As expected, the Bank of Canada (BoC) raised the benchmark interest rate in Canada by 0.75%, bringing the Canada’s benchmark interest rate to 3.25%, a 14 year high. The new rate is now above their target range of between 2% – 3%. The BoC said they will maintain their aggressive stance and the rate will continue to rise as they battle inflation, approaching a 40 year high. The only question is how much but rumours have ranged up to 4%. COVID-19, supply-chain issues and Russia’s invasion of Ukraine continue to boost prices of goods and services which contributes to high inflation rates.
Of course, Canadian banks immediately announced an increase in their Canadian prime rate by 0.75% basis points to 5.45%, effective September 8, 2022. Where the benchmark rate is what the BoC (or any nation’s central bank) lends out at to banks, the prime rate is the interest rate the Canadian banks use to set their interest rates to customers for loans, lines of credit and mortgages. The prime rate closely follows the BoC’s benchmark rate.
Inflation reached across the Atlantic where the Bank of England forecasts inflation in the United Kingdom will peak above 13%, the highest since the early 1980s. However, some analysts believe inflation could reach 22% in the UK, closer to the 1975 postwar record. Across the channel, in the European Union, the European Central Bank (ECB) cranked up the interest rate by 0.75%, the largest raise since the ECB came into existence, bringing the EU benchmark (what the central bank lends out at to banks) rate to 1.25%. As well, the ECB suggested there could be several similar moves in the future as part of the ECB’s fight against inflation.
The big driver of inflation in the UK and Europe is Russia’s invasion of Ukraine. In response to European sanctions, Russia has turned off the taps of their natural gas pipelines which is used to heat many homes and run many factories. Despite requests from various European governments, the Canadian government says there is no business case to supply natural gas and oil to Europe. Hmmm.
Ethereum blockchain is undergoing a potentially transformative software update this. Called the Merge, it is expected to decrease the energy used to create new coins and validate transactions by 99.95%. The Merge is designed to make Ethereum more competitive in price and usability compared to the king of cryptocurrency – Bitcoin. Investors in Ethereum, like me, hope the changes will lead to significant rise in the price of Ethereum. For more information on Ethereum, check out the Ethereum.org
While it is not investing related news, Queen Elizabeth II passed away this past week. Her reign of 72 years was longest in Britain’s history. With her passing, Prince Charles becomes King of the United Kingdom and 14 other countries. The British national anthem was updated, and it will now be ‘God Save the King.’ Bringing it back to wealth through investing, I admit a tenuous tie, does Canada and every other nation that has Queen Elizabeth II on their currency have to print new currency featuring King Charles III? And what happens to existing currency featuring Queen Elizabeth? 😊
While we ponder those big questions, let’s check out the week that ended September 9…..
Weekly Market Review
Monday: The stock markets in both Canada and the USA were closed for Labour Day.
Tuesday: The shortened week got off to a rocky start with all four North American Indexes – the Toronto Stock Exchange Composite Index (TSX), the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) – ending lower. In Canada, all Canadian sectors ended the day lower as investors await the latest interest rate hike from the Bank of Canada (BoC), due later this week. Many analysts expect a 0.75% hike, but it could be a second 1.0% as Canada’s central bank continues its fight to stamp down inflation.
In the US, interest rates, energy supply concerns and Covid-19 lockdowns in China all weighed down the markets. Nasdaq pushed its losing streak to seven straight sessions, as higher interest rates continue to take their toll on the big tech companies and other growth, interest rate sensitive companies.
Wednesday: I would like to think the BoC limiting their interest rate hike to 0.75% was the reason all four of the major North American Indexes ended the day higher, but the BoC is not influential enough to impact the American markets. And I am sure Americans would agree with that. 😊 In Canada, all the Canadian sectors ended higher, except Energy, which sank as the price of oil fell almost $5 today.
In the US, it was a similar story as ten of the eleven S&P sectors posted a gain, with the Energy sector being the lone exception. I do not see today’s rally as anything but a bounce since the US Federal Reserve (Fed) is signalling another interest rate hike at their next meeting in late September. Fears of the size of the upcoming hike will likely send the markets lower. However, the rally was enough for the Nasdaq to get back into the win column.
Thursday: With all four Indexes closing higher today, a winning streak has been established. Its only two, but it is a start. 😊 In Canada, the Basic Materials (mining companies), Financials (banks) and Technology sectors led the way, with only Telecommunications, Consumer Staples and Healthcare sectors ending lower.
In the US, the chairman of the Fed confirmed the Feds’ aggressive stance on fighting inflation, signalling another significant interest rate hike is in the works later this month. In the stock markets, the Utilities, Consumer Cyclicals, and Healthcare sectors led the way higher, while the Telecommunications, Consumer Staples and Utilities sectors were the only sector that failed to end higher.
Friday: The week ended on a fine note with all four Indexes ending higher for the day, and for the week. In Canada, the TSX had its largest gain since May 2022 as Basic Materials companies (mining and fertilizer companies) led broad-based gains, with all the Canadian sectors ending in the black. The Canadian Technology, Consumer Staples, and Basic Materials sectors were the frontrunners on the TSX.
In the US, investors went on a shopping spree, pushing all eleven S&P sectors upward. Leading the way were the Basic Materials, Energy, and Technology sectors. Analysts and investors now turn their focus to Tuesday’s August Consumer Price Index (CPI) report for an indication if the higher interest rates are having an impact on slowing consumer spending.
For the week, the TSX gained 2.6% ,the S&P 500 gained 3.6%, the Dow rose 2.7% and the Nasdaq climbed 4.1%.
Weekly Portfolio Review
A bit of a surprising week in the North American stock markets. All four Indexes snapped a three-week slump and recovered some of the losses of the previous weeks. With recent aggressive interest rate hikes and talks of equally aggressive rate hikes in the future for both Canada and the USA, I thought the Indexes would be essentially flat at best. Once again, I prove to myself that on any given day, I’ve no idea which way the market will go. 😊
As for the three Portfolios, again I was expecting all three to lose ground this week, so I am pleasantly surprised to see they all ended the week higher. Once again, I am impressed to see the more balanced Portfolio 2 essentially keeping pace with the more aggressive Portfolios 1 and 3. I will take the wins this week, but we are in for a bumpy ride for the next while.
Weekly Portfolio & Index performance for the week ended September 9, 2022.
Companies on the Radar
Amazon (NASD:AMZN), Ferrari (NYSE:RACE) and Brookfield Select Opportunities (TSX:BSO.UN) remain on my Radar List, and have been joined by two new companies.
XPEL, Inc. (NASD:XPEL): XPEL provides paint and interior protection products for vehicles, watercraft, homes, and commercial buildings. They are one of the top suppliers of films to protect paint, windows, and interiors to the automotive industry and are expanding into the marine, home and building markets, as well as expanding globally. They company has shown strong revenue and profitability growth.
WESCO International (NYSE:WCC): Originally the distribution arm of Westinghouse, Westinghouse Electric Supply Company (WESCO) was spun off in 1993. After numerous acquisitions, including Anixter International in 2020, WESCO now provides business-to-business distribution, logistics services, supply chain solutions, network & security solutions, electrical & electronic solutions, and utility power solutions. I like that Wesco has multiple revenue sources in multiple markets.
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended September 9, 2022: UP
Portfolio 1 commentary with links to each company the first time mentioned.
Alphabet’s (NASD:GOOGL) YouTube’s has become an economic powerhouse the last few years thanks to ad sales that grew 254% in the years since 2017. YouTube is watched on smart devices and televisions, with over 700 million hours watched on smart TVs alone in January 2022. As well, in 2019, at least 500 hours of footage are uploaded to YouTube every minute. I am sure this number has gone up considerably since then. With all these eyeballs constantly checking out content on the platform, it is only a matter of time before Google starts to increase the monetization of YouTube.
Lightspeed Commerce Inc. (TSX:LSPD), announced the launch of Lightspeed Restaurant — a “unified hospitality commerce and point-of-sale (POS) platform.” The platform will be introduced in Australia before expanding to other countries.
Canada’s competition watchdog said the sale of Shaw Communications Inc (TSX:SJR.B) unit Freedom mobile division to Quebecor Inc (TSX:QBR.B) was not enough to eliminate antitrust concerns with the proposed C$20 billion merger of Shaw and Rogers Communications Inc. (TSX:RCI.B). This means the merger will drag on longer as Shaw and Rogers negotiate with the Canadian regulators to approve the merger.
Its anticipated Apple (NASD:AAPL) will ask the Federal court to toss the decision to award US$ 502 million to VirnetX Holdings over infringing on their Virtual Private network (VPN) patents. One of the reasons Apple will cite is the patents were invalid during the period between the trial and a retrial.
Electric car maker Tesla (NASD:TSLA), cranked up their deliveries in China, almost tripling its July sales. This sounds amazing but one needs to remember the July numbers were down due to the plant being closed for upgrades. Nonetheless, nearly 77,000 Tesla’s sold in August is an impressive number.
In other Tesla news, Tesla may add mining company to its list of capabilities. The company is considering building a lithium refinery on Texas’s gulf coast. The lithium refinery would secure the supply of one of the key resources required in the development of electric batteries used in electric vehicle. If the refinery goes ahead, Tesla will be the first vehicle manufacturer to also be a mining company.
In related news, General Motors (NYSE:GM) has seen sales in China drop by a third over the last five years as the Chinese clamour for electric cars, especially from Chinese companies. To turn the tide, GM will launch ‘experience centres’ in major cities, where invited guests can view GM’s prospective electric vehicles.
In a sign that supply chains are slowly returning to normal, cargo shipping rates are tumbling. The cost of shipping a 40-foot container on various south east Asian routes is down as much as 60%. On one hand, this should ease some of the inflationary pressures caused by high shipping rates. On the other hand, it explains why ZIM Integrated Shipping (NYSE:ZIM) has seen its share price cut in half.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Revenue of $622,184 for the three months ended June 30, compared to $511,844 for the same period in 2021. An increase of over 21%.
Net loss of $45,078 for the three months ended June 30, compared to net loss of $25,501 in the same period in 2021.
Diluted earnings per ordinary share of $0.22 for the three months ended June 30, compared to $0.13 for the same period in 2021.
Revenue of $1,210,876 for the six months ended June 30, compared to $980,923 for the same period in 2021. An increase of over 23%.
Net loss of $72,451 for the six months ended June 30, compared to net loss of $33,855 in the same period in 2021.
Diluted earnings per ordinary share of $0.36 for the six months ended June 30, compared to $0.17 for the same period in 2021.
Portfolio 2
Portfolio 2 for the week ended September 9, 2022: UP
Guardant Health (NASD:GH) announced they will present data showing how the “use of Guardant Health’s blood tests and real-world evidence dataset to advance cancer therapy trials, predict and monitor patient response to therapy, and identify genomic mechanisms of acquired resistance to cancer therapy.”
