“Sports however and having the love/hate relationship with your favourite team is something special. CEO Bob Iger said that US households would watch sport across all platforms and was confident that they could monetise it. He is right. Currently US households are cutting their TV cable services, and many of those include ESPN in the package.”

To market to market to buy a fat pig. Sometimes tepid news is interpreted as good news. It is like standing in front of the Nando’s menu staring up at the board and wondering whether or not you should have hot (or extra hot), even though you know you may sweat. Yet it will taste good, you know this from past experience, humans are wonderful at recognising and avoiding past mistakes. OK, not all of us. Yesterday the ADP employment number came in lighter than anticipated, a miss (lemon and herb in this case), leading to the market to believe that rates may or may not actually go up in September.

The relationship between the guessing of the market, finding this ever so important and when the Fed will actually act reminds me of paper passing in junior school with the answer to your question awaiting a yes/no box check. The anxiety before the wait, do you remember that? Will you be my girl/boy friend, yes/no? How complicated and simple things were back then. In the case of Mr. Market this has been the longest wait ever for interest rates to be moved. The guessing is certainly in a tighter range than ever before, almost each and every time it has been “later” rather than sooner. As we said yesterday, this is beyond the control of all of us, the professionals are in charge, file it in the drawer of things to pay attention to yet have no control over.

After all was said and done the market in the US was a mixed bag, the Dow Jones lower by a smidgen, the nerds of NASDAQ up two-thirds of a percent and the broader market S&P 500 somewhere in the middle of that, up 0.31 percent. The difference between all of those was the impact of Walt Disney, that stock was down 9.21 percent on the day. Fear not, the stock still sports a 17 percent gain YTD and is up nearly 30 percent over the last 12 months, 228 percent over the last half a decade, with returns of 333 percent over a ten year period. Do I hear the sound of Cinderella again, Snow White communicating with the animals, Ariel under the sea singing a lovely tune? Yes?

It wasn’t as a result of the parks, movies like Inside Out were hits, as we have pointed out before, the biggest money spinner for the Walt Disney is actually their stake in ESPN. Sports advert sales fell, the prior comparable period included the World Cup in Brazil. The truth is that sport is the only thing that you have to watch live and in the moment. Live sport or reruns without the anticipation or excitement. You choose, you know that they are not the same.

If you are like my mum and couldn’t care too much for the excitement of sport, then I guess it doesn’t matter either way. Sports however and having the love/hate relationship with your favourite team is something special. CEO Bob Iger said that US households would watch sport across all platforms and was confident that they could monetise it. He is right. Currently US households are cutting their TV cable services, and many of those include ESPN in the package. Netflix, Amazon and Apple are shaking up the TV industry, the sport is certainly not going to stop. ESPN is 80 percent owned by Disney, the balance is the Hearst Corporation (those of you old enough will remember the drama of family member Patty Hearst in the 70’s). If you study the Disney results and look specifically at the segmented results operating income:

See? Dominated by media networks. That is ABC (which includes the history channel), Disney channels and most importantly ESPN. I ran through the Disney report and found that an executive member was Mary Jane Parker. MJ must have married Spiderman and then got a real day job on the board of Disney. Kidding. Anyhow, the company is just fine.

Resource stocks were the main drivers of the overall markets yesterday, up over three and a half percent as a collective with huge moves northwards in the share prices of the diversified miners. The overall market closed two thirds of a percent higher, there were gains across the board. Remember that the big event that attracts Octoboxes (eight inserts on the same screen) is tomorrow, the non-farm payrolls number. Two thirty local time, turn on your favourite business channel to watch it live. There is always anticipation around this number, tomorrow there is the added excitement of trying to preempt the Fed. And what for? Just to say, yip, I called it!

Company corner

As promised, we are looking at the results of Cerner from two days ago. Cerner is a support system to the medical industry, supporting hospitals by providing critical digital solutions all the way through from dispensing of medicines to making sure the accounts are in order. By providing services software to make medical care more about the care, than the admin. Enabling care givers to go about their jobs easier, that is essentially Cerner’s job.

18 thousand facilities worldwide are connected via their technologies. There is certainly a load of work to do, recently the company was awarded the job of digitising the US Military health records, 9.5 million in total. The amount of paperwork needed in hospitals is mind-blowing, using existing technologies to minimise mistakes and thereby reduce human error which ultimately saves lives. If the pharmacy dispenses the right medication, if the right medication is administered, and there is an electronic trail all of the time, everyone can be assured that the right thing is being done for the patient.

