Standard Bank of course. Individuals own a mere 2 percent according to my reading of it.

The stock closed the day down nearly 11 percent, and based on the big hit to earnings, looks marginally expensive at these levels. The market as ever is trying to factor in future earnings after this cupboard sweep and may well be thinking that at this time next year (with an improving outlook), that "things" may be on a more steady keel. That light looks a little dimmer. See the BusinessDay take - Liberty update leaves sector reeling.

Over the hills and across the giant seas, stocks were mixed again, the nerds of NASDAQ marginally higher by one-tenth of a percent, with the other two majors, the broader market S&P 500 and the Dow Jones marginally lower. Energy stocks took some heat, I noticed that the weekly rig count saw accelerated additions, meaning that more of the frackers are really comfortable at these price levels. Government pieced together organisations (you know what I am talking about) have very little sway over private institutions.

Starbucks took some heat after their guidance disappointed, the stock was around 4 percent lower on the session. Alphabet (the holding company for Google) lost over a percent on the dat, at the opposite end of the spectrum JNJ and Microsoft enjoyed a day of gains. Amgen also had a good day, their numbers are expected a little later this week, on the second of February. Of course there is the small matter of Apple's numbers after market tomorrow, those are always highly anticipated. Expectations are for around 76 million units (iPhones) to be sold in the last quarter. Jeepers, that is roughly 826 thousand units a day, or 34.4 thousand phones an hour. Wow.

Company Corner

JNJ shelled out a sizeable amount of money last week to acquire a business called Actelion, the presentation casts it as a Unique & Compelling Value Proposition. In short, JNJ are buying the Actelion business for 30 billion Dollars, to "Expands and complement (the) Janssen portfolio with leading, differentiated in-market medicines for pulmonary arterial hypertension."

PAH (pulmonary arterial hypertension) should be read simply as a type of high blood pressure that occurs on the right side of the heart. In the arteries that supply blood to your lungs. As my readings reveal, this is very different from having "normal" high blood pressure. To read more about it, check the piece: Pulmonary hypertension (PH) or pulmonary arterial hypertension (PAH).

As the presentation puts forward, 65 thousand patients are currently being treated with these Actelion therapies, and those generated 2 billion Dollars of annual sales in 2015. Quite quickly you can see at 15 times annual revenues that this isn't a cheap acquisition, and in fact, since the news of the potential acquisition broke (last year October), the stock has been lit. Actelion is up (in Switzerland) 103 percent over the last 12 months. And the founder of the business (Jean-Paul Clozel), has hit serious money, 1.5 billion Dollars to be exact.

Even 6th grade math will tell you that he owned 5 percent of the business. Wait, there is more, however. Clozel is going to run an R&D business that will be spun out from the acquisition, a business that could be worth 1 to 2 billion Dollars. That business, call it "Actelion risky" will hold all the experimental treatments (not yet approved) of the existing business. That business, the riskier one will have an initial 16 percent shareholder ship by JNJ, with an option to acquire another 16 percent (to lift it to 32) through a convertible note. i.e. they are going to fund the business in different manners. The former Actelion shareholders will hold 84 percent of the R&D business, which is why it is compelling for them. I have seen others suggest that the pipeline of the R&D business is pretty pedestrian at best, which is why it was good not to tag that whole lot along. Everyone gets want they want?

JNJ suggests that this will add 35 to 40 cents EPS immediately. And it will "use" a lot of external US cash, this company is in Switzerland. The expectations are for growth rates to be 1.5 to 2 percent above the long term consensus. I think that this is good for JNJ, which is the only reason we really "care" to pay attention here, even though they paid a lot. Expectations are for this year that earnings are likely to be 7 Dollars a share, at 16x forward earnings, the stock is well priced and we continue to accumulate on weakness.

Linkfest, lap it up

As the spectre of a trade war looms due to countries becoming more nationalistic and pushing back against globalisation, Josh puts certain job losses into perspective - The truth about trade. As Sasha points out, putting up a wall and charging Mexico 20% import tax isn't charging Mexico for the wall, it is charging the US consumer for the wall. i.e. The consumer will pay the elevated costs as we do for instance with the motor vehicle industry here (and chicken). Clothes and shoes too.

When Gates and Buffett talk it is normally worth listening to. They are some of the smartest people around, so if you have an hour to spare here they are on the stage together talking about the future - Bill Gates and Warren Buffet at Columbia University.

