Tech recovers, Microsoft shines, we benefit – The Editor’s Desk

DUBLIN — After a devastating October, the global tech sector has posted a significant recovery in recent weeks. Many of the shares included in the Biznews Global Share Portfolio, like Apple and Amazon, clawed back a good portion of their share price decline. But one share in particular, Microsoft, outshone the rest and managed to overtake its long-time competitor Apple in market cap terms. In this episode, Alec Hogg and I discuss the tech turnaround and look at how company's like Amazon, Apple, and South Africa's Discovery are combing tech and healthcare in exciting new ways. We also discuss the sad story of SA-listed Intu Properties – Intu is the unlucky victim of the political uncertainty created by the disorderly Brexit process. We wrap up with a look at the latest news about Theresa May's Brexit deal. – Felicity Duncan.Hello and welcome to this week's episode of The Editor's Desk. This is BizNews Radio and I'm Felicity Duncan. Alec. welcome to the show. It's been a very interesting week, especially from the perspective of our Global Shares Portfolio. Now, you know over the last couple of years it's done very well for us. There are some really brilliant companies in there. Apple is in there. Amazon is in there. They've run really hard. Then of course, in October we had a very serious sell-off and that was really very concentrated among what some people call the FANG Stock (Facebook, Alphabet (the parent app of Google) Apple, Netflix, which of course we don't we don't own. Those ducks all got really trounced in October and then they sort of slightly recovered but what's been really interesting is that the rest of the tech sector has recovered even more strongly than those sort of big brand names. .___STEADY_PAYWALL___.And in particular, the performance of Microsoft (another holding in our portfolio) has been very interesting and actually right now as we speak, is a more valuable company than Apple..It has indeed. It got past Apple. It was 851-billion at the close of trading on Friday whereas Apple is now 847-billion and that's because on Friday the one went up by half a percent and the other went down by half a percent. So, you when you have a look at the Microsoft share price performance – and I'm just going back for a year for the past year – it has outperformed Apple by about 25% and it's been very steady. So, Microsoft has been 'slow and steady wins the race' whereas Apple was really hard hit in the most recent time. Hurt as well, by Donald Trump's Trade War with China and then threatening now to bring Apple products into that Trade War. If there is a more positive meeting (and tonight – Saturday night – Donald Trump and President Macri are having dinner together would you believe in Buenos Aries. I hope they're both having a big fat Argentinian steak..But, if they do meet or make some kind of progress there, I guess you'll see Apple rebounding on Monday and then getting back ahead against Microsoft as well. But the broad story has been a sell-off significantly in October but a very strong rebound and the one that's really picked up has been Amazon, which is the core stock in our portfolio. And Amazon's gone from below $1500.00 to just under $1700.00 in the last few trading sessions. So, there has been a wipe-out. Some people panicked. Thankfully we didn't and I still love those stocks and you mentioned earlier that we don't have Netflix. The response to that is…YET..Interesting. So, Netflix possibly on the shopping list especially after its recent pummelling. Now Amazon's an interesting one. I don't know if you've been following the news over the last couple of weeks but they've made several very interesting moves in healthcare. Just this week, Amazon announced a partnership where doctors have an app that they can use to recommend medical devices to their patients through Amazon. So, they can say you can get 'this, this, or this' and it sort of adds that to the customer's Amazon. So, it facilitates the patient getting the right device and getting it quickly and easily and at a good price. And that is a very bold move. .Obviously, there's a lot of privacy risks because we're talking about people's health information but the healthcare market in the United States is just gigantic. I mean it's hard to even think about 20 percent of the economy ultimately comes down to spending in the healthcare space or connected industries. And so, if Amazon can really get in there, that is a potentially massive driver of growth..Interesting point that because this week Adrian Gore was in town in London and they released the results of a survey of 400,000 people that was done by Reign Europe into whether or not you can incentivise people to get healthier by giving them more information and rewards. And the big thing that that's come out of this survey and the Rand Health chief executive president was astonished by it. I must tell you it was quite an extraordinary event because you had the British Health Minister, one of the top guards from Apple, and Nobel Prize winning behavioural economist Richard Thaler in attendance. So, Adrian really had esteemed company around him. But the point you're making now about Amazon is really interesting. Apple is working more closely with Amazon than in the past..We're seeing that Siri and Alexa are getting a little closer together. It's almost like those two companies are getting together/getting more into alliances. Discovery's in a very strong alliance with Apple. In fact, at this event, the chief operating officer of Apple Inc. had quite a lengthy video where he praised Discovery's operation. Of course, Discovery is all about information and health, and informing people so that they can get their lives better and so the insurance costs go down. It's a very interesting connection that you make there and if Discovery could plug into Amazon on this new tech that they talking about on the policy side… Who knows? Anyway, fascinating developments and technology really is changing the