Wesl3y @Wesl3y: "💬 𝐌𝐚𝐫𝐤𝐞𝐭 𝐔𝐩𝐝𝐚𝐭𝐞 The past few..."

United Kingdom

💬 𝐌𝐚𝐫𝐤𝐞𝐭 𝐔𝐩𝐝𝐚𝐭𝐞 The past few weeks have seen very interesting macro- and micro-economic developments, for example: • US inflation has come in a little under expectations. At the same time, there are more signs that US economic growth is slowing • Inflation across Europe is getting pretty close to central bank targets, and economic activity is starting to pick up • Several influential emerging markets e.g. Brazil, are powering up Recent US corporate earnings have also been revealing e.g. • Retail powerhouses such as Nike and Lululemon are down double digits on weak numbers this year • Household brands such as Starbucks and McDonalds touched 52-week (or more) lows for similar reasons • Software behemoth Salesforce had its biggest share price drop in 20 years because of a very weak forecast • Tech consulting giant Accenture (a bellwether of corporate tech spending) has fallen 20% this year as deal flow has slowed These are all high-quality juggernauts but it looks as though the US economic slowdown has spread beyond consumers and into businesses. With the Fed committed to holding rates at current levels for longer it's reasonable to expect US earnings will weaken further. At that point, some of these titans of industry will be excellent investments. 💰 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 I've made a few changes to the portfolio over the past few weeks, and have more planned. Here's a summary of what's changed, and why: • I've seen many requests for comment on $APPS (Digital Turbine Inc) earnings. I've been travelling so responding hasn't been possible. The business delivered a shocker of a report together with terrible guidance. At one point this company had an incredible advantage over competitors but quarter after quarter they fumbled the ball e.g. failing to integrate acquisitions in a reasonable time frame, ballooning personnel costs, and tech issues. Management has been unable to turn things around over several quarters, and now they're carrying a large amount of debt with little-to-no growth prospects. My mistake has been believing management could hit their targets. But I closed my position after this most recent report • $HL.L (Hargreaves Lansdown) popped on news they'd received an acquisition offer. They refused the approach but it's expected they'll receive a revised offer this month. The business is in the process of a turnaround under new leadership - this seems to be working as the business hit record revenue and profit levels. I've taken a little profit but have left the majority in play • I've initiated a position in $RMV.L (Rightmove PLC) - the market-leading real-estate platform. This is another UK business setting revenue records and is likely to benefit from the rate cuts expected in the UK. The company has very strong cash flow, monstrous (in a good way) margins, and only one real (but much smaller) competitor. • I've grown my $PYPL (PayPal Holdings) position slightly as the stock has been incredibly punished and seems to have found a bottom. Paypal was effectively a monopoly for a long time but competitors have emerged and taken some of its market share. It's still a major player though with strong revenue growth (another company with recent record revenues) and is cheaply valued • $PATH (UiPath Inc.) shared decent earnings for the quarter. But the share price collapsed as it announced the very sudden departure of its CEO and weak guidance for the year to come. It seems the CEO may have been fired because of this financial misstep. Given the weakness mirrored in Salesforce's earnings, macro seems to be part of the issue here (both are enterprise software businesses). The business is cash-rich, generating tons of free cash flow, and has been growing customers in a tough environment. I'm not going to catch the falling knife but given the new CEO is the founder I will consider adding to my position when the dust settles 👀 𝗢𝘂𝘁𝗹𝗼𝗼𝗸 Slowing growth in the US is spreading and the key question is whether the Fed cuts rates in time to stop a recession. Looking past this, the share price of some great companies has already started falling. I will continue to hold a chunky allocation to high-yield US bonds as these generate monthly returns and they will rise in value when rates are eventually cut. They are a better version of holding cash at the moment. At the same time, I've slightly increased my allocation to economies that are ahead of the US in terms of inflation targets and rate cuts. Emerging markets will also do well when rate cuts arrive because their US-denominated debt will become cheaper to service. With this in mind, I'm currently looking into emerging market ETFs.

5 Mentioned

APPS

HL.L

RMV.L

PYPL

PATH