In an interview with BizNews, David Shapiro, a renowned market analyst from Sasfin Securities, shared insights on the potential resurgence of resource stocks amid global economic shifts. He highlighted optimism around platinum investments and discussed the evolving dynamics in luxury brands like Hermes and Ferrari. Shapiro also delved into the bond market’s attractiveness amidst declining yields and speculated on the future of tech giants like Nvidia in investment portfolios. His perspectives provide a comprehensive view on current market trends and investment strategies amid uncertain global conditions.
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Highlights from the interview
In a wide-ranging interview with Bronwyn Nielsen, David Shapiro, a seasoned market analyst at Sasfin Securities, offered a nuanced perspective on several key economic and investment themes. Shapiro expressed cautious optimism about the resurgence of resource stocks, particularly emphasizing platinum and major players like BHP and Glencore amid global economic shifts. He highlighted the potential for these stocks to outperform as global interest rates adjust and economic growth patterns evolve, noting their intrinsic value in uncertain times.
Shapiro also delved into the luxury goods sector, pointing out notable performers such as Hermes and Ferrari, where demand for exclusive products like Birkin bags and classic cars continues to drive market dynamics. He underscored the enduring appeal of these brands in investment portfolios due to their robust market positions and enduring consumer demand.
Additionally, Shapiro discussed the evolving attractiveness of bond markets, particularly long-term bonds and real estate investment trusts (REITs), as global bond yields adjust and investor sentiment fluctuates. His insights into these diverse sectors provide valuable guidance for investors navigating the complexities of today’s volatile financial markets.
Edited transcript of the interview ___STEADY_PAYWALL___
00:00:11:21 – 00:00:30:15
Bronwyn Nielsen
David, all the news flow at the moment is about the attempted Trump assassination. And markets are reacting. Many are saying that this has boosted Trump’s chances of actually winning the presidential election in November. What are your views?
00:00:30:17 – 00:01:00:10
David Shapiro
It’s very interesting. I wish I had a clear view of what was going to happen. Initially, when it did occur and the news came through, my first thought was that world markets would come under a lot of pressure because those kinds of events normally cause worries and concerns due to the uncertainty. And, you know, the initial recommendations were to buy gold, go into treasuries, buy the dollar, and sell off equities.
00:01:00:10 – 00:01:26:13
David Shapiro
And the opposite has happened. I mean, equities are very strong on the strength that, as you mentioned, Trump’s going to be a shoo-in for this election. And, of course, he’s pro-business, reducing taxes, introducing tariffs, and so on. So, looking at the markets now, things are a lot better around that.
00:01:26:15 – 00:01:50:04
David Shapiro
I’m concerned. We’re not as concerned as to where this is going to lead. Bronwyn, I’m not clear. I have children in the United States. When I talk to them, it’s not that certain. They’re concerned about who Trump is or what he stands for. And I think a lot of people are saying we’ve had enough; we want to go to the middle road.
00:01:50:06 – 00:02:12:23
David Shapiro
We want the good old Norman Rockwell America again, you know, pumpkin pie and Sunday baseball games, those kinds of things. So there are a lot of issues we’re going to have to navigate in the next couple of weeks leading up to the election.
00:02:13:03 – 00:02:38:23
Bronwyn Nielsen
Have you paid any attention, David, to what many are calling the Trump trade? Energy companies, as you say, pro-business energy companies, credit card companies, insurance, health insurance companies, private prisons, those are the things that unfold in this so-called Trump trade. Have you got any thoughts on whether we should be positioning?
00:02:39:00 – 00:03:09:20
David Shapiro
Well, the positioning, and I think it doesn’t only include the Trump trade, is on this whole energy situation because there have been real buttons to push the EV electric vehicle side of the market. And there’s a view that this is going to take time. And, you know, he is one who would favor going back to oil exploration and using radical oil, and pushing the internal combustion engines.
00:03:09:20 – 00:03:37:01
David Shapiro
I think we’re going to get halfway, which is going to be a hybrid type situation where you still have internal combustion as well as battery. So, but those are the kinds of issues that will change with Trump. He doesn’t take prisoners and when it comes to ESG, I think it’s going to be a lot more difficult for him to actually get out of it.
00:03:37:01 – 00:03:58:05
David Shapiro
I think the world’s going that way. And, Bronwyn, I think this is where I’m getting to: people are not quite sure what they want of America. Is this the America they want? What do they want? They don’t want the liberal America. They don’t want the far left. I think they’re looking for the center.
00:03:58:07 – 00:04:16:04
David Shapiro
And Trump’s got a very solid base of support. But, you know, so have the left or the Democrats. And I think it’s those middle voters that are going to decide. We don’t know where they are at the moment. I’m not sure that they will get a push to Trump. I really am not sure.
