The Larry and Sergey show

“Google is not a conventional company. We do not intend to become one. Throughout Google’s evolution as a privately held company, we have managed Google differently. We have also emphasized an atmosphere of creativity and challenge, which has helped us provide unbiased, accurate and free access to information for those who rely on us around the world”


 

To market to market to buy a fat pig Bump and grind Friday, we hugged the thin red line all the way through to the close, in the end a nearly one-quarter of a percent gain on the day wasn’t the best outcome. Joburg was quiet, a long weekend essentially. We should really make some holidays on Fridays and Mondays rather than outside of that, productivity plumbs new lows is my sense. If anyone has a labour intensive business, let me know what these holidays do to you. Not that I don’t think that celebrating these special events in our history are wrong, we could do a whole lot worse in honouring the legacies of those gone before us by working extra smart and extra hard, looking to build a better society.

Of course the most important event of the week, at least as far as Mr. Market’s sheep are concerned, is the Brexit or more likely Bremain. Hype sells, ordinary doesn’t really sell that much. In other words, not once have I heard anyone put out a note suggesting what will happen if the UK remains in the EU. Which is what the bookmakers are putting the odds at 4-11 for a remain. Or in other words, as a percentage, 73.33 percent. Not much has changed in that regard. And then in terms of the exit crowd, Paddy Power is giving you odds of 9-4, or in percentage terms, 30.77 percent. So ignore the news headlines, the bookies have more to lose than the headline makers. Tell that to the sheep and the herders however. It does however seem that the market is settling to the idea that there will not be a shock vote. Suddenly stocks are going up!

Across in Asia this morning stocks are up, unless of course you are in Shanghai, or participating in that market. Year to date stocks in Shanghai are down nearly 19 percent. Stocks in Japan are up over two and one-third of a percent, the Japanese Yen is weakening again. Let us simply suggest that Mr. Market refers to this as risk on. Again. Stocks in New York (New York) on Friday were sold off, both the S&P 500 and the Dow Jones Industrial Average ended the session down one-third of a percent, whilst the nerds of NASDAQ were sold off a little more aggressively, down 0.92 percent.

Apple stunk up the joint again, that stock was off over two percent, so was Alphabet (Google) though, down nearly two and three-quarters of a percent. Citigroup suggested that Alphabet could miss their second quarter revenue estimates. I was reading the founding letter (again) on Saturday, as well as the references made to the same letter to shareholders by Larry and Sergey. The company refers to these as the founders letters. There are a couple of sentences that are worth sharing from both of those letters, first the last one – 2014 Founders’ Letter:

“We shared a profound belief in the power of technology to make life better for people everywhere and imagined what life could be like 10, 15, 20 years down the road. Nevertheless, now that we are here, I am amazed at the progress and opportunities. For example, I could not have imagined we would be making a computer that fits in a contact lens”

 

We often sit here and get caught up in the day to day machinations of the market and too often discount those trying to (and doing it) change lives. I often tell my youngish kids that they won’t need to learn to drive, perhaps not quite yet. Larry and Sergey continue in that letter:

“The increasing power of computation extends well beyond the Internet. One example close to my heart is our self-driving car project. The goal is to make cars capable of driving themselves entirely without human intervention. We hope to make roadways far safer and transportation far more affordable and accessible to those who can’t drive.”

 

This continues to be a big investment theme. A trip back down to the listing IPO founders letter has An Owner’s Manual for Google’s Shareholders:

“Google is not a conventional company. We do not intend to become one. Throughout Google’s evolution as a privately held company, we have managed Google differently. We have also emphasized an atmosphere of creativity and challenge, which has helped us provide unbiased, accurate and free access to information for those who rely on us around the world.”

 

And then lastly, they nail it:

As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to “make their quarter.” In Warren Buffett’s words, “We won’t ‘smooth’ quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.”

 

So I give two you-know-whats about what Citi think about the upcoming quarter. That is their opinion and whilst it counts, it certainly gives us another opportunity to add to what is likely to continue to be an iconic company of our time. Google is down nearly 10 percent year-to-date, let us just say that this might be a huge blessing for all of those wanting to add to the business. Based on the same analyst predictions, Google trades for the next full year earnings at 18.5 times earnings. Sounds dirt cheap for a company with so many amazing opportunities!

And then Apple sold off as the Chinese authorities decided that the iPhone 6 and 6 Plus are too close to a local competitor, in shape and feel and the like. No worries, as far as I understand it, the company hasn’t been selling that model for a few months now, remembering that they sell the one model up. The iPhone 6 is so last year. Again, price targets slashed and earnings estimates downgraded for this coming quarter. In the classics, this is a horse has bolted type scenario.

One client, in a WhatsApp conversation said: “market is behaving like a sulky teenager. Making me mad. If Apple drops any further the cash balance will exceed the market cap!” In other words he is saying this company is dirt cheap and the market is wrong on the stock. Lastly, I can’t get enough of the Google founders letter. As they say:

“If opportunities arise that might cause us to sacrifice short term results but are in the best long term interest of our shareholders, we will take those opportunities. We will have the fortitude to do this. We would request that our shareholders take the long term view.”

 

We should always think the same. Take the long view. 15 years is hardly a lifetime in investing. It is about as long as it takes to pay off your house, for many people their largest asset. Let your equity portfolio far outsize your property asset, keep saving all you can. It is far easier to spend money and not save it.


 

Linkfest, lap it up

As department stores struggle thanks to more people moving online, so too are the shopping malls that the retailers are based in – America’s Dying Shopping Malls Have Billions in Debt Coming Due. Given how many shopping malls we have in South Africa, how long is it until something similar starts to happen?

Earth has a new rock that orbits us, it is only around 100 meters wide though – Earth’s New ‘Quasi’ Moon Will Stick Around for Centuries

Ladies you now have another reason to buy that Chanel Bag that you have been eyeing out – Chanel Bag value increased 70 percent in the last 6 years. As the globe gets richer, the top 1% will still want to be seen with unique items.


 

Home again, home again, jiggety-jog. Big news, Rob Shuter who is currently working for Vodafone in Europe has been appointed as MTN CEO, and will take over as soon as possible. He was once upon a time the CFO of Vodacom South Africa, and comes from an investment banking background. Good for him, I am pretty sure that he is thrilled to get the job, he knows the industry well and understands deal making better than most. Positive for the business, let us see how the share price reacts. My little one got to have a picture with three of the Irish (and Ulster) teammates yesterday, including the flyhallf from Saturday, she was pretty pleased with herself. Markets should start a little better here.


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

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