| Welcome to the August issue of the Select Wealth Management Dashboard Newsletter. This month I’m going to break character and I’m going to start my newsletter with some stock specific information. I’d like to talk about a couple of companies that have been in the media over the past 30 days – FaceBook and Apple. If you’ve followed my newsletter over the years, you would know that it is very rare for me to speak about specific companies – I’m certainly no “stock picker” or “market picker”. But these companies have had some significant developments recently which are worthy of mention.
Let’s start with FaceBook. This is a company that in the past could do no wrong. The general public and investing community have loved Mark Zuckerberg and FaceBook. The company has created a cultural revolution and has been a darling investment since it went public in 2012. Every single day, 1.5 billion people login to FaceBook to connect with friends and family, advertise their businesses, consume media, or post a photo of their dinner. It is an extremely influential platform. However, FaceBook’s share price fell by over 20% in the last month after a quarterly conference call revealed several concerns at the company. Earlier this year, the company faced a scandal as a result of 87 million user’s information being improperly shared with another company (Cambridge Analytica) – the equivalent of a “digital invasion of privacy”. At around the same time, FaceBook also admitted that tens of millions of people had previously been “reached by Russian propaganda”, presumably to influence the US Elections. Despite the severity of these breaches (to the point where this could be captured in “ethical investment” filters), the share price held up well at the time. However, it seems that in the last few months people are paying more attention to this and starting to lose their patience. The conference call confirmed that the growth in “daily active users” had recently slowed, and was likely to continue to fall in the foreseeable future - Europe being particularly weak. The company also announced that it had to employ an extra 10,000 people to help with cyber security, taking the head count of this team to 30,000 – significantly more than was ever anticipated and a cost that is weighing heavily on profitability. Advertising revenue was also down. So all in all, bad news for FaceBook - fewer users, slower growth, higher costs, and lower revenue. The end result was a 20% slump in share price headlined in every financial media outlet. So what does this all mean for FaceBook as an investment? Is this a good opportunity to buy FaceBook shares now if you don’t have any? Or should you sell them if you do? Who would know? What I can tell you is that despite a drop in share price of 20% over the past month, FaceBook shares are still up 7.5% over the past year – a pretty healthy return. And since they listed in 2012 they have grown by 33% per annum every year. And no doubt, if they still exist in 10 years’ time, their share price will be higher than today. There is an anecdote which suggests “the best time to make any investment is 10 years ago”, and this is a great example of that. Now let’s have a quick look at Apple. Over the past while, there has been a race on between Apple, Google (or parent company Alphabet) and Amazon to see which company becomes the first ever business worth US$1 trillion. Well, on 3 August Apple was confirmed the winner when the collective value of all Apple shares moved over $1 trillion. This is a staggering achievement. A trillion is such a big number that it’s difficult to get your head around – it’s a 1 with 12 zeros after it. That’s a lot of iPhone sales! So is this good, bad or indifferent for Apple? Does this make Apple too big to fail? Once again, who’s to know? As I said earlier – I’m not a “stock picker” – I am a Financial Planner. So that begs the questions then – what does a Financial Planner do. There is no one specific answer to this, but here is a list of things that a good Financial Planner should be able to do for you:
It’s very difficult to put an absolute dollar value on a plan that does the above. But I can tell you that over the past 20 years, I have seen a lot of wealth destroyed by people not having a plan like this. I have also seen a lot of comfort and assurance from people that do. The funny thing is that once you have a plan and you know where you’re going, the journey there becomes way less stressful and more enjoyable. I heard a great little saying a few weeks ago that I thought was fantastic. “The dress they bury you in doesn’t have pockets”. A good financial plan will ensure that you get to enjoy your wealth in your lifetime, and that it is a stress-free and enjoyable process. In terms of the numbers over the past 30 days, the most noticeable change has been in our currency. The NZ$ has weakened significantly against most trading partners – the only exception being the GBP. There was a particularly sharp fall after the Reserve Bank of New Zealand made a statement suggesting that interest rates in New Zealand are likely to remain unchanged until 2020, and may even go lower before they go up. Good news for those with a mortgage, bad news for deposit holders. Share markets have been mixed with modest losses across most markets – the exception being the American markets which were up 1% for the month. New Zealand was the worst performing market over the past 30 days with a loss of 2.6%. The average house price in New Zealand fell for the second consecutive month according to QV stats. It’s the first time in a very long time that I can recall a fall in the average price 2 months in a row – this despite the Reserve Bank signalling that mortgage rates are likely to stay lower for longer. Here are the numbers for the past 30 days: |
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In terms of your Select Wealth Management portfolio, there is not a great deal to report at this stage. Performance has been in line with expectation, and the weakening NZ$ has helped investors who have investment domiciled in foreign currency (particularly US$). I meet with researchers JMI Wealth this month for the quarterly review, but do not expect any fundamental or wholesale changes. I’ll keep you posted. Finally, a quick update on our Giving Back program. As you may recall, we are working with Te Omanga Hospice for the second half of the year. The last month has been a bit slow, so we have not added a great deal to the Giving Back fund over the past 30 days (although we are up to $700 now). However, I am pleased to say that we have a very busy few months ahead so I am confident that we will reach our target of $2,500. As always, thank you to those of you who have sent referrals of friends, family and colleagues – we really appreciate it. Keep ‘em coming! You can follow progress at www.mifinancialplanning.co.nz/giving-back.html . Until next time, keep warm and well. Warm regards Dave and the team at Isaacs Financial Planning dave@mifinancialplanning.co.nz |
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This newsletter is intended for general distribution and does not constitute personal financial advice. Copy of my primary disclosure statement and secondary disclosure statement.