Before the bell: markets celebrate

As the United States appears to be moving toward de-escalation in the Middle East, Western markets enjoyed one of their best days in months on Wednesday. Less encouraging were Nike’s corporate results.

With a gain of 3.8%, the technology-heavy Nasdaq recorded its strongest day in several months. Reports suggesting that the military operation in Iran may be nearing its end appear to be the main driver. The strongest performances came from the Magnificent 7 stocks. Alphabet (+5.1%), Tesla (+4.6%) and Meta (+6.7%) were among the top gainers. A new partnership between Nvidia (+5.6%) and Marvell Technology (+12.8%) also boosted both stocks significantly.

In Asia, the news surrounding Iran is also having a positive effect. South Korea’s Kospi index is up 8.6% on the day, while Japan’s Topix index is gaining 4.5%. Investors will also be able to react to Floridienne’s results later today. The Belgian holding saw its profit halve due to headwinds abroad, although revenue still increased by 4%. Attention will also turn to a press conference by Donald Trump on the Iran–Israel conflict, scheduled to take place after US markets close.

Own fault, own problem

A red flag for investors? When companies consistently point to external factors to justify weak results. Nike is, in my view, one of those companies. The sportswear group expects revenue to decline by 2% to 4% in the coming quarter. The explanation? The war in Iran and trade tariffs. Yes, fewer shoes may be sold in the Middle East. But globally, the issue lies elsewhere—namely increasing competition and weak product innovation. Nike relied too long on iconic models such as the Air Jordan and Air Force 1, making them so ubiquitous that their scarcity value disappeared. Wholesale partners such as Foot Locker and Macy’s were sidelined as the company shifted fully toward its own stores and online platform. External factors can often explain disappointing results, but in this case, the root cause appears to be self-inflicted. We expect a sharply negative opening later today.

Listen to the Indian Warren Buffett

Ask me which investor I respect most, and I will not name Warren Buffett, but rather his Indian counterpart Mohnish Pabrai. Anyone interested in his investment philosophy should read his book The Dhandho Investor: The Low-Risk Value Method to High Returns. One of his key principles? Invest only in existing and proven business models. That is one of the reasons why I cannot invest in Fluxys Belgium. The group plans to invest up to 6 billion euro in hydrogen pipelines by 2033. But who will actually use that hydrogen? Energy experts such as Professor Ronnie Belmans of KU Leuven argue that hydrogen is economically and technically inefficient for broad applications such as heating. Fluxys itself also acknowledges that there is currently very limited concrete demand from industrial users. Pabrai’s principles come to mind when reviewing the company’s annual results. I see better opportunities elsewhere, despite the 7% dividend yield.

Did you know…

that the Nike logo is one of the cheapest logos ever created for a multi-billion-dollar company? In 1971, Nike paid just 35 dollar to a graphic design student for the logo. The company’s founder was reportedly not immediately convinced, saying: “I don’t love it, but it will grow on me.” Today, that symbol is worth billions.

This article was translated from Dutch and was originally published on Spaarvarkens.be.