Talking Barclays, HSBC, KOSPI, Lloyds, MIGO, Microsoft, NatWest, Rightmove, SpaceX & Taylor Wimpey

Join the team as they discuss more wild moves in South Korea's KOSPI index and Microsoft's historic $500bn one-day gain as well as UK bank results and warnings from Rightmove and Taylor Wimpey.

There's a look at the latest results from Dividend Hero investment trusts Alliance Witan and Saints, plus why MIGO Opportunities is pressing Gresham House Energy Storage Fund to put itself up for sale. 

Transcript

SPEAKER_02 0:06

Good afternoon and welcome to the Friday edition of the Sherzy Five Podcast. Once again, James and Steve are here. How are you guys? Excellent. Now, a quick bit of housekeeping before we get into markets. Uh, we had a very good podcast yesterday, didn't we, James, with Ian Pyle of Aberdeen Equity Income. That's well worth a listen. Um, it's on our page, it's on Spotify, it's on YouTube, it's on Apple. So, whatever your preferred podcast provider, or go to our website again, as I say, it's there. Um, and also busy time for pods. We've got um JP Morgan emerging market growth and income on Monday. So, watch out for that one. We've also got Aberdeen New India on Thursday. So, if you're an emerging market investor, you are going to want to tune into both of those next week.

SPEAKER_01 0:55

It's really interesting in because I mean those those markets have been really choppy. Japan, um, the nifty fifty in India, um, the South Korean market, cosplay. We've been talking about this uh frequently, so it'd be a really good opportunity to hear what these months, these these people actually run real money, what they actually think about the backcloth.

SPEAKER_02 1:12

Yeah, absolutely. As I say, if you're an emerging market investor, you can't afford to miss either of those two. So JP Morgan, emerging market growth and income on Monday, Aberdeen, New India on Thursday. On to markets, though, and uh we just had the biggest gain in the Nasdaq overnight, Steve, 3.4 percent. The Cosby, though, you said it, star of the show, 18%, biggest ever one-day gain. So you've got SK Heinex up 30%, Samsung Electronics up 27%, but it's been a good week for the FTSE as well. FTSE 100 is about to make its third intraday all-time high in a row, and it's on track for its best month since February, 4% gain. That would take it up 10% year to date, and that's better than the SP or the Nasdaq, which are up eight, eight and a half percent.

SPEAKER_01 2:03

So I mean, Ian, I think the real important point is is that um there's been talk about you know hedge funds uh shorting markets and then being chased out of the markets because they'd fallen to such levels. Um, whether that's true or not, I couldn't say. But what I can say with some confidence is that markets seem to have just gone, okay, we're looking at the evidence, and we suddenly feel very differently about wider markets than we did yesterday and in previous weeks, and that's why uh markets have really rallied strongly. And of course, the thing to watch with the cost fees, we've said this before, it's so dominated by two companies, you know, it's SK Heinex and Samsung. So they dominate worth more than 50% of the index. So you're going to get very volatile uh direction changes there. So something to bear in mind, it's not to be shy of that market, but just bear in mind it will be up and it will be down.

SPEAKER_02 2:54

Yeah, heck of a lot. Um, James, uh, we've had some action in the investment trust world this week, haven't we?

SPEAKER_00 3:00

We have. We've had updates from two big global funds now, um, both underperform their benchmarks in the first half. So this is Alliance with An and Saints. Alliance within lags, it's really you'd expect it to do. It's it's been an AI-driven market, but the managers insist they've still got lots of companies that are undervalued with strong fundamentals. And a crucial point here is on track for a 60th consecutive year of dividend increases. Similar story at Saints Hero Yeah, yeah. You know, underweight the semis trade really with Saints, but it's really all about sort of inflation protection, inflation beating, and that trust is on course for a 53rd dividend hike in succession. So you know, these are really trust that should interest income investors. So two year rest of the price of one. Two superheroes, yeah, indeed, Steve. Another one that's interesting is MyGo. Now, this is uh the AVI trust that specialises buying discounted funds. Um, managers Tom Trainer and Charlotte Cusmus. Now they've backed Primestone's call for grid to put itself up for sale. It's been quite a decent holding for MyGo, but they reckon a sale would be the best outcome.

SPEAKER_02 4:01

No, that'd be interesting. I mean, Charlotte has been on the pod um this year, so maybe we'll get it back again and ask about that.

SPEAKER_01 4:07

Um I was I was reading through the um your your alliance with sandpiece, James, and the thing that really struck me was that obviously they're not running a portfolio that's gonna match up with wider indexes. So, of course, all of this the movement with AI trade and chips and so on, they're bound to just not perform as well when they've had such steep rallies in in that um bleeding edge tech stuff. So, I mean it's kind of understandable that they're they're they're gonna they're gonna underperform when those kind of markets go ballistic and they're gonna outperform when those markets really, really, yeah.

