Stock Watch - 22 May 2024 | The Close

Summary

In this insightful discussion, financial experts G Letter to Levy, David Shapiro from Sassman Securities, and Wayne McCurry from FNB Wealth and Investments delve into the intricacies of the stock market. They address a range of topics, including the strategic mergers and acquisitions in the mining sector, the potential for a commodity upcycle, and the influence of AI on the tech industry. The panelists also provide investment advice, with a focus on companies like BHP, Anglo American, and Nvidia, and discuss the current state of the South African Rand. They explore the impact of political stability on the economy and provide insights into the future of resource ETFs and the prospects of retail stocks like Target. The conversation is a testament to the dynamic nature of financial markets and the importance of staying informed in an ever-evolving landscape.

Takeaways

• 📉 BHP's Offer Rejection: Anglo-American has firmly rejected BHP's offer but has given them an additional week to improve it, indicating a potential openness to a better deal.
• 🔄 Finality of BHP's Offer: BHP has declared its current offer as final, not intending to make a better one, which raises questions about the future of negotiations.
• 💡 Shareholder Power: Shareholders have the ultimate say in major decisions like mergers or acquisitions, even if directors disagree.
• 📊 Market Analysis: There is a possibility of a commodity upcycle in the next few years, which could positively impact the South African Rand and share market.
• 🌐 International Influence: Decisions by companies like BHP are influenced by global factors and stakeholders outside of South Africa.
• 🔑 Future of Kumba: The future of Kumba, a subsidiary of Anglo American, is uncertain following the rejection of BHP's offer.
• 🛑 Uncertainty in Tech: Nvidia's results are seen as a bellwether for the tech industry and the economy, with expectations running high.
• 🚀 AI and Semiconductors: The demand for AI and semiconductors is increasing, with companies like Nvidia leading the charge in innovation.
• 💻 Market Sentiment: The 'man on the street' is becoming more interested in commodities like copper, indicating a potential shift in market sentiment.
• 🌐 Global Impact: The impact of AI is becoming more evident in everyday life, affecting how we live, shop, and entertain ourselves.

Q & A

What was the main topic of discussion regarding BHP and Anglo-American?

The main topic was Anglo-American's firm rejection of BHP's offer, but with an indication that they would consider a better offer if presented within a week. BHP, however, announced that their offer was final and would not be improved upon.

What does David Shapiro think about the potential merger between the two companies?

David Shapiro believes there is still a lot of discussion to be had and that the strategies of the two companies are quite similar. He suggests that many shareholders or investors might support a merger due to the potential for a strong focus on developing copper interests.

What is Wayne McCurry's perspective on the shareholders' role in the potential sale of their company?

Wayne McCurry explains that ultimately, the shareholders have the final say, even if the directors disagree. Shareholders can call a special general meeting and make decisions through proxy votes or actual votes.

What is the general sentiment regarding the South African Rand (ZAR) and its potential movement?

There is a belief that the ZAR could strengthen, possibly moving towards an overvalued territory if a commodity upcycle occurs over the next two to three years. However, this could change rapidly based on external factors such as US inflation or job reports.

How does David view the current situation with Nvidia and its significance in the market?

David sees Nvidia as a significant player in the market, especially as a pure play on AI. He believes that Nvidia's results could act as a catalyst for a market rally or at least allow the market to hold its current position.

What is the panel's opinion on investing in copper, specifically through companies like Copper 360?

Wayne McCurry is cautious about investing in single commodity companies like Copper 360, despite acknowledging the bright future for copper due to the move towards electrics and a lack of new big copper deposits.

What does the panel suggest about the potential for a commodity upcycle and its impact on the economy?

The panel suggests that a commodity upcycle could lead to a stronger Rand, a better performing share market, and an improved economy. However, they also advise to sell and take money overseas if things start looking better.

What is the discussion around selling South African bonds in anticipation of declining interest rates?

Wayne McCurry advises against selling South African bonds now, as they are yielding about 10% plus capital growth. He believes that if the Rand strengthens and interest rates fall, the value of long bonds will increase.

What are the panel's views on investing in resources ETFs, and which ones do they recommend?

The panel suggests focusing on the Resi 10 ETF, which includes major resource companies. They also caution against ETFs that include gold shares, as they appear to be topping out.

What stock picks do the panelists offer for the current market conditions?

Wayne McCurry suggests investing in US retail, specifically Target, due to the potential for a rebound in consumer spending if US interest rates decrease. David Shapiro recommends Roet, a company he believes is well placed for future changes and a good dividend payer.