Ghost Global is a new weekly segment that will be brought to you by the Ghost Grads on a rotational basis. This week, Jordan Theron updates us on earnings from some significant US companies.
Ford: feeling a little fragile?
Ford sold 152,262 vehicles in June, up 31.5% year-on-year. This was due to the increase in truck and SUV deliveries and its new all-electric pickup trucks. Whilst this is positive, US auto industry sales are down 11%, showing difficulties replenishing car dealerships and high levels of inflation forcing buyers out of the market.
For the first 6 months of 2022, sales were down 8% reflecting the current supply chain crisis dogging the global economy. This problem has led to decreasing inventory levels.
Can the old-time heavyweight giant pull its weight with its shiny new F 150 and take on the likes of Tesla, VW, and Toyota? With a YTD share price performance of -46%, they’re going to need to start finding their feet in this increasingly competitive electric car market.
Pass the chips
With the world becoming increasingly reliant on technology, Taiwan Semiconductor Company (TSM) is a stock you should care about even if you don’t own it.
TSM produces semiconductor chips which are used in everything from cellphones and cars to rocket ships. They reported better than expected earnings, with June sales up 18.5% YOY and revenue for the 6 months to June being $34.41 billion.
Even though the stock is down 36% YTD, it has produced a share price CAGR of 17.6% over 5 years.
The threat to TSM is a potential drop in demand for its chips, either due to lower consumer demand or oversupply in the market. TSM has to invest a huge amount of capital in R&D and facilities that manufacture chips (known as a “semiconductor fab”), which leaves the company exposed to supply / demand dynamics. Political tensions with mainland China also can’t be ignored.
With the full June quarter results coming out later this week, this is a stock you will want to keep an eye on.
Warren Buffett and fossil fuels
Its pretty hard to talk about investing in the stock market without talking about the legendary Warren Buffett. From delivering newspapers to becoming the Oracle of Omaha, Buffett has had arguably the largest impact on the investing world of anyone. He is the CEO of Berkshire Hathaway, which recently increased its stake in Occidental Petroleum to 18.7%, an investment valued at around $11 billion after the rapid spike in the oil price. The brent crude oil price has risen from as low as $72/barrel to as high $120/barrel this year.
This rise can be attributed to various factors such as poor energy policies from western countries, an increase in demand after the pandemic and a supply crunch from the conflict in Ukraine. We may be suffering at the pumps, but the big oil companies are printing money at a rate that even Jerome Powell would be impressed by.
Occidental Petroleum is up 110% this year and is trading on a Price/Earnings multiple of around 9x. Despite huge inflationary consequences for consumers around the world from the current oil price, Buffett clearly doesn’t see that trend slowing down. Is he too eager about this cycle, or is he slowly capitalising on an opportunity we are all ignoring due to the new climate change agenda?
Costco is cashing in
The famous value retailer has released strong monthly sales numbers for June, beating expectations with net sales jumping 20.4% YOY to $22.78 billion. This is further proof of the slow and steady winning of market share from its competitors in a difficult economic environment.
The really impressive number is the 18.1% increase in same store sales, which beat Wall Street expectations of 14.1%. With its business model focusing on membership fees to help subsidise great in-store prices, as well as cheaper gasoline (Jordan lives in the US so he’s using the right term here!) to entice customers to purchase more goods, it seems Costco might just have found its sweet spot in this fragile economy.
This recent success has led to speculation about a potential cash dividend to reward shareholders with the balance sheet looking juicier than normal, making this proudly American company one to keep an eye on.
Turmoil at Twitter
Who can forget the buzz created in the streets (both tarred and virtual) by the announcement that Elon Musk offered to buy Twitter for $44 billion?
With an increasingly political and polarizing environment in the US, this created massive waves with most Republicans praising the South African-born Musk’s free speech stance vs the Democrats crying wolf about his increasing global influence due to his enormous wealth and more libertarian approach to public policy.
He has recently notified Twitter of his intention to withdraw his offer due to Twitter’s inability to validate that less than 5% of its accounts are spam or bots. Interestingly, this has resulted in a 2% rise in Tesla stock while leading to a drop in Twitters stock by 5% in day trading and another 5% overnight.
Twitter has become a controversial platform for many reasons which we need not mention, but it should provide for some good entertainment in the coming months with Twitter’s plan to legally bind Musk to his original offer.
Only time will tell what will happen to the public town square of the new world, but for now a cautious approach is best with Twitter stock.
Magic Markets Premium – expand your universe
With the JSE’s listed universe of companies shrinking by the month, learning about global investment opportunities in critical. In Magic Markets Premium, The Finance Ghost and Mohammed Nalla bring you a weekly report and podcast on global stocks. There are around 35 reports already in the library, including three of the companies in this week’s edition of Ghost Global (Ford, TSM and Costco).