00:04:16:06 – 00:04:38:06
Bronwyn Nielsen
Another thing that we can’t ignore, of course, is softer inflation out of the US on Friday and everybody jumping on the bandwagon in terms of potential rate cuts out of the Fed in September. We also have the South African Reserve Bank meeting later this week. Any chance of some relief, do you think, on the local front?
00:04:38:11 – 00:05:06:20
David Shapiro
Oh yeah. Oh, definitely. It’s going to happen. And I think, probably not this week, but there’s a chance. We started to raise rates long before the rest of the world. I think we need it. We need to give this economy a little bit of a kick. And in line with the government of national unity, who are also going to be trying hard to get growth back.
00:05:06:20 – 00:05:27:16
David Shapiro
Yeah, so inflation is still relatively high. We’re still above, we’re in that four and a half to five rate, which is high. But it’s going to come. And I think there’s almost now a 70-90% chance that the US will cut rates. And I think the commentary coming out of Trump, you can see, is a lot more optimistic.
00:05:27:18 – 00:05:57:00
David Shapiro
And, you know, he’s not only governed by inflation, he’s governed by growth as well or employment. So it’s very important. And he’s very sensitive about that market, which is slowing down. So I’m ultra bullish that we’re going to get two rate cuts. And once they start, they don’t stop. So I think globally, the next year is going to be underpinned or characterized by rates coming down, which is great for equity.
Read more: David Shapiro predicts strong Rand surge amid global market optimism
00:05:57:09 – 00:06:07:02 Bronwyn Nielsen: It’s great for equity markets. So what should we be looking at to ensure that we take advantage of an interest rate cutting cycle?
00:06:07:04 – 00:06:33:13 David Shapiro: Very. That’s, you know, that’s what we do. We go for tech. Tech is still dominant. It’s still very, very dominant in the global market, especially in the US. AI is a theme that’s not going to suddenly fade away. It’s not a fad. There’s real money going into it. There is real growth. These companies are making, you know, the tech companies are flush with cash. They’re still spending, so you can’t ignore that. Instinctively, you want to sell those and go for interest rate-sensitive stocks. I think there’s going to be some of that happening. I haven’t made up my mind, you know, where to go.
00:06:50:03 – 00:06:51:09 Bronwyn Nielsen: Are you going to hold up?
00:06:51:11 – 00:07:19:10 David Shapiro: Yeah, I’m holding on to tech. I’m also starting to look at some of those businesses like Walmart and Costco, which are going to pick up more spending. Some of the beauty companies like L’Oreal, Home Depot, businesses like that, you know, where you expect the housing market to come back into a bit of growth. People will start spending more, maybe spending more on their homes. So yes, you can’t ignore it. So, you know, definitely it will play out. But I haven’t got a clear-cut strategy at the moment. I’m sticking to my favourites, which have to be, oh, and luxury as well. I think it’s also going to bring some relief, you know, on the luxury side. China is still the missing link in that. It’s disappointing, but so I think it’s going to be a good market, you know. But how to play it, I haven’t really got to that.
00:07:47:00 – 00:08:01:05 Bronwyn Nielsen: When you say how to play, I’m looking for some insight into that timing. Am I clear when I hear you say that you’re not sure yet when you are actually going to start buying the consumer stocks?
00:08:01:09 – 00:08:23:14 David Shapiro: I’m not quite sure which stocks to buy, you know what I mean? So, yeah, the stocks I mentioned are certainly on my list. You know, I’ve always liked businesses that are well-run. What I’m trying to say is, I’m not abandoning tech. That’s the point I’ll make. You know, I’m staying with my tech choices, and I’m staying with the AI theme. I’m staying with the obesity theme, you know, with Novo Nordisk, Eli Lilly’s weight loss drugs. But I’m trying to find, okay, which are the best companies if interest rates do come down. Am I going to them or are there others? That’s my uncertainty.
00:08:40:10 – 00:08:54:03 Bronwyn Nielsen: Well, chatting to Alec earlier, two weeks ago, he was saying a simple thank you for an email and putting that into the portfolio. Is there more opportunity there?
00:08:54:05 – 00:09:16:14 David Shapiro: Oh, yeah. I know that’s not for this year. This year they’ve already signaled that things will be flat. But it’s from next year that the growth is going to take off. You know, they build these enormous machines, without which you can’t have AI, the same as Nvidia. Without the Nvidia chips, you can’t have AI. So I think the two stocks that I really love and continue to buy, and they are well-run businesses, are ASML. It’s like a monopoly. And I’m still a big Nvidia fan. I still think that the story’s not over. The more I read about it, the more I like it. And the more that it goes up, the more cynics come into the market and tell you to get out. I’d say not yet. Yeah, there will be a time where it explodes and it gets too much. But in the meantime, you can still hang around there.