Alimentation Couche-Tard (TSX:ATD) changed their stock symbol from ATD.A to ATD.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
No C$ dividends this past week.
US $
Microsoft Corp (NASD:MSFT)
Quarterly Reports
No quarterly reports this past week.
Portfolio 3
Portfolio 3 for the week ended September 9, 2022: UP
Shopify (TSX:SHOP) is shaking up its C level management. Kaz Nejatian takes over immediately as their new Chief Operating Officer, taking over from retiring Toby Shannan. As well, Chief Financial Officer Amy Shapero is stepping down after Shopify’s third quarter 2022 earnings announcement in late October. Her replacement, Jeff Hoffmeister comes over from Morgan Stanley’s Technology Investment Banking group.
In their letter to shareholders, Enghouse Systems (TSX:ENGH) stated they had C$229 million in cash, cash equivalents and short-term inventory with no external debt, cash flows of $29.8 million, and bought back $9 million of shares. Not bad. Now to get their share price moving upward again.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
No C$ dividends this past week.
US $
Microsoft Corp (NASD:MSFT)
Quarterly Reports
Enghouse Systems Ltd.
All currency listed in thousands of Canadian dollars
Despite slumping the week ended August 26, the S&P 500 Index (S&P) had bounced back 15% since its June low and all 11 sectors of the index have been in the black since the start of the third quarter (July 1). Bet you did not know that was the S&P’s best start to a third quarter since 1932? I did not.
A mini summer rally led some to believe the tough times of the first half of 2022 were over. However, analysts and investors were split over whether the market had reached a bottom in June, or if the rally was a bear trap. Going into the start of this past week (August 29), despite the July rally, the S&P remains down about 13% (a market correction), and the Nasdaq is still down more than 20% (a bear market).
Since US Federal Reserve (Fed) Chair Jerome Powell’s speech on August 26, reiterating the Fed’s determination to increase interest rates in their fight against inflation, even in the face of a slowing economy, the S&P has plunged more than 5%. Since then, the markets have turned bearish, and the summer rally is now unravelling as we head into what has historically been the toughest month for the US stock market.
September has been the worst month for the S&P since 1945, averaging a 0.6% loss. One reason is fund managers are back from summer vacations and are looking to polish up their fund’s performance numbers for the end of the third quarter (September 30) and tend to get rid of underperforming companies. This year, as we head into September there does not appear to be much chance the markets will buck that trend. The main reason is the Fed will continue hiking interest rates and keep them above their target inflation rate of 2% longer than anticipated. This in turn will have an adverse effect on consumer demand.
Adding more fuel to the Fed’s fight against inflation, US labour demand in July showed no signs of cooling as job openings rose, and consumer confidence rebounded strongly after falling from May through June. When millions of Americans continue to quit their jobs, this is viewed as a sign of confidence in the labour market. Thanks to a continued demand for workers, salaries have gone up which in turn has led to an ongoing rise in consumer spending, two items that fuel inflation. Unfortunately, the US jobs data released on September 2 was a mixed bag. Job openings continued to rise, although at a lower pace, but wage increases slowed down and unemployment rose indicating more people were returning to the workforce. Prior to the jobs report, analysts believed the Fed was likely to raise the interest rate by 0.75% for a third time. After the jobs report showed signs of a slowing labour market, investors are hoping this could ease the pressure on the Fed to deliver another big rate hike. Unless September data shows the US economy and inflation slowing, I think the Fed will remain aggressive in their next rate increase.
In Canada, the Bank of Canada (BoC) is the Canadian equivalent of the Fed. Like the Fed, its primary mission is to keep inflation in the 1% – 3% range, typically 2%. With inflation in Canada currently over 7%, analysts believe the BoC will make a fourth increase of 0.75% in their fight against rampant inflation. This would leave Canada’s benchmark interest rate at 3.25%, full 3% higher than it was in March 2022. Ouch! Not good for those with loans, mortgages, or companies with significant debt.
Whether you invest in the Canadian or American markets, we are in for higher interest rates and it appears we are in for more tough times. ☹
Enough of about what might happen, lets look at what did happen this past week ……
Weekly Market Review
Monday: The stock markets picked up where they left off on Friday – heading lower. Investors were still digesting comments by the head of the US Federal Reserve (Fed), and the impact of higher interest rates on corporations, especially the high growth, technology companies. All four major North American Indexes – the Toronto Stock Exchange Composite Index (TSX), the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) – ended lower. Higher oil prices helped soften the decline as the Energy sector was the best performer in each country. The Utilities sector, traditionally a defensive sector, was the second-best performing sector in both countries. It was not a good day for growth companies.
Tuesday: The four Indexes kept their respective losing streaks alive for a third straight day. Canada’s TSX fell the most in a sell off that touched every sector. The Canadian Energy and Basic Materials sectors fell the hardest, while Consumer Staples (aka Non-Cyclical Consumer Goods & Services, a defensive sector) was the only sector to gain ground.
In the US, it was a similar story in the US with Energy and Basic Materials sectors dropping the most in a drop that saw all eleven S&P sectors slide backwards.
Wednesday: With another day in the red for all four Indexes, the stock markets ended August on a four-day losing streak. The price of oil futures (U.S. West Texas Intermediate) fell below US$ 90 a barrel on concerns that the global economy will slow further because of the ongoing Covid-19 restrictions in China which will limit China’s productivity and demand for oil.
In Canada, Statistics Canada data showed economic growth lower than anticipated, indicating the Canadian economy may be cooling off faster than projected. However, the Bank of Canada is still expected to raise interest rates by another 0.75%. On the TSX, lower oil prices, combined with lower commodity prices for natural resources, all but guaranteed the TSX would end lower.
In the US, the news was not any better. The three US main Indexes had their largest monthly decline since 2015. Fears of another aggressive interest rate hike by the Fed has continue to plague the markets as once again all eleven S&P sectors ended the day lower.
Thursday: A mixed bag today with 2 Indexes ending higher, two ending lower, and all four Indexes within 1% of yesterday’s close. In Canada, the TSX fell the most of the four Indexes thanks to a drop in oil prices caused by additional Covid-19 lockdown measures in China. The Canadian defensive sectors Consumer Staples, Utilities and Telecommunications Services were the only sectors to gain ground today.
In the US, thanks to a late rally, the DJIA and the S&P ended their respective losing streaks, while the Nasdaq increased its losing streak to five sessions. The Utilities, Healthcare, Consumer Cyclical and Consumer Staples sectors were the only S&P sectors to gain ground. A key US labour market report, the non-farm payroll report, is due Friday. The report is an indicator of trends in economic growth and inflation. If the payroll numbers are increasing too quickly the Fed will likely interpret that as a sign that inflation is not slowing. If that is the case, they will have another reason to raise the benchmark US interest rate.
Friday: Another mixed day with the TSX ending higher and the three US Indexes each dropping over 1%. The big news of the day was the mixed US jobs report. There were more hirings than expected but wage growth was limited, and unemployment was higher than July, indicating some people have re-entered the job hunt. The increase in the number of people returning to the workplace could lead to the further cooling of wage growth, which would in turn help slow inflation. The favourable jobs report eased the pressure on the Fed for another aggressive interest rate hike. However, the odds are still on a 0.75% rate hike.
In Canada, the TSX’s losing streak came to an end thanks to higher energy and commodity prices. Investors in Canadian stocks now await the Bank of Canada’s meeting next week when they will announce the latest hike for Canada’s benchmark interest rate.
In the US, the higher energy and commodity prices helped the S&P Energy and Basic Materials sectors end higher while the other nine sectors ended lower.
For the week, the TSX dropped 0.37%,the S&P 500 lost 3.28%, the Dow fell 2.99% and the Nasdaq ended 4.21% lower.
For the month, the TSX dropped 1.2%,the S&P 500 fell 4.24%, the Dow slid back 4.06% and the Nasdaq lost 4.64%.
Weekly Portfolio Review
The Stock Markets came out of July on fire, but ran into a wall of cold water and closed out August with a four-day losing streak. What looked like the start of a rally turned out to be a bear trap when the head of the Fed, Jerome Powell, stated getting inflation under control was the Fed’s #1 priority. Mr. Powell’s speech has become known as the Jackson Hole Jolt because of the sudden drop in the market immediately following his speech to a gathering of the heads of central banks at Jackson Hole.
As for the Portfolios, they followed the same pattern as the Indexes with early gains only to end August on a sour note. The big surprise was Portfolio 2 ended the month higher. I cannot think of any obvious reason for this superior performance other than it is a more balanced combination of proven, reliable companies. As for Portfolio 1 and Portfolio 3, both lost ground in August but at least they did not slide back as far as the American Indexes.
Monthly Portfolio & Index performance for the period Aug. 1 – Aug. 31, 2022
The lingering effects of Mr. Powell’s comments about the Fed’s war on inflation weighed heavily on the stock markets all week long. As you can see from the chart below, this past week has not been good for the Indexes, with drops of more than 4% for the American Indexes.
While it was a bad week for the Indexes, it was a worse week for Portfolio 2 which dropped almost 8%. I cannot remember a Portfolio or Index moving up or down that much in a week. The big anchor in Portfolio 2 was MongoDB (NASD:MDB). MongoDB’s quarterly report showed increasing losses, which had doubled compared to the year-ago quarter which rattled investors causing the share price to drop by 25%. As for Portfolios 1 and 3, they followed the direction of the Indexes but did not drop as much as the Indexes.
Weekly Portfolio & Index performance for the week ended September 2, 2022.
Companies on the Radar
It appears fears of a 0.75% interest rate hike by the Fed caused the share prices of both Amazon (NASD:AMZN) and Ferrari (NYSE:RACE) to fall into my price range. Amazon will be a good long-term investment because of its various revenue streams and market dominance in a few areas. Ferrari is more an ego thing, so I can say I own Ferrari. 😊Hopefully, their share prices will continue to drop through September and my patience will be rewarded.
Brookfield Select Opportunities (TSX:BSO.UN) remains on the radar because of its 10% quarterly dividend which is good for small pockets of cash in any of the Canadian accounts within the three Portfolios.
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended September 2, 2022: DOWN
According to Rivian’s (NASD:RIVN) CEO, the company has over $15 billion of cash on hand as of June 30. More than enough to keep the company producing electric vehicles through 2025, despite recent headwinds caused by rising battery costs and the new Inflation Reduction Act which ties tax incentives to using the raw materials in batteries from North American sources.
It didn’t take long for Alphabet’s (NASD:GOOGL) Google to come out strongly against Microsoft’s (NASD:MSFT) update licensing agreements (see Portfolio 3 for information) which supposedly make it easier for small cloud providers to compete. Google said, “The promise of the cloud is flexible, elastic computing without contractual lock-ins.” It will be interesting to see how the European Union antitrust committee views these changes as it was their concerns that prompted Microsoft to make the changes.