SPEAKER_02 4:41

Yeah, yeah, yeah. Yeah, that very narrow leadership. It's very hard if you're a global fund to keep up with that kind of stuff. Um now we did say, we did say email in if you want us to do a piece, and uh I did threaten to do something on the banks. You're all right, I'm not gonna spend two, three minutes talking about banks. Um, but uh what I will say is they haven't really impressed this week, the UK banks. Barclays didn't really impress, shares went down, Lloyd's went up a little bit. Both of those have got the same problem fundamentally as I see it, which is that loans and deposits just aren't growing, and that's their basic business. Um, Nat West, I'm slightly bemused by the move today because they nudged up that was a marginal beat of Q2 earnings, they nudged up their fully a return target, they dangled a buyback because they stopped buybacks at the end of last year. So they said, you know, we might we might buy back shares um at the end of FY26, which I presume is January next year. Um, and then we had oh, the one thing I would say about that, Wes, by the way, I've been quite rude about the investment bank. I what I would say is that they've got a lot of work to do. I mean, I don't even know why they have an investment bank. It seems to me to make no money and only benefit the people working there, not the shareholders.

SPEAKER_01 5:51

But um, it's interesting, I I find because I I'm not a banks investor at all, but I mean they've all had pretty strong runs over year to date. So I think you you can look at um short-term pricing and think, well, maybe there's just some profit taking after very strong runs. The other key thing to me is you own banks mainly for the income stream. So as long as their income looks like it's stable, it's the light to grow outside of inflation rates. I mean, that's the real lever to to own a bank, isn't it? Is is is that really reliable income?

SPEAKER_02 6:22

I think that I think most of your total return from now on is going to come through dividends and through share buybacks, to be honest with you. Um, I think that the share prices have run up a long way. And you know, until the economy really picks up, they are giant cyclicals, they rely on increasing loan growth basically to make their money. So until that happens, I just don't see. And and if you look at what Taylor Wimpy and Wright Move have said today, it's not going to be the housing market that spurs the economy, that's for sure. Taylor Wimpy cut their outlook for um completions, cut their dividends, quite a big cut to the dividend, and right move cut its outlook as well.

SPEAKER_01 6:59

So it's a permanent bear market, isn't it?

SPEAKER_02 7:02

No, it's just look, it just if if Taylor Wimpy, one of the biggest developers in the country, can't tell you when the market's gonna turn, and right move, which owns the most popular by far, planning you know, property portal, can't tell you when the market's gonna turn. Don't don't try and call it yourself, just leave these things alone. Yeah, there'll be plenty of opportunity to get in, I'm absolutely sure. But instead of the banks, we're looking at Microsoft, Steve.

SPEAKER_01 7:29

Yeah, I mean it's it's been such a I mean, it's it's obviously such a big part of almost everyone's portfolio. You either own it directly or you own it through a FT uh sorry, a global tracker or an SP tracker or a Nasdaq tracker. I mean, almost everyone owns some uh uh exposure to Microsoft. It's been an absolutely brilliant business and a brilliant investment for decades. Um, what's been going on obviously this year is earlier in the year people were a bit more focused on the chip side of things and that kind of infrastructure level. More recently, the share price has been even soggier because everyone's been really worried about um the amount of capex going in from hyperscalers. Now that hasn't really changed. Um their most recent earnings, they're talking about 200 billion or so. It's on a quarterly basis. They said about 50 billion for next quarter. So you analyze that, you're looking at about 200 billion, which isn't in the ballpark of what Alphabet's doing, what Amazon is doing. The key thing here though is Microsoft the same, Alphabet are the same, Amazon the same. Their cloud businesses are going bonkers, and this is the real return story. Investors are saying, Well, what you're spending all this money, where's the extra growth? Well, the extra growth has come through. We start to come through this last quarter. Um, you've seen it with um Google Cloud, you've seen it with uh AWS today, and Microsoft has yeah, the same thing acceleration and acceleration sequentially on Q1 or the Q1 calendar, and also sequentially year on year. And that's really important. That's the key driver of the sentiment change with Microsoft, is people are seeing real returns now coming to real growth and real cash flows, and that's going to be a big, big change in mindset for investors. Now, there's no end of the story here, right? We all know these investment uh investments is a long game and uh it never really runs out. There's always a new hurdle to climb over, but it's certainly stabilized the sentiment around those big um cloud uh hyperscalers, and Microsoft is increasingly looking like one of the better places because it's got such a broad range of revenue streams. Think about um Microsoft 360, almost almost everyone uses that in their work life or in the home life. You've got the co-pilot, it's it's it's real kind of uh angle into AI. Um, and look at valuations. I mean, we're used to talking about these companies in the higher 20s, maybe into the 30s. Microsoft is trading at about 20 times um rolling 12-month PE. Um, Amazon um Alphabet, slightly different, Alphabet, pretty similar. Um, but put that into context about other companies that are growing at low single digits and they're trading on not dissimilar, kind of high-themes PEs. You start thinking there's some value to be captured here. So that's that's really what's driving, I think, investors. They're starting to think, Blimey, this is a company on a pretty discounted rating based on historical standards. It's still generating loads of cash, it's spending lots of cash, but its returns look like they're going to be very steady and compound over many, many, many years to come.

