Before the bell: Japanese business confidence weakens

Nvidia boosts Tesla’s competitors, a French bank gives UCB and Tubize a lift, and shares of a Polish parcel-locker specialist surge after a takeover approach.

Wall Street had another strong session, with solid gains for the S&P 500 (+0.6%) and the Nasdaq (+0.7%). Shares of Amazon (+3.4%) and IBM (+2.5%) were in demand. Tesla (-4.1%) moved in the opposite direction after the Consumer Electronics Show in Las Vegas made clear that Nvidia’s technology (-0.5%) can also help other car manufacturers develop self-driving vehicles. The Euro Stoxx 50 (+0.2%) barely moved. In Europe, the standout was InPost (+28.5%). The parcel-locker specialist is considering a non-binding takeover proposal it has received. Adidas, by contrast, lost 4.2%. The Bel20 had an excellent day, closing up 1.6%. The strong performance of the Brussels market was largely due to UCB (+7.4%) after BNP Paribas raised its price target for the pharmaceutical company from 265 to 281 euro. UCB closed yesterday at 252.2 euro. Monoholding Tubize (+7.1%), which holds a 36% stake in UCB, rose in tandem with the success of its core participation.

In Asia, investors are taking some profits after yesterday’s strong performance. In Tokyo, the Topix is down 0.8%, while the Hang Seng in Hong Kong falls 1.3%. Shares of power producer Tokyo Electric Power lose 7.6%, giving back a large part of the gains booked ahead of plans for new nuclear power plants in Japan. In that same country, service-sector business confidence has weakened. The purchasing managers’ index fell month-on-month from 53.2 to 51.5 points. Later today we will receive eurozone inflation data, and shortly after 2.00 p.m. our time ADP will publish US private-sector employment figures. After the close, US brewer Constellation Brands will report quarterly results.

From 100,000 dollars to 25 million dollars

The CEO of Berkshire Hathaway is getting a pay rise. Warren Buffett was satisfied for decades with an annual salary of 100,000 dollars for his work, but that will not suffice for his successor Greg Abel. Abel will receive a salary of 25 million dollars this year. Last year, when he was number two at the holding company, he already earned around 21 million dollars. That level of compensation is – how should we put it – on the high side. The new CEO certainly has big shoes to fill. But does that really require such a pay package? Granted, Apple CEO Tim Cook earns even more, but the bulk of his compensation consists of performance-linked bonuses. Abel receives his annual pay in cash, regardless of how Berkshire performs. No, I am not jealous, but I am convinced that a very high salary does not automatically lead to better performance by a top executive.

UCB remains top quality

The sharp jump in UCB’s share price yesterday surprised me. Large daily moves do happen from time to time, but a gain of more than 7% for a heavyweight stock – UCB has a market capitalisation of roughly 46 billion euro – without any real news is substantial. A modest price-target increase by a BNP Paribas analyst is hardly news. At best, it serves as an excuse for a fund manager to finally add UCB to the portfolio. Sensible investors do not worry too much about short-term ups and downs. They simply hold on to their shares because the company performs extremely well and is likely to continue doing so for a long time. With UCB, we are also doubly well positioned through Tubize, which gives us much more UCB exposure for our money. And that has worked out very well for us over the past two years.

Did you know…

that UCB has been listed on the stock exchange since 1928 and has grown over that period into a quality stock that has often delivered above-average returns to its shareholders?

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