November 2025 Newsletter

Highlights of this month’s newsletter:

“How do you tell a Communist? Well, it’s someone who reads Marx and Lenin. And how do you tell an anti-Communist? It’s someone who understands Marx and Lenin.”

— Ronald Reagan

Market overview: performance figures (%)

Source: Edmond de Rothschild, 30.10.2025

Source: Edmond de Rothschild

October was an eventful month, marked by two primary factors: a resurgence in trade uncertainty between the US and China and the peak of the S&P 500 earnings season.

Concurrently, the Federal Reserve enacted another 25-basis-point interest rate cut. This move aims to stimulate economic activity and employment while remaining wary of inflation, which persists above the target level. In commodity markets, gold experienced a pullback following an exceptionally strong rally.

The third-quarter earnings season is in full swing. Below is a summary of notable companies that reported in October.

Coca-Cola (KO)

Coca-Cola’s results were well-received by the market, with the share price gaining 4% post-announcement. The company’s third-quarter organic sales rose 6.0%, and adjusted operating profit grew 8.0%, as margins expanded 120 basis points to 31.9%.

We expect health-focused innovation to remain a strategic priority. Following the global success of Coke Zero Sugar (volume up 14%), the company is poised to accelerate the launch of other “better-for-you” offerings, such as those with functional benefits like protein and fiber.

At a forward P/E of 20, Coca-Cola may appear expensive when compared to its revenue growth rate. For instance, Alphabet trades at a similar P/E ratio but is growing earnings at 25% annually, compared to Coca-Cola’s 8%. However, Coca-Cola is a highly defensive stock with a proven ability to grow revenue and maintain margins in various economic environments. We believe this resilience justifies its valuation premium.

Alphabet (GOOGL)

Alphabet reported strong third-quarter earnings, with sales growing 16% to $102 billion. Adjusted operating margins expanded by 160 basis points to 34%. The Google Cloud division continues to demonstrate robust performance, with sequential growth accelerating to 34% for the quarter, now accounting for 15% of total sales.

Alphabet’s effective execution in AI, evidenced by the strong traction of its Gemini app, which has over 650 million monthly users, continues to drive results and counter the narrative of AI-led disruption. Trading at a forward P/E of 25 and a PEG ratio of 0.9 , we consider Alphabet’s valuation to be attractive relative to the market for a company of its caliber, and it remains on our buy list.

Meta Platforms (META)

Meta delivered solid third-quarter results, featuring a 26% increase in sales to $51 billion. However, operating margins contracted by 300 basis points to 40%, reflecting rising costs associated with artificial intelligence. The firm has signaled significant future investment, indicating that AI-related capital expenditures will exceed $100 billion next year. To help fund this, Meta has issued bonds to raise additional capital.

Meta’s advertising business is performing exceptionally well. Management attributes this to AI-driven improvements in engagement and monetization, continued growth in ad inventory and strong user engagement on Facebook and Instagram. Meta utilizes two primary levers to drive ad sales:

Volume: Increasing ad inventory and user count. Daily users grew by an impressive 8% to 3.54 billion.

Price: AI investments are enhancing ad targeting and returns for advertisers, which in turn supports higher ad prices. This was evident in the 10% increase in ad prices this quarter.

Following the earnings release, Meta’s share price declined 11% as investors reacted to the scale of the planned AI capital expenditure. We view this market reaction as excessive and consider the current price a buying opportunity. The stock now trades at a forward P/E of 21. Given the company’s strong growth profile and solid margins, we believe the valuation is now attractive relative to the market.

Microsoft (MSFT)

Microsoft’s first-quarter results substantially exceeded the high end of its guidance. Revenue increased by 17% year-over-year (in constant currency) to $77.7 billion. The company’s operating profit strengthened further, with the operating margin now at 48.9%.

Microsoft has demonstrated consistent earnings growth of approximately 20% per year over the last decade and is expected to maintain this trajectory, supported by its clear leadership in artificial intelligence. Currently, the stock trades at a forward Price-to-Earnings (P/E) ratio of 31 and a Price/Earnings-to-Growth (PEG) ratio of 2, which we view as a fair valuation given the company’s quality. Microsoft remains one of our top-rated holdings.

