Google goggles, iPhone turns 5!
June 28, 2012 in Uncategorized
“Since the iPhone release, the major competitor at the time, RIM, has seen its share price down 83.85 percent, Nokia down 92.11 percent. Whereas the Apple share price is up 367 percent. The markets have voted with their feet.”
Jozi, Jozi. 26o 12′ 16″ S, 28o 2′ 44″ E. We were slipping gears yesterday as the commodities complex continued to take the pain, heaviest hit were some of the single commodity stocks, Kumba Iron Ore which was down over four percent, and then the gold miners collectively lost two percent. The gold miners are down 21 percent over the last five and a quarter years, whereas the Rand gold price is up 165 percent over the same time frame. There is something sadly very wrong with that for our local gold miners, costs rising and ore bodies a shadow of their former glory days are largely to blame. So, in short there is not so much gold in those hills. Over the last five years, the gold stocks are off two and a half percent, relative to an all share index that has added nearly twenty percent, and dare I say it, the yields on the all share is probably a lot better than on the gold stocks. The platinum stocks are worse, much worse, over a five year period the stocks are down a whopping 51 and a half percent. Perhaps the time is close, but Aquarius have indicated that it is still very tough out there.
Byron’s beats has a look at an update from one of our recommended stocks, Sasol.
- This morning Sasol released a very long and detailed update for the 9 months ended 31 March. Here it is if you would like to read it otherwise I’ll give you a summary. Basically it covered 4 points, 1. Overall macro-economics supports group profitability, 2. Improved operational performance, 3. Financial performance 4. Project updates. Lets look at the highlights and some important points that stand out.
As I said in my piece a few days ago (Sasol, the Rand and the oil price) Sasol earnings are heavily influenced by changes in the rand and the oil price. This release first looks at the macro issues which affect the moves of these prices and then looks at the stuff which Sasol can control, production.
They mention, and this is immediately factored into the share price, that the oil price has improved over the year of operation and that the rand has weakened on average. These variables resulted in a 31% rise in average domestic fuel prices and should boost Sasol’s earnings strongly. Other than that concerning macro issues, they talk about issues in Europe and the US, which had a negative impact on the chemicals business.
In terms of production the Synfuels division recovered nicely after some plant incidents which halted production in the first half of the year. They also plan to be 60% self sufficient in terms of electricity generation by next year. That is very exciting and once they become 100% self sufficient it will completely mitigate all electricity hikes that most companies have to deal with. I know I’m stating the obvious but it needs to be repeated.
The Oryx GTL plant continues to break production records as it maintains an 80% utilization rate. This is important to note because the success of this project has big implications for further GTL expansion. On that note the recent shale gas assets they purchased in Canada are under pressure because of low gas prices. This has resulted in a loss for the year to date. At this stage they are just drilling gas but we think the future lies with a GTL plant in that region. In that case cheaper gas is better.
Financially the company is sound. They say it better than I can. “Healthy cash generation for the nine months ended 31 March
2012 reduced group debt after funding significant capital expenditure, allowing the group to maintain a strong balance sheet. Our strong balance sheet supports the funding of our capital growth programme, potential acquisition opportunities as well as our progressive dividend policy whilst providing a buffer against volatility and retaining flexibility in uncertain credit markets where the cost of funding has increased. We continue to focus on strengthening working capital management and monitoring credit exposure and counterparty risks.”
All in all things are looking good at Sasol. Last year the company made R33.85 a share. Although there are some losses, with better production and a higher price received in the synfuels division earning will grow. At R345 a share the company looks very cheap and I would expect a very healthy dividend. We will carry on buying into this weakness.
New York, New York. 40o 43′ 0″ N, 74o 0′ 0″ W. Durable goods order for the month of May beat expectations, I guess that was encouraging and in fact helped the early buying. After two consecutive months of durable goods falling, it was pleasing to see a reversal in the trend, although the commentary that I read suggested that this momentum is likely to be short lived. Darn those haters. I guess the argument that the Chinese are slowing their exports (because the demand side is not completely clear right now) and European growth is nonexistent, then perhaps this will hold true. BUT, of course local manufacturers (in China) tapping a new market in the form of internal consumption might be telling a different story. Jim O’Neill keeps on drumming this into us, whenever he is asked the question about China slowing. His simple response is to say that the shift to internal consumption is happening, and this is a good thing for the rest of the globe.
