A Little Birdie Told Me So

“Last thing about Twitter. We sit here and wonder about the company and their ability to monetise their platform. Here is an amazing statistic. From the 90 minute US presidential debate on Sunday evening, there were an amazing 17 million tweets.”


 

To market to market to buy a fat pig Stocks across the oceans and far away closed better, off their very best levels, as the oil price barrelled higher. Huh? Yes, the Saudis and the Russians, two of the biggest producers of crude have agreed in principal to freeze production. Or suggested that. The Saudi oil minister says that he thought that the the oil price could go to 60 Dollars a barrel. Well, he said that a rally to that level was not unthinkable. Yes. Jeff Currie (who hasn’t got it all right) thinks that the frackers would have another say should the price rally hard. i.e. any production cuts from the majors would be met with production by the frackers. The frackers are more nimble and only have one objective, to be profitable. State entities have all sorts of liabilities, current and future. It is what it is, you cannot stop the profiteers from advancing their cause, which is simple. As the Mask said in that world class movie, you can’t be the scene if you don’t have the green.

Basic materials and energy led the charge last evening, the Dow Jones Industrial Average added nearly half a percent. The broader market S&P 500 closed up 0.46 percent whilst the nerds of NASDAQ added just over two-thirds of a percent, a day in which Apple’s star shone brightly. Not quite a 52 week high, that was last November, certainly a year to date high, the stock is up a little over 10 percent. Add on a 2 percent yield and I would take that return year in and year out. Of course we cannot be too greedy! Samsung woes have been a positive for Apple, eish, it is never good to see the wild ride that another company is experiencing. Burning batteries. It is just another reminder of the remarkable engineering that goes into these devices.

At the opposite end of the Apple scale was Twitter, I saw ex-CNBC staffer Charlie Gasparino burning more bridges along the way, making some choice remarks on Twitter. About the Twitter sale that never happened. See this series of low blows:

 

Oooffff. If you needed reminding of Charlie when he was at CNBC, here goes: Strange Charlie Gasparino, and here is another gem way back during the financial crisis – CNBC’s Charlie Gasparino Drunk/Hungover on Air. Really, Charlie is a force of nature. So I wasn’t surprised to see this tweet, basically implying insider trading:

 

 

Last thing about Twitter. We sit here and wonder about the company and their ability to monetise their platform. Here is an amazing statistic. From the 90 minute US presidential debate on Sunday evening, there were an amazing 17 million tweets. During the 90 minutes, I am sure that there were many more afterwards. This is a record. This is not the Super Bowl or the World Cup Final, it is a presidential debate. And whilst we were getting served these juicy numbers, you would expect this to be positive for Twitter.

 

Not so friends, the stock was getting poleaxed, down 11 and a half percent on the session. The “buyers” were supposedly lining up, well, they seem to have disappeared in a hurry. I for one suggested that going it alone would be a good thing. They may have to be really patient. And please stop dishing out stock to staffer en masse, it seems that is “not working”, at least in the short term. I still maintain that the company should go it alone, the audience is there, they are highly engaged and tweeting more than ever before.

I use Twitter as my number one go to for news. The product is designed to be your customisable news feed, if you are interested in following people that are famous for being famous, then do that, if you are interested in the local news, there are plenty of quality people to follow. I also use it to message people. Next results for this company, 27 October. Perhaps I have undue “faith” in the model, that they will monetise it, it is taking a lot longer than many would have thought. Investors and silicon valley types are all equally hyperactive and unlikely to want to be told this. The old CEO Dick Costolo said something that stuck with me “Once you get it, Twitter becomes indispensable”. The biggest issue for them, a lot of people do not get it. And are not going to try any time soon.


