News & Insight • Weekly Newsletters

19 January 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• US jobless numbers and retail sales continue to point towards a stronger than expected economy
• To underline this, Federal Reserve Governor Christopher Waller suggested that they are not in any rush to cut interest rates
• Meanwhile, UK retail sales fell by 3.2% in December, the largest decrease since January 2021 when we were in lockdown
• China's population declined for a second consecutive year. Data released this week showed a population of 1.41bn at the end of 2023 - a 2.08m decrease from 2022

COMPANY NEWS

• TSMC had a decent print and suggested that the bottom of the semiconductor cycle had been reached. Companies in the sector (ASML, AMD and Nvidia) rallied
• US banks continued to report with Goldman Sachs and Morgan Stanley continuing to issue worries about the US consumer
• After the food retailers (supermarkets) had decent prints, we are starting to get a good picture of consumer spending over the festive season. Watches of Switzerland, which owns shops such as Mappin & Webb and the rights to Rolex, unfortunately didn’t participate
• BP announced that current interim CEO and former CFO Murray Auchincloss would take over the job on a permanent basis. BP stated that Auchincloss’s “deep understanding of the opportunities and challenges in the energy transition will serve BP well as we continue our disciplined transformation to an integrated energy company”
• Investors have been worried about the luxury goods sector - but Richemont reported third quarter sales of €5.59bn slightly above consensus estimates
• Flutter announced their last set of numbers before their secondary listing starts trading in the US. With revenue up 11% quarter on quarter, management commented that they were on track for an NYSE listing on 29^th January and that while sports results were very customer friendly, particularly in the NFL in November, the underlying momentum in the business remained very strong heading into 2024
• Chinese data (above) continues to be poor, and so do the shares in companies such as Alibaba and com

SMALL-CAP

The UK mid and small capitalised businesses are cheap – as we have said for some time. Larger companies are deciding to switch geographic listings – please see CRH and Flutter (above) for details but others are sitting ducks. The latest being the UK logistics company, Wincanton, who have agreed to an acquisition by the European firm CEVA Logistics for £566.9m. As Deutsche Numis state, ‘The Acquisition implies an enterprise value multiple of approximately 6.8x Wincanton's underlying EBITDA and 11.7x Wincanton's underlying EBIT (in each case on an IFRS 16 basis) for the twelve-month period ended on 30 September 2023’

INTERESTING ELSEWHERE - FOOD

“It’s an existential threat to the food industry and certainly an existential threat to the processed food industry.” NYT, on the disruptive effect of weight loss drugs (Eli Lilly/Novo Nordisk) on the snack/fast food market in the US.

WATCHING PAINT DRY

As part of The Atlantic Institute’s 2024 predictions, its Next Gen team have been looking ‘under the radar’ at less headline grabbing things to watch for… Purdue University has developed a white paint that can reflect 98% of the sun’s rays. Painting buildings in this would keep them cooler and reduce A/C energy requirements by up to 40% and reduce the heat released into the atmosphere. Given that the temperatures in cities can be 7˚F higher than in rural areas, a simple change in building materials could have a meaningful impact on city temperatures and energy consumption

TRUST WATCH

A new year story that has been particularly prevalent has been the merging of investment trusts on discounts (LXI and London Metric being the first). We had another as there was a recommended all share merger of abrdn Property Income with Custodian REIT. Unless REIT shares start to rally, we see this continuing in the year ahead

THIS WEEK IN HISTORY

1980: the silver price reaches its all-time inflation-adjusted high

1984: Steve Jobs unveils the first Apple Mac computer. The original Macintosh sold for $2,495 (more than $6,000 in today’s dollars). Apple shipped 70,000 Macs over the following five months

MARKET DATA

As at 19^th January. Source: InFront

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