Tesla (NASD:TSLA) CEO Elon Musk has set a bold goal of selling 20 million electric vehicles in 2030 as part of Tesla’s pledge to push sustainable energy. If Tesla were to achieve their goal, this would make Tesla twice the size of any other vehicle maker. I am not sure how he would do this without a massive infrastructure build out, not to mention cornering the market in raw materials needed for batteries (lithium and nickel, among others) to power the 20 million vehicles. One small detail, experts say the raw material capacity for those 20 million vehicles currently does not exist. 😊
Docebo (TSX: DCBO) announced they won seven Human Capital Management awards including six medals in the Learning and Development category and one gold medal in the Sales Performance category.
Nvidia (NASD:NVDA) said they have been told by US officials stop exporting two of their top semiconductors used in artificial intelligence to China. American officials said this move is to limit the risk the chips will be used for military purposes. Nvidia had expected those chips to generate US$ 400 million in sales this quarter. This ban will put a major crimp in Nvidia’s anticipated revenues.
General Motors (NYSE:GM) will offer all its Buick franchisees a buyout if they want to end their relationship with Buick as Buick moves to an all-electric line up. For those who retain their Buick dealerships, GM will provide monetary assistance to help dealers make the necessary investments to sell and service electric vehicles.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Revenue of $535,153 for the three months ended June 30, compared to $337,690 for the same period in 2021. An increase of almost 58%.
Net loss of $48,313 for the three months ended June 30, compared to net loss of $57,318 in the same period in 2021.
Diluted loss per ordinary share of $0.21 for the three months ended June 30, compared to $0.25 loss per share for the same period in 2021.
Revenue of $1,022,987 for the six months ended June 30, compared to $640,533 for the same period in 2021. An increase of almost 60%.
Net loss of $78,722 for the six months ended June 30, compared to net loss of $140,189 in the same period in 2021.
Diluted loss per ordinary share of $0.35 for the six months ended June 30, compared to a $0.63 loss per share for the same period in 2021.
Added 1,741 net new subscription customers in the quarter for a total of 19,686 subscription customers as of July 31, 2022, representing 51% growth year-over-year.
Named Best Security Company by 2022 SC Awards US and received the Best Emerging Technology Award at SC Awards Europe 2022 for Falcon XDR.
Portfolio 2
Portfolio 2 for the week ended September 2, 2022: DOWN
While Disney (NYSE:DIS) lost the streaming rights to the Indian Premier League (IPL), the most-watched cricket group in India, Disney was able to secure a four-year deal to stream International Cricket Council (ICC) events through the end of 2027. The ICC’s Men’s T20 World Cup, last held in 2021, attracted a record television reach of 167 million.
Guardant Health (NASD:GH) announced an expanded strategic collaboration with Merck. The partnership will focus on leveraging Guardant’s GuardantINFORM platform to help accelerate the development of Merck’s pipeline of potentially transformative cancer medicines.
MongoDB shares dropped over 25% after the company reported a greater second quarter loss, and forecast greater losses for the current third quarter as well as the fiscal 2023 year. A share price drop of 25% in one day is not a good thing, unless you are confident the company will rebound and take this as a buying opportunity. Hmmm, something to think about.
Telus (TSX:T) completed the acquisition of LifeWorks Inc, formerly Morneau Shepell, for $2.3 billion. Telus will roll LifeWorks into its Telus Health unit.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Revenue of $303,660 for the three months ended June 30, compared to $198,747 for the same period in 2021. An increase of almost 52%%.
Net loss of $118,865 for the three months ended June 30, compared to net loss of $77,133 in the same period in 2021.
Diluted loss per ordinary share of $1.74 for the three months ended June 30, compared to a loss of $1.22 for the same period in 2021.
Revenue of $598,107 for the six months ended June 30, compared to $380,395 for the same period in 2021. An increase of over 73%.
Net loss of $196,159 for the six months ended June 30, compared to net loss of $141,125 in the same period in 2021.
Diluted loss per ordinary share of $2.88 for the six months ended June 30, compared to $2.26 for the same period in 2021.
Portfolio 3
Portfolio 3 for the week ended September 2, 2022: DOWN
Microsoft announced effective October 1, 2022, they will update their outsourcing and hosting terms. The changes will “support customers’ ability to move their licenses to a partner’s cloud, leverage shared hardware, and have more flexibility in deployment options for their software licenses.” Microsoft hopes these changes will address EU antitrust concerns that Microsoft has an unfair advantage against smaller European cloud service providers.
In other Microsoft news, Britain’s Competition and Markets Authority (CMA) said Microsoft’s acquisition of Activision Blizzard could harm competition in the gaming industry. Given Microsoft’s Azure cloud platform, leading computer operating system Windows, as well as one of the top gaming consoles in Xbox, the company would be in an enviable position to dominant the gaming industry. The CMA said these strengths in combination with Activision’s industry leading games could damage competition in the emerging cloud gaming services market.
Shopify (TSX:SHOP) announced a restructuring that led to more layoffs while at the same time increased the pay for remaining staff.
Activity
Bought Brookfield Select Opportunities. With its strong management team (Brookfield Corporation (TSX:BAM.A)) and a 10% dividend, this was bought as an income generator. If the shares can stay near the average cost, I will be happy to collect the quarterly dividend. 😊
Sold
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
This weekend is the one-year anniversary of this blog – 52 weekly updates, plus the occasional commentary post. There have been changes along the way as we try to figure out what information to feature and how to present it. One thing learned has been earnings seasons are a real grind. It seems every company has their own way of releasing the information, as well as what information they want to highlight. I have found the best way is to review the financial statements, ignore the spin, and check out anything that does not look right. It only took nine months to figure that out. 😊
With that being said, another earnings season has come and gone, well, almost gone. With over 90 different companies across the three Portfolios, that is a lot of companies’ earnings to review. And I get to do it every three months. 😊
I hope you found a bit of useful information, even if its “that was dumb, I won’t do that.” Otherwise, thank you for following along.
This past week, the heads of central banks, economists, and others from around the world gathered in Jackson Hole, Wyoming to discuss the global economy. Normally an event like this would cause my eyes to glaze over, but this time I was interested to read what the head of the US Federal Reserve (Fed) had to say about inflation and future interest hikes.
Jerome Powell, the head of the Fed, stated interest rates will keep rising and are not likely to come down any time soon as the Fed fights to knock inflation down to their 2% target. What he did not say was how much they will raise the benchmark US interest rate at their meeting in September. The size of the rate hike depends on upcoming economic data. Analysts and investors are now looking for clues whether a 0.75% or a 0.5% hike is coming in September. Until inflation is under control, Mr. Powell said to expect slower economic growth, and “some pain” for families and businesses alike.
In Canada, it is likely there will be another aggressive interest hike. I am guessing in the 0.75% to 1.0% range as the Bank of Canada wrestles with inflation here in the Great White North. As in America, higher interest rates will have a negative impact on growing the Canadian economy. However, as long as oil prices remain high they should provide a bit of a cushion for the Canadian economy, similar to how the Toronto Stock Exchange Composite Index (TSX) has not fallen as far as its American counterparts – S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq Composite Index – thanks to the multitude of energy companies (oil and natural gas) listed on the TSX.
Last week I asked if the markets were on the verge of a bull market or if this is a bear trap about to be sprung on us investors. Well, after the markets’ reaction to Mr. Powell’s comments on Friday, it is looking more like the later.
While bigger heads debate how much to raise interest rates, and analysts try to read between the lines what the increase will be, lets take a look back at the past week ….
Weekly Market Review
Monday: This week got off to a rough start with all four major North American Indexes ending the day lower. Fears of another round of aggressive interest rate hikes by the Bank of Canada and the US Federal Reserve caused the markets and Indexes to decline. On Canada’s Toronto Stock Exchange Composite Index (TSX), higher oil and commodity prices pushed the Canadian Energy and Basic materials sectors higher, preventing the TSX from falling as far as the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq).
In the US, the S&P Energy sector was the only one of eleven sectors to gain ground today as the S&P posted its worst day in more than two months. The interest sensitive Technology and Consumer Cyclical sectors fell the hardest, falling 2.62% and 2.74%, respectively.
Tuesday: In the US, investors were cautious ahead of a Fed meeting later this week when data showed a slowing economy, as well as concerns about future interest rate hikes. As a result, all three US Indexes ended the day lower, but essentially flat. The question on investors and traders’ minds is whether the Fed will raise rates in September by 0.5% or 0.75%
In Canada, the TSX ended the day higher thanks to gains in oil prices and Energy stocks, offsetting losses in the Financials sector. Canadian investors are watching the Bank of Canda to get a hint of the size of September’s interest rate hike.
Wednesday: The markets were once again flat as all four Indexes ended the day within 0.4% of where they started. In Canada, Canadian listed energy companies lifted the TSX higher thanks to higher oil prices. Financials had another down day when Canada’s largest bank, the Royal Bank of Canada (TSX:RY), missed analysts earnings estimates. Higher interest rates have led to higher mortgage rates which in turn has led to fewer mortgages.
In the US, all eleven S&P sectors ended higher thanks to the Energy and Technology sectors. Investors remained largely on the sidelines today, waiting for clues from the head of the Fed’s speech this Friday on how aggressive the Fed will be when they next raise the interest rate in the US, and the chances the Fed can execute a ‘soft landing’ for the economy.
Thursday: All four Indexes were solidly in the black today. In Canada, the Healthcare, and Technology sectors had a good day, combined with a bounce back in the Financials sector, pushed the TSX higher. In America, it was another broad-based rally with all eleven S&P sectors ending higher. Leading the way were the Basic Materials (mining and natural resources) and the Technology sectors
Friday: The head of the Fed indicated they are going to continue raising interest rates to control the highest inflation the US has seen in decades. With news of additional interest rate hikes, the stock market acted as one would expect – all four Indexes tanked. In the US, all three American indexes fell more than 3% in a broad-based retreat where all eleven S&P sectors ended lower.
In Canada, the US Fed’s remarks reverberated through the Toronto Stock Exchange, causing the TSX to end the day in the red. All Canadian sectors lost ground with the Technology, Consumer Cyclicals and Basic Materials suffering the worst losses.
For the week, the TSX dropped 1.2%,the S&P 500 slumped 4.0%, the Dow fell 4.2% and the Nasdaq plunged 4.4%.
Weekly Portfolio Review
With another week in the stock markets ending lower, it appears the recent bear market rally is unravelling, as investors fret over higher interest rates and the resulting economic slowdowns. After a relatively flat week, the comments coming from the head of the US Federal Reserve indicating the Fed will continue its aggressive fight against inflation sent the markets tumbling on Friday. Looking at the chart below, the high growth, tech heavy Nasdaq fell the hardest. Coming in a close second was the DJIA which fell more than 1,000 points on Friday (from 33,364.70 to 32,278.22). The TSX was the best performing Index thanks to over weighting in energy and mining companies.