world. You've just got to keep your eyes open to these new disruptive developments and wherever Amazon goes, it really is a force always to be reckoned with..We just saw where I have been doing quite a lot of work on Amazon is looking at its advertising potential and there it's now starting to suck up an ever-bigger slice of a market that's been dominated by Google, Facebook, and well, now Amazon's going in there3. Already, I think they've got 5 percent of the online advertising market in the US, which doesn't leave a whole lot left for traditional media companies. Interesting changes in the world..Absolutely, and your points on the health is very interesting and it's interesting also that they're in talks (in a sense in talks) with the UK health system because of course that, with the National Health System… if Amazon/Apple/Discovery are able to create something that's going to help with cost savings and help with health improvements in a national health system that becomes really attractive. As a single buyer, one of the challenges for anyone going into the US health market – and I think Discovery ran into this when they made their attempts in America – one of the problems there is it's extremely fragmented. Each state has a number of different systems. There's a ton of different insurers. .The hospitals are all independent or they're in groups, so it's not like you can just sell your product to one person and get that rolled out nationally but you can do that in a place like the United Kingdom. So, that's potentially a very exciting opportunity. Now of course, talking about the United Kingdom raises the spectre of Brexit and we saw some interesting South Africa-related news on that front at least, this week, with the events around INTU properties the South African connection there and also something that really highlights the really kind of serious impact that Brexit can have on the prospects for business..It is indeed. INTU properties by way of background for those who haven't been following it is the old Liberty International. So, Liberty Life's founder Donald Gordon created an offshore business long before it was popular and he went into properties and built Liberty International into one of the top hundred companies in the UK. It then morphed through capital and counties and is now called into properties INTU. And because of its South African heritage – it's widely-held in South Africa is still listed on the JSE – 20% of the equity is actually owned by Coronation fund managers which I think they'd be feeling a little bit sick about at the moment. The PIC (public investment commissioners) own six per cent of the equity so big South Africans slice there. What happened this week was that a proposed takeover deal that had been announced (and at the time, INTU's shares were trading at 148)..The takeover deal was announced. It's by one of its biggest shareholders and a Canadian group. We're going to buy it out. The share price shot up to 189 and it traded pretty much around that level. This happened back in October for the last couple of months. This week the potential purchasers withdrew and they quoted political uncertainty. On the withdrawal, the share price crashed. It dropped by 39%, recovered a little bit by the end of the day and ended about 36% down. But the important thing is before the takeover bid the share price was 148. After the takeover bid where it is right now, the share price is 114 so there has been a complete collapse. And if you take it over a lengthy period you haven't seen the 114 area (in fact, ever) on INTU properties. It is in a in a very bad way at the moment..So, INTU Properties is widely held in South Africa. It's been influenced directly by Brexit. They dressed it up as political uncertainties but Brexit was it and it just shows you that there is a lot of uncertainty. With INTU being a shopping centre company, you got to be looking back at a at a market that is that already is being attacked by Amazon. But now with Brexit overlaying it, it's not a place to have a lot of your money..Absolutely. You know we've talked about this before but ultimately, whatever happens right whether there's negotiated deal/an orderly exit and whatever the shape of the relationship after March looks like, – really, whatever happens – what businesses are looking for is certainty and they've been operating in this kind of perpetual uncertainty for two years because the negotiations didn't go great. A lot of UK politicians have been saying, "Oh, we should just crash out" and so there's just been no consensus built internally for what is going to happen. And so, just the perpetual uncertainty is going to erode your ability to make decisions as a business. .And of course, for something like property and then for something that's so dependent on consumer spending and consumer sentiment you just end up in an almost an impossible situation and I think political uncertainty is exactly the right description for what this was about. One hopes that we can just get some final certainty this week so that companies can get back to just managing their businesses and making their plans..Well that's exactly what Theresa May is trying to do (the British Prime Minister). She says she's been going out with an outreach. Her message is 'let's get on with it', which is a very British thing to do. Even if you have the bombs raining over London from the Blitz, it's 'let's get on with it. Let's beat these terrible people even if it does take us five years' and there's been a swing in public sentiment to her – to supporting her. First of all, as far as business is concerned, there've been a number of business leaders who have this week come out strongly in support of her saying that it's not the ideal Brexit deal that she's put together but it's the best we could have hoped for in the circumstances. She's done a great job and it is so much better than crashing out..And the British public are also being taken by this 'let's get on with it' approach, saying that the latest surveys are showing that