Would you eat a plastic bag? Of course not you say. Wait, there has been a breakthrough, so much so that you can "drink" the plastic bag after having dissolved it in water - Finally! A Plastic Bag That's Safe to Eat.

This is quite "enlightening". The chap in the picture is Art Cashin wearing the Dow 20000 cap. The story points to what we often say, the S&P 500 is the "most important" of all the indices, the Dow has had 133 constituents in 120 years, and is "slow to change" with the times. Nonetheless, it is important - Wow 20,000?

Home again, home again, jiggety-jog. Happy new year of the Chinese kind, the year of the monkey is now a thing of history. Being the year of the monkey explains a lot. We are now into the year of the rooster, in fact it is the fire rooster.

Sent to you by Sasha, Byron and Michael on behalf of team Vestact.

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Wednesday, 23 November 2016

Stay Rich

"Lastly, when asked What is the most important skill in finance?, he had this to say: "The most important quality to do well is temperament which would permit the control of fear and greed which have ruined many. Anyone who has become rich twice is dumb. Why would you risk what you need and have for what you don't need? If you are already rich, there is no upside to taking on a lot more risk, but there is disgrace on the downside." "

To market to market to buy a fat pig Dow 19000. New improved model, comes standard with the usual anxiety and a whole lot of hot aired commentators. Doesn't do bears, likes bulls. Unless the bears are ready to short and know something that the rest of the market does not. Dow 19000 for the first time last night sports lovers, it took over thirty years for the index to increase from 1900 to 19000. It took less than three weeks for the index to rise from below 18000 to the present level.

The moves north have been breathtaking, the whole idea that the Donald could re-ignite infrastructure spend have been grabbed with two hands by Mr. Market. What is also quite interesting (hat tip to the Daily Shot) is that USD emerging market bond funds are seeing significant outflows. Commodity prices meanwhile have been going bananas, materials stocks last evening in New York closed nearly 2 percent higher, energy stocks also getting a small lift from higher prices (and then lower prices) as OPEC tries to reach some sort of cut and freeze on production with Russia. Will it happen, won't it happen? Gosh ..... I don't know and nor do I have any useful insight. All we know is that with budgets under pressure, the volumes have kept their expanding pace, the world is awash with oil.

The only sector not feeling any love was healthcare, Medtronic tumbled nearly 9 percent as their last quarter sales disappointed the investor community (potential investors in a company would like a lower share price, not so?), the outlook was patchy too. As a result of the market uncertainty around the Trump administration and the direction that healthcare is likely to take (less or more intervention). Caution was the watchword and that segment of the market sold off over one a half percent.

That didn't stop the markets as a collective, the closing new high water mark for the Dow Jones is 19023, the new and fresh all time closing high for the S&P 500 and the nerds of NASDAQ is 2202 and 5386 respectively. All these indices were up between 0.22 and 0.35 percent, a decent enough day for all the major indices. This is of course a slow week for volumes, folks will have one eye on the Turkey, how to baste it and stuff it. Oh, and for the record, the market expects rates to rise at the next Fed meeting in December. Like 100 percent chance. Rates have continued to move higher, a two year auction yielding the highest rate in years, above one percent comfortably. We wish around these parts.

On another note separately, I saw a couple of people on the Twittersphere make reference to an incredible piece titled Warren Buffett's Meeting with University of Maryland MBA/MS Students - November 18, 2016. Why this is great is this fellow Buffett, who is now 86, has an incredible way of explaining complex "things" and making them very understandable. Twenty students, twenty questions. This is the summarised thing, I particularly enjoyed the part when he said that he was now getting hard of hearing and a specific interaction with Charlie Munger.

Equally I enjoyed the first point: "You should take a job that you would take if you didn't need a job." Easier said than done when you have a mortgage and bills to pay, right? And then on being too clever for the market as a whole - "Successful investors need to have the right temperament. Those with high IQ's frequently panic." Related in a question further down the page was "Anyone with an IQ above 130 should sell off the excess above that level." Ha ha. In other words, do not try and overthink the investment with complicated and complex models, read everything you can and then make a real investment decision and stick to it.

The question around regulation that I enjoyed the most (perhaps you would be surprised by the answer) which was put to Buffett, and why this is relevant is that the next administration in the US is looking at repealing elements of this: What is your opinion of Dodd-Frank?. Buffett answered: "We are less well equipped to handle a financial crisis today than we were in 2008. Dodd-Frank has taken away the Federal Reserve's ability to act in a crisis." And then the part that struck it home in a big way: "Dodd-Frank took this option away from the Fed. Fear is contagious. It paralyses. Confidence comes back one at a time, not by a stampede. Both General Electric and Goldman Sachs were "in the domino line". We were lucky we had the right people."

