Pavan Sharma

Elders’ shares rise, Manchester United jumps +8.78% amid takeover talk, Disney fends of Nelson Peltz, and Mainfreight starts to show signs of slown-down.

Macquarie shares jumped after reporting its third quarter update, which was slightly ahead of a strong corresponding period last year. The result driven by strong performances from its markets-facing businesses thanks to strong commodity prices, which offset softer performances from its annuity-style businesses. Additionally they have excess capital of $12.5b ready to take up opportunities to keep growing their banking, asset management or commodities businesses.

US markets (S&P 500 Index –1.1%) were lower overnight, as investors digested mostly weaker earnings as well as the Fed reiterating their hawkish stance, which has been mostly ignored by the market recently. 

The Australian market (ASX200 Index, -0.5%) after the Reserve Bank of Australia increased it increased interest rates for the ninth time in a row.

We continue to rate Alphabet a BUY. It trades at 17x fwd earnings, and advertising revenue has remained resiliant, if flat. It remains in control of a virtual search monopoly in the Western world & should continue to generate strong cash flow for years to come.

Long story short, tech reported “underwhelming” earnings which prompted a much needed sell-off. This was a classic Soros-style “reflexivity” trade – earlier in the week we saw a rally based upon the notion that i) The Fed would hike interest rates 25 bps and ii) the Fed might pause or pull make rates later in the year. The beaten-down “loss making companies” surged (CVNA, OPEN, etc) and acted like the tide that lifts all boats. Tech earnings acted as a much-needed antidote, with big players like Alphabet (GOOG) and Amazon (AMZN) falling anywhere from 400-1000 bps within the day. If anyone needed a reminder that the market is not rational, this was it.  

Tower shares have had a rough week down -7.8%, following heavy flooding across Auckland and other parts of the north island. As of Friday it is estimated that there are 20,000 claims relating to the floods have been made to date (across all insurance companies).

Estee Lauder reported underwhelming results for Q4. The headline is that China isn’t quite back and consumer discretionary products are starting to feel the pain. Skincare sales fell 20% – skincare has been a “hero” line the past decade, as the consumer focus has shifted from makeup to self-care. It’s a big harbinger of consumer pain – we think more so than other disappointing results (Apple, Snap, etc). The other headline to note here is that EL’s budget line – “The Ordinary”, which grew double-digits in every region. In comparison, ultra-luxe lines like La Mer experienced a decline in sales, which suggests that the wallet of top-middle-income-bracket folks is starting to be stretched. We reiterate our buy-rating, as the company remains best-in-class. Since our initial recommendation the stock has re-rated +25%.