Chart 1: Microsoft P/E ratio (orange) and PEG ratio (white)

Source: LSEG

Summary

This year has been characterized by significant market noise, leading to considerable share price volatility. Despite this, the overall summary from the current earnings season has been very positive, with most companies exceeding analyst estimates. While outliers exist, corporate earnings as a whole appear to be resilient, diminishing fears that economic growth might slow due to tariffs or broader economic uncertainty.

Source: Moneyweb, SARB

The JSE All-Share continues its strong run, returning 1.2% in October. The JSE Banks Index is up 5% during October, contributing the bulk of its 11% YTD gain (17% including dividends). By contrast, the JSE ALSI has outperformed banks YTD (29% YTD; 31% including dividends) as gold, platinum and dual-listed counters have driven the bourse higher. We believe the banking sector is poised for a sustained rally, potentially similar in magnitude to the post-GNU c.30% move. We maintain BUY ratings across the industry, with a preference for growth names (Capitec and, over the longer term, Standard Bank) and for the recovery story at Absa.

Chart 2: Banks index performance (past 7 years) – October looking like the start of a rally

Source: Bloomberg, SBGS analysis

South Africa: S&P outlook steady, upgrade unlikely this year

The Financial Action Task Force has officially delisted South Africa from its greylist, marking a swift turnaround for a country once accused of laxity on money-laundering and terror-finance controls. The move supports investor confidence, though the real test is maintaining compliance. S&P placed South Africa on a positive outlook in November 2024, citing cooling inflation, a more credible SARB, and early reform traction under the GNU, signals that could bolster private investment and fiscal consolidation if sustained. In May 2025, the agency affirmed BB-/positive, highlighting fiscal pressure, weak growth and governance/SOE implementation risks that argued against an immediate upgrade.

With the following review on 14 November 2025, we expect BB-/positive to be reaffirmed rather than raised. The outlook reflects better inflation dynamics and policy credibility, but an upgrade still requires firmer execution.

What we’re watching: MTBPS follow-through on consolidation, tangible progress on load shedding and logistics (Eskom/Transnet), the trajectory of the primary balance, and restraint on new SOE support. Clear gains here would keep the positive outlook intact and sustain upgrade prospects into 2026.

Gold: sharp pullback, still a buy in our view

October saw one of the sharpest precious-metals reversals in years. Spot gold fell >5%, but held above $4,000/oz, while silver slid >8% before a modest rebound. We see this as a correction, not a regime shift. The core bullish pillars remain: low real yields as cuts proceed despite sticky inflation; elevated geopolitical risk; continued central-bank accumulation amid de-dollarisation; downward pressure on the USD; and returning ETF inflows. In our view, it was repricing, not capitulation, and it creates an attractive entry point for quality gold names.

The trigger looks technical/positioning-driven. After YTD gains of approximately 60% for gold and 73% for silver, profit-taking was driven by speculation around a potential US–China breakthrough and US fiscal headlines. Selling appears to have come mainly from longs trimming exposure, rather than fresh shorting. Our constructive stance rests on fundamentals: inflation in major economies continues to surprise to the upside (energy, wages, sticky services), keeping real yields suppressed even as nominal rates rise. Emerging-market central banks continue to diversify reserves into gold; a structural demand base silver lacks.

Meanwhile, the Fed’s tone is edging more dovish as the labour market cools; markets price a 25 bp cut at the next meeting and another in December. As cuts erode real yields and pressure the dollar, gold’s role as a store of value and inflation hedge is reinforced.

Bottom line: the sell-off looks like momentary noise. With core drivers intact, we see a buying opportunity in our preferred gold names. One oft-cited support is central-bank buying. Per the ECB (June): central banks’ gold demand in 2024 remained at record highs, accounting for 20%+ of global demand (vs ~10% in the 2010s). Yet reported central-bank holdings rose by 228 tonnes over the most recent 12 months—sizeable, but modest by recent purchase standards.