Lastly, when asked What is the most important skill in finance?, he had this to say: "The most important quality to do well is temperament which would permit the control of fear and greed which have ruined many. Anyone who has become rich twice is dumb. Why would you risk what you need and have for what you don't need? If you are already rich, there is no upside to taking on a lot more risk, but there is disgrace on the downside."

Lovely. Thanks once again for the insight of one of the best investors out there. Many enjoyable snippets in there and probably moments in the life of those students that they are unlikely to forget.

Local was lekker for the most part, other than gold stocks, most indices ended the day on a much firmer footing. The ALSI tacked on a percent to close the day out above 51 thousand points. Ratings agency people are watching as the three majors (in terms of ratings agencies) are set to deliver their verdict before the year is out. Junk is just a term that people who don't have time to do their homework hold onto with both hands, you are always going to need guidance from outsiders on what is investment grade and what is not.

The worst part of it all is that there is nothing you can do about it, perhaps that is why there is heightened anxiety around these things. It is real, certain investors have a specific mandate on what they may invest in, and if your bonds are not "investment grade" then they cannot own them. That is the simple long and short of it all. No investment grade = sell. There is of course an argument to be made that if our finances get back on an even keel, with more accountability comes a larger bang for your buck and an improved outlook. A creditworthy rating is exactly that, investment grade and non investment grade. The fact that we find ourselves here in this position, this is not necessarily something that jumps out at you, it happens in slow motion.

Unemployment figures from South Africa suggested that whilst we had actually been creating jobs, there are many more in the workforce who need to get sucked in. I have no idea what to think about the minimum wage argument, all I know is that 246 Dollars at the current exchange rate is hardly a liveable wage. We need skills and plenty of them. We all need to do our bit to up-skill and get people back on track and involved in the economy. Most of all, people need to know that they can do anything and need to be helped in that regard. Confidence is pretty huge too.

Linkfest, lap it up

I would order a pizza just to see this technology in action. To think that drones were almost unheard of 2 years ago - The future is here: Drones are delivering Domino's pizzas to customers. Note also that New Zealand doesn't have restrictive drone laws, hence the technology being implemented there.

Americans becoming millionaires the old fashioned way, inheriting the wealth - 1,700 People in America Are Becoming Millionaires Every Day. As wealth is transferred to the next generation spending patterns are changing, good news for companies geared towards a younger consumer.

Here is a quick look at historic tax rates in the US. Imagine having to pay 94% tax when in the top tax bracket - Hoover, FDR and Clinton Tax Increases: A Brief Historical Lesson. The conclusions drawn by the blogger are still up for debate in the economic community, all actions always have unintended consequences.

Whether it is religion and personal beliefs, exercise from running to yoga, eating habits (or lack thereof), being a vegan, meditating or listening to music, this is an awesome WSJ piece on How Surgeons Stay Focused for Hours. The article focuses on the different methodologies of the organ transplant surgeons and how they manage the mammoth procedures. It could teach us all about focus in the moment and then the subsequent wind down.

As online sales start to dominate a large part of the US landscape, there are bound to be many casualties - These 14 major retailers are each closing at least 100 stores. It is an important reminder of staying relevant and looking for alternative avenues, before it is too late.

Home again, home again, jiggety-jog. There are results from Tiger Brands this morning, they have a new chairman too. Stocks are mixed to higher here, Tiger is marginally higher at the get go. More on that tomorrow!

Sent to you by Sasha, Byron and Michael on behalf of team Vestact.

Attention: One of our sub-tenants is moving to Cape Town so we have some open offices to lease. There are 2 spaces available, one is 32 square meters, the other is 12 square meters. Fully serviced, in Melrose Arch. Please get in touch if you are interested.

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Friday, 19 August 2016

Own the Company, not the Price

"Know that you own a company. Not the economy, not a share price, not politics, not the global view, not the Fed, not the ECB, not negative yielding bonds, not Twitter finance, not 24 hour business TV, and the list could go on."

