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The week ending July 29, 2022

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Loose change….

Yes! There is light...... at the end of the tunnel! | Make a Meme A busy week of earnings for the three Portfolios with 17 companies across the Portfolios announcing their respective quarterly results. I was not sure if the light at the end of the tunnel was going to be the end of the tunnel or an approaching train. It turns out it was light at the end of the tunnel. 😊

Many of the companies listed on the North American exchanges (including the aforementioned 17 companies) had earnings reports that were viewed as positive by analysts and the market in general, soothing investor fears. As well, the US Federal Reserve (Fed) made history when it raised its benchmark interest rate 0.75%, as anticipated, for the second time in as many months. The Fed said a future 0.75% interest rate hike was possible but did commit to any specific rate hike. This wiggle room provided investors hope for a slower pace of rate hikes.

Speaking of rallies, have you noticed the S&P 500 Index is chipping away some of the losses from the first half of 2022. The Index is up over 9% in July. A good start to the second half of the year.

The energy company heavy Toronto Stock Exchange continues to benefit from the surge in oil prices caused by the world reopening after the lifting of Covid-19 restrictions, and the Russian invasion of Ukraine squeezed supplies even tighter. The Energy sector is one of the few sectors to gain ground in 2022. However, the good times in the energy sector probably will not last.

July was not all roses as interest rate hikes in Canada and the USA mean the cost of borrowing money has gotten higher. For companies, this means more money is required to service their debt rather than growing their company. For us consumers, it means mortgages, lines of credit, credit cards, and loans will all get steeper.

Looking at the bounce in share prices this past month, I cannot help but wonder, “Is the market correction/bear market over?” I hope August is as good to investors as July. In the meantime, while we ponder whether the stock market has finally bottomed, lets take a look at the past week ….

Weekly Market Review

Monday: Earnings week has begun in both Canada and the United States. To mark the start of a busy week of earnings reports, the 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 the day …. relatively flat. The TSX ended the day higher thanks to a rise in Canadian listed oil companies.

In the US, the Indexes bounced up and down as investors await earnings reports from the big technology companies, and for the US Federal Reserve (Fed) meeting later this week where they will announce their latest interest rate hike. A 0.75% rate hike is anticipated but a full 1% raise is not out of the question.

Tuesday: Monday’s relatively flat performance by all four Indexes is looking rather good after today’s poor performance. The TSX was the best performer, ‘only dropping’ 0.69%. The main culprit was the Canadian Technology sector which was dragged down by Shopify’s (TSX:SHOP) 13.6% fall after announcing they would layoff 10% of their workforce. Portfolio 3 is going to feel the pain of that drop.

In the US, all three Indexes slid backwards after Walmart (NYSE:WMT) lowered its profit forecast, causing the value of its shares to fall 7.6%, as well as the share price of other retail companies to drop. Most retailers are part of the Consumer Discretionary sector. The only good news for me was Amazon (NASD:AMZN) share price dropped 5.2% today. Because of Amazon’s market capitalization size (its huge) it was the biggest anchor on Nasdaq.

Tomorrow is a big day as the Fed will announce its latest interest rate hike. Will the Fed stick with a 0.75% hike or be more aggressive in its battle to control inflation and raise the interest rate a full 1%? We shall see.

Wednesday: Nothing like good news to lift the Indexes. The Fed raised interest rates 0.75% rather than the feared 1%. Combined with strong earnings reports from big technology companies, investors spirits were raised, and they jumped back into the markets. In Canada, the TSX was lifted by strong reports from Shopify, despite an earlier announcement of upcoming layoffs, and CN Rail (TSX:CNR), among other reporting companies. The Canadian Technology sector led the way in a broad-based rally where only the Non-Cyclical Consumer Goods & Services sector failed to gain ground.

In America, it was also a broad-based rally with all eleven S&P sectors gaining ground. Nasdaq rose 4% and the S&P rose 3.9%, both biggest one day gains since April 2020. The big driver for both Indexes was the Technology sector which was buoyed by strong earnings reports from Microsoft (NASD:MSFT), Alphabet (NASD:GOOGL) and others. Nothing like seeing companies you own mentioned as drivers of Index gains. 😊

Thursday: All four Indexes posted a second straight day of gains. In Canada, the TSX hit its highest point in six weeks as all Canadian sectors edged higher. In the US, all three Indexes ended at least 1% higher as investors began to speculate the Fed may not be as aggressive in raising the benchmark interest rate. The upbeat mood led to another broad-based rally sending the Indexes higher.

