This week on Equity Mates

Hey there Equity Mate,

Here are some headlines that caught our attention last week:

• Nvidia was up 12% for the week, after it’s Q1 earnings report beat expectations. The company reported $26.04b in quarterly revenue, up from $7b a year earlier, and $14.88b in quarterly profit, up from $2b a year earlier!

• Australian superstar startup Canva continues edging closer to an IPO. At their recent conference, the company unveiled Canva Enterprise which is seen as an enticement for a number of deep-pocketed US investors that love the B2B SaaS space

• Boeing continues to struggle through the safety crisis, forecasting a negative free cash flow for this year. Meanwhile, the head of the Federal Aviation Administration said Boeing faces a “long road” to address safety issues. The stock was down 7% overnight and is down 32% for the year.

With plenty happening in markets, make sure you’re listening to our podcasts to keep up to date. Here’s what we’re releasing this week:

Equity Mates Investing (Spotify | Apple | YouTube)

• Monday - Nvidia earnings, is it time to buy Tesla & with the Yen so low, should we invest in Japan?

• Tuesday - Ask an Advisor: In the room with Glen Hare & a real client

• Thursday - Ren tries to solve the housing crisis, Pimp my Portfolio & the saga of Paramount Global

• Friday - Uncovered: Saving brain cells from stroke damage | Argenica Therapeutics

Get Started Investing (Spotify | Apple | YouTube)

• Tuesday - $100 Challenge: Get paid to walk

Your questions, answered

Jordan asked via email:
Hi team! I’d be very interested in hearing what your thoughts are on the current low value of the Japanese Yen currently and why the index is trading at all time highs. Do you think that this presents any investing opportunities for us?

Reasons the Yen is low:

1. Monetary policy - BoJ has had historically low interest rates; in contrast major economies much higher, making Yen less attractive

2. Economic performance - economy has faced structural challenges, including an ageing population and low productivity growth - slower economic growth compared to other major economies

Reasons for the high stock market index:

1. Corporate earnings - improving profitability, boosting investor confidence

2. Foreign investment - weaker yen is attracting more foreign investment

3. Government policy / intervention - government has implemented various policies to support the stock market, including corporate governance reforms and incentives for companies to increase shareholder returns

It can present some short-term investing opportunities. When currency is weak, domestic investment opportunities to explore include:

1. Companies the derive a large portion of revenue from exporting

2. Domestic travel and tourism companies

3. Real estate (foreign investment coming in)

However, for us, the real question is the long-term opportunity. And with Japan facing some serious structural issues, we think there’s probably better opportunities elsewhere.

If you have a question you’d like answered, hit us up at [email protected] 

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What we’ve been reading

An NVIDIA Primer

Nvidia is the bell of the ball. Sure, there are companies bigger than it - at this point it is just Microsoft and Apple. And sure, there are companies growing faster than it - hello Super Micro Computer. But the combination of its size and its growth rate is unprecedented in economic history.

Last week, Nvidia reported it’s quarterly earnings and the whole business world watched in anticipation. As we noted above in the news section - they smashed it:

• Quarterly revenue up 262% to $26 billion

• Earnings per share up 629% to $5.98

• Increased dividend 150%

• Announced a 10-to-1 stock split

Given the results and the continued growth, we figured it would be a good time to share what is driving that growth - a company, 30 years in the making, that was made for this moment.

This primer walks through Nvidia’s product lines, a little of its history, and why it is so integral to the artificial intelligence revolution that is underway today.

If you want to be more informed next time you see a Nvidia headline (and trust us, there will be a next time), this is a good place to start.

NCAA, Power 5 agree to deal that will let schools pay players

One of the most egregious uses of corporate power (in our opinion) is slowly coming to an end. American college sports was an exploitative system that made athletes destined for professional careers take a 1-3 year pitstop (depending on the sport) at college and play for free, generating millions of dollars for the colleges and the NCAA governing body in the process.

It would’ve been far less exploitative if players had a choice - go to college on scholarship and get a free education or go professional and get paid. But players weren’t given a choice. To be eligible to play in the NBA (professional basketball) players must have played at least 1 season in college (or an overseas pathway). And to be eligible to play in the NFL (professional football) players must have played at least 3 seasons. And while in college, these student-athletes weren’t paid.

Meanwhile, the colleges and the NCAA raked in money. The NCAA makes over $1 billion each year from media rights, sponsorship and ticket sales. Meanwhile, the colleges would sell stadiums out every weekend while not having to pay the athletes that drew the crowds.

Now, after a landmark deal between US Government lawmakers and the NCAA, this will be changing. The NCAA has agreed to pay more than $2.7 billion in damages to past players and will allow colleges to pay their student athletes.

This ushers in a brave new world of college sports and raises a number of questions - paying football players and basketballers is pretty clear cut, how the money trickles down to other athletes in less popular sports will be interesting. But at least the days of college athletes being exploited are behind us.