As of this week, both the Nasdaq and S&P are down double digits as we head into the third quarter of 2022. I do not want to look but I am sure the Portfolios are down a similar amount, if not more. However, I am investing for the long term, so time is on my side. I expect all three Portfolios to recover and increase in value. Once again, the high growth, technology heavy Portfolios 1 and 3 dropped in value the most, reflecting the Indexes. The more balanced Portfolio 2 managed to limit losses the best. When I see graphs like this, I am reminded of the benefits of a more balanced, less high growth-oriented portfolio like Portfolio 2. 😊
Weekly Portfolio & Index performance for the week ended August 26, 2022.
Companies on the Radar
Amazon (NASD:AMZN) and Ferrari (NYSE:RACE) remain on my Radar, however, I’m waiting for a significant drop in share price of both stocks. I am hoping either fears of a 0.75% interest rate hike, or an actual hike by the Fed in September will lead to a 10+% drop. That would put Amazon shares in the US$ 125 range, and Ferrari in the US$ 180 range.
Brookfield Select Opportunities (TSX:BSO.UN) stays on my radar because of its 10% quarterly dividend. I view BSO as a good option for small pockets of cash in any of the Canadian accounts within the three Portfolios.
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended August 26, 2022: DOWN
Tesla (NASD:TSLA) stock split 3 for 1 on August 25. The lower share price should make Tesla shares more attractive to retail (small) investors.
In other Tesla news, the company is facing several race and sex discrimination cases, mostly at their Fremont , California plant. In one lawsuit, Tesla has asked the judge to throw out the charge on the grounds it is politically motivated. One lawsuit maybe, but according to the report there are several lawsuits working their way through the legal system.
CrowdStrike (NASD:CRWD) was named a winner in the Best Security Company category for the 2022 SC Awards US. This is their fourth victory in five years, more than any other cybersecurity vendor. The SC Awards are for cybersecurity companies that demonstrate product strength, customer satisfaction and committed investment in research and development.
To avoid getting caught in covid-19 lockdowns, and political squabbles between the USA and China, Apple (NASD:AAPL) is shifting some its production of the iPhone 14 to India.
Rogers Communications Inc (TSX:RCI.B) and Shaw Communications Inc (TSX:SJR.B) say the sale of Shaw’s Freedom Mobile wireless division to Quebecor Inc (TSX:QBR) should satisfy Canada’s antitrust watchdog’s concerns about Rogers and Shaw’s planned merger.
PayPal (NASD:PYPL) announced a new product called Grant payments. In partnership with National Philanthropic Trust and Vanguard Charitable, donors will be able to send grants to charities through PayPal.
General Motors (NYSE:GM) announced their Mexican production facility for GMC and Chevrolet trucks will halt production due to supply chain challenges.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Pulse Seismic Inc (TSX:PSD)
TMX Group Ltd (TSX:X)
US $
No US$ dividends this past week.
Quarterly Reports
Enwave Corporation
All currency listed in thousands of Canadian dollars
Revenue of $6,704 for the three months ended June 30, compared to $6,507 for the same period in 2021. An increase of almost 3%.
Net income of $656 for the three months ended June 30, compared to net income of $2,374 in the same period in 2021.
Diluted earnings per ordinary share of $0.26 for the three months ended June 30, compared to $0.94 for the same period in 2021.
Revenue of $14,992 for the six months ended June 30, compared to $12,168 for the same period in 2021. An increase of over 23%.
Net earnings of $2,274 for the six months ended June 30, compared to net earnings of $4,285 in the same period in 2021.
Diluted earnings per ordinary share of $.90 for the six months ended June 30, compared to $1.68 for the same period in 2021.
Segmented Revenue from: Data Center was up 61% from previous year; Gaming revenue was down 33% from a year ago; professional Visualization was down 4% from a year ago; and, Automotive was up 45% from a year ago.
Toronto Dominion Bank
All currency listed in millions of Canadian dollars
Revenue of $10,925 for the three months ended June 30, compared to $10,712 for the same period in 2021. An increase of almost 2%.
Net income of $3,214 for the three months ended June 30, compared to net income of $3,545 in the same period in 2021.
Diluted earnings per ordinary share of $1.75 for the three months ended June 30, compared to $1.92 for the same period in 2021.
Revenue of $33,469 for the nine months ended June 30, compared to $31,752 for the same period in 2021. An increase of over 5%.
Net earnings of $10,758 for the nine months ended June 30, compared to net earnings of $3,545 in the same period in 2021.
Diluted earnings per ordinary share of $5.85 for the nine months ended June 30, compared to $5.68 for the same period in 2021.
Portfolio 2
Portfolio 2 for the week ended August 26, 2022: DOWN
Brookfield Infrastructure (TSX:BIP.UN), signed an agreement with Intel Corporation (NASD:INTC) to jointly fund Intel’s new Arizona semiconductor fabrication facility. As part of the agreement, Brookfield Infrastructure will invest nearly US$15 billion for a 49% interest, with Intel investing an additional US$15 billion and retaining majority control.
TC Energy (TSX:TRP) had work stopped at one of their sites in Alberta by a federal regulator after a non fatal injury occurred. The affected pipeline provides natural gas from northern Alberta and northern BC to TC Energy’s main pipeline system that transports natural gas to locations in Canada and the US.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Dream Industrial Real Estate Investment Trust (TSX:DIR.UN) DRIP
US $
No US$ dividends this past week.
Quarterly Reports
The Bank of Nova Scotia
All currency listed in millions of Canadian dollars
Revenue of $7,799 for the three months ended June 30, compared to $7,757 for the same period in 2021. An increase of almost 0.5%.
Net income of $2,594 for the three months ended June 30, compared to net income of $2,542 in the same period in 2021.
Diluted earnings per ordinary share of $2.09 for the three months ended June 30, compared to $1.99 for the same period in 2021.
Revenue of $23,790 for the nine months ended June 30, compared to $23,565 for the same period in 2021. An increase of over 0.9%.
Net earnings of $8,081 for the nine months ended June 30, compared to net earnings of $7,396 in the same period in 2021.
Diluted earnings per ordinary share of $6.39 for the nine months ended June 30, compared to $5.73 for the same period in 2021.
Portfolio 3
Portfolio 3 for the week ended August 26, 2022: DOWN
Fairly quiet week for the companies in Portfolio 3. Most of the stocks’ share prices were essentially flat (within a dollar or two), including Shopify (TSX:SHOP), which accounts for the bulk of the value of the portfolio. The biggest contributor to Portfolio 3’s loss for the week was mega cap technology company Microsoft (NASD:MSFT) which fell 5%.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
No dividends this past week.
Quarterly Reports
Royal Bank of Canada
All currency listed in millions of Canadian dollars
Canada’s Consumer Price Index (CPI) inflation for July was 7.6%, down from June’s 8.1%, but still well higher than the Bank of Canada’s target of 2%. As in the US last week, the fall in the price of gasoline was the main driver in the lower CPI. However, when volatile components, such as gasoline, are removed, the core CPI continued to climb. Core CPI is the CPI, excluding food and energy prices.
The Bank of Canada stated inflation was still too high so expect another interest rate hike in September as the BoC attempts to cool down the economy. The only question is how aggressively the BoC will raise the benchmark interest rate.
A quick reminder, when interest rates rise, it increases the cost of borrowing, so people tend to borrow and spend less and as a result they save more. The BoC wants to slow down spending to allow the supply side to catch up with the demand side and cool off inflation.
In case you think higher interest rates are unique to Canada and the USA:
in July, the European Central Bank hiked its interest rate by 0.5%, its first interest rate increase since 2011.
In the United Kingdom, the Bank of England recently increased its interest rate by 0.5% to 1.75%, its highest level since late 2008, in its battle against inflation which had jumped to 10.1% in July, its highest since February 1982.
In Norway, the Norges Bank recently raised interest rates another 0.5% to 1.75% and indicated more hikes were on the way.
Sweden’s Riksbank raised their interest rate by 0.5%, its biggest hike in more than 20 years, bringing Sweden’s interest rates to 0.75%.
The Reserve Bank of New Zealand implemented a fourth straight hike of 0.5% to bring their interest rate to 3%, the highest since September 2015.
The Reserve Bank of Australia raised rates by 0.5%, for a fourth straight month.
As you can see, inflation is everywhere, and will be with us for a while. By raising interest rates in the short term, the central banks hope to bring inflation down for the long term.
Have you noticed, since the start of July, the markets went from a bear market to the verge of a bull market. Or, is this one hell of a bear trap about to be sprung on us investors.
While we contemplate that thought, lets look back at the week that just ended……
Weekly Market Review
Monday: Despite a slow start to the day, all four major North American Indexes rebounded to end in positive territory. On Canada’s Toronto Stock Exchange Composite Index (TSX), only the Canadian Energy sector (lower oil prices) and the Basic Materials sector (lower gold and copper prices) failed to end the day higher.
In the US, investor confidence continues to push the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) higher. It was another broad-based rally on the S&P as the index reversed early morning losses, with only the energy and materials sectors ending in the red. Mega market cap technology companies led the Nasdaq higher, with Tesla (NASD:TSLA), Apple (NASD:AAPL), Microsoft (NASD:MSFT) and Nvidia (NASD:NVDA) leading the way.
Tuesday: Mostly a positive day for the Indexes with the Nasdaq being the only Index not to end in the black. The TSX extended its winning streak to 5 straight days and ended at its highest point in two months. Even more impressive, the TSX gained ground without the assistance of the Energy sector that had been holding the TSX up for most of 2022. Consumer Staples (companies that sell goods and services that are needed daily) and Consumer Cyclicals (companies that sell non-essential goods and services) were the leading sectors today.
In the US, a strong earnings report from Home Depot (NYSE:HD), among other Consumer Cyclical sector companies, helped push the S&P and DJIA higher. For those invested in technology companies, the Nasdaq slipped slightly into the red.
Wednesday: I do not like the trend shaping up this week. Monday had all four Indexes ending higher, not much, but higher, Tuesday saw the Nasdaq fall back, and today all four Indexes ended lower. I hope that trend is reversed tomorrow. In Canada, the TSX’s five day winning streak ended as the Technology and Basic Materials (natural resources) sectors dragged the Index down. The only sectors to post a gain for the day was the Energy sector (higher oil prices) and two defensive sectors: Consumer Staples and Utilities.
In the US, the story is not much better with ten of the eleven S&P sectors ending lower. Only the Energy sector made it into the black. The main source of the negative mood was the release of the US Federal Reserve’s minutes from their meeting in July where they indicated they are still committed to raising the US interest rate to get inflation down to their 2% target. The one positive from the minutes was they may not be as aggressive when they raise interest rates in September.
Thursday: I am glad to see the downward slope that had been developing this week ended today when all 4 Indexes ended the day higher. Canada’s TSX hit its highest closing since early June thanks to a rebound in oil and commodity prices that propelled the Canadian Energy and the Basic Materials sectors higher.
