The S&P/ASX 200 (ASX: XJO) is expected to trade higher on Monday morning, according to data from the Sydney Futures Exchange.
ASX 200 stumbles: worst week since Easter
The ASX 200 delivered its worst week since April, 2020, falling 3.9% after Friday’s 0.5% decline. That said, it was a strong month given the background of uncertainty, with the index 1.9% higher.
By far the news of the day was under-pressure wealth manager, AMP Limited (ASX: AMP), receiving a non-binding offer from Ares Management to purchase 100% of the company. The news sent the AMP share price soaring 19.5%, offering some validation to those who have seen value in the company’s asset management and banking divisions. Management confirmed the offer but also highlighted that it has received significant interest in each of its businesses, with hopes of a bidding war to come.
The other highlight was ResMed Inc. (ASX: RMD) who made an incredible pivot towards manufacturing ventilators in 2020. The company reported a 37% increase in net profit to US$184.4 million after ventilator sales spurred a 10% increase in revenue, to US$751.9 million. ResMed shares finished 9.5% higher for the day.
US market delivers 2nd month of losses, big tech report
It was a rough finish to the week, despite the strong GDP results, with the S&P 500 falling 1.2% and the Nasdaq 2.6% as the world’s largest companies provided earnings updates. The rough day sent both indices down 5% for the week and over 2% for the month, the second consecutive month of losses. Given the backdrop of the impending election and over 100,000 COVID-19 cases in the US, some weakness was expected.
It was a mixed day for the technology sector with Apple Inc (NASDAQ: AAPL) falling 5.6% after announcing a 20% fall in iPhone sales but revenue slightly ahead of estimates at US$64.7 billion for the quarter. Accessories, including the AirPods, remain the key growth driver, up 20.8% for the quarter.
Amazon.com Inc (NASDAQ: AMZN) offered a more mixed result, with the cloud computing division up 29% and revenue slightly ahead of expectations at US$96.1 billion for the quarter. CEO Jeff Bezos did however flag higher costs and shrinking margins as COVID-related costs hit earnings.
Facebook Inc (NASDAQ: FB) was among the hardest hit on Friday, falling 6.3% despite overcoming a boycott of ad sales to beat revenue expectations by 10%, hitting $21.47 billion. In the case of Facebook, this 20% quarterly sales growth was considered a slowing!
Alphabet Inc (NASDAQ: GOOGL) was the winner of the day, reporting revenue of US$46.2 billion. Growth was driven primarily from its booming YouTube division, where ad sales grew 32% as the world turned digital during the pandemic.
My top takeaways for investors
My key takeaways from Victoria’s first week out of lockdown are that we are not quite out of the woods yet. Despite the great news and feeling of normality returning to people in Australia’s second-largest city, border closures continue to dominate headlines, as does the second wave hitting Europe and the US.
This week offered a reminder that Australia remains an attractive hunting ground for companies, with Coca-Cola Amatil Ltd (ASX: CCL), AMP and Link Administration Holdings Ltd (ASX: LNK) all under offer from global players. The common trait for each of these businesses was resiliency amid the pandemic.
Whilst they don’t offer the incredible growth rates of the popular technology companies, it is clear that slow, consistent growth will only become more valuable in the years ahead. The question is who’s next? In my view, any company with consistent, non-cyclical recurring revenue will be popular, particularly given the incredibly low cost of debt.