Friday: The stock markets ended the day on an upbeat note as today’s gains meant all four Indexes ended the week on a positive note. In Canada, the combination of strong earnings reports from Energy and Basic Materials sector companies, and initial data indicating Canada’s economy continues to expand, propelled the TSX higher.

In the US, solid earnings from the technology mega cap companies, and hope that the Fed will be less aggressive with future interest rate hikes led to a rally in the American stock markets. Healthcare, and Non-Cyclical Consumer Goods & Services were the only sectors not to end the day in the black.

For the week, the TSX grew 3.74%, the S&P gained 4.26%, the DJIA advanced 2.97%, and the Nasdaq climbed 4.70%.

It has been a while since all four major North American Indexes ended a month higher than they started. July quietly turned out to be the best month for the S&P since November 2020, and the Nasdaq had its strongest performance since April 2020. For the month, the TSX advanced 4.4%, the S&P jumped 9.12%, the DJIA rose 6.73%, and the Nasdaq out did them all, rising 12.3%.

Weekly Portfolio Review

Another good week in the stock markets, with all four major North American Indexes ending the week higher. Even more impressive, all four Indexes gained at least 4% for July. I cannot remember the last time that happened. Certainly not in 2022.

As for the Portfolios, for the second consecutive week all three ended the week in the black. That is three of the four weeks in July they have gained ground. Not as much as last week, but gains are gains. With the Nasdaq having a great month its no wonder the Portfolios are slowly climbing out of the hole created by the 2022 bear market. Portfolio 1 continues to benefit from the big technology companies, as well as the energy companies picked up in late 2021. Portfolio 2 is the most balanced of the three portfolios. It does not have any one company driving the portfolio, but neither does it have any companies dragging it down. It also benefits from many of the companies paying a decent dividend. Finally, Portfolio 3 is largely technology driven with Shopify being the biggest holding. As Shopify goes, so goes Portfolio 3. Many of the other holdings, including technology companies, are smaller, Canadian companies that do not get the same growth rate as American based companies. Something I need to investigate. For now, after six months of watching the Portfolios lose ground, I am happy to see all the Portfolios finally end a month higher.

Weekly Portfolio & Index performance
Weekly Portfolio & Index performance for the week ended July 29, 2022.

Companies on the Radar

Amazon and Ferrari (NYSE:RACE) continue as the only companies on my Radar. I am still regretting not buying these companies at the end of June when both were cheaper. Trying to out think the market appears to have failed, again. Argh! ☹

I still need to run both companies through my Multibagger Analysis.

Radar Check of Amazon

Figure 1: Radar Check of Amazon

  • Ferrari: scored a 9 out of 13 on my Radar Check test.

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended July 29, 2022: UP Green Up Arrow, signifying a positive week

  • Amazon announced Rivian (NASD:RIVN) electric vans are now delivering packages in select cities and they (Amazon) plan to have them making deliveries in 100 cities by the end of the year. Amazon first started making deliveries in Rivian vans in late summer 2021. It would be interesting to know how many Rivian vans Amazon has received, how many are making daily deliveries, and any issues with the vehicles.
  • To increase production at its Gigafactory’s in Austin, Texas and Berlin, Germany, Tesla (NASD:TSLA) plans to raise its capital spending by US$ 1 billion.
  • GM (NYSE:GM) announced the US Energy Department has agreed to loan GM US$ 2.5 billion to help build GM’s Ultium battery cell facilities in the US. This will be the government’s first loan for a battery cell manufacturing project under the vehicle 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.

Canadian $

  • Shaw Communications Inc (TSX:SJR.B)

US $

No US$ dividends this past week.

Quarterly Reports

Alphabet Inc.

All currency listed in millions of US dollars

Selected highlights from their second quarter 2022 financial results on July 26, 2022

  • Revenues of US$ 69,685, up 13% year over year.
  • Operating margin of 28%, compared with a margin of 31% in the previous year.
  • Net income of US$ 16,002.

CN Rail

All currency listed in millions of Canadian dollars

Selected highlights from their second quarter 2022 financial results on July 26, 2022

  • Record revenues of C$4,344 million, an increase of C$746 million or 21%.
  • Record operating income of C$1,769 million, an increase of 28%.
  • Free cash flow for the first six months of 2022 was C$1,568 million compared to C$1,280 million for the same period in 2021.

General Motors Co.

All currency listed in millions of US dollars

Selected highlights from their second quarter 2022 financial results on July 26, 2022

  • Revenue of $35.8 versus 34.2, a ~5% increase year over year.
  • Net income of $1.7 compared to $2.8 in the same period last year.
  • First and only company to operate a commercial, driverless ride hail service in a major US city.
  • Building out a nationwide electric vehicle fast charging network.
  • Binding agreements in place to secure ALL battery raw material supporting GM’s goal of 1 million units of annual capacity in North America in 2025.