To market to market to buy a fat pig Up, up and away. One of the contributing factors was a really positive retail read from the UK, and this was post the British referendum vote. Bidcorp for example caught a bid and rallied nearly 7 percent. Another stock that caught a bid was Standard Bank, that was on the release of their results which as you can tell, were well received. Stocks as a collective rallied 1.3 percent, financials added 1.88 percent. Over the last year our equities market is up around 6.5 percent, it is tough out there! Except for a couple more medals in Rio, looking good on that score. Hey, and lest we forget, the Proteas and the Springboks getting involved in the same weekend, plus another potential gold medal at 2:15 on Sunday morning early, what a treat sports lovers.

There was also a set of results from Truworths, the stock was axe poled, down 8.2 percent by the close. Year to date the stock is down around seven and a half percent, before yesterday it was about breakeven. Of course they are pretty generous on the dividend front and always have been. with a high profile UK purchase, a softer looking pound doesn't bring with it stronger Rand profits, as it was supposed to, not so? And with long time CEO Michael Mark having to return after decades at the helm, with the sudden resignation of Jean-Christophe Garbino at the end of last year, there seems to be a void that needs to be filled.

I like the business (Truworths), I like the prospects for retail in South Africa as a whole, a lot does depend on the outlook for rates. And in the end, there is an element of government policy that leads to higher gross fixed capital formation (the baking of more pies), by way of improved confidence. In other words, making sure that in the words of "number 2" that there isn't a strike by private capital. If we sit somewhere in-between, as we do now, then cash just sits around and does nothing. There is a lot of cash sitting around doing very little other than earning interest that is about the same as inflation. In other words, nothing. Yet investment decision makers are reluctant to do anything for the time being. Call it a stalemate.

Over the seas and to the West of where we sit, stocks in New York, New York, a piece of land (Manhattan) in which the Dutch swapped 60 guilders (1000 bucks about in 2014, even accounting for inflation) with the Lenape native Americans. Worst deal ever. The Dutch swapped Manhattan for Run Island (which contained Mace and Nutmeg) with the English, possibly the worst deal of all time. Nutmeg and Mace were more important than fur trading back then. If the US hadn't adopted economic freedoms for all and sundry, life would certainly be VERY different today from what it was back then, no doubt about it. The ability of the free Western world, unshackled from kings and queens and autonomous powers has everything to do with it. Strangely, if you encourage people to make money, rather than taking it away from them, society as a whole becomes more prosperous. Who would have thought?

Wal-Mart reported revenues for the quarter slightly ahead of analyst expectations (at a whopping 120 billion US Dollars), which saw the share price rise 1.88 percent. Nice. Whilst costs are ticking up in the US, with wages rising and spend on stores to make them look better, the outlook is less certain, competition on all fronts. Let us just say that Wal-Mart doesn't employ the department store employee, Wal-Mart is where people go for the basics and not to spoil themselves. After all is said and done, the stock trades at 16 times earnings, the market cap is 231 billion dollars, the annual revenues are approaching half a trillion Dollars. Wal-Mart's annual revenues are now bigger than the entire economic output of Poland. Just saying.

We have been speaking about this for a little while now in the office, is too much information hurting your investments and your investment approach? Firstly, I think that many people invest in equities with exactly the same goals. It is simple, if you are assuming more risk than the next person, you expect to be rewarded above the risk free rate, or definitely above the cash rate. The risk free rate being government bond yields. In a South African context, you are setting the bar quite high. I am no expert on the bond markets, I do know that the ten year is currently benchmarked against the R186 (a specific issuance by Treasury) and that currently yields 8.41 percent. Interest is of course taxable, so one should definitely take that into account when measuring yourself against other asset classes.

You can, at a stretch, get around 6.5 percent on cash rates, those obviously have a term attached to them, from the Postbank to Standard Bank. Daily Money Market call rates, as per the Standard Bank website is around 6.17 percent if your balance is less than 100 thousand Rand, 6.7 percent above 20 million Rand. We have a fair idea that the cash rates in Msanzi are around six and a half percent, the ten year bond, the so called risk free rate yields a rather high 8.41 percent. The question then is, what return should you expect in equity markets for the risk you assume. There is risk that you are assuming on government bonds here in South Africa, it is not risk free. Nothing in life is risk free. I recall an interview of some bond investor who kept a Russian Imperial Bond certificate framed in his office, to remind him of this.