These results were for the second quarter to end June, revenues were lighter than the company had guided at 1.126 billion Dollars, that was still a 32 percent increase on the corresponding quarter last year. Good work. Bookings however were at an all time high during the quarter, at 1.29 billion Dollars, the backlog is now 13.3 billion Dollars, an increase of 37 percent from a year ago. Even though that was the first number introduced in the second quarter results, it was largely ignored by the market, record bookings that is. Adjusted diluted EPS was also 30 percent higher than the corresponding quarter, clocking 52 cents and inline with consensus.

The company updated their full year guidance to be 4.475 to 4.575 billion Dollars in revenue, lower than the 4.65 to 4.8 billion Dollars, leaving EPS guidance at 2.09 to 2.15 Dollars, the current quarter guided slightly lower, a voluntary separation plan expense impacting. That reflects a 28 percent growth on the prior year at the midpoint. So, forward, at 67.30 Dollars, the stock trades at 31.6 times. With a PEG ratio of 1.11, PEG being price to earnings (in this case 31.6 times) over growth, in this case 28 percent. You would expect high growth companies to have higher valuations.

The company is growing fast and is starting to become the “choice” and go-to business in their field. There is an enormous amount of work to do, and whilst the stock looks expensive, it has the forward growth rates to match the market rating. This moderate fall back in the share price represents an opportunity to buy a few more at these lower levels. We maintain our positive outlook for the company (and the stock) and are still rated a buy!

Last week our favourite beauty company, L’Oreal reported their half year numbers. Given that they are based in Europe and not the US, their earnings got a big boost from the stronger dollar which is a nice change.

Here go the numbers: Sales are up 14.7% (5% at constant exchange rate), operating profit is up 14.5% and EPS is up a solid 18.9%. Below is the breakdown of how each division and region did.

Have a look at the whopping growth in North America, a large chunk due to the stronger dollar. We own the shares in US Dollars though which hurt the share performance a bit. L’Oreal’s primary listing in Euro’s is up 26% ytd compared to the US based shares which are up 15% over the same time. In Europe where currency fluctuations don’t have an impact and GDP growth has been flat, they managed to grow sales by 5%.

In their other regions, particularly in developing countries they have solid double digit growth. They had poor numbers out of Brazil where they said “. . . Brazil where the economic context is very unfavourable. The Brazilian Real is weaker by over 50% over the last 12 months!

The story of why you own this stock is still the same. As the world gets richer and as the large number of young people move toward working age, people will consume more of L’Oreal’s products (Discover our Brands). They are a great stock, for whom the market has big expectations. So far they have met those expectations and look well positioned to do so going forward. Buy

Linkfest, lap it up

As a shareholder knowing more about a company is always good – 9 things you didn’t know about Starbucks. Here are a few facts to help you sound clever around the braai this weekend.

Renewable energy has been the theme this week in our links. Here is what some of the biggest economies look like in terms of energy demand – How will the Clean Power Plan improve US energy performance? India is an interesting case as they have 26% of their energy produced by alternate sources but they still have a massive Co2 emission. Which explains the poor air quality that we talked about on Monday.

Retailers are making it as easy as possible to spend, with innovations from Amazon like their ‘1-click’ buy option and just the ease of handing over a card as opposed to handing over cash. Apps are popping up to help people keep track of what they spend and where, which is meant to help people spend more wisely resulting in saving more – I Let an App Tell Me What to Spend. The principle that seems to work best is still the “pay yourself first” principle. Who ever has money left over at the end of the month which can go toward savings?

Avoiding the bad investors is probably an easier task than finding the great ones – 20 People You Don’t Want to Invest With

Home again, home again, jiggety-jog. Tesla released numbers after market, the sales number disappointed, I think that the story certainly remains intact. Old Mutual, one of the most widely held stocks in the country has reported their half year results this morning. They continue to do a great job, one of the great accumulators of assets. Whoa, funds under management at Old Mutual are up to 335.7 billion Pounds, multiply that by 20 to get Rands. Asian stocks are a mixed bag, up in Japan and down in China, down in Hong Kong. Hopefully it is not up and down in Nottingham today, where the 4th Ashes test starts. This has been the best Ashes in a decade, let this match be no different, although this one looks like the weather may well feature. No, go away.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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