Visa Inc.

All currency listed in billions of US dollars

Selected highlights from their third quarter 2022 financial results on July 26, 2022

  • Revenues of $7.3, up 19% compared to the same period last year.
  • Net income of $3.4, up 32% compared to the same period last year.
  • Returned $3.3 of capital to shareholders in the form of share repurchases and dividends.
  • Total processed transactions, for the three months ended June 30, 2022, were 49.3 billion, a 16% increase over the prior year

Upwork Inc.

All currency listed in millions of US dollars

Selected highlights from their second quarter 2022 financial results on July 27, 2022

  • Revenue grew 26% year-over-year to $156.9 in the second quarter of 2022.
  • Gross profit was $116.0 for the second quarter of 2022, or 74% of revenue, compared with 73% of revenue in the prior quarter and 73% of revenue in the year prior.
  • Net loss was $(23.8) in the second quarter of 2022 compared with GAAP net loss of $(16.5) million in the second quarter of 2021.
  • Gross Services Volume in the second quarter of 2022 was just over $1 billion, with continued strong year-over-year growth of 19%.
  • Guiding third-quarter 2022 revenue to be between $156 million and $158 million, which is 23% year-over-year growth at the midpoint.

Teladoc Health Inc.

All currency listed in thousands of US dollars

Selected highlights from their second quarter 2022 financial results on July 27, 2022

  • Second quarter revenue grows 18% year-over-year to $592.4 million.
  • Net loss of 3,101,461 compared to a net loss of 133,819 in the same quarter in the previous year, primarily driven by non-cash goodwill impairment charge of $3.0 billion.
  • Gross margin, which includes depreciation and amortization, was 68.2% for the second quarter of 2022, compared to 67.9% for the second quarter of 2021.
  • For the third quarter, anticipate revenues of $600 – 620 million and a net loss of $0.85 – $0.60 per share.
  • For fiscal 2022, anticipate revenues of $2,400 – $2,500 million and a net loss per share of $62 – $61 thanks to the impairment charge mentioned in bullet 2.

Cargojet Inc.

All currency listed in Canadian dollars

Selected highlights from their second quarter 2022 financial results on July 27, 2022

  • Revenues for the quarter were $246.6 million compared to second quarter 2021 Revenues of $172.1 million.
  • Net income for the quarter was $160.9 million (net income of $26.2 million excluding warrant valuation gain) compared to net loss of $11.1 million in 2021 (net income of $23.6 million excluding warrant valuation loss).

Roku, Inc.

All currency listed in thousands of US dollars

Selected highlights from their second quarter 2022 financial results on July 28, 2022

  • Revenue grew 18% year over year to $764 million for the three months ended June 30.
  • Net loss of $110,513 for the three months ended June 30.
  • Total net revenue of $1,498,105 for the six months ended June 30.
  • Net loss of $134,003 for the six months ended June 30.
  • Added 1.8 million incremental active accounts to reach 63.1 million.
  • Average Revenue Per User grew to $44.10 (trailing 12-month basis), up 21% year over year.

Apple Inc.

All currency listed in millions of US dollars

Selected highlights from their third quarter 2022 financial results on July 28, 2022

  • Posted a June quarter revenue record of $83.0 billion, up 2 percent year over year.
  • Net income of $19,442 for the three months ended June 30, 2022, compared to $21,744 for the same period in 2021.
  • Net income of $79,082 for the nine months ended June 30, 2022, compared to $74,129 for the same period in 2021.
  • Generated nearly $23 billion in operating cash flow and returned over $28 billion to shareholders.
  • Declared a cash dividend of $0.23 per share of the Company’s common stock.

TMX Group Ltd.

All currency listed in millions of Canadian dollars

Selected highlights from their second quarter 2022 financial results on July 28, 2022

  • Revenue of $286.1, up 17% from $245.0 in Q2/21, including $27.3 from acquisition of voting control of BOX on January 3, 2022.
  • Net income attributable to equity holders of TMX Group  in Q2/22 was $92.1, compared with a net income attributable to equity holders of TMX Group of $77.3, for the second quarter of 2021.
  • Revenue of $573.2 for the six months ended June 30, 2022, up 15% from $497.0 in the same period in 2021.
  • Net income attributable to equity holders of TMX Group in the six months ended June 30, 2022, was $35.9.5, up 107% from $173.7, for the same period in 2021.
  • Declared a dividend of $0.83 on each common share outstanding.

