CEO INSIGHTS – Week Ending 6 April 2023

“In fact, with a click of an iPhone, $US42 billion left one [Silicon Valley Bank] in one day. To give you a sense of order of magnitude, in the financial crisis of ’08 one bank lost $US17 billion in a week, so the rate of withdrawal was 20 times what it was then” James Gorman, CEO, Morgan Stanley

As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.  

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Manufacturing

“As the chip shortage taught us and I think taught many others, going further up the supply chain vertically is critically important when there are things that might be in shortage in the future” Paul Jacobson, CFO, General Motors Co.

Freight & Transport

“We are seeing pricing on shipping containers and rates come back to more normalised levels” Steven Woodward, CEO, Kirkland's Inc [major US furniture and home decor company]

Banking System / Bank Failures

“In fact, with a click of an iPhone, $US42 billion left one [Silicon Valley Bank] in one day. To give you a sense of order of magnitude, in the financial crisis of ’08 one bank lost $US17 billion in a week, so the rate of withdrawal was 20 times what it was then” James Gorman, CEO, Morgan Stanley

“The current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come” Jamie Dimon, CEO, JPMorgan Chase & Co.

Domestic Economy

“Population growth has picked up sharply and it now seems likely that the annual rate of population growth will soon be around 2 per cent, which would be close to the peak reached during the resources boom” Phillip Lowe, Governor, Reserve Bank of Australia

“You are starting to see the early signs it is slowing down…They [consumers] are starting to be more cautious, and it does hurt. It is not just interest rates, it is rental, grocery bills, power accounts, fuel in the car – but we need to get rid of inflation” Ross McEwan, CEO, National Australia Bank Ltd

Consumer Staples

“We hadn’t seen an awful lot of that [consumers trading down] until early 2023 and then we started to see it. It’s not a massive trend at the moment but there is a bit of shift, and you can see private label sales increasing, trading across into cheaper products and fresh into frozen” Grant Ramage, CEO, Metcash Food      

Marketing & Advertising

“All the evidence shows that marketers that invest consistently, when times are good, when times are not so good, deliver. You have stronger brands and deliver higher returns” Mark Read, CEO, WPP Plc

Employment & Offices

“Employment markets are sensitive to the economic cycle in the short term, but less so in emerging markets” Market Statement, Seek Ltd

“We’re seeing prime CBD office rents continue their upward trajectory in most markets across Australia, with Sydney setting the pace in the new year” Dominic Brown, Head of Research, Cushman & Wakefield ANZ

Building

“The problem is the big building companies with their large sales teams, [post COVID] they all signed up three, four, maybe even five times the number of contracts that would normally sign in a year…All those contracts were signed on fixed price contracts, which meant they lost money on all those contracts if they didn't renegotiate them before they commenced construction” Russ Stephens, CEO, Association of Professional Builders

Cybersecurity

“Just to give you an idea of why the endpoint [physical computing devices] is the epicentre of the enterprise. It's because 80% of the most valuable security data collected comes from the endpoint…90% of successful cybersecurity attacks and 70% of successful data breaches originate at the endpoint” George Kurtz, CEO, CrowdStrike Holdings Inc [major global cybersecurity software company]

Energy

[The energy transition] challenge is enormous. To tackle it, the world needs large world-scale solutions. We need them deployed globally, and at much lower cost than today. The world needs to establish a new industry, a carbon reduction industry with new value chains and products, and we need it sooner, rather than later” Darren Woods, CEO, ExxonMobil Corp

Media & Sports

“A driving force in our business is the continued appreciation and rights value of sports and premium content…The migration of consumers toward live experiences was widely evident before the pandemic and has returned in full force” Mark Shapiro, President, Endeavour Holdings Group [world’s largest talent agency / owner of UFC & WWE]

Commodities & Resources

“Australia needs China to consume its iron ore, coal, and other products... currently somewhere between 30 to 40 per cent of Australia’s exports are to China” James Gorman, CEO, Morgan Stanley

“You’ve got that category of OEMs [original equipment manufacturers] who are scrambling, trying to shore up their [lithium] supply chain. They definitely exist, but then throughout the supply chain you have got different groups wanting to secure supply” Dale Henderson, CEO, Pilbara Minerals Ltd

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Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. It does not constitute an offer to purchase any security or financial product or service referred to herein. It does not take into account the investment objectives, financial situation or needs of any particular investor. Before making an investment decision, investors should consider obtaining professional investment advice that is tailored to their specific circumstances. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.