David Shapiro: US election market jitters and SA’s construction crisis
In this morning's BizNews Briefing with Alec Hogg, David Shapiro shared his take on Trump's polarizing influence on markets and the fallout for US bonds. Closer to home, Shapiro discussed the struggles of South African construction giants like Murray & Roberts, now mere shadows of their former selves amid a stagnant economy.
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U.S. Politics: Trump's Resilience Amid Scandals
The interview began with a discussion on the ongoing U.S. election. Shapiro, who has family in the U.S., reflected on the changing political landscape and the deeply polarized atmosphere. He highlighted the historical context of American politics, pointing out that figures such as Abraham Lincoln, who was a Republican, played pivotal roles in shaping the nation's direction, while current Democrats and Republicans have reversed roles over time.
Shapiro expressed concern over the possible outcome of the election, specifically noting the close race between incumbent President Donald Trump and his Democratic rival, Kamala Harris. He argued that, while Trump might win, it's crucial for him to recognize the substantial number of voters who backed Harris and govern with that in mind. "The winning party tends to run wild over the opposition, which is always a concern," he said. The stakes were high as swing states remained on a knife edge, and every vote was now crucial.
While his "heart" was with Harris, Shapiro's "head" suggested that Trump would likely edge her out, despite his questionable personal history and financial troubles. He was puzzled by Trump's continued support, given his well-publicized scandals, including his financial woes and accusations of sexual misconduct. Yet, Shapiro noted that many voters seemed to look past these issues, focusing instead on his governance. He also speculated that Trump's policies might be inflationary, contributing to market volatility.
The South African Construction Sector in Crisis
Shapiro also turned his attention to South Africa's troubled construction sector, specifically the challenges facing iconic companies like Murray & Roberts. He criticized the company's current strategy, which seemed to prioritize cost-cutting rather than revenue growth. The company's shift from being primarily a construction business to focusing on mining contracts, including the Venetia Diamond Mine, has not been enough to stem its decline.
Shapiro lamented the downfall of once-mighty companies such as Murray & Roberts, which had expanded internationally but failed to thrive. The company's poor performance across various regions, from the Middle East to Australia, had led to a dramatic drop in its market capitalization, now hovering at a mere R1 billion. He pointed out that the broader South African construction industry was also struggling, citing the collapse of projects and the difficulty in retaining skilled labor.
"The construction sector reflects what has happened to the South African economy as a whole," Shapiro said. With limited new projects and a lack of demand for construction services, businesses like Murray & Roberts were left fighting to stay afloat. This crisis underscores the broader economic challenges facing the country, particularly in sectors reliant on infrastructure development.
Altron's Impressive Growth Amid Local and Global Challenges
Despite the dire outlook for the South African construction industry, Shapiro was more optimistic about certain local companies, particularly Altron. The technology group has been one of the standout performers on the Johannesburg Stock Exchange (JSE), more than doubling its share price this year. Altron has successfully repositioned itself, focusing on high-tech divisions such as fintech and health tech, areas that have seen substantial growth.
Shapiro praised Altron for its ability to adapt to the changing business landscape, especially as global tech trends like artificial intelligence and digitization reshape industries. "They've done well in areas we wouldn't traditionally associate with Altron, such as software and tech services," Shapiro explained. He also acknowledged that the company had surprised many investors, who had previously viewed Altron as a cable and electronics business.
The company's success was further demonstrated by its impressive turnaround, with various divisions thriving even in a difficult environment. Shapiro likened Altron's transformation to that of other companies that had managed to pivot and thrive, citing examples like Palantir and ASML, which have flourished by embracing technological change.
South African Tech Companies: The Hidden Potential
Shapiro also drew attention to the local tech sector, which he believes is ripe for growth. He discussed how companies like Palantir, ASML, and Altron were leading the charge in industries that are not only changing the way we live but also driving the next wave of business innovation. Altron, with its growing footprint in fintech and health tech, has increasingly gained recognition from investors who now view the company as a key player in the tech landscape.
Moreover, Shapiro pointed out the disparity in how local and international markets value similar companies. For instance, Netstar, owned by Altron, is valued at just R8 billion in South Africa, while its competitor Cartrack, listed in the U.S., is valued at nearly R34 billion. Shapiro emphasized that this undervaluation of local tech companies could present significant investment opportunities for those willing to do their homework.
Conclusion: A Time for Innovation and Caution
David Shapiro's insights provided a clear picture of the challenges and opportunities in both local and global markets. While the political landscape in the U.S. remains volatile, and South Africa's construction sector faces serious obstacles, there are bright spots in the tech industry, both locally and internationally. Companies like Altron, Palantir, and ASML offer investors a glimpse of what the future holds for businesses that can adapt to the ever-changing landscape of technology and innovation.
As Shapiro concluded, it's clear that while uncertainty remains a constant, there are still opportunities for those who are prepared to adjust their strategies and embrace the new age of business.
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