WorldWide Markets with Simon Brown

Strong Retail Sales and the Two-Pot System:

• Retail sales show a positive trend, rising 3.2% in August, exceeding expectations of 2.1%.
• The Two-Pot System has already released R20 billion in six weeks, with the money used mainly for paying down debt, saving, and spending.
• Retail sales recovery, though from a low base, is a strong indicator of improved consumer health due to factors like slightly lower interest rates and inflation.

South African retail sales | YonY

Tribute to Tito Mboweni:

• Simon reflects on the passing of Tito Mboweni, former Finance Minister and Reserve Bank Governor.
• Mboweni’s contributions include institutionalising the Reserve Bank’s MPC meetings and implementing key labor reforms during his tenure as Labor Minister.
• His lasting impact on the country’s economy and financial sectors was highlighted, along with his personality as a Twitter chef and self-styled "Duke of Magoebaskloof."

Johnson & Johnson – A Smooth Dividend Play:

• Simon shares his reasons for holding Johnson & Johnson: consistent dividend growth (around 3% yield) and a steady 8% annual share price growth in US dollars.
• Despite some issues, the company offers reliable long-term returns in a competitive health and consumer space.

Johnson & Johnson quarterly dividend payments

Bytes Technology Group and Investment Opportunity:

• Bytes operates in the UK, offering hardware, software, and services. The stock showed mixed market reactions but has strong support around certain levels.
• With a forward P/E of 20 and a dividend yield of 3.6%, Simon sees it as an interesting opportunity for long-term investors in the tech space.

Quilter Trading Update:

• Quilter’s strong Q3 results follow a good first half of the year, with significant inflows supporting future earnings.
• A solid financial services player with a dividend yield near 4% and a forward P/E of 15, Quilter is performing well and trading at all-time highs since its 2018 listing.

Sasol – A Weak Chart:

• Simon discusses Sasol’s ongoing struggles, with a weak chart suggesting possible further declines.
• Investors should wait for technical indicators before making any moves.

Brent Oil Price and Rand Volatility:

• Brent crude oil hit highs recently but is now retreating to $70 per barrel, with potential for further declines due to global oversupply.
• The rand, affected by dollar strength, is volatile but could see a return to 16.80 against the dollar in the coming months.

Chapters

00:00 Retail Sales Recovery and Economic Outlook 04:29 Tribute to Tito Mboweni 08:32 Johnson & Johnson: A Steady Investment 09:52 Bytes Technology Group: Market Reactions 12:32 Quilter's Strong Performance 14:29 Cecil's Ongoing Struggles 15:56 Brent Oil Prices and Global Economy 17:48 Volatility of the Rand and Market Predictions

Simon Brown

* I hold ungeared positions.

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Market Overview

Crypto Surge, Gold Decline: Bitcoin rallies as investors shift from gold to crypto. Gold hit a recent high of $2,800 but is now pulling back, possibly towards $2,300-$2,400. Central banks continue to buy gold as a hedge against U.S. dollar dominance and geopolitical risks.

[caption id="attachment_43623" align="aligncenter" width="849"] Gold | Weekly | 13 November 2024

Rand Weakness: The ZAR weakened above 18 to the dollar, driven by strong U.S. dollar demand amidst market volatility. South African Rand overshoots due to its high liquidity, making it vulnerable to sharp moves.

Trump's Impact on Crypto

Market speculation suggests Trump may be crypto-friendly, unlike the current SEC chair Gary Gensler, known for his strict regulatory stance. Potential shifts in the regulatory landscape could benefit cryptocurrencies, particularly Bitcoin.

Simon holds Bitcoin and advises caution: ensure crypto is stored in a hardware wallet for safety.

Bitcoin | Weekly | 13 November 2024

Local Telco Sector: Vodacom & MTN

Both companies struggle with weakened African currencies like the Ethiopian Birr and Egyptian Pound. Profits are impacted when converted back to ZAR.

Despite attractive dividend yields (MTN ~4%, Vodacom ~5.6%), Simon remains bearish, highlighting high capex demands and sector challenges.

Raubex: Construction Sector Bright Spot

Strong results from Raubex, showing resilience in a struggling sector. Diversification into renewable energy and mining operations boosts performance.

Simon notes it as one of the few quality construction plays left, alongside Afrimat.

Consumer Market Struggles

Updates from AVI and BidCorp indicate persistent weak consumer demand, despite optimism from a possible government of national unity. Inflation has eased, but consumer spending remains subdued as households repair balance sheets.

Retail updates show mixed results: Truworths reported disappointing numbers, while The Foschini Group* performed better.

Tencent Results

Tencent posted strong results, though it did not significantly boost Naspers or Prosus stock prices. The market reaction was muted despite the solid performance.

Final Thoughts

The market remains volatile, with significant moves in crypto, gold, and the Rand. Simon advises a cautious approach, with a focus on quality stocks and long-term plays.

Remember: be kind and look out for others. Kindness is rule number one.

Simon Brown

* I hold ungeared positions.

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00:00 Market Overview: Crypto vs Gold 02:50 The Trump Effect on Gold and Crypto 06:01 The Future of the Rand and Emerging Markets 08:55 Sector Analysis: Vodacom, MTN, and Raubex 16:02 Consumer Trends and Company Updates

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Market Updates & Analysis:

• Sasol Reversal Pattern? – Examining Sasol’s technical setup and the significance of a ‘kangaroo tail’ pattern.
• Rand Stability Amid Trump’s Threats – Despite geopolitical concerns, the rand remains steady.
• Top 40 at All-Time Highs – Market momentum and investor confidence.