In fact, 228 tonnes sits in the bottom quartile of the past 5, 10, and 15 years. So why the “unprecedented” headlines? Because estimates of unreported official demand lift total purchases to roughly 804 tonnes, about 7½ times a blue whale, placing the tally in the top tercile of the past 5–10 years and the top quartile over 15 years.

Chart 3: ETPs are still not at an all-time high in tonnage terms

Source: ETP issuers, Bloomberg, RBC Capital Markets

In October, the VEGA Global Strategic Fund delivered a return of 1,1%, while the MSCI All Country World Index, our reference benchmark, gained 2,2% in USD terms. Since inception, the fund has advanced 17,7%, compared with the benchmark’s 16,2%. This reflects a strong relative performance, with the fund outperforming global equities so far this year.

Chart 4: Total return in USD since inception

Portfolio strategy

In the wake of heightened market volatility following President Trump’s tariff announcements, our stance has been to remain disciplined and avoid reactive portfolio shifts. History consistently shows that impulsive responses to short-term political noise often result in suboptimal investment outcomes.

Instead, we have used this environment to evaluate high-quality businesses that were indiscriminately sold off despite their strong long-term fundamentals. Periods of uncertainty can create attractive entry points into quality companies at compelling valuations, and we continue to focus on identifying these opportunities with a long-term perspective.

The portfolio remains concentrated in leading global businesses with durable competitive advantages, particularly those delivering high returns on capital and robust free cash flow generation. Dividend policies are not a central consideration in our selection process, as we generally favour companies that reinvest earnings to drive future growth.

We also resist the temptation to follow short-lived market trends or fashionable investment narratives, as preserving portfolio quality takes precedence over chasing momentum.

Changes we made during the month

Pfizer — Position added

We initiated a position in Pfizer, taking advantage of attractive valuations following a period of underperformance. We see scope for recovery as the company stabilises earnings post-COVID and unlocks value from its strong pipeline in oncology and immunology.

Valterra Platinum — Position added

We added exposure to platinum through Valterra Platinum, reflecting our constructive view on the metal’s long-term demand outlook. Structural supply constraints and recovering industrial demand underpin our positive stance on the platinum sector.

Northam Platinum — Position added

We reintroduced Northam Platinum to the portfolio to increase our South African precious metals exposure. Northam’s solid balance sheet, improving production profile, and leverage to the rebound in platinum prices support our investment case.

Alibaba — Position added

We initiated a position in Alibaba, capitalising on its attractive valuation and improving fundamentals. The company’s dominant e-commerce platform, growing cloud segment, and renewed focus on shareholder returns offer compelling upside potential.

GDS Holdings — Position added

We added to GDS, a leading Chinese data centre operator, to gain exposure to the region’s growing digital infrastructure demand. The company’s expansion into Southeast Asia further diversifies its revenue base and supports long-term growth.

L’Oréal — Position removed

We exited our holding in L’Oréal after strong performance, realising profits following a period of significant share price appreciation. While the company remains a quality consumer franchise, we saw limited upside relative to other opportunities.

Canadian Pacific Kansas City Ltd —Position removed

We sold our position in Canadian Pacific Kansas City to reduce exposure to cyclical North American transport. The decision reflects our preference to reallocate capital to higher-conviction growth and precious metals opportunities.

Top 10 Holdings

Monthly returns in USD net of fees

Share of the month: Intuitive Surgical

Intuitive Surgical is the clear category leader in robotic-assisted surgery and we view the company as one of the most compelling compounding stories in global med-tech. The core da Vinci platform has become the reference standard for minimally invasive procedures across urology, gynecology and an expanding set of general-surgery applications. With an installed base now exceeding 10,000 systems worldwide, Intuitive benefits from powerful network effects: hospitals invest in multi-year training and workflow redesign, surgeons build case volume and proficiency, and patients increasingly ask for robotic options. This embedded ecosystem, reinforced by a vast, proprietary body of clinical data and accumulated procedure know-how, creates high switching costs and a durable moat that is difficult for latecomers to replicate.

