Capitec keeps pumping

Good morning Voornaam,

Well, here we are. We've all woken up to the news that South Africa is the latest country in Trump's cross hairs. If you'll forgive the cheekiness, I can't help but joke that our economy is sovereign in the streets and welfare in the sheets. This is a difficult position where we obviously need to have our rights respected as a sovereign state (the alternative is a terribly slippery slope), but we also aren't strong enough economically to simply shrug this off without a care in the world.
A few people have already shouted at me on X this morning that "only 0.11% of our GDP is US aid" - assuming that is true, it completely ignores the potential downstream impact of tariffs and the true value of our relationship with the US. We are a fragile economy with poor economic growth by emerging market standards. We are an important country globally, but certainly nowhere near strong enough to call our own shots with guaranteed success. The very, very last thing we need is disruption to the improved sentiment around here.
At least Eskom's little load shedding issue lasted just long enough for solar owners to crack open something cold and remind themselves why they spent so much money on panels. Let's hope that load shedding stays away, or it will make the US risks look mild.
Hopefully, things blow over and end in some kind of mild outcome. The markets are about understanding the spectrum of risk and not pretending that some of them are simply impossible. Uncertainty leads to lower asset prices and it's frustrating that we now have this additional uncertainty to deal with as a country!
Speaking of possible outcomes, could this be the start of a shift in global politics that sees South Africa benefit from a world that is now skeptical of America? Maybe. Just as we shouldn't ignore major risks, we also shouldn't be blind to opportunities. If that is the destination for this journey though, it's still going to be a bumpy ride.
I know that's a rather hectic start to a Monday morning, so I'll quickly move on to the objectively good news: Capitec. This is the best post-democracy business story in our country and the latest trading statement is just another reminder of that fact. Earnings are through the roof and Capitec is the best performing stock in the sector over 12 months, adding to the outperformance over practically any longer period as well.
Also, Nampak has been paid almost in full for the disposal of Nampak Bevcan Nigeria. The market loved this of course, as nothing tastes sweeter than an improved balance sheet.
Anyway, that concludes the good news. Sorry.
In bad news valley, we find Truworths. If you've ever wondered why it trades at a lower multiple than its peers, look no further than the sales performance at Truworths Africa. In more retail heartache, Spar has paid R2.67 billion for someone to drag the bruised and battered business in Poland away. Yes, you read that correctly. And finally, Gemfields had a rough year for auction revenue in 2024 and it came at exactly the wrong time, leading to a sharp deterioration in the balance sheet.
Stocks don't always go up, so reading the bad news along with the good news is how you build a balanced portfolio and spot opportunities. Get all the important details with just one click in Ghost Bites>>>
It's time for a palate cleanser. Dominique Olivier's column this week is all about Netflix and its excellent Originals strategy. I admit, I was skeptical for a long time about whether this approach would work out for Netflix, as they were spending an extraordinary amount of money on creating their own content. History has proven me 100% wrong, as Netflix has clearly come out as the streaming winner. In this great piece, Dominique digs deeper into the gamble Netflix took with their Originals.
That's already a lot to take in, so I'll keep the rest brief. Here are some great podcasts for you to consider adding to your day:

Duma Mxenge of Satrix joined me for a 2025 kick-off chat that evolved into a wonderful conversation on rent vs. buy and the updated strategy I'm following in that regard. There's a lot to learn and think about in this podcast>>>

Japie Lubbe of Investec Structured Products walks us through International Opportunities Limited, the latest structure that seeks to address the capital risks of investing in Chinese equities, while giving geared upside as well. Get all the details in this podcast>>>

Magic Markets last week turned out to be unpleasantly relevant for South Africa, as we touched on some of the initial behaviour by Trump (this has obviously moved quickly since then) and developments in AI. We also talked about turnaround stories we are tracking: Nike, Walgreens and Burberry. Enjoy it here>>>

Have a great day and remember that although we cannot ignore the risks out there, the very best thing you can do is focus on controlling your controllables.
Move forwards as best you can in whatever it is that you're doing!

INVESTEC: International Opportunities Limited - a Chinese equity structured product

SATRIX: 2025 kick-off and fresh views on rent vs. buy

GHOST BITES - Making sense of SENS on the local market

DOMINIQUE OLIVIER - Netflix: The Originals Gamble

Unlock the Stock - KAL Group

MAGAnomics: Trump and the global economy

International Business Snippet:

Oil companies. Remember those?
Exxon Mobil beat profit estimates thanks to higher production that offset pressure on oil prices and refining margins. Although oil companies would certainly prefer to be producing less and selling it for more, they have enough flexibility to play the hand that they are dealt. Still, although earnings were ahead of guidance, they were well down on the prior year.
That's still better than Chevron, which missed estimates and posted its first loss in its refining business in four years. After Trump signed an executive order forcing Americans to refer to the Gulf of Mexico as the Gulf of America, Chevron did exactly that in the earnings call. It's really a sign of just how much has changed in such a short space of time.
Exxon Mobile is up 5% over 12 months and Chevron is down 2%. The gap is much higher over 5 years, with Exxon Mobil up 74% and Chevron up 36%.
In the luxury sector, our research in Magic Markets Premium this week is on Burberry as a genuinely interesting turnaround candidate for riskier equity portfolios in 2025. Our subscribers can enjoy our detailed work on this company, complementing some of our other recent reports with similar turnaround opportunities.

Magic Markets: Banking on banking

Macroeconomic indicators

Trump tariffs, set to be implemented on Tuesday, are causing significant angst in the market place. China, Mexico and Canada will be worst hit from the import duties imposed, and markets now await a retaliatory response.
Risk-off trade is the order of the morning, with global equity markets under pressure while the dollar is firmer along with US Treasury Yields.
South Africa has found an audience with US president Trump, who is now threatening to cut off funding and possibly trade benefits due to the recently signed Land Expropriation Bill.
The rand was of course significantly weaker over the weekend and the JSE All-Share Index is expected to open lower this morning.
Oil prices have jumped on the prospect of Trump’s increased duties against Mexico and Canada, although gains are now being tempered on the prospect of increased supply by OPEC+ who meet today.
Gold has started to retreat from all time high territory, drawing inverse correlation to movements on the US dollar.
Traders will want to keep an eye out for Flash CPI inflation data from Europe, and ISM Manufacturing data out of the US today.

Key Indicators: USD/ZAR R18.96/$ | US 10yr 4.55% | Gold $2,787/oz | Platinum $967/oz | Brent Crude $76.30
As often as practically possible, insights from the IG Markets morning macro update by Shaun Murison will be featured here. Where this isn't possible, only indicators will be provided. If you want to learn more about trading, refer back to The Trader's Handbook, a podcast series that takes you through many of the important principles in trading.