- FTSE falls and Latin American billionaire builds stake in BT
- Federal Reserve holds rates steady, reducing expectations for cuts
- Tesla shareholders to vote on Musk’s $56bn pay packet
- Oil price retreats on higher inventories and demand outlook
- Halma – record revenue and profit
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
“The UK market has shrugged off more upbeat trading in Asia to open down at the open. This partly reflects a lack of high-octane corporate news in the region and is partly a natural fall-back after a stronger session on Tuesday. News that Mexican billionaire Carlos Slim has built a 3% stake in BT is making a splash through the markets too. On its own, the investment doesn’t mean too much, but it potentially opens the door to some interesting developments down the line.
The other headlines markets are digesting today come from the Federal Reserve’s decision to keep interest rates steady. Expectations for the number of rates cuts this year have fallen to just one, as policymakers make it very clear that loosening conditions isn’t a priority until there’s a clear sign it’s what the economy needs. While consumer prices stayed flat in May, they’re still up on a yearly view. Unemployment remains at levels that can’t be sustained in the long-term. In tandem, all these points mean the US economy remains pretty rock solid, and bigger cracks need to be seen before the Fed will change the status quo.
Tesla shareholders are gearing up to vote on Elon Musk’s controversial $56bn pay packet later today. If the notion doesn’t pass, there are concerns Musk could divert focus from his electric vehicle venture to artificial-intelligence startup xAI and social media platform X. Musk fans will highlight his instrumental role and passionate vision are the reasons Tesla is where it is today, and that the pay is justified. A more conservative analysis could suggest some of that money would be better spent bolstering defences for a tougher EV market. It’s also possible we’re approaching a more natural time for Tesla to seek a new executive leader, with so much of the heavy lifting successfully completed.
Brent crude futures fell to around $82 per barrel on Thursday, which is a reduction from two-week highs. EIA data showed that US crude inventories increased the most in six weeks, and higher-for-longer borrowing costs in the US has clouded demand expectations.”
Halma – Matt Britzman, equity analyst, Hargreaves Lansdown:
“Halma’s attraction is simple. It’s a mash-up of businesses working to provide technology solutions in the safety, health, and environmental markets. These may not be the most exciting businesses, but Halma’s clear purpose and quality of execution mean performance is impressive. Revenue passed the £2bn mark for the first time in Halma’s history, and improving margins meant profits had an even bigger uplift, coming in ahead of expectations too.
One of the first things to look at in a buy-and-build business model is its ability to generate cash. Buying businesses isn’t cheap; it’s much more sustainable if it can be funded by internally generated cash. Halma is a beast when it comes to converting profit to cash, a key advantage and marker of a well-run business. Total acquisition spend was down after record spending the prior year. While there’s no point in spending for the sake of it, investors will be hoping to see a little more activity over 2024. it’s good to see one target already snapped since the financial year ended.
Halma’s strengths are well known, so don’t come here if you want a bargain. But paying up for quality isn’t a bad way to go.”