In the US, investors continued to weigh the chances of the Fed raising interest rates 0.5% or a third straight rate hike of 0.75%. Meanwhile, in actual stock trading, the S&P Technology sector had a good day to go along with another strong day from the S&P Energy sector to lift all three American Indexes into the black.
Friday: Today was much like a submarine – all four indexes took a dive and then stayed down for the rest of the day. Sigh! In both Canada and the USA, concerns about the size of future interest rate hikes weighed down the Indexes. In Canada, the defensive sectors – Telecommunication Services, Utilities and Consumer Staples – were the only sectors to advance. The Canadian Technology sector had a rough day falling 3.56%.
In America, it was a general decline as not one of the eleven S&P sectors advanced. Fears of higher interest rates hit the Technology sector hard, with the mega cap technology companies Apple and Microsoft pulling the Nasdaq and S&P lower.
For the week, the TSX dropped 0.3%, the S&P 500 fell 1.2%, the Dow slipped 0.2% and the Nasdaq lost 2.6%.
Weekly Portfolio Review
After a good run since the start of the second half of 2022, this is the first week where all four Indexes declined. The DJIA was the best performer thanks to its small number (30) of large, mature companies. The TSX with its energy and natural resource companies was next, followed by technology heavy S&P and Nasdaq. Technology and other high growth companies that can be found on Nasdaq, and to a lesser extent the S&P, are sensitive to interest rates. When investors are concerned about interest rate hikes, the growth companies get beaten down because higher interest rates mean more money is required to service their debt (which most have in abundance).
When I saw that the Nasdaq was the worst performing index, I had a hunch it would not be a good week for the Portfolios. When I saw all four indexes declined, I knew it was not a good week for the Portfolios. And I was right. ☹
All three Portfolios lost value this past week. In fact, looking at the chart, if it were not for the Nasdaq, the Portfolios would have posted the three worst performances. Portfolio 3 had a particularly bad week with a decline almost double the Nasdaq (shares of Shopify (TSX:SHOP) had a bad week). Looking at the glass as being half full, all three Portfolios are ahead of where they were at the start of the second half of 2022. 😊 Let us hope next week the Indexes and Portfolios gets back on the winning track.
Weekly Portfolio & Index performance for the week ended August 19, 2022.
Companies on the Radar
Amazon (NASD:AMZN) and Ferrari (NYSE:RACE) remain on my Radar. I am hoping fears of a 0.75% interest rate hike by the Fed in September will lead to a 10+% drop. I hope I do not regret waiting.
Brookfield Select Opportunities (TSX:BSO.UN) is part of all three portfolios because of its 10+% dividend. Its back on my radar due to its drop to under C$ 4.50 in late July. Unfortunately, I did not notice the drop until recently. Fortunately, it appears to be heading back up to the $6.00 range. Since the fund/stock is managed by the Brookfield Corporation (TSX:BAM.A), formerly Brookfield Asset Management, I have confidence the fund is well managed and will continue to be able to pay out these juicy quarterly dividends. If any account has a few hundred dollars, I am looking to pick up shares because I would rather get a 10% dividend than nothing.
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended August 19, 2022: DOWN
Alphabet’s (NASD:GOOGL) Google is experimenting with adding artificial intelligence to robots in Google offices. The robots are currently limited to internal use only, and they simply retrieve chips and pop from breakrooms for employees. It will be a few years before these robots are seen outside of Google offices due to concerns about the devices being used for surveillance, as well as fear of using offensive language when interacting with employees.
General Motors (NYSE:GM) is reinstating their quarterly dividends. The first dividend will be for US$ 0.09 per share, payable on September 15, 2022. Not a lot, but at least its something. GM suspended their dividends and share buyback at the outset of the Covid-19 outbreak in April 2020 to conserve cash. With the rollout of their electric vehicles and US based battery manufacturing capabilities, GM is confident they will generate sufficient capital to return money to us shareholders.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Automotive Properties Real Estate Investment Trust (TSX:APR.UN)
Revenue of $2,200 for the three months ended June 30, compared to $0 for the same period in 2021.
Net loss of $19,614 for the three months ended June 30, compared to net loss of $13,577 in the same period in 2021.
Net loss per share of $0.38 for the six months ended June 30, compared to a net loss per share of $0.28 for the same period in 2021.
Revenue of $4,008 for the six months ended June 30, compared to $0 for the same period in 2021.
Net loss of $41,280 for the six months ended June 30, compared to net loss of $26,294 in the same period in 2021.
Net loss per share of $0.79 for the six months ended June 30, compared to a net loss per share of $0.56 for the same period in 2021.
Added to the Russell 2000 (the smallest 2,000 companies in the Russell 3000) and Russell 3000 Indexes (measures the performance of the 3,000 largest public companies incorporated in the US, measured by total market capitalization), as part of the 2022 Russell indexes annual reconstitution.
Revenue of $43,792 for the three months ended June 30, compared to $41,118 for the same period in 2021. An increase of 6.5%.
Net earnings of $5,173 for the three months ended June 30, compared to net earnings of $4,807 in the same period in 2021.
Basic earnings per share of $5.06 for the six months ended June 30, compared to a net earnings per share of $4.54 for the same period in 2021. An increase of 11.5%.
Revenue of $82,700 for the six months ended June 30, compared to $78,618 for the same period in 2021. An increase of 5.2%.
Net earnings of $9,404 for the six months ended June 30, compared to net earnings of $8,952 in the same period in 2021.
Basic earnings per share of $9.17 for the six months ended June 30, compared to a net earnings per share of $8.41 for the same period in 2021.
Added to the Russell 2000 (the smallest 2,000 companies in the Russell 3000) and Russell 3000 Indexes (measures the performance of the 3,000 largest public companies incorporated in the US, measured by total market capitalization), as part of the 2022 Russell indexes annual reconstitution.
Revenue of $3,428.8 for the three months ended June 30, compared to $2,382.0 for the same period in 2021. An increase of almost 44%%.
Net income of $1,335.8 for the three months ended June 30, compared to net income of $888.2 in the same period in 2021.
Diluted earnings per ordinary share of $11.11 for the three months ended June 30, compared to $7.38 for the same period in 2021.
Revenue of $7,145.2 for the six months ended June 30, compared to $4,126.3 for the same period in 2021. An increase of over 73%.
Net earnings of $3,046.8 for the six months ended June 30, compared to net earnings of $1,477.8 in the same period in 2021.
Diluted earnings per ordinary share of $25.26 for the six months ended June 30, compared to $12.56 for the same period in 2021.
Declared dividend of approximately $571 million, or $4.75 per share, representing approximately 30% of second quarter net income and a 10% onetime catch-up from the Q1 2022 net income
Portfolio 2
Portfolio 2 for the week ended August 19, 2022: DOWN
Guardant Health (NASD:GH) announced their Guardant Reveal detection test for residual and recurrent colorectal cancer is now available for patients with breast and lung cancers. According to Guardant, “The liquid biopsy test helps manage early-stage cancer patients by detecting circulating tumor DNA to identify patients with minimal residual disease who are at a higher risk of recurrence and may benefit from additional therapy.”
Hedge fund company Third Point is encouraging the Disney Corporation (NYSE:DIS) to offload ESPN while buying the remaining 1/3 of Hulu Disney doesn’t own and merge Hulu into the Disney+ subscription.
Mitek Systems (NASD:MITK) received a notice from Nasdaq advising them that the company was not in compliance with Nasdaq’s continued listing requirements. Mitek failed to file its Quarterly Report for the quarter ended June 30, 2022 (the “Form 10-Q”) in a timely manner. Mitek has 60 days from receipt of the notice to submit a plan to regain compliance with Nasdaq regulations.
Activity
Bought: Canadian Natural Resources (TSX:CNQ). Global demand for oil and natural gas will continue for many more years. The company is well run, extremely profitable with consistent cash flow. Like all oil and gas companies, it is benefiting from high oil prices. As long as there is demand for oil and the price remains high, the company will continue to do well. Thanks to the money they are making they have been able to reduce their long-term debt by nearly 30%. As well as paying down debt, the company has been raising their dividend and currently pays a 4.3% dividend. In addition, they are paying out a special, one-time dividend of $1.50 per share because of all the cash they are generating. If they keep producing cash at this rate, there could be more special dividends. 😊
I ran the company through my Radar Check, and it generated a 12 out of a possible 13 points. One of the highest scores ever. Lots of upside and a decent dividend.
Bought: Disney Corporation. While reviewing Disney’s latest quarterly earnings I noticed that they have taken over the top spot for the number of streaming subscriptions, a position long held by Netflix (NASD:NFLX). Mind you, they still trail Netflix when it comes to revenue from streaming. In addition to a solid streaming increase, Disney did very well in their Parks division which grew revenue by 70%. On the technical side, according to Morningstar’s analysis, Disney shares are currently significantly under valued, and TD Direct Investing shows it as a Strong Buy with 16+% upside.
I like that Disney produces top rate movies and TV shows (well, mostly top rate 😊) and is able to supply content from its vast library of shows for its streaming services rather than having to purchase content from other sources, it is a leading streaming service with lots of room to grow revenue, its parks are returning to pre covid-19 levels and they are building new attractions (such as, Star Wars: Galactic Starcruiser) to attract new customers and keep previous visitors coming back. With Disney’s numerous revenue streams (streaming, parks, movies, etc.) its hard not to like Disney. Plus, who does not like Mickey Mouse? 😊
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Summit Industrial Income REIT (TSX:SMU.UN)
US $
No US$ dividends this past week.
Quarterly Reports
No quarterly reports this past week.
Portfolio 3
Portfolio 3 for the week ended August 19, 2022: DOWN
Shopify launched a new strategic initiative to connect digital content creators with merchants, brands, and companies on Shopify’s platform in a bid to find new sources of growth amidst a slowdown in e-commerce. Shopify believes online creators are the next wave of entrepreneurs and they are trusted by audiences who turn to them for insights about brands and their products. Shopify wants to become the “creator’s commerce platform of choice.”
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
After falling 20% from its April highs to its June lows, thanks to a July rally, the Toronto Stock Exchange Composite Index (TSX), is now up 10% from it June lows. Before getting too excited, the TSX is still down almost 6% in 2022.
The good news continues in the US where the S&P 500 Index is now only 12% below its all-time high in January, despite being largely in a bear market (down 20% or more since all time high) for most of 2022. The Nasdaq Composite Index (Nasdaq) is now up more than 20% since bottoming in June. Dare I say it? OK, I will say it. When an Index or market rises by 20% it can be considered a bull market. However, the Nasdaq is still down 18% in 2022 and still needs to pass its prior peak in November to confirm a new bull market.
Its not unusual for a retail investor (also known as an individual investor, like me) fueled rally to occur in the summer because the professional and institutional investors have gone away for summer vacations. As well, during this year’s bear market, bounces (especially in the US markets) have been brief, before reversing course and resuming their downward trajectory. These mini rallies are also known as bear traps. This leads me to wonder if this rally will last. Once September comes around and the pros return from vacation, then we will find out if this rally has legs or if it is a bear trap.