The investment case rests on three pillars

Long runway for procedure growth, the attractive “razor-and-razorblade” economic model (where the initial system sale is like selling the razor, and the recurring sales of instruments and accessories are like selling the blades), and a next-generation product cycle that refreshes the installed base while opening new clinical frontiers.

Procedure volumes have compounded at double-digit rates as robotic techniques have moved beyond specialist domains into mainstream general surgery, particularly in hernia repair, cholecystectomy and appendectomy. Even in the United States, where penetration is furthest along, the addressable market remains substantially underdeveloped; outside the U.S., adoption is earlier, but accelerating, as training capacity, evidence and reimbursement frameworks catch up. This geographic mix shift matters because it extends the growth runway well beyond the typical med-tech product cycle.

Intuitive’s model blends upfront system revenue with a high-visibility stream of recurring income from instruments, accessories and service. Each da Vinci case consumes a standardized set of tools designed for precision and sterility; those instruments carry attractive margins and refresh on a usage schedule tied to procedure count. Service contracts further stabilize revenue and deepen customer relationships, while periodic system refreshes, typically every five to eight years, anchor multi-year capital planning at the hospital level. The result is a business with unusual visibility for a device maker. Once a hospital adopts da Vinci, utilization drives a steady cadence of consumables and service revenue, while clinical expansion and new placements add incremental layers of growth.

The current product cycle is particularly supportive. The rollout of the da Vinci 5 platform enhances surgeon ergonomics, imaging and control precision, and it is already catalyzing both upgrades and new placements. We expect this cycle to lift system sales in the near term and to sustain higher procedure throughput over time as operating room efficiency improves. Beyond abdominal surgery, Intuitive’s Ion system for robotic bronchoscopy addresses the fast-growing need for minimally invasive lung biopsy. Clinical interest and utilization suggest that Ion can become a meaningful second platform, with the potential to scale into a billion-dollar business over the forecast horizon as screening expands and earlier, tissue-sparing diagnosis becomes the standard of care.

Financially, Intuitive operates from a position of strength. The company carries no debt, generates robust free cash flow and allocates capital with discipline, prioritizing organic R&D and training infrastructure, opportunistic share repurchases and selective tuck-in acquisitions. As the installed base scales and productivity initiatives take hold, we expect adjusted operating margins to trend toward the low-40% range over time, notwithstanding some mix headwinds from lower-priced systems and international expansion. Importantly, management has consistently resisted overextending into large, dilutive M&A, opting instead to compound within the firm’s core capabilities in minimally invasive intervention.

Valuation is anchored by a fair value estimate of $378 per share, lifted on stronger-than-expected procedure growth through 2025 and a faster-than-modeled da Vinci 5 upgrade cadence. Within the model, instruments and accessories remain the primary engine, growing around the low-double-digit range, with system sales contributing mid-single-digit growth over the longer term as placements expand into new geographies and specialties. While headline multiples can appear full versus the broader med-tech universe, we think the combination of durable growth, recurring revenue quality, balance-sheet strength and category leadership justifies a premium.

We are mindful of risks. Competitive intensity is building as large diversified peers bring alternative robotic platforms to market. The most credible threats are likely to compete on price or niche features, exerting localized pressure in certain specialties or geographies. That said, the hurdles to displacing an incumbent at scale are formidable: beyond the capital cost of a robot, a hospital’s true investment lies in surgeon training time, standardized workflows, instrument logistics, clinical protocols and the reputational impact of outcomes data. Moreover, much of Intuitive’s economic value is embedded in its usage layer, the instruments, accessories and service stack, where consistency, reliability, and support are paramount for operating room teams.

Stepping back, Intuitive is a rarity: a med-tech company that created its category, continues to define its technical frontier, and benefits from a usage-based revenue model that compounds with scale. The installed base and data advantages are self-reinforcing; the training ecosystem and clinical evidence form high walls around the castle; and the pipeline—led today by da Vinci 5 and Ion—adds credible options for sustained innovation.

