Is lockdown back?…
We’ve seen some interesting data on the quasi-lockdown going on in Australia right now due to the increased Covid cases. Mobility and spending have taken a hit, as has consumer confidence. Its putting more pressure on growth expectations in Australia and adds another interesting topic we are hoping to get insight on in earnings season – particularly from the domestic retailers.
2. Volatility is back…
The Henry Hub natural gas futures price was up 46% overnight. The front-month February futures contract expired at the end of the trading session. It had been up as much as 70%, the largest jump on record due to an apparent short squeeze.
As one month’s gas contract approaches expiration, traders move to the subsequent month contract, resulting in volumes falling significantly for the soon-to-expire contract. It appears that a person, company, or fund was caught short the February contract and forced to cover in the afternoon, in a very thinly traded market.
It’s not great timing for energy demand as a winter storm warning has been placed on the Northeast of the US.
3. TINA is back…
The only current “megacap” holding in the Firetrail S3 Global Opportunities Fund, Microsoft, reported strongly during the week. There’s no slowdown from Covid with MSFT – it’s cloud business (Azure) grew revenue 46% year on year, we continue to see more than 20% free cash flow growth for the next few years, and its trading on just 27x PE.
The more interesting news was the trends in Office 365 (Outlook, Excel, Word etc!). Sales grew 19% y/y, of which 16% is increased users. And users have doubled in the last four years!
The next thing to look out for is in March, when further price increases of 10-20% will be implemented. It looks like TINA (‘there is no alternative’) is back…except if you think Lotus Notes can make a comeback?!
Source: MSFT, Firetrail