In other news, it was a big week for investors as the American Consumer Price Index (CPI) report for July was released. While inflation remained high at 8.5%, it was below June’s 9.1%, and it came in at less than expected (8.8%). A major reason was a significant drop in the price of gasoline. As well, recent data indicated the US Producer Price Index (PPI) fell 0.5% in July. The PPI calculates the average change over time in the selling prices received by domestic producers of goods and services. The drop in PPI, combined with inflation cooling off as indicated by the CPI report, raised hopes that the US Federal Reserve’s (Fed) next interest rate hike would be 0.5% rather than another 0.75% increase that was feared after Wednesday’s CPI report.
With signs of decelerating inflation in the US, investors are hoping that may have opened the door for the Fed to slow their roll with coming interest rate hikes. Keep in mind that one report of slowing inflation is not enough for the US Federal Reserve to declare victory, and it is a long way from the Fed’s target of 2 – 3% inflation rate. Canada will release its inflation numbers next week.
With a double shot of good news out of the way, let’s see what happened this past week in the North American stock markets….
Weekly Market Review
Monday: The week started with mixed, yet essentially flat, results for the four major North American Indexes. In Canada, the Toronto Stock Exchange Composite Index (TSX) inched above the bar thanks to the rising price of oil, causing many companies in the Canadian Energy sector to end higher.
In the US, all three Indexes – the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) – started out higher before retreating as investors digested the possibility of additional aggressive rate hikes. The DJIA was able to nudge into positive territory while the S&P and the Nasdaq ended the day just under the bar thanks to a revenue warning from my favourite chipmaker – Nvidia (NASD:NVDA), indicative of a slowing US economy.
Tuesday: Fears of another interest rate hike by the Fed in September sideswiped the Technology sector stocks in both Canada and the US, sending all four Indexes lower. In Canada, the Energy and Basic Materials sectors helped limit the damage caused by the decline in the Technology and the Healthcare sectors.
In the US, fears of a third consecutive 0.75% interest rate hike by the Fed increased after last week’s strong jobs report. If Wednesday’s inflation report continues its upward trend it is likely the Fed will aggressively raise the interest rate. As a result of these fears, interest rate sensitive sectors such as Technology and Consumer Cyclicals had a rough day, dragging down all three American Indexes into the red. Not helping was weaker than expected reports from semiconductor companies.
Wednesday: A good day in the stock markets as the Technology and Consumer Cyclical sectors led the way in what were broad-based rallies in both Canada and the USA after the release of lower than expected inflation numbers in the US (8.5% rather than 8.8%). On Canada’s TSX, only the Utilities sector (a defensive sector) lost ground. In the US, news of slowing inflation led to the largest single day gain in two weeks for the Nasdaq and S&P, the largest single day in three weeks for the DJIA, and the entire US market was up 1%. Quite the little rally!
Thursday: The technology heavy Nasdaq and S&P returned a bit of Wednesday’s gains, while the more diversified DJIA, along with the energy & mining oriented TSX inched into the black. In Canada, the TSX was lifted to its highest close in two months thanks to higher oil prices driving up the share price of TSX listed energy companies.
In the US, yesterday’s euphoria over the lower than anticipated inflation rate ran into realty today as it dawned on investors that inflation is still high, and the Fed will still raise the baseline interest rate in September. The interest rate sensitive Technology and Consumer Cyclical sectors weighed down the S&P and Nasdaq despite a valiant attempt by the Energy sector lift them into positive territory with the DJIA.
Friday: The week ended on a good note with all four major North American Indexes gaining ground. In Canada, all Canadian sectors advanced with Basic Materials (natural resources) and Financials (bank stocks) leading the way.
In the US, with today’s advances, the S&P and the Nasdaq posted their fourth consecutive week of gains! The lower-than-expected CPI has given investors increased confidence that the worst of inflation is over, and a bull market may be around the corner. All eleven US S&P sectors gained ground, led by old favourites Consumer Cyclical and Technology sectors. It was a bit of surprise to see the US Energy sector at the bottom of the eleven sectors after being the leading sector for most of 2022.
For the week, the TSX climbed 2.9%; for the fourth straight week the S&P 500 gained, this time 3.25%; the Dow rose 2.92%; and the Nasdaq jumped 3.08%.
Weekly Portfolio Review
Another good week for all four Indexes with each gaining 3+/- percent. As mentioned in the opening Spare Change section, since the start of the second half of 2022, the markets and Indexes have been making strong moves upward. The interest rate hikes by both countries’ central banks (Bank of Canada and the US Federal Reserve) appear to be baked into existing stock prices and investors appear to be cautiously optimistic the economy will continue to grow. Whatever it is, I am glad to see the Indexes heading north.
As glad as I am to see the Indexes heading upward, I am very happy to see the Portfolios growing. This week Portfolio 2 led the way, beating all four Indexes. This continues to surprise me as it is the most conservative of the three portfolios. It is anchored by two big growth companies but otherwise it is slow and steady, relatively safe and reliable, dividend paying companies (at least I call them safe and reliable). But slow growth is still growth, and that keeps moving Portfolio 2 forward while at the same time the dividends limit the downside in tough times like the start of 2022. There might be something to this strategy. 😊
As for Portfolio 1 and Portfolio 3, they did well, growing 2+%. Not as good as last weeks 4.9% and 5.7% but growth is still growth, and the portfolios are better off than they were at the start of the week. 😊
Weekly Portfolio & Index performance for the week ended August 12, 2022.
Companies on the Radar
Amazon (NASD:AMZN) and Ferrari (NYSE:RACE) remain on my Radar but they are moving away rather than closer. Joining them on mt radar this week is Canadian Natural Resources (TSX:CNQ).
Canadian Natural Resources is a Canadian explorer, developer and seller of natural gas, light crude oil, heavy crude oil, bitumen, and synthetic crude oil (SCO). Russia was one of the top natural gas producing and exporting countries in the world. However, the Russian invasion of Ukraine has led to increased global demand for natural gas from other natural gas producing countries, such as Canada, causing prices to remain high. Demand for natural gas and other CNQ products is expected to continue for several years, as the world scrambles to secure long-term liquified natural gas (LNG) supplies. Without the need to invest money in drilling more wells, CNQ is becoming cash rich. They can return cash to shareholders via dividends (currently at 4+%), or indirectly via share buybacks which increases shareholders’ piece of the pie. I like both! 😊
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended August 12, 2022: UP
Nvidia warned second-quarter revenue would end up 19% lower than the past quarter. While Data Center revenue reached a record high, it still fell short of analysts’ expectations thanks to supply chain issues. However, the reason for the revenue drop was a result of a 44% drop in revenue from their gaming business.
Alphabet (NASD:GOOGL) offshoot Google Fiber announced plans to roll out high speed internet service across 5 states – Arizona, Colorado, Idaho, Nebraska, and Nevada.
In other Alphabet news, the Google was fined A$ 43 million for misleading Australians about how Google collected users’ location data.
In a sign of growing use of Marqeta’s (NASD:MQ) products among big name companies, Marqeta announced a partnership with Western Union in Europe; and, was named as the payment processor of choice by Mastercard Prepaid Management Services for Opal Plus, a new transit program in Australia. Two big deals with two large financial companies, in two distant parts of the world. I am taking this as a positive sign. 😊
Tesla (NASD:TSLA) was back in the news, this time two American lawmakers are asking the National Highway Traffic Safety Administration for a briefing on their investigation into crashes involving Tesla vehicles that were using Tesla’s Autopilot and related driver assistance systems at the time of the crashes.
Rogers Communications Inc (TSX:RCI.B) and Shaw Communications Inc (TSX:SJR.B) finalised an agreement to sell Freedom Mobile to Videotron, a unit of Quebecor Inc. This was the biggest issue standing in the way of the Rogers/Shaw merger receiving the blessing of Canada’s antitrust agency. It will be interesting to see how quickly the merger moves forward from here, both as a Shaw shareholder, Shaw internet subscriber and a Shaw mobile customer.
The conglomerate Berkshire Hathaway (NYSE:BRK.B) lost US$ 43.8 billion last quarter, yes, billion. The fall in overall stock prices during the second quarter hammered the bottom line of Berkshire. However, Warren Buffet, president of Berkshire Hathaway and considered the best investors of all time, says to ignore fluctuations like this and remain focused on the long term. Despite the loss, the share price of Berkshire Hathaway hardly moved. You would think a loss of $43 billion would send some investors fleeing but Berkshire shareholders remain confident in Mr. Buffet’s ability to grow their wealth (as I do).
Activity
Sold: Auxley Cannabis Group (TSX:XLY): This was part of a basket of cannabis stocks. The highpoint was back when cannabis was legalized in Canada in October 2018. I should have sold it then but was in my buy and hold forever phase (I am no longer in a buy and hold forever in small niche companies). Since cannabis companies are no longer the ‘hot stocks,’ and the company has not shown any sign of growth, I finally decided to unload this stock. Lost about 90% on this one. Fortunately, wisely did not invest much in this company.
Sold: Greenlane Holdings (NASD:GNLN): Originally bought as Kushco Holdings, part of the same cannabis basket of stocks as Auxley. Unfortunately, same story – highpoint was October 2018, management never grew company. Hoped with numerous US states legalizing cannabis it would grow but it did not. Last straw was the recent 1 for 20 reverse split so the company could maintain its Nasdaq Exchange listing. Held onto this company way too long, losing 90+%. However, like Auxley, did not invest a lot in this company because it was high risk (and rightly so!).
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
No C$ dividends this past week.
US $
Apple Inc.
Quarterly Reports
Crew Energy Inc.
All currency listed in thousands of Canadian dollars
Revenue was $297,043 for the three months ended June 30, an increase of 9% from the second quarter of 2021.
Loss from operations was $204,158 for the three months ended June 30, or 67% of revenue, compared to loss from operations of $149, or 55% of revenue, in the second quarter of 2021.
Revenue was $617,169 for the six months ended June 30, compared to $508,334 in the second quarter of 2021.
Loss from operations was $381,713 for the three months ended June 30, compared to a net loss from operations of $255,802 in the second quarter of 2021.
Revenue of $140.3 for the three months ended June 30, compared to $61.8 for the same period in 2021. An increase of 127% driven by acquisitions during the past year and organic growth.
Net loss of $792 for the three months ended June 30, compared to net loss of $11,520 in the same period in 2021.
Revenue of $266,834 for the six months ended June 30, compared to $87,353 for the same period in 2021. An increase of 305%.
Net loss of $3,116 for the six months ended June 30, compared to net income of $19,040 in the same period in 2021.
WELL Health delivered 833,819 total omni-channel patient visits in Q2-2022, representing a year over year increase of 49%.
WELL Health is increasing its guidance for 2022 annual revenue to exceed $550 million from the previous guidance for annual revenue to exceed $525 million.