For VEGA’s purposes, we consider Intuitive a high-conviction, long-duration compounder suitable for a core growth allocation. The path to value creation does not depend on heroic assumptions: steady double-digit procedure growth, disciplined capital allocation and incremental margin expansion can deliver attractive shareholder returns, even if system sales normalize to mid-single-digit growth. On balance, the asymmetry still skews positive: downside is cushioned by a sticky, recurring revenue base and fortress balance sheet, while upside is leveraged to international adoption, general-surgery penetration, and the optionality embedded in Ion and future platforms.

For our offshore portfolios, we also have indirect exposure to Intuitive Surgical through the iShares U.S. Medical Devices ETF (IHI), where it is the second-largest holding at 15.5%.

In this chapter, Morgan Housel turns his attention to one of the most overlooked drivers of our happiness, behaviour and investing success: the gap between what we expect and what actually happens. He argues that while many things around us change rapidly, one of the things that doesn’t change is how deeply expectations shape our reality, for better or worse.

Housel opens by showing how human progress, higher incomes, better health, improved technology, continues nearly everywhere across the globe. But the twist is what this means for our mindset: as objective conditions improve, our expectations often improve even faster. That creates a double-edged sword: even though we’re better off than previous generations, we can feel worse if our expectations outrun our actual situation.

One of his core insights: happiness is less about your objective circumstances and more about the gap between your reality and your expectations.

He explains how happiness is pretty simple in theory: it arises when reality meets or exceeds expectations. But in practice, as circumstances improve, expectations ratchet up, we want more. The goalposts move. So someone in “good” conditions might still feel discontent because their expectations are even higher.

Housel also emphasises how this affects investing and life: Suppose you assume the world will constantly improve (and many data points suggest it will). In that case, you might stack your plans on that assumption, expecting returns, income growth, or favourable outcomes,  and be disappointed when they don’t materialise or when the path is bumpy.

Conversely, if you keep expectations too low or hold pessimism even when conditions are improving, you may under-invest, under-participate, or miss out because you assumed the worst.

Managing the relationship between expectation and reality becomes a strategic advantage: you want to calibrate your expectations to be realistic enough to avoid chronic disappointment, yet optimistic sufficient to engage and take advantage of opportunities.

Another critical point Housel makes is that comparisons drive expectations: we don’t just measure our reality against our past, but also against what we believe others have and what we think we should have. This creates a shifting target: the richer our neighbour looks, the higher our expectations climb, and the harder it is for our own life or investing journey to feel satisfying. By reframing how we think about expectations, Housel says we can protect ourselves, emotionally and financially,  from the subtle traps that accompany progress, while still participating in its upside.

What this means for investors

Be careful about anchoring your portfolio or strategy to very high expected returns simply because “things always go up”—if reality comes in lower, the disappointment may cause you to abandon the plan. Plan with the possibility that your expectations will drift upward (either consciously or unconsciously) — therefore, guard against complacency and always ask: “Am I happy if things go less well than I expect?”

• Use lower expectations as a buffer: if you assume more modest outcomes, you may be pleasantly surprised rather than disappointed — this is a margin of emotional safety akin to the financial safety margin.
• Recognise that comparisons can be harmful: don’t let others’ visible successes inflate your expectations unrealistically, pursue a plan tuned to your reality, timeline, and goals.

Ultimately, reduce the gap between expectation and reality so that you’re less likely to be thrown off by normal market fluctuations, economic noise, or the inevitable “surprise” events.

Source: Visual Capitalist

Sources

Alpine Macro, Anchor, Bloomberg, BNY Mellon, Charlie Bilello, Compound Advisors, Edmond De Rothschild, ETFMG, FactSet, Haver Analytics,  JP Morgan, Julius Baer, LSEG, Morningstar, Morgan Stanley, Refinitive, RMB, Statista, Sygnia, Strategas, The Intelligent Investor, UBS.

Disclaimer

VEGA Asset Management has taken care that all information provided in this document is true and correct. VEGA Asset Management does not accept responsibility for any claim, liability, loss, expense, or damage. Any information herein is not intended nor does it constitute financial, tax, legal, investment, or other advice. VEGA Asset Management is an authorised Financial Service Provider with FSP number 776. Past performance is not necessarily an indication of future performance.