The guys discuss AMD, AMZN, GOOG and META results, and why hedge funds are selling tech stocks

In today’s Podcast, the Sharesify team talk markets, momentum, tech earnings, banks, booze stocks, air fryers and more. Our tech expert Steven discusses blowout earnings from chip designer Advanced Micro Devices (AMD), which doubled its total addressable market forecast for server CPUs just six months after its last estimate.
Ian explains why momentum and big stocks are driving markets and why hedge funds are actually selling tech shares. He also lends us his view on HSBC (HSBA), while James talks booze stocks. Beer volumes have turned positive at Budweiser maker Anheuser-Busch InBev (ABI), while Guinness maker Diageo (DGE) delivered a positive Q3 sales surprise. New boss Dave Lewis admitted North America remained a challenge.
Finally, Steven previews earnings from chip designer ARM Holdings (ARM), which reports after-hours Wednesday. Investors will be scrutinising the firm’s Q4 earnings and its comments about how the company fits into the wider AI ecosphere.

Transcript

SPEAKER_01 0:07

Hello and welcome to the latest edition of the Sherify podcast. Now I should say, you lucky people, this is the second podcast we've done today because earlier we had the great pleasure of interviewing Anthony Lynch, one of the managers of the JP Morgan Claverhouse Investment Trust. Now, Claver House is an AIC dividend hero, which means it has more than 20 years of uninterrupted increases in the payout. In fact, Claverhouse has increased its dividend an unbroken 53 years. So this is well worth a watch. Anthony has a wealth of experience as an income manager and as a small cap specialist, and the trust is going to release its results for the full year next week. We think on the 25th, Wednesday the 25th. So keep an eye out for that and make sure you watch uh uh earlier podcasts. Anyway, Steve, back to the markets. What a difference today makes.

SPEAKER_02 1:06

Yeah, it does, doesn't it? Just uh it's just it's just bonkers, isn't it? I mean the market is all over the place. Both both global markets in general. I mean, they're they're they're shooting up, they're shooting down, and it's all to do with, of course, you know, what's going on in the Middle East, and you know, the rhetoric seems to be for a longer conflict, a shorter conflict, and of course the ripple effects are are being felt across markets, across oil markets, across gold prices. Uh so it's it's just a case of ride by the city of your pants at the moment.

SPEAKER_01 1:35

Yeah, I mean, we were talking on Wednesday, markets were happy, they were up a couple of percent. Uh, you know, we'd forgotten about energy. We were looking at we were looking at tech hardware stocks, weren't we? And then, of course, this uh this major energy infrastructure strike. The International Energy Agency is saying this is the largest supply disruption in the history of the oil market, yeah. And it's advising us all to drive slower, fly less, and work from home.

SPEAKER_02 2:01

Yeah, yeah.

SPEAKER_01 2:02

Works.

SPEAKER_02 2:03

I tell you one one interesting thing strikes me is it's um it's just purely circumstantial, but um can you imagine if we were in this position going into say October, where you've got the big uh northern hemisphere heating um season coming up, and we're walking into the obviously our summer now, so the demand um is going to be relatively low relative to say December, January, February. So, in many ways, I mean our household bills hopefully won't be as bumpy over the next few months. But um, I think we're in many ways fortunate that it's happening now rather than happening in September, October.

SPEAKER_01 2:39

Yeah, because we're all big importers, the UK and continental Europe, big importers of um liquefied natural gas. And you know, although renewables are taking a growing share of the market, you know, you've had um German baseload power prices have had to go up because of this, and that's a that's going to affect manufacturing, you know, it will affect manufacturing across Europe.

SPEAKER_02 3:00

Um and and and it's just worth pointing out to listeners as well. I mean, that they're I'm sure they're more than aware, but I mean we we live in a world where we're still so reliant on oil and oil-based products, and as much as new energy is trying to replace that reliance, it's still so important. So if you consider over the last month, the brink the price of Brink crude has gone up by about 50%. Now, that is an enormous impact it's going to have onto economies, and that's why central bankers, we talked about this on Wednesday, central bankers are all looking at sitting in on my hands because they don't know what that's going to do to inflation, and inflation needs to be kept under control. So don't expect any any cuts to interest rates anytime soon, is the key message.

SPEAKER_01 3:44

No, and this is the problem actually, yeah. Interest rate expectations. I mean, here we might have been looking at a cut, maybe two by the end of the year. Now they're actually thinking maybe the Bank of England might have to raise. You saw that in the market as well. You know, unsurprisingly, BPN Shell flew yesterday, but the stocks that got really hammered were Barrett Red Row, Persimmon, Vistry, Nat West. Nat West was down seven percent. And the problem is that because interest rate futures are going up, that means that mortgage rates are gonna have to go already. People have been you know when this conflict started, yeah, a lot of the lenders started to withdraw their cheaper offers. Um, and already the price of or the the uh gather the uh average mortgage deposit needed now is somewhere in the region of 40 grand. Well, that's about the average national wage, yeah, yeah. So no wonder house builders are struggling with that. What else? What have you seen, James? What's grabbed you?

SPEAKER_00 4:44

Yeah, well, one of the big stories obviously being Unilever. So it's in talks to sell its food business to spices and sauces make a McCormick. Um, so Unilever's food business might include Hellman's, Marmite, and Knorr, but it's non-core by management considered.

SPEAKER_02 4:58

Right.

