‘We going to see a spending splurge’ – David Shapiro on South Africa as we come out the pandemic

Sasfin Securities David Shapiro shares his insight on developments taking place in local and international financial markets. Shapiro, who follows a growth-oriented investment style, has a busy week with a number of US tech giants releasing quarterly results over the next few days. He says he’ll be keeping a close eye on the likes of Amazon and Facebook, both for different reasons. In the local market, small-cap stocks Ascendis Health and Bell Equipment dominate the conversation. The Bell family’s lowball offer to shareholders, which was made at a 40% discount to its share price prior to the announcement, is discussed at length. After two years at the helm of Ascendis, Mark Sardi has announced his resignation following shareholders’ approval of the restructuring deal that will most likely see the health and wellness group depart the JSE. Lastly, ways to manage your portfolio during a high inflationary environment wrap up the interview. – Justin Rowe-Roberts

David Shapiro on what’s driving global markets higher: 

Confidence. I think consumers are feeling better. They’re feeling better about what is out there. Remember, there’s a huge amount of savings that were accumulated during 2020 and during this year – during lockdown – and that needs to come out. Everybody wants to go out and spend it. Jobs are around – I’m talking in the global markets – certainly in the US. There are two other elements as well. I believe the China story is beginning to settle down. Not that they’re going out there to spend, but I think they’re dialling back and people are getting a little more confident about where China is. They are downgrading their growth, but this is controlled by the Chinese government. It’s a difficult area to understand, but we’re not feeling the same kind of fret that we did. Inflation is still a big story. I think the labour side is still a big story. We can’t make head or tail of it – you know – of whether that is a threat or not. I think broadly, people want to get out there and spend, and we’ll see something very similar here; as the weather improves, as we come to the end of the school year. South Africans are tired of being locked down and vaccinations are increasing. I think you’re going to see a spending splurge.

On big tech earnings this week: 

I’m worried about Facebook. You know, we love to hate him. And yes, you can’t do without him. I’m [talking] about (Mark) Zuckerberg. Amazon and Alphabet are the ones that I’m very keen to look at; Amazon from a point of view of the cloud of their web services and also generally, how they fare against increasing competition. As well as, you know, prime their app where things are tight. We’ve gone through so many things at the moment, especially the shortage of delivery. How is that affecting them? Where there has been a squeeze on the supply chain. So, I think all these numbers are going to be very important to go through. Don’t get carried away by the knee-jerk reactions of markets because markets react or need immediate release. Go through the results. Listen to what the corporations have to say themselves. You get a much better feel from those transcripts or even listening to the webcast or podcasts.

On how to hedge against an inflationary environment:

For me, it’s business, as you know. I like growth businesses because that’s the only way to overcome inflation. If inflation is going to come, you’ve just got to work harder and get more money because it’s hard to hedge against that. That, to me, is the only way you can overcome inflation. Well, if the petrol prices are going up, one has to just work a little bit harder and increase productivity to recover it. I urge you to go look at some of the businesses that have just released results like ASML and Philips and businesses like that because they see future growth. They don’t see short-term inflation. They just say the demand for chips is coming; this is a 10-year growth area. So that, for me, is where we hedge ourselves.

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