 

Crossing over to the financial capital of Africa, the JSE sits not quite in the heart of Sandton, close enough I guess. I took a picture of the foyer of the JSE last week, I said I would, and then I promptly forgot to publish it. It isn’t what you expect, not much “action” going on, all these boards and multiple floors. Nice and airy foyer though, here is my best shot:

OK, that is horrible. Perhaps I will ask Bright to take a short video or better shot. Darn, that is bad. Or Paul, he goes there each and every day. Stocks on the local front ended about flat. Financials lost one-quarter of a percent, resources were the driver of gains, the oil price drove Sasol to near the top of the winners board, Richemont was the biggest “winner” on the day, up 1.85 percent. At the opposite end of the spectrum was South32, the stock however clocked a 52 week (and possibly all time Rand) high the day before. I think. There was another 52 week low for Brait, the Brexit weight is too much for the company at the moment, the Rand NAV sagging as the Pound tests new lows to the Dollar, and multi year lows to the Rand. Currently 17.06 to the ZAR this morning. One Dollar gets you 13.89 Dollars, One Euro gets you 15.45 Rand. That is spot, you are certainly NOT going to get that from your bank now, are you?


 

Company corner

Famous Brands have released a trading update ahead of their results on the 24th of October. Those should be exciting, we were discussing Kevin Hedderwick the other day, in person he always downplays his role (a good characteristic), those who have dealt with him suggest that he is really good quality. Not just a chap from East London, someone who has certainly changed a mom and pop type business into a professional outfit with multiple irons in the fire. Recognising that there is a food revolution afoot, they also want to control the supply chain from top to bottom. Controlling the quality of all the ingredients will be key to the consumer coming back and back time again. My wife often tells my kids about her dad’s saying, it is not how many people come, it is how many people come back. Quite right.

What is also quite cool about this business, is that according to the last annual report, individuals own one-third of this business. The biggest institutional share holder is the PIC with 10.63 percent of this business. The business was founded back in 1969, it has been around for an absolute age. It has been professionalised over the last 15 years, Kevin was appointed as the managing director of the Steers brand in Feb 2000, he came from a food and beverages background including SAB (as it was back then), Foodcorp and Distell. The family, Halamandaris and Halamandres still own 28 percent (more or less) here. With a market cap of 16.68 billion Rand, as at close last evening (around 100 million shares in issue), the life work has turned into 4.67 billion Rand. And 113 million Rand (before tax) of dividends a year at current levels, forget what they paid for it!

I thought that this was supposed to be about the trading statement? Quite right. Let us do a copy paste of the two exceptional items:

“- a R141 million derivative gain on the call option that was utilised to hedge the purchase price of the acquisition of GBK Restaurants Ltd. in the United Kingdom, of which details were published on the Stock Exchange News Service (“SENS”) of the JSE on 1 September 2016; and

– a R20 million impairment of the investment made in 2013 in UAC Restaurants Ltd. in Nigeria.”

 

Of course, as Michael points out, if that hedge isn’t closed then they are in a bad way now, they have closed that deal, effective date was the seventh of October. I guess that they may have lost some money there. We will have to wait and see how the market reacts. Headline earnings per share are expected to be 67-74 percent higher than the comparable first half, 403 to 419 cents per share. Before exceptional items, HEPS is expected to be around 10 to 14 percent higher, more reflective of a tougher operating environment, that range is 264 to 275 cents per share. The next two reporting periods will include the full integration of the gourmet burger business in the UK. We wait for the half year results on the 24th.


 

Linkfest, lap it up

Our default status is risk aversion, this probably comes from back in the days when not being aware of risks ended up in you being eaten by a sabre tooth cat. Receiving regular price updates on your asset values means that you are more likely to ‘act’ to avoid loss with the long term result being that we underperform – How Short-Term Noise Affects Risk Taking

Getting data from A to B across the internet in the most efficient manner is starting to matter more and more. Particularly if you are a High frequency trader, video streamer or gamer – How the company behind League of Legends rebuilt its own internet backbone so that it’s faster for gamers. Remember that as a Naspers shareholder you own part of League of Legends.

That article is part of a series that Quartz did on the internet – Map of the Internet. Give it a look, it is well worth your time.

I’ve never noticed the smell of a new Mac, have you? I understand the new car smell, this seems a bit over the top – Love that new Mac smell? Now you can buy a candle that smells like a freshly-opened Apple product. Does the normal burning smell of a candle represent new Samsung products?


 

Home again, home again, jiggety-jog. US futures are lower, Hong Kong stocks are lower, Japanese stocks are higher.


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

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