In May 2022, began trading on the US OTCQX Market, a key step towards strengthening and broadening the Company’s American investor base.
Revenue of $9,825,164 for the three months ended June 30, compared to $7,952,832 for the same period in 2021. An increase of 23%.
Net loss of $11,496,339 for the three months ended June 30, compared to net income of $8,637,563 in the same period in 2021. Includes the unrealized changes in market prices of investments in public equity securities in Boston Omaha’s reported earnings, primarily investment losses of $16,933,563 in the second quarter of 2022, which are mainly related to unrealized losses from public securities held by Boston Omaha and our United Casualty and Surety Insurance Company subsidiary.
Revenue of $18,963,313 for the six months ended June 30, compared to $15,106,517 for the same period in 2021.
Net income of $4,806,254 for the six months ended June 30, compared to net income of $93,075,190 in the same period in 2021.
Portfolio 2
Portfolio 2 for the week ended August 12, 2022: UP
A deposit was made on Friday. This amount was subtracted from the end of the week total and has been added to the starting amount of next to avoid skewing growth rate.
Guardant Health (NASD:GH) announced the US Food and Drug Administration approved its Guardant360 CDx liquid biopsy test as a companion diagnostic for Daiichi Sankyo and AstraZeneca’s (NASD:AZN) Enhertu medication for treatment of certain patients with unresectable or metastatic HER2-mutant non-small cell lung cancer.
The mouse roared! Thanks to Disney’s (NYSE:DIS) new guest experience package Genie+, Disney’s theme parks saw overall attendance increase dramatically in the latest quarter, increasing revenues by 70%. Genei+ is a premium ticket add-on allowing visitors to skip lines and reserve time slots for specific attractions. I remember using a similar package the last time I was at Disney World, and it was fantastic to go to the head of hour+ long lineups.
Along with increase in revenue from its theme parks, Disney added more than 14 million subscribers to its Disney+ streaming service this past quarter. Combing all of Disney’s streaming services (including ESPN and Hulu), Disney has unseated Netflix (NASD:NFLX) as the #1 streaming service. People cannot get enough of Disney, either in person or on screen. 😊
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Revenues increased 76% to $5.5 million, as compared to $3.1 million for the second quarter of 2021.
Net loss of $3,633,888 for the three months ended June 30, compared to net loss of $1,519,315 in the same period in 2021.
Revenue of $6,553,901 for the six months ended June 30, compared to $2,842,205 in the same period in 2021.
Net loss of $7,060,148 for the six months ended June 30, compared to net loss of $5,799,153 in the same period in 2021.
Portfolio 3
Portfolio 3 for the week ended August 12, 2022: UP
One of Shopify’s (TSX:SHOP) main growth drivers, merchants using the Shopify platform, is starting to feel the bite of rising costs and lower consumer spending. Shopify helps companies’ setup their online stores and payment systems in return for monthly fees. Through the first half of 2022, Shopify added 71,000 net merchants, well below the 314,000 merchants added in 2021, putting the company on pace for their lowest merchant additions since 2018.
Enghouse Systems Ltd. (TSX:ENGH) is expanding its telemedicine service Vidyohealth’s capabilities to provide a better experience for patients, doctors, and providers. The service integrates health records, scheduling, and video conferencing, among other capabilities.
Brookfield Asset Management (TSX:BAM.A) will essentially be broken into a parent company and a separate company. The parent company will be Brookfield Corporation, and they will own 75% of the spin off company. The spin off company will be the asset management component of the current Brookfield Asset Management. Making it more confusing, the spinoff will be called Brookfield Asset Management.
While going over their latest interim financial statements and press release, I noticed they have been calling the company Brookfield rather than Brookfield Asset Management.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Revenue of $14,824 for the three months ended June 30, compared to $7,582 for the same period in 2021. An increase of 95%.
Net income of $6,631 for the three months ended June 30, compared to net income of $1,834 in the same period in 2021.
Revenue of $29,759 for the six months ended June 30, compared to $13,884 for the same period in 2021. An increase of 201%.
Net loss of $17,746 for the six months ended June 30, compared to net income of $2,837 in the same period in 2021.
Repaid an additional $2.5 million of their credit facility, bringing the balance outstanding to $2.5 million. As of June 30, 2022, had a net working capital surplus of $11.6 million, including $13.7 million in cash and cash equivalents.
Revenue was $297,043 for the three months ended June 30, an increase of 9% from the second quarter of 2021.
Loss from operations was $204,158 for the three months ended June 30, or 67% of revenue, compared to loss from operations of $149, or 55% of revenue, in the second quarter of 2021.
Revenue was $617,169 for the six months ended June 30, compared to $508,334 in the second quarter of 2021.
Loss from operations was $381,713 for the three months ended June 30, compared to a net loss from operations of $255,802 in the second quarter of 2021.
Sales of $167.9 million, an increase of 39% from the $120.5 million reported in the second quarter 2021.
Net income of $1.7 million or $0.01 per share, compared to $16.2 million or $0.09 net income per share reported in the second quarter 2021.
Free cash flow from ongoing operations of $21.9 million compared to $19.2 million reported in the second quarter 2021.
Gold and silver production of 62,171 ounces and 1,652,895 ounces, respectively. An increase of 100% and a decrease of 13% respectively compared to the second quarter of 2021.
Another busy week of earnings reports with 21 companies reporting for the period April 1 – June 30, 2022. These three months are commonly referred to as the second quarter but depending on when a company’s fiscal year starts, this can be the first, third or fourth quarter. For example, Skyworks Solutions reported their third quarter earnings this week. Something to keep in mind when reviewing a company’s quarterly reports – quarterly earnings reports do not necessarily align with calendar quarters.
The Bank of England raised interest rates by 0.5%, the largest in 27 years, to 1.75% in its attempt to stamp out inflation which is now over 12% in the United Kingdom. The biggest driver of the soaring inflation is the Russian invasion of Ukraine which has sent energy prices in the United Kingdom soaring.
On Friday, a stronger than expected July jobs report coming out of the US with 528,000 jobs added and the unemployment rate falling to a 50 year low of 3.5%. The report caused investors to think the Fed will stay the course for their aggressive interest rate hikes into September. In Canada, the Canadian jobs report showed the number of jobs falling, while at the same time Canada’s unemployment rate remained at its record low 4.9%. Seems odd to lose jobs and have the unemployment rate remain unchanged. In any event, the bank of Canada is likely to continue their aggressive approach to battling inflation with at least a 0.75% interest rate hike at their next meeting.
Weekly Market Review
Monday: Not the greatest start to August as the four major North American Indexes ended the day essentially flat. In the case of Canada’s Toronto Stock Exchange Composite Index (TSX), the Index gained ground. It was a holiday across most of Canada so while the TSX was open for business, most Canadian investors took the day off.
It was business as usual in the US, with the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) breaking a three-day winning streak. Hawkish comments coming out of last week’s US Federal Reserve (Fed) meeting, as well as data indicating growth in the manufacturing sector was slowing down dragged down the Indexes. While all three Indexes ended the day in the red, none dropped more than 0.3% (basically even to where they started the day).
Tuesday: After a strong July, all four Indexes are falling back as it appears investors are locking in recent gains. Tensions between China and the USA over Speaker of the House Nancy Pelosi’s visit to Taiwan also weighed down the Indexes. On the TSX in Canada, the Technology and Healthcare sectors were the only Canadian sectors to gain ground.
In America, the three Indexes went on a rollercoaster ride today, with all three Indexes ending the day in the red. It was a broad-based decline with all S&P sectors losing ground today.
Wednesday: The easing of geopolitical concerns related to Nancy Pelosi’s visit to Taiwan, strong corporate earnings, and stronger than expected economic data helped boost all four major North American Indexes as they rebounded from Tuesday’s losses. In Canada, the Canadian Technology and Financial sectors lifted the TSX higher, overcoming the drag of the Canadian Energy sector, which was weighed down by a drop in oil prices. In the US, the Nasdaq reached its highest level since May 2022 led by gains in the Consumer Cyclical and the Technology sectors.
Thursday: The marketplace was essentially flat as investors await employment data that will likely influence future interest rate hikes. Strong reports could lead the Bank of Canada and the US Federal Reserve to be more aggressive in their respective future interest rate hikes. The TSX and Nasdaq inched into positive territory, while the S&P and DJIA fell slightly. In Canada, strength in the Canadian Consumer cyclical and Industrials sectors were enough to offset a fall in the Energy sector (oil fell to its lowest level since before the Russian invasion of Ukraine).
In the US, it was the high growth technology companies that buoyed the Nasdaq into the black while the S&P and DJIA were unable to overcome the drop in the S&P Energy sector caused by lower oil prices.
Friday: The Indexes didn’t do all that great, but did enough during the week to end the week in the black. In Canada, The TSX nudged slightly upward as an increase in the price of oil lifted the Canadian Energy sector. The Basic Materials (natural resources), Healthcare, and Industrials sectors also helped the TSX end the day higher.
In the US, the DJIA was the only US Index to end the day in the black thanks to the gains in the S&P Energy sector. Fears of another 0.75% interest rate hike beat down the interest sensitive Technology and Consumer Cyclical sectors, preventing the S&P and Nasdaq from joining the DJIA on the positive side of the ledger.
For the week, the TSX dropped 0.37%,the S&P 500 gained 0.36%, the Dow slid back 0.13% and the Nasdaq jumped 2.15%.
Weekly Portfolio Review
A mixed bag for the four major North American Indexes. The technology company heavy Nasdaq once again led the way with the S&P also ending the week higher. The energy and mining company heavy TSX fell back as the price of oil continued to drift downward. Finally, the more diverse yet smaller (30 companies) DJIA ended the week lower.
As for the portfolios, another good week with Portfolio 3 leading the way. As you can see all three Portfolios easily best the best performing Nasdaq Index. As the graph shows, the heavier the concentration in technology companies the better the Portfolio performed this past week. This is slowly starting make up for the pain in the first half of 2022 when being technology heavy was an anchor.
Weekly Portfolio & Index performance for the week ended August 5, 2022.
Companies on the Radar
Amazon (NASD:AMZN) and Ferrari (NYSE:RACE) remain as the only companies on my Radar. As the share price for both continues to rise, they are moving away rather than closer.
Amazon was dropping when it caught my attention. It went down further before rising to its current price. If I had bought it when it first came to my attention, I would be up 14%, even more if I had bought it when it was under US$ 110. Sigh!
Ferrari was rising from its June lows when I came across the notion of owning Ferrari. It has continued to climb and is now 16.5% higher. Double sigh!
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended August 5, 2022: UP
Good earnings report from Lattice Semiconductor (NASD:LSCC), growing net income by over 100%. As a result of their continued robust growth, Lattice has been moved up to the Russel 1000 Index (the top 1000 companies from the Russell 3000 Index) from the Russell 2000 Index (the smallest 2,000 companies in the Russell 3000).