00:09:47:08 – 00:10:11:06 Bronwyn Nielsen: You mentioned luxury goods, and we chatted a while back on Richemont potentially being in play with LVMH. I had a chat with Jean-Pierre Staffer, who said perhaps Kering is a better match for Richemont. Any thoughts on this corporate activity that could galvanize Richemont?
00:10:11:08 – 00:10:35:19 David Shapiro: That’s interesting. He says Kering because Kering has been a big underperformer. But you know what, Bronwyn? What you’re finding in the luxury area, it’s the people who manage the business and also what they make. The bags that they make, the shoes, you know, that’s luxury. And Kering just hasn’t made it. They’ve got their strategy wrong.
00:10:35:19 – 00:11:14:19
David Shapiro
They just haven’t captured the imagination of the consumers. It can turn around straight away. You need just one good designer, you know, as we saw in the past with Tom Ford, who turned Gucci around once before. So, you know, watch it carefully. LVMH is going on a very strange strategy, you know, which I’m becoming a little worried about. They are cannibalizing their brands, as we saw with Pierre Cardin many, many years ago, although that was his strategy, you know, to bring luxury to the common person.
00:11:14:21 – 00:11:39:13
David Shapiro
But what’s interesting is that Richemont is making its way back, and it’s not only in luxury watches. It’s on the jewelry side, and Cartier is killing it, you know, doing very, very well and making big gains. Who’s going to take them? I don’t know which is the better match. I’m not really sure, but I think we need some guidance from Kering. Kering has to get its own business right. It’s got to get its brands right. It’s an incredibly interesting area of the market. The ones that stand out are Hermès, or however you want to pronounce it.
00:11:39:15 – 00:11:59:09
David Shapiro
And I love Ferrari. I always say this, not even jokingly, where in Hermès, your Birkin bag, the second-hand bag costs more than the new bag. There’s demand out there. The same thing with Ferrari, where their old cars are selling for more than the new cars. I like this brand. This is something else.
00:11:59:11 – 00:12:20:02
David Shapiro
So it’s a good investment, very specific, a very interesting area of the market to understand and analyze. But I love that area and I love to watch and understand those companies.
00:12:20:03 – 00:12:22:20
Bronwyn Nielsen
Good.
00:12:23:02 – 00:12:34:10
David Shapiro
Investment, very specific, a very interesting area of the market to understand and analyze. But I love that area and I love to watch and understand those companies.
00:12:34:14 – 00:12:51:18
Bronwyn Nielsen
You spoke about consumer stocks on the international stage, but you haven’t spoken about consumer stocks locally. Is there anything that you think you could pick up in light of an interest rate-cutting cycle coming to fruition?
00:12:51:20 – 00:13:14:06
David Shapiro
I suppose we used to have well-run retailers. I’m not so sure anymore after what we saw with Pick n Pay and what we see with small companies coming down. But the one I like is Foschini. I just like Foschini very much. I still like Shoprite. I’m still a big fan of Shoprite and the strategy that they’ve pursued. Woolies… I was a little disappointed in their recent results. They’ve been hurt in Australia again. So for choice, I would choose those two. I would stick with Shoprite on the grocer side and Foschini on the consumer apparel side.
00:13:14:08 – 00:14:02:07
Bronwyn Nielsen
David, we haven’t chatted about resources. Obviously, as you said, the Trump attempted assassination, we thought there would be a huge flight to safety that may still occur as the week unfolds. But from a resource perspective, I mean, we’ve had so many conversations over the years on the resource play, specifically in South Africa.
00:14:02:09 – 00:14:23:20
David Shapiro
You know what, I get to be a chicken. When I say chicken, the way that I’ll describe it, there’s more upside than downside. Okay. In other words, you’ve got more chance of making money in resources at the moment than of losing. But when this turnaround is going to come, I think we’ve been waiting and waiting. It will come, and I think it’ll come once we start to see interest rates globally coming down. It’s going to mean that we’re going to push growth up. China’s recent growth numbers have been disappointing, but it does…
00:14:23:20 – 00:14:38:07
Bronwyn Nielsen
Run the same level.
00:14:38:12 – 00:15:13:23
David Shapiro
Well, what it does suggest is that they are going to start stimulating or they’re going to have to start stimulating. So we need growth. Growth out of China still remains very important. In marketing resources, I read quite a few reports on platinum now, and I’ve come back to the story that we mentioned earlier with the hybrid vehicle, which I think is going to be more popular than the EVs. You’re going to need petrol as well, oil, which is platinum. You’re going to need those converters. It’s early days. I don’t want to pull the trigger yet, but it’s going to happen soon. I’m watching very, very carefully. I’ll watch the charts carefully and see if there are more sellers and buyers, you know, and I’m waiting for that turnaround to come. But it will come.
