The Week Ahead

  • The S&P 500 hits a new record close

    The S&P 500 closed at 2 939.88, its highest-ever close and a whisker away from its record intra-day high set in Sep 2018. Much better-than-expected US GDP growth figures helped push the index higher, as did slightly better corporate earnings figures. Additionally, lower-than -expected inflation figures were also released. What this means in simple terms is that the US economy is growing faster than anticipated and inflation is rising more slowly than anticipated-the perfect combination for a strong equity market outlook.

    The US economy grew by 3.2% seasonally adjusted in Q1, even though consumer spending was soft, probably due to the impact of the government shutdown early in the year. While a moderation in growth from these levels can be reasonably expected as the year progresses, the US economy will likely end 2019 with at least a 2% growth rate, which is significantly ahead of most of its developed market peers.  

    Amazon was the big newsmaker on US markets last week, smashing through analyst expectations with respect to revenue, profit and earnings. The company is also planning to turn up the heat on its traditional retail competitors, with the news that it plans to offer one-day delivery for its Amazon Prime customers instead of the existing two days.

    Pick n Pay released its results for the 53 weeks to end Feb 2019 last week and these were way ahead of any of its competitors. On a comparable 52 week basis, headline earnings per share rose by 18% on comparable turnover growth of 4.8%. Market share was gained, probably from Shoprite and selling price deflation averaged 0.3% for the period.

    Long for Life, founded by Brian Joffe, release an extremely positive trading statement last week, forecasting headline earnings per share to be up by between 22% and 32% when the year end results to Feb 2019 are released on 15 May. Although no segmental detail was given in the trading update, it seems likely that Sorbet was a prime contributor to this strong performance.

    PSG Group released its earnings for the year to end Feb. An investment holding company, PSG derives approximately two-thirds of its earnings from Capitec. Given that around 90% of its investments are listed entities in their own right, it is fairly simple procedure to value PSG on a so-called sum-of-the parts-basis-in other words, just adding together the listed value of its underlying components and estimating a value for the small, non-listed portion. On this basis, at 18 Apr 2019, the sum-of-the parts valuation of PSG was R272.90, compared with a share price of R329.73. The discount of the share price to the sum-of -the parts value was thus 17%.

    The JSE Alsi closed at 58 894 on Fri 26 Apr, a fall of 0.6% on the week.   

    Economic related events this week;

    30 Apr                                                            SA Private Sector Credit, Monthly Budget Balance, Trade Balance Mar

    1 May                                                             May Day Public Holiday

    2 May                                                             NAAMSA New Vehicle Sales Apr, Absa Mfg PMI Apr

    3 May                                                             US Nonfarm payrolls Apr (Consensus 181k)