Tesla (NASD:TSLA) shareholders will be voting on another stock split, this time a 3 for 1 split. Tesla’s management maintains the stock split will make shares in Tesla more affordable to small and individual investors.
Rogers Communications (TSX:RCI.B) is balking at the Canadian competition tribunal’s request for at least an additional six months to investigate the sale of Shaw Communications (TSX:SJR.B) Freedom Mobile to Canada’s Quebecor. The tribunal is concerned the merger of Rogers and Shaw will minimize competition in Canada’s wireless industry. I would suggest going from four players to three players minimizes competition.
In recognition of Celsius Holdings (NASD:CELH) strong earnings and growth, the company is being promoted from the S&P SmallCap 600 to the S&P MidCap 400. The SmallCap 600 covers 601 fast growing companies with a market capitalization between US$ 850 million and US$ 3.6 billion. The Midcap 400 covers 400 fast growing companies with a market capitalization between US$ 3.6 billion and US$ 13.1 billion. This promotion is a good thing!
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Net revenue for the three months ended June 30, 2022, of $33,310, compared to Revenue of $27,399 for the same period last year.
Net income of $967 for the three months ended June 30, 2022, compared to net income of $1,566 for the same period last year.
Net revenue for the six months ended June 30, 2022, of $65,565, compared to Revenue of $55,815 for the same period last year.
Net income of $2,729 for the six months ended June 30, 2022, compared to net income of $3,250 for the same period last year.
Gross profit remains at 61%
Through June 30, 2022, the Company repurchased and cancelled 1,350,567 common shares under the share repurchase program at a cost of $7.0 million, representing an average buyback price of $5.18 per share.
Revenues of approximately $70.5 million in the quarter, representing a 44% increase from the prior year’s quarter.
Net income of approximately $39.9 million for the quarter.
Paid a quarterly dividend of $1.75 per common share, representing a 25% increase over the prior year’s second quarter 2021 dividend, equal to an annualized dividend of $7.00 per share.
Second quarter revenue grew 74% year-over-year to $406 million.
Net loss for the three months ended June 30, 2022, was $4,879, compared to $9,362 in the same period last year.
Net income for the six months ended June 30, 2022, was $4,859 compared to a net loss of $22,430 in the same period last year.
As of June 30, 2022, had approximately 2,420 customers with Annual Re-occuring Revenue of $100,000 or more, an increase of 54% from 1,570 as of June 30, 2021.
Revenue of $221.9, up 70% compared to $130.9 in the same quarter in 2021.
Net loss in the second quarter was $116.3 compared to a net loss of $94.9 in the same quarter in 2021. This includes a $10.7 goodwill impairment charge associated with their gaming segment attributed to the decline in their market capitalization.
Subscription revenue growth of 70% year-over-year. Ad revenue grew 32% year-over-year.
Ended the quarter with a healthy liquidity position of $378.8 million in cash and short-term investments.
Subscription revenue of $73.6 million, an increase of 47%. Transaction-based revenue of $91.5 million, an increase of 62%
Net loss of ($100.8), as compared to a net loss of ($49.3).
Forecasts its second quarter revenue at US$178-US$183. For fiscal 2023, it expects revenue to be between $740 – $760, in line with its target organic subscription and transaction-based revenue growth rate of 35-40%.
Gross premiums written of $642.2 compared to $363.5 in the second quarter 2021. An increase of 76.7%.
Net income of $20.2 million in the quarter grew 19.6% compared to the second quarter 2021, driven by growth and profitable underwriting in Canada and the US.
Earnings Per Share of $0.48 in Q2 2022 compared to $0.40 in Q2 2021.
Return On Equity of 19.2% compared to 18.3% in Q2 2021, exceeding their mid-teens target despite significant growth.
BCE Inc.
All currency listed in millions of Canadian dollars
Revenues of $5,861, up 2.9% from the second quarter 2021.
Net earnings of $654, down 10.9% from the second quarter 2021.
Cash flows from operating activities increased 3.9% to $2,597 compared to the second quarter 2021.
declared a quarterly dividend of $0.92 per common share, payable on October 15, 2022, to shareholders of record at the close of business on September 15, 2022.
Quarterly Revenue of $195.0 Million, Reflecting 52% Growth Over the Prior Year Period.
Net income of $8,768, a decrease of 53% as compared to $18.7 million. The lower net income was due primarily to the higher non-cash stock-based compensation expense, which was partially offset by the higher gross profit and operating efficiencies realized on our higher revenues, as well as a tax provision in the current period as compared to a tax benefit in the prior year.
Net cash generated by operating activities for the second quarter of 2022 was $19.2 million, compared to net cash used by operating activities of $7.5 million in the prior year period.
Working capital of approximately $211.5 million and no debt.
Issues Revenue Guidance of $190.0 to $197.0 Million for the Third Quarter, Reflecting Growth of 55% to 61%.
Second quarter total revenue totaled $234.5 million, representing an increase of 54% year-over-year.
Net loss was $63.5 million, compared to $35.5 million in the second quarter of 2021.
Net cash flow from operating activities was $38.3 million, compared to $7.5 million for the second quarter of 2021. Free cash flow was negative $4.4 million, or 2.0% of total revenue, compared to negative $9.8 million, or 6.0% of total revenue, in the second quarter of 2021.
Telus Corporation
All currency listed in in millions of Canadian dollars
Revenues of $4,401, an increase of 7.1% over the same period last year.
Net income of $498 million increased by 45 per cent over the same period last year.
Total mobile and Fixed customer growth of 247,000, up 24,000 over last year and our strongest second quarter on record.
Declared a quarterly dividend of $0.3386 per share payable on October 3, 2022, to holders of record at the close of business on September 9, 2022. This quarterly dividend reflects an increase of 7.1% from the dividend declared one year earlier.
GDI Integrated Facility Services Inc.
All currency listed in millions of Canadian dollars
Revenue was $526 for the three months ended June 30, 2022, an increase of $154, or 41%, over the second quarter of 2021, which is mainly the result of organic revenue growth of 11% and growth from acquisitions of 29%.
Net income was $10 for the three months ended June 30, 2022, compared to $14 in the second quarter 2021.
Revenue was $1,021 for the six months ended June 30, 2022, an increase of $265, or 35%, over the same period of 2021, which is mainly the result of organic revenue growth of 7% and growth from acquisitions of 27%.
Net income was $17 million for the six months ended June 30, 2022, compared to $27 million in the same period of 2021.
Portfolio 2
Portfolio 2 for the week ended August 5, 2022: UP
Guardant Health (NASD:GH) announced its Guardant Reveal product, a molecular residual disease test, can now be used by fee-for-service Medicare patients with stage 2 or 3 colorectal cancer whose testing is initiated within three months following curative intent therapy.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Revenue of $109.1 million for the second quarter of 2022, an increase of 19% over the corresponding period of 2021.
Gross margin was 66%, as compared to 68% for the corresponding prior year period.
Net loss was $229.4 million for the second quarter of 2022, as compared to $97.6 million for the corresponding prior year period.
Guardant Health continues to expect full year 2022 revenue to be in the range of $460 million to $470 million, representing 23% to 26% growth over full year 2021.
Chorus Aviation Inc.
All currency listed in thousands of Canadian dollars
Revenues of $4,401, an increase of 7.1% over the same period last year.
Net income of $498 million increased by 45 per cent over the same period last year.
Total mobile and Fixed customer growth of 247,000, up 24,000 over last year and our strongest second quarter on record.
Declared a quarterly dividend of $0.3386 per share payable on October 3, 2022, to holders of record at the close of business on September 9, 2022. This quarterly dividend reflects an increase of 7.1% from the dividend declared one year earlier.
Revenues of $3,681 for the three months ended June 30, 2022, compared to $2,663 for the same period in 2021.
Net income of $425 for the three months ended June 30, 2022, compared to $1,306 for the same period in 2021.
Revenues of $7,092 for the six months ended June 30, 2022, compared to $5,346 for the same period in 2021.
Net income of $719 for the six months ended June 30, 2022, compared to $1,719 for the same period in 2021.
Declared a quarterly distribution in the amount of $0.36 per unit, payable on September 29, 2022, to unitholders of record as at the close of business on August 31, 2022. This distribution maintains the 6% increase over the prior year but reflects an adjustment for the 3-for-2 unit and share split that took place in June 2022.
Portfolio 3
Portfolio 3 for the week ended August 5, 2022: UP
Shopify (TSX:SHOP) has entered into a partnership with Klaviyo. Shopify will invest in Klaviyo to enhance collaboration between the two partners. In return, Klaviyo will become an email solution provider for Shopify’s Plus program.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Net revenue for the three months ended June 30, 2022, of $33,310, compared to Revenue of $27,399 for the same period last year.
Net income of $967 for the three months ended June 30, 2022, compared to net income of $1,566 for the same period last year.
Net revenue for the six months ended June 30, 2022, of $65,565, compared to Revenue of $55,815 for the same period last year.
Net income of $2,729 for the six months ended June 30, 2022, compared to net income of $3,250 for the same period last year.
Gross profit remains at 61%
Through June 30, 2022, the Company repurchased and cancelled 1,350,567 common shares under the share repurchase program at a cost of $7.0 million, representing an average buyback price of $5.18 per share.
Second quarter total revenue totaled $234.5 million, representing an increase of 54% year-over-year.
Net loss was $63.5 million, compared to $35.5 million in the second quarter of 2021.
Net cash flow from operating activities was $38.3 million, compared to $7.5 million for the second quarter of 2021. Free cash flow was negative $4.4 million, or 2.0% of total revenue, compared to negative $9.8 million, or 6.0% of total revenue, in the second quarter of 2021.
Revenue of $624 million for the three months ended June 30, 2022, up 17% year-over-year and 21% on a constant currency basis.
Net income of $56 million for the three months ended June 30, 2022, compared with $16 million in the same quarter last year.
Revenue of $1,223 million for the six months ended June 30, 2022, up 18% year-over-year.
Net income of $90 million for the three months ended June 30, 2022, compared with $19 million for the same period last year.
For the full year, management has suggested revenue in the range of $2,550 to $2,600 million, representing growth of 16.2% to 18.5% on a reported basis, and growth of 20% to 22% on a constant currency basis (previously 19% to 21% on a constant currency basis).
GDI Integrated Facility Services Inc.
All currency listed in millions of Canadian dollars
Revenue was $526 for the three months ended June 30, 2022, an increase of $154, or 41%, over the second quarter of 2021, which is mainly the result of organic revenue growth of 11% and growth from acquisitions of 29%.
Net income was $10 for the three months ended June 30, 2022, compared to $14 in the second quarter 2021.
Revenue was $1,021 for the six months ended June 30, 2022, an increase of $265, or 35%, over the same period of 2021, which is mainly the result of organic revenue growth of 7% and growth from acquisitions of 27%.
Net income was $17 million for the six months ended June 30, 2022, compared to $27 million in the same period of 2021.
