That Was The Week That Was
- The US non-farm payrolls employment data massively exceeded expectations with 353,000 new jobs created, almost twice what was expected.
- Expectations of a rate cut in the first half of the year on both sides of the Atlantic are becoming more distant
- The Bank of England held rates at 5.25% - one member voted for a cut and two voted for a hike
- UK house prices rose more than expected in January according to Nationwide
- A court in Hong Kong ordered the liquidation of debt-laden Chinese property giant Evergrande
- Novo Nordisk Q4 sales and profits beat expectations once again. Sales of Wegovy in the quarter were below consensus but Ozempic sales beat by 14%. Profits were around 5% ahead of expectations
- Ferrari was another European stock up strongly as results came in better than analysts thought. With the ticker RACE it lived up to expectations by signing up Sir Lewis Hamilton in F1 to send the shares even higher
- Diageo shares fell initially on continued weakness in Latin America and the Caribbean (11% of group revenue). Overall sales were down 1.4% year-on-year
- Ryanair missed on results primarily due to the ongoing arguments with internet flight search companies
- Phoenix Group showed resilient cash flows and tremendous dividend cover (that currently yields over 10%). The lack of a buy-back left the shares unmoved
- Shell hiked its dividend after reporting its second-highest cashflow in its history and announced another round of share buybacks. BP report next week.
- Thermo Fisher Scientific shares fell after the medical device maker gave lower-than-expected guidance for 2024 as biotech companies rein in product spending
- Merck enjoyed another sold quarter as earnings and revenue both beat expectations. Its blockbuster cancer drug Keytruda sales grew 19% to $25bn
- Bristol Myers Squibb also beat on earnings and revenues. They forecast 2024 revenue would increase by low single digits but the shares were muted
- The seed specialists, Corteva, showed growing profitability due to higher prices and the shares flowered as it announced a $1bn buyback of its stock
- Intel announced a delay to its Ohio chip plant to 2026
- AMD (which has been trying to catch up with its semiconductor rival, NVIDIA) had its print which was weaker than expected
- Elon Musk’s $55.8bn share reward from Tesla was blocked in the company’s home state of Delaware
- The largest company in the world, Microsoft, had excellent results with every division better than consensus. There was a reacceleration of cloud growth and AI is providing a strong tailwind to the business
- Alphabet’s shares were down as results were very good but ad revenue missed by 1% and guidance was poor. AI was then mentioned 70 times on the investor call
- Amazon keep on improving and the shares are following. This print showed the continued cash flow as investment in logistic hubs and cloud computing are starting to reap benefits. Its international business isn’t as far along in the turnaround as its North American business there is a pathway. CEO Andy Jasay said “every consumer business has, or will have, generative AI”
- Apple’s shares have been a little soggy of late and the market proved correct as results confirmed growth has stalled and its Chinese business is under pressure. iPhone sales were better than expected and its services division is turning into a monster. They also have “plans on generative AI announcements this year”
- On the eve of its 20th birthday, META announced fantastic results in the core business with great cash flow offsetting further losses in its metaverse (Reality Labs) division. With a $50bn buyback and the initiation of a $0.50 dividend the shares rose sharply by 20% adding $197bn to the market cap – an intraday record
EVs, ENERGY & ELECTROLYSERs
The renewables sector has been under pressure for some time since the heady days earlier in this decade and there is a sense of some investors giving up. Volvo stated they were going to stop backing their EV division Polestar, and elsewhere, Renault has cancelled the IPO of Ampere, its EV and software arm, and Volkswagen look to have pushed back similar plans for PowerCo, its EV and battery unit.
This wasn’t all as Harmony Energy Income Trust, which invests in energy storage and renewable energy projects, followed its rival Gresham House Energy Storage, by cutting its dividend due to weaker underlying revenue.
Fortunately for the renewable investor there were some green shoots as ITM Power, the electrolyser specialists, showed signs of stopping the share price decline (down over 90% from its all-time high) as the first-year plan by CEO Dennis Schulz took shape. Cash burn is down dramatically, and the market now looks forward to his focus on sales.
UK Equities (% return)
World Equities (% return)
10 Year US Treasury Yield (%)
GBP / USD (fx rate)
As at 2nd February 2024. Source: InFront
THIS WEEK IN HISTORY
1637: The Holland tulip market suddenly crashes. Within a day there are no buyers for tulips at any price, after reaching prices as high as 6,000 Guilders for a single bulb. This week represented the peak of the now infamous tulip bubble
1971: Rolls Royce declares bankruptcy triggered by huge losses incurred in developing engines for Lockheed’s new Tri-Star Airbus. The aero-engines side of the business was nationalised, while ownership of the cars division was retained by the receiver and, by 1990, the Rolls-Royce empire had returned to the private sector
This publication has been produced by Vermeer Investment Management Limited (VIM) trading as Vermeer Partners. It is provided for information purposes only. VIM makes no express or implied warranties and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. VIM will not treat unauthorised recipients of this publication as its clients. Prices shown are indicative and VIM is not offering to buy or sell or soliciting offers to buy or sell any financial instrument. Without limiting any of the foregoing and to the extent permitted by law, in no event shall VIM, nor any of its officers, directors, partners, or employees, have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any lost profits, lost revenue, loss of anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising from any use of this publication or its contents. Other than disclosures relating to VIM, the information contained in this publication has been obtained from sources that VIM believes to be reliable, but VIM does not represent or warrant that it is accurate or complete. VIM is not responsible for, and makes no warranties whatsoever as to, the content of any third-party website referred to herein or accessed via a hyperlink in this publication and such information is not incorporated by reference. The views in this publication are those of the author(s) and are subject to change. VIM has no obligation to update its opinions or the information in this publication. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the client who receives it. Any securities discussed herein may not be suitable for all investors. VIM recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. This material has been issued and approved for distribution in the UK by VIM. ©2024 Vermeer Investment Management Limited. All rights reserved. No part of this publication may be reproduced or redistributed in any manner without the prior written permission of VIM. VIM is authorised and regulated by the Financial Conduct Authority (FRN: 710280) and is incorporated in England and Wales (company number: 09081916).