SPEAKER_00 4:58

Um yeah, so a multi-billion dollar sale that would complete Unilever's pivot to you know the higher growth, higher margin beauty, and personal care categories. Um yet another company that's slimming down, which is quite interesting, is the works, which has decided to give up the ghost on its online operations. And I guess um selling those kind of small ticket arts and crafts, games and toys is not hasn't proved proper to go online, so they decided to just focus on the stores business.

SPEAKER_02 5:24

Yeah, that's that sounds a bit worrying to me, I have to say.

SPEAKER_01 5:28

I I gather also, though, James, they had uh an issue with their the suppliers basically let them down.

SPEAKER_00 5:34

Yeah, two separate fulfillment partners sort of let them down. So they're a really torrid two years for the online piece, but now they're just focusing on the uh the profitable part of the business, which is stores 500 plus stores. Yeah, yeah.

SPEAKER_02 5:47

Um so of course they they have to carry all that all that additional cost of running, you know, carrying rents, carrying extra staff costs and so on. I mean, so it's true, it's it's very rare that you're seeing a business back away from from e-commerce for you know traditional bricks and mortar commerce.

SPEAKER_01 6:04

Yeah, Steve, I was gonna mention micron because we were looking forward to that on Wednesday, weren't we? And the numbers weren't bad at all.

SPEAKER_02 6:11

No, they they were they were really pretty impressive, to be honest. Um, but you know, we we've talked about this over the last couple of months here, and um, it's about expectations management and big spending, big capex spending. So we've seen big capex budgets across all the big cloud providers and AI investment, etc. Well, Micron upped its own capex by about um 25%. So from about 20 billion to 25 billion this current year, and that that seems to kind of unsettle investors a bit. Um now you've got to remember that um AI, all the stats, all the gross stats are going gangbusters, right? So demand is way outstripping supply. So pricing is very, very firm. But of course, the the chip market is notoriously cyclical. It's always been tied to a pretty pretty much economic cycle. They have slowdowns, then they have speed-ups, then they have slowdowns. At the moment, because there's so much money going into AI-based stuff and and memory, which is what Micron does so well. Um, you're just seeing um investors being asked to, is it no longer cyclical? And and that's that's an unanswered question at this point in time. We don't know where we're gonna be two years from now. Um, will it return to normal or is this a new paradigm shift?

SPEAKER_01 7:25

Yeah, yeah. Now, here's interesting, we're starting to see IPOs come back. I got an email dropped in my inbox this morning. I think you might have got it too, James. Vista Parks is coming to the market. Um, 31st of March, I think. There's a retail offering. Now, this is a residential and holiday part business targeting the 60 plus market, so it's a kind of saga market. Um, if you if you you know want to downsize your house and move to a residential park, these are the guys to talk to, apparently. So an interesting one. Um, what else is what else we've got to look forward to next week, then, James?

SPEAKER_00 8:03

Well, it's another big week for retail, isn't it, Ian? So we've got um Kingfisher, which is your BQ and screw fix owner. Um, can that company raise guidance again and do a Wix of a good uh beaten raise from Wix earlier in the week? Yeah, and then uh one retail that very much is making online work is next. So uh I guess investors will be wondering, can they pull another rabbit from the hat and upgrade guidance again? Um, you know, they're notoriously conservative with guidance. So we'll see what happens with that one on uh later in the week.

SPEAKER_01 8:32

What's on your radar, Steve? Anything?

SPEAKER_02 8:34

Well, I mean it's starting to quite down now, realistically. I mean, um the sort of US earnings season has has largely passed now for the latest one. So we're just really waiting, I suppose, for March year ends to start coming through, and that's going to take uh a few weeks. Um, so ultimately, um it it's it's a bit patchy. One company that did stand out to me though is a company called Syntas. Now, I don't know if that many UK investors will be familiar with it. It's one of your, like you mentioned, diploma the other day about dull but kind of desirable. Very high quality but pretty dull. Well, Syntax is exactly the same kind of business. Dull but desirable. It's got an absolutely cracking record. And I remember talking to a fund manager many years ago. He introduced me to the company and he was using it as an example of um the company's brilliant, tick all of their high-quality metrics, but never seemed to be at the right kind of price, always looked a bit frothy, and it's on a P of about 40 times. So it's still frothy, but this fund manager has explained to me the price has just kept going up and up and up. So it's it they were hoping to get that little dip where they could dive in, and it never they never got that opportunity, so we never invested in the business, and it's just gone cranking on, cranking on dividends, uh, cash flows, uh, growth, it's got everything. And this is just basically working in it, supplies you know, uniforms for workers, it supplies cleaning for work for industrials and businesses. It's all about making workplaces sort of cleaner, safer, and and more professional. Um, so real dull business, but a brilliant opportunity for a quiet company that goes about its business very quietly and just keeps generating returns for investors, returns for investors.

SPEAKER_01 10:16

Brilliant. Well, hey, we look forward to that then. Um that about wraps it up, I think, doesn't it, chaps?

SPEAKER_02 10:21

Yeah, I think that's gonna help a damn thing.

SPEAKER_01 10:24

Well, if you've enjoyed this, please like, press the like button, make sure you follow us on YouTube and your whatever podcast uh platform you listen to. If you want to get involved with this, and and particularly if like JP Morgan Claver House, you're a trust, or if you're a fund and you'd like to come on the show and get your message across to the retail audience, just email us at editorial at sharesify.com and we'll do the rest. And with that, have a good weekend.

SPEAKER_02 10:50

Cheer we are everyone.