over 60% of the British public are in favour of Mrs May's deal relative to a no deal which would be rather chaotic. Of course, it all depends on the 11th of December where there is a vote in parliament and right now, even though business is strongly in her camp and the public are strongly in Mrs May's camp, the politicians are playing their games. It's a dangerous game that they're playing because if you're in a constituency which is (a) pro-Brexit and (b) pro what Mrs May is wanting and you vote against it in Parliament on the 11th of December, you might find yourself in a very difficult situation when it comes to going home or being able to vote next time around..This is where the British parliamentary system does play a quite important role in South Africa of course, with proportional representation and the parties being all dominant. You can't really hold individual MP's to account. In the UK, you very much do. We know in the area I live – Philip Hammond is the Member of Parliament – everybody here knows that (not just because he's famous as the Finance Minister (but you do know who your MP is and if there is an issue you can let them know. And if Hammond were to vote against Mrs May's proposal, which presumably is not something he would do) then members of the public here would be able to tell him that they did not agree with it and so on. So, it's an old democracy and it works. Whether the politicians can continue with whatever trading that they're up to as they do in the United States with guns and butter etc..I suppose it's open to question but whatever parliamentarian in this country decides to go against the opinion of their constituents it becomes a very risky issue. And that's something that those of us from other parts of the world (or used to political systems in other parts of the world) need to be paying attention to. As this swing in public opinion goes more and more towards Mrs May, you've almost got the sense that she's going to bring it home on the 11th even though you have British newspapers that are trying to convince the public (or some British newspapers) that she is on a dead duck – that she's gonna lose by 200 votes and that would suggest she gets almost fewer votes. Well, that she would get only one-third of the votes that she needs. So, whether or not there is any substance in that, it's a bit like asking whether you should believe the tabloids because that's what the tabloids are telling us..Yeah, and tabloid journalism obviously in the UK has played a very large and prominent role in the Brexit… from before the referendum to now has played a really loud role in the whole process. And I think they wear their hearts fairly clearly on their sleeves as far as what they're looking for. And so one does I think have to say, "Well, let's just put a big grain of salt here when we read their reporting|..Little subtlety to it, isn't there? It really is what it is. The British public are at the end of the day going to determine what happens here. They want a good National Health System. They know that at the moment this is the jewel in the crown. Something like 20% of public spending goes into it. That National Health System is at the moment open to anybody who comes into the country. So, if you happen to be living in a less developed country within the EU and you've got a medical issue where do you go to? Clearly, you go to the UK and people will then be looked after here. It's of course something that I'm not so sure has been has been thought through carefully in South Africa..When South Africa, wanting to repeat a National Health Insurance system like you have in the UK and you have those porous borders suddenly, if you're a guy who's living anywhere else on the continent and you've got a medical issue which you cannot afford to have fixed, it's the most important thing in your life because you could lose your life through it. Where are you going to go to and how do you then stop giving that to everybody who's around? Clearly, the British people are not stupid. They know this. They know as well that being part of Europe means that their sovereignty is being determined in Brussels. The High Courts are determined there and there are all of these issues that aren't discussed as much as they should have been discussed perhaps beforehand..Of course, we all want to be part of a brotherhood or a sisterhood of mankind and as a consequence of that, it seems the smartest thing would have been to reform Europe rather than to move away from it. But it's hard to get that message through to a public which at the moment is voting on day-to-day issues. It'll be interesting though. in all of this, to see whether the decision to crash out which seems to be the alternative that Mrs May is putting on the table is one that parliamentarians will risk doing. We have seen the Eurosceptics not even being able to get the 45 votes I think it was that they needed to put forward a motion of 'no-confidence' in her leadership..So, at the end of the day; when the real decision has to be made, until somebody else like the Eurosceptics can come up with an alternative it looks like what Mrs May has proposed is something that is going to… Well, nobody is terribly happy with it at the moment but it does seem that it is the best option and the British people are supporting it..Yeah, and one sort of thinks 'would it not have been easier to change the rules on the NHS than to crash out of the European Union'? But you know those choices are made and as you rightly say, it now it's kind of 'what is that going to look like'? And as you point out, May's deal is the only deal on the table after a long, difficult, and complicated negotiation. And it's very unlikely that something better would come along if this is not the successful deal. And so, one hopes that reason will prevail although of course when it comes to politics you can never be certain that reason is going to prevail.

Tech recovers, Microsoft shines, we benefit – The Editor’s Desk

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