SPEAKER_02 10:39

Yeah, well, that there you go. I mean, the stock up 15 and a half percent overnight, biggest one day gain in its history. The most value added by a single US stock in a single day ever, about 500 billion dollars. It's about half a trillion quid.

SPEAKER_01 10:53

I mean, that's just that's a half trillion dollars. I mean, that's just staggering. I mean, just think back, it's 2018 is when Apple first became the first company to be valued at one trillion dollars. Now we've got about 10, 12 of them. Um, but to to to jump in value by half a trillion dollars, it's gobsmacking, honestly.

SPEAKER_02 11:13

Yeah, now James, we're not looking at anything quite that uh spectacular next week, but you've got a few companies lined up.

SPEAKER_00 11:20

Yes, another big week. So we've got a Q2 update from next. So Lord Wolfson is you know comments on the consumer always very closely followed. Uh Coca-Cola Hellenic, which is the uh bottling company. Um, actually, it's a uh a purchase for Ian Power, Aberdeen Equity Income. So do check out the pod. Um Coca-Cola, the parent company, sort of set up some really sparkling results this week. So you know that should be quite a positive update, I would imagine. But I think the big one will be Diageo. So full year results and a strategy update from Dave Lewis. So we'll see what happens there. You're talking more banks, aren't you?

SPEAKER_02 11:53

Yeah, Steve, HSBC will be out next week. I mean, to me, that's always been the best of the bunch, but it's not really a UK bank as such, because 70% of its business is in Hong Kong and Asia, and they got on the wealth management, they got into wealth management very early on compared with the rest of the banks. Um, Nat West today was talking about the purchase of Evelyn partners, which is a good deal for them, and they're talking about get Charlie Nunn's talking about going up the value chain and this sort of thing. Um, you can sorry, Paul Thwaite. Um, but you can definitely see that's worked at HSBC, you know that that that business is going to drive those earnings. And uh they stopped buybacks at the end of last, what, about October, November last year, because they bought Hang Seng bank. So watch out for that. I think that might be even more important than the uh if the Netwest reaction today is anything to go by, restarting the buyback could be more important even than the numbers next week. So that's out on Tuesday. And what about you?

SPEAKER_01 12:46

And then, yeah, in in the US, uh of course we've got loads more tech companies. Sandis, one of the market's favorite memory companies. We've got Palantir, um, really interesting AI companies, does a lot of business with the US government and other governments, but the big knockout one to me is going to be SpaceX, it's debuting course the earnings after its record IPO. Now, of course, whatever you do, don't expect to learn anything about the long-term story here, long-term investment case by one set of earnings. And and earnings forecasts, they're pretty vague at the moment. I think even analysts are a bit reluctant to predict uh where earnings might come on a quarterly basis. We're looking at um around 7 billion worth of revenue um for the quarter about to report, uh, which will be up about 2 billion um on the previous quarter. We're looking still at losses, but much better, much improved, reduced losses. Um, but it's really going to be about the commentary and whether it feeds into that sentiment of why people invested in the IPO at the first place. So if you liked it, you know, at IPO, there's no real reason not to like it now because nothing much has changed, and the earnings won't really change anything. So it's not really about earnings, it's really about you know the commentary around it. So that's what people should be looking out for. We're running out of time, guys, but um interesting to get your feedback, uh, listeners. Um, did you like that slightly longer slot talking about Microsoft? Send us uh your feedback, editorial at sharesify.com. Um, send us your feedback about some of these podcasts as well. We think they're really value added. Um, so send us your feedback. What ones do you like? What ones would you like to hear on on the pod? Again, sharesifyeditorial.com. Um, and uh at that, I suppose we've got to wrap up really chaps, haven't we?

SPEAKER_02 14:27

Yeah, it's gonna be a really interesting week next week, guys. So uh have a good weekend. Have a great weekend.