Read more: David Shapiro – Stark contrast between Evergrande disaster and sublime ASML
00:15:30:15 – 00:15:37:04
Bronwyn Nielsen
And you, what would it be specifically if you know platinum? I mean, I’ve got two things here.
00:15:37:06 – 00:15:55:18
David Shapiro
From a platinum point of view, maybe Amplats and Impala are going to be the highly geared ones. Amplats is probably the safest one. But if I had to buy resources, I’d probably say, yeah, I’ve got to go ballistic. I’ve got to go with BHP.
00:15:55:18 – 00:16:18:00
David Shapiro
You know, I like a well-run business under a bit of pressure, still struggling on the nickel side, but maybe that’s the way. Glencore, I’d go. But if you want to be adventurous, you’ve got to make money out of platinum. Whenever it gets to these weird, you know, I can’t call the exact point, but that’s why I say I think there’s more upside.
00:16:18:05 – 00:16:22:18
David Shapiro
Even if you bought them now and waited, I think you’re going to see more upside than downside.
00:16:22:23 – 00:16:28:10
Bronwyn Nielsen
Well, I definitely don’t want to force you to buy, you know, I think…
00:16:28:12 – 00:16:54:05
David Shapiro
Yeah, you know, it’s a good business. It’s a bit lukewarm at the moment, you know, going nowhere. But that’s okay. We tend to become too impatient and we want everything now. We want immediate gratification. It’s never like that. And, Bronwyn, I always remind people, if you go into the ten-year Treasury bond in the United States, you’re getting 4.2% per annum.
00:16:54:07 – 00:17:15:18
David Shapiro
Okay, I’ll say that again. That’s your annual return. So you can’t get 4% today; it’s 4% per annum. So if you go into equity markets, be happy with a little bit of a premium, 6% per annum, somewhere around that. I’m talking in dollar terms that you can convert at the end. So I think we’ve got to learn to be a little patient.
00:17:15:18 – 00:17:34:05
David Shapiro
We’ve lost it in a rush to kind of, you know, with too much influence. But you know what? We’ve been seeing the TikToks and some of the other sheens as well. We’ve got to get back to kind of almost a normal way of looking at investment.
00:17:34:06 – 00:17:43:13
Bronwyn Nielsen
I think we spoke four weeks ago. You were talking about bond yields. You were talking about property REITs, and you were saying, watch this space. Any further clarity?
00:17:43:19 – 00:18:20:13
David Shapiro
Watch this space. If rates start coming down, suddenly those property stocks will become attractive. They’ve gone through five years of really difficult times, but they will turn. And some of the yields that you’re getting there are very appealing. I still think that what I read on Bloomberg on Thursday was one of the biggest days in the bond market with inflows from foreigners since January ’22, massive amounts coming in. We saw our yields come down.
00:18:20:18 – 00:18:39:20
David Shapiro
So I still think there is attraction in our long bonds, the kind of yields now, and again, I say as REITs come down, you know, you’re going to make that capital profit. You can lock in a yield for as long as you lock in 15 to 20 years. And you will make some capital profit.
00:18:39:20 – 00:18:52:14
David Shapiro
Those things are going to improve. So I’ve got no doubt that, you know, that’s what I’m saying. We’re in for a good year, so far even longer than that of markets, bond markets, equity markets, property markets and so on.
00:18:52:19 – 00:19:09:04
Bronwyn Nielsen
And as you’ve seen, I mean, you’re an equity man, for you to be talking about the bond market and the property yields, etc., that is quite something I think we should take note of. The biggest holding in your portfolio, what is that as we close up?
00:19:09:06 – 00:19:31:14
David Shapiro
Not Nvidia, not, you know, it’s something that has just staggered me, you know, and the conundrum, Bronwyn, what do we do now? Do we take profits or do we go for the ride? My view is go for the ride still, because the story is still strong. And if it’s this, if we sell, what are we going to do with the money? Going to some of the top stocks, going to TSM, Taiwan Semiconductors, or are you going to go into Microsoft? Are you going to go into Alphabet? You’re getting into some of the top companies. So if Nvidia falls, they’re going to fall as well. So at least you want to go into the stocks that I was mentioning.
00:19:31:14 – 00:19:48:18
David Shapiro
You know, some of the interest rate-sensitive stocks I think are the right thing. Let’s wait and see with it. Let’s wait for the next set of results. We’ll review it then. But I still think that story’s not complete. It’s not finished.
00:20:02:04 – 00:20:11:00
Bronwyn Nielsen
David, until we catch up again. Thank you very much for your time. David Shapiro, Sasfin Securities.
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