Before the bell: the sting is in the tail

Markets ended the week deep in the red. Sellers remain present in Japan this morning, although one standout winner emerges. In Brussels, we expect buyers for Tubize today.

A strong trading week filled with better-than-expected earnings ultimately ended in a bloodbath. On Friday, stock markets tumbled. On Wall Street, the S&P 500 dropped 1.6%, and the Nasdaq fell 2.2%. Earlier that day, European stocks lost an average of 2.9%. Investors reacted to the increasingly aggressive tone from the US president toward countries that have not yet struck a trade deal with the US. On a weekly basis, the S&P 500 fell 2.4%, the Nasdaq 2.2%, and in Europe losses totaled 3.5%. However, the Bel20 did much better with a modest 1% decline. The Brussels exchange attracted buyers following strong results from pharmaceutical giants Argenx and UCB, although even those stocks slipped on Friday by 1.7% and 2.9% respectively.

In Japan, the Topix is down 1.3% this morning. Shortly after the Tokyo Stock Exchange opened, the drop had reached 2.1%. Investors are reacting to a rise in the Japanese yen, which gained 2% on Friday after disappointing US unemployment figures. The rationale is that the Federal Reserve might cut rates in September, while in Japan, rates could rise—prompting investors to swap dollars for yen. In Hong Kong (+0.5%), there’s a modest gain. Computer maker Lenovo (+5.0%) is among the winners, while automaker BYD is down 1.9%. Today, PostNL, ON Semiconductor, and Palantir will report earnings.

Saturday shift

Few companies issue press releases on Saturday. In the Middle East, it’s not unusual, as Saturday is a regular workday. But elsewhere? Berkshire Hathaway is a well-known exception. In Belgium, we have Tubize, the holding company above UCB, which reported results on Saturday. These figures aren’t very significant in themselves, since Tubize is “just” a holding. We mainly look at UCB’s performance, where we continue to see strong potential. What is noteworthy: Tubize announced it is now debt-free. Over the past few years, the company went into the red to buy an additional one million UCB shares, paying an average price of 78.5 euro per share. On Friday, UCB closed at 184.85 euro. Impressive! Tubize receives over 98 million euro in dividends from UCB but only pays out 46 million euro itself, allowing it to reduce its debt. On Saturday, Jim calculated Tubize’s intrinsic value in Spamalot: 293.03 euro. On Friday, shares closed at just 146.00 euro. That means a discount of over 50%. Strong buy!

BYD: quo vadis?

BYD shares dropped another 1.9% this morning. Since 22 July, the stock has fallen 14.9%. In July, BYD sold 344,296 vehicles, just 0.6% more than a year ago and even 10% fewer than in June. Not great. In Belgium, such as at BYD Kempen, sales are still growing monthly. This weekend, the importer announced a price cut (a 1,300 to 1,400 euro discount on the Seal U) which should attract new buyers. In China, the government no longer allows steep price cuts and is demanding that BYD pay its (smaller) suppliers faster. That means BYD will need costlier financing. Not a deal-breaker, but enough to spook some investors. I’m holding on. Long-term potential still looks strong to me—for both electric vehicles and home batteries. And I have no doubts about the technology. Sure, German, French, and Italian automakers may be cheaper, but I’d rather hold shares of winners in my portfolio.

Did you know…

that Nintendo stock jumped 5.3% this morning—even in a weak Japanese market? The video game maker is benefiting from strong numbers and rising demand for the Nintendo Switch 2. The company expects to sell 15 million units of the new console this fiscal year, which would make it Nintendo’s fastest-selling console ever.

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