Portfolio 2

Portfolio 2 for the week ended July 29, 2022: UP Green Up Arrow, signifying a positive week

  • Pushed by an activist investor, Suncor (TSX:SU) announced they were reviewing their investment in gas stations. One possible suitor is Alimentation Couche-Tard Inc. (TSX:ATD) since they have a strong Balance Sheet. The acquisition of Suncor’s gas stations would dramatically increase Couche-Tard’s footprint in Canada. However, I have two concerns. First, they get a good deal on the acquisition. Second, a sizable majority of these stations must be easily converted to what I call energy stations, where drivers can fuel up or charge up. Based on their record, I am confident they can get a fair deal. As for the second concern, Couche-Tard would need to perform a great deal of due diligence, plus an ability to read the political tea leaves to determine how much incentive there is to add charging stations to these properties.
  • Microsoft missed analyst expectations for the quarter, however, they suggested their next fiscal year looked good, and that forecast was enough to send the share price higher. Microsoft received a boost from its growing advertising revenue stream this past quarter, and that should only get better thanks to the recently announced deal to manage streaming advertising for Netflix.
  • Telus (TSX:T) was named Canada’s fastest mobile network by Ookla for the 10th consecutive time. Telus has also been recognized by UK based Opensignal and New York based JD Power for network excellence.

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 $

  • TC Energy Corp (TSX:TRP)

US $

No US$ dividends this past week.

Quarterly Reports

Microsoft Corp.

All currency listed in US dollars

Selected highlights from their fourth quarter 2022 financial results on July 26, 2022

Fourth quarter highlights

    • Revenue was $51.9 billion and increased 12% (up 16% in constant currency)
    • Operating income was $20.5 billion and increased 8% (up 14% in constant currency)
    • Net income was $16.7 billion and increased 2% (up 7% in constant currency)
    • Diluted earnings per share was $2.23 and increased 3% (up 8% in constant currency)

Fiscal year highlights

    • Revenue was $198.3 billion and increased 18% (up 19% in constant currency)
    • Operating income was $83.4 billion and increased 19% (up 21% in constant currency)
    • Net income was $72.7 billion GAAP and increased 19%, and $69.4 billion non-GAAP and increased 15% (up 16% in constant currency)
    • Diluted earnings per share was $9.65 GAAP and increased 20%, (up 17% in constant currency)

TC Energy Corporation

All currency listed in millions of Canadian dollars

Selected highlights from their second quarter 2022 financial results on July 28, 2022

  • Net income attributable to common shares of $0.9 billion compared to a net income of $1.0 billion in 2021.
  • Declared a quarterly dividend of $0.90 per common share for the quarter ending September 30, 2022.

Fortis Inc.

All currency listed in millions of Canadian dollars

Selected highlights from their second quarter 2022 financial results on July 28, 2022

  • Second quarter net earnings of $284, an increase of $31 compared to the same period last year.
  • Year to date earnings of $634, an increase $26 compared to the same period last year.
  • A dividend of $0.535 per common share of the Corporation, payable on September 1, 2022.

Mitek Systems Inc.

All currency listed in US dollars

Selected highlights from their third quarter 2022 financial results on July 28, 2022

  • Total revenue increased 24% year over year to $39.3 million in a record third quarter.
  • Net loss was $0.9 million, or $0.02 per diluted share.

iAG Financial Group

All currency listed in US dollars

Selected highlights from their second quarter 2022 financial results on July 28, 2022

  • Net income attributed to common shareholders of $222 million.
  • Return on common shareholders’ equity for the trailing twelve months of 12.5%.
  • Approved a quarterly dividend of $0.6750 per common share payable in the third quarter of 2022, an increase of 8%, or $0.05, from the previous dividend paid.

Portfolio 3

Portfolio 3 for the week ended July 29, 2022: UP Green Up Arrow, signifying a positive week

  • Shopify is laying off 10% of its workforce (approximately 1,000 employees) as the company contends with slowing growth caused by a drop in online shopping. Shopify benefitted greatly from a surge in demand during the Covid-19 pandemic but is feeling the pain now as shoppers return to in-store shopping. Shopify gambled that online shopping would continue to grow at a rapid pace even after the pandemic and hired up accordingly. They gambled wrong and as a result, they will have to downsize like a lot of other companies that increased their respective workforces during the pandemic. Online shopping/e-commerce will continue to grow, just at a slower pace than they predicted. Shopify is making the necessary changes to its business to adjust to the shifting landscape.
  • Adyen (OTCM:ADYEY) has teamed up with Etsy (NASD:ETSY) to allow US buyers on the Etsy