South Africa’s Budget Speech (Wednesday, 2 PM SAST)

• Revenue shortfalls and potential tax bracket adjustments
• Universal Basic Income and National Health Insurance funding discussion
• Expectations for the fiscal policy outlook

Stock & Sector Insights:

• Telkom: Revenue up 0.9%, in a turnaround phase, but Simon remains skeptical about telcos.
• Santam: Strong earnings growth (40-60% increase in HEPS), but insurance sector risks remain.
• Shoprite*: Consumer stock pullback; long-term bullish outlook despite short-term pressure.

China Stocks & ETFs:

• Alibaba up 40% on Apple collaboration
• Satrix China ETF – is it time to reconsider investing in China?
• General sentiment split between ‘China is uninvestable’ vs. ‘China has potential’

Bond Market Watch:

• SA Bonds Showing Volatility: A significant move in bond yields post-Trump comments, raising concerns about borrowing costs.

Simon Brown

* I hold ungeared positions.

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Sasol's Struggles:

Simon revisits Sasol's recent production and trading updates. Despite some positive news, the company's financials remain grim due to significant write-downs and a challenging pricing environment, especially in the chemical complex. With a forward PE ratio hovering around 3, Simon questions the actual value in Sasol and advises caution, emphasising the importance of waiting for a stock to show signs of recovery before investing.

Sasol weekly chart | 13 August 2024

ADvTech's* Solid Performance:

Simon provides insights into ADvTech's latest trading update. Despite a voluntary update (not mandated by a 20% variance), the company shows strong growth in earnings per share. He discusses the stock's valuation, historical performance, and why he remains optimistic about its future prospects, even as it trades at a PE ratio of around 15.

ADvTech weekly chart | 13 August 2024

Combined Motor Holdings* (CMH):

Simon shares his thoughts on CMH, a stock he has held for years. Despite a stagnant price movement over the past three years, the stock offers a solid dividend yield. He discusses the broader consumer environment, the potential impact of reduced interest rates, and why he continues to favour CMH over competitors like Motus.

CMH weekly chart | 13 August 2024

Renegen's* Milestone:

After a year and a half of delays, Renergen finally starts producing helium. While the stock has seen a recent uptick, Simon highlights the challenges that still lie ahead, including scaling up production and the company's upcoming NASDAQ listing. He also reflects on the broader sentiment in the junior mining sector.

Coronation's Active ETFs:

Coronation has launched six actively managed ETFs on the JSE, a significant development in the local ETF market. Simon explains the concept of actively managed ETFs and why this move could be a game-changer for both Coronation and the JSE, even if he personally isn't planning to invest in them. Find details here.

US Inflation Update:

The latest US CPI data shows a slight decrease to 2.9% for July, but core inflation remains elevated. Simon discusses the implications for future interest rate cuts by the Federal Reserve and the potential impact on South African monetary policy.

Tribute to Brett Duncan:

Simon pays tribute to Brett Duncan, a former stockbroker and warrants market leader at Standard Bank, who recently passed away. Brett was a key figure in Simon's early career and played a significant role in the South African warrants market. His passing is a significant loss.

Simon Brown

* I hold ungeared positions.

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Presidential Vision for Infrastructure Development:

The South African President's recent speech emphasised making the country a hub of construction and infrastructure development. The potential for public-private partnerships and the types of infrastructure that might be developed, including roads, energy transmission, and public buildings.

Stocks That Could Benefit:

• Construction Stocks: A detailed look at various construction-related companies and their potential to benefit from the President's infrastructure plans.
• PPC: Potential benefits from increased construction activity.
• Murray & Roberts: Despite historical losses, they have a division in infrastructure and renewable power that might benefit.
• Stefanutti Stocks: Focus on their claim against Eskom, which is crucial for their future.
• Wilson Bayly Holmes (WBHO): Expected growth, though a significant portion of their revenue comes from Australia.
• Raubex: Strong performance and solid management, with significant involvement in road construction through Sanral.
• Afrimat: Supplier of construction materials, benefiting from Sanral and Transnet orders.
• Reunert: Involvement in industrial cabling and commercial battery storage, critical for new power facilities.

Market Insights:

• Mr Price* Update: Gaining market share and performing well post-elections and during a late-arriving winter.
• Sasol Production Update: Management's effective handling of controllable factors and slight improvements in Transnet's performance.
• Kumba Iron Ore: Confirmation of slight improvements in Transnet, echoing Sasol's observations.

JSE Listed Construction Stocks | 1 year return | close 23 July 2024

International Market Movements:

• CrowdStrike* Incident: A significant security update issue affected numerous systems, impacting the stock but not signalling an end for the company.
• US Small Cap Stocks: Rotation into small caps like those in the Russell 2000 index, offering a cheaper alternative to large-cap tech stocks.

Simon Brown wraps up the episode by emphasizing the importance of infrastructure development for South Africa's economy and reiterates his top stock picks to benefit from potential future construction projects: Raubex, Afrimat, and Reunert. He also touches on the potential 3% GDP growth for 2025 and the broader market implications.

Simon Brown

* I hold ungeared positions.

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