The other real big driver and economic release for the US markets last evening was the release of pending home sales which blew away expectations, clocking a 5.9 percent increase when expectations were for a one percent increase. And we all know how much emphasis is placed on the US housing markets, this was a good catalyst for stocks. The broader market S&P 500 added 0.9 percent to close at 1331, a gain of nearly 12 points. The Dow added 92 to close at 12627 points, whilst the nerds of NASDAQ added exactly the same percentage wise as blue chips, 0.74 percent to end at 2875.
We have been discussing a stock in the office here, because we believe that if a company can crack the code to obesity, then sales of that specific company are going to fly. And that is exactly what happened last evening after a VERY LONG wait, check out the release directly from the horses mouth: FDA approves Belviq to treat some overweight or obese adults. Arena, a Swiss based business, that is listed in the US, flew up 28.7 percent on the announcement. You must know that the company is still not profitable. And the results, whilst good, are not mind blowing. Hey, this is a good start.
Perhaps the biggest corporate news of the day, no, let me rephrase, the most exciting corporate news of the day was the unveiling of the Nexus 7 tablet by Google. And at the same time two other pieces of hardware designed by Google, which must be making the old hardware producers quake in their boots. There is something called a Nexus Q, which is a home entertainment system of sorts and then perhaps the most out there product, Google Glass, you must have seen the prototype in previous messages. The glasses with an embedded computer display, which enables you to find stuff on the fly, and do all the wonderful things that tech geeks would want. Google added around four fifths of a percent, Mr. Market liked the news clearly.
Check out the reviews, here is a good one: Google Nexus 7. By the same crowd, a less flattering review of Google Nexus Q, but this could be because of the price tag, as the review points out, it is made in the USA. The last one is perhaps the most exciting, I try the Google glasses. Sort of. Awesome applications for people on the move I guess, not so much for the folks who are desk bound. I am not too sure that I would be jumping to get the glasses, but I think that they are an awesome innovation.
I am not too sure that the Google announcement was supposed to coincide with the Apple iPhone celebrating their 5th birthday yesterday. 150 billion Dollars worth of collective sales since 2007 and 250 million of them shipped over that time is nothing short of amazing. The app store will celebrate their fourth birthday next month. The iPhone 4S was released in October last year, and was a resounding success. I have seen various analysts stick a 1000 Dollar plus price on the stock. I see that most analysts still have a conviction buy on the stock, the next quarterly numbers will be a catalyst for the stock to move higher (or lower), it has had a cracking year so far, 41 percent higher, but is lower over the last three months.
The Business Insider had a really nice chart of the selling price of the device over the last five years: One Of The Most Amazing Things About The iPhone’s First Five Years. That last point is key, if Apple were losing any share, they would cut their prices. For the time being this is not happening, but I suspect that this is a company that you have to watch more closely than most. Since the iPhone release, the major competitor at the time, RIM, has seen its share price down 83.85 percent, Nokia down 92.11 percent. Whereas the Apple share price is up 367 percent. The markets have voted with their feet.
Currencies and commodities corner. Dr. Copper last traded at 335 US cents per pound, the gold price is lower at 1570 Dollars per fine ounce, whilst the platinum price has also gone lower to 1404 Dollars per fine ounce. The oil price is lower at 79.89 Dollars for WTI Nymex, 92.74 for Brent Crude oil. The Rand is weaker as Mr. Risk off steamrolls Mr. Markets house, 8.42 to the US Dollar, 13.10 to the Pound Sterling and 10.47 to the Euro. We are lower here today at the get go, Euro anxiety makes for a change. Or not.
Parting shot. Today is being touted as the make or break for Europe. The days when after the 19th such meeting in 24 months that they must deliver something more concrete. Not that everyone is hopeful of anything actually happening, because Angela Merkel has thrown down the gauntlet already, by saying that there are to be no Euro Bonds in her lifetime. Politicians obviously make those kind of statements to emphasise a point, Merkel turns 58 this year later, average life expectancy for woman in Germany are per this Wiki table List of countries by life expectancy is 82.1 years. So, on that basis we should see Euro bonds somewhere around late 2036. But the news today that is sending the Euro lower suggests that we will see less than nothing at this summit. So much for the one that was critical and was supposed to change everything. Sigh.
Sasha Naryshkine and Byron Lotter
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