That still doesn't answer the question, what is the acceptable return for equity investors? Time frames are all different for all individuals, we are all at different stages in our respective lives, I saw a financial house advertising on Twitter that you have 2 salaries, the one you earn now and the other one that you earn when you are likely to draw down on your investments. Delaying the draw downs, i.e. contributing more over time has a double compounding impact, it gives the ability for your funds to grow more at the end. Compounding interest is certainly one of the modern wonders of the financial world. The differences are pretty huge though, when it comes to compounding interest. If your 1 million Rand manages to return 10 percent per annum, you get 2.6 million Rand after 10 years, if you compound annually. The difference, if you add an annualised 2 percent per annum is half a million Rand, the amount at the end of the ten years is 3.1 million Rand. An 8 percent per annum annualised return over ten years sees your ending amount at 2.158 million Rand.

Now this is where it becomes trickier, if you add 5 thousand Rand per month to the million Rand and you get a 10 percent per annum return, you end up with 3.645 million Rand after ten years. The answer that we are looking for is definitely open ended, I cannot produce with any degree of confidence a glossy piece with all the projected ending amounts. Nor should you accept that from any financial house, the truth is that nobody knows what the future holds. We could quite easily end up with a scenario where the market doubles every 5-6 years, the 12-14 percent per annum scenario.

Here is the caveat, you do not have to own the market. You can pick and choose at will, the companies that you want to own. Owning the market will get you market returns, which is far better than being a consumer that blows every last cent of disposable income in the hope that a golden parachute appears from somewhere. The single greatest mistake that many retail customers make is selling stocks when the price performs badly (bad economy, poor sentiment, etc.) and buying stocks when the price goes up sharply, hoping to not miss out. Many chasing their tails forget that they don't own a share price, rather they own a share on future profits of the business that they now OWN and have paid a price today that represents that reality today. If you can distinguish between the two (and I have learnt that not all of us can), then you are more than half way there.

Next, I am going to give you a simple scenario on whether or not you think that this is a good investment. For the purposes of this exercise, we are also going to use leverage, i.e. borrowed money that the bank is willing to take on the risk of lending the money to you. Let us presume that the starting amount is 500 thousand Rand. Over a 5 year period, you will pay in interest and capital 673 thousand Rand. You would expect at the very least to earn an inflation (6 odd percent) plus return, right? It is a travesty to learn that your original "investment" in this case can only realistically sell for somewhere in the region of 160-170 thousand Rand. You wouldn't be surprised then to learn that I am talking about a motor vehicle. Of course a motor vehicle is a tool, it provides you with the transport to and from wherever it is that you are going. You could take public transport, you could rely on lift clubs, you could make a whole number of choices.

I think the only point that is worth making is that it is far easier to spend than to invest, even if we know that it doesn't make financial sense. Having a long term savings goal is far better than not having one at all. In conclusion, investing in equities is always going to be hard. Your earth may be shattered from time to time, take it in your stride. Know that you own a company. Not the economy, not a share price, not politics, not the global view, not the Fed, not the ECB, not negative yielding bonds, not Twitter finance, not 24 hour business TV, and the list could go on. If ever you feel like this is hard and it is tough to stay the course, know that the gains that will transpire in the future were hard earned. Warren Buffett saved and went from 6000 Dollars net worth at age 15 to 1 million Dollars at age 30 to 1 billion Dollars at age 56. By the time he was 83, he had clocked 58.5 billion Dollars. Don't get defensive too early, that is also another lesson once you have built the base aggressively. Check it out courtesy Dataviz, how much was Warren Buffett worth at your age:

Linkfest, lap it up

In the spirit of setting records, this is a milestone that markets have been anticipating since the dot com boom at the turn of the millennium - Amazon may beat Apple to become the first $1 trillion tech company. As shareholders of all 3 of these businesses, I hope that one of them reach the milestone in the not too distant future.

I didn't realise that this could be a problem, currents in the pool could have shaved fractions off some swimmers times - Researchers believe certain lanes in the Olympic pool may have given some swimmers an advantage.

A longtime Apple follower and blogger on all things statistical, Horace Dediu has concluded that Apple would be the first company to reach 1 billion paying customers. And lending credence to the idea that the services business will some day be the biggest in the world. Imagine that, one billion customers possibly paying one dollar a day, 365 days a year - Counting Apple's Customers.

Home again, home again, jiggety-jog. Stocks are mixed to better here in the city built on gold. The Rand is weakening a little again, stocks are up, the commodities complex is looking mixed.

Sent to you by Sasha, Byron and Michael on behalf of team Vestact.

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