News & Insight • Weekly Newsletters

01 December 2023 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• US core PCE inflation, the Federal Reserve’s favoured measure, rose 3.5% in October, the lowest rate of growth since April 2021
• At a speech on Friday, Federal Reserve chairman Jerome Powell continued to leave further rate hikes on the table but markets, still hungry for any whiff of dovishness, latched onto a change of tone. Rather than referring to restrictive policy, instead he noted policy was “well into restrictive territory”
• The Eurozone annual rate of inflation fell more than expected to 2.4%, down from 2.9% a month earlier
• Nationwide said that UK house prices rose for the third straight month as the market responded to hopes that mortgage rates have peaked
• World leaders at COP28, taking place in Dubai, have decided to target agriculture and the food cycle

COMPANY NEWS

• The best performing UK large cap stock this year has been Rolls Royce, following on from January comments by new CEO, Tufan Erginbilgic, that the company was a “burning platform” there have been decent results, and this continued with a Capital Markets Day with forward guidance that was much better than expectations
• Ashtead Technology, the UK sub-sea equipment company, soared by around 20% after confirming an earnings enhancing acquisition of ACE Winches, a leading offshore energy infrastructure engineer, for £53.5m
• Rightmove look to have thrown down the gauntlet to the recent purchaser of On The Market by announcing some punchy targets through to 2028 on the back of a trading update that was “at least in line” with previous numbers
• Philips has had a number of profit warnings this year and has further negative news when it announced its sleep apnea products were being investigated
• The emphasis on future guidance has been enhanced in this quarter and fortunately Snowflake – one of the popular stocks during the rise in the market post-Covid – came out with revenue and earnings better than expected
• There were reports from the Wall Street Journal that Humana is set to merge with Cigna. The combined market cap of the two businesses would be just under $150bn with reports noting that any deal would give them scale to rival CVS Health and UnitedHealth

CHARLIE MUNGER

In a week that saw the deaths of former Chancellor of the Exchequer Alistair Darling, Henry Kissinger, and Shane MacGowan who penned perhaps the greatest Christmas song of all time, we doff our caps to a fairy tale of Omaha, Charlie Munger.

Not just Warren Buffett’s sidekick, Buffett always credited Munger with teaching him to move beyond the Benjamin Graham principles of value investing to consider more growth companies. Buffett once said Munger told him: “Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices”.

INVESTMENT TRUST M&A

Although we have tended to focus on individual companies at the smaller end of the market cap ladder on looking too cheap, there were two announcements proving that this opinion has filtered into the boardrooms of investment trusts. Firstly, Troy Income Growth Trust (holds UK listed stocks) was bought out by STS Global Income Growth Trust (previously known as Securities Trust of Scotland) at a 2% discount. Meanwhile, Fidelity China Special Situations revealed it was due to merge with Abrdn China with a 33% cash exit for ACIC shareholders at a 2% discount.

THIS WEEK IN HISTORY

1835: Andrew Carnegie is born. Carnegie founded the Carnegie Steel Company in 1892 which he later sold to JP Morgan's newly formed United States Steel Corporation for $492m, $226m of which went directly to Carnegie himself

1999: a $73.7bn merger between Exxon and Mobil Oil establishes what was to become the largest company in the world at the time

MARKET DATA

As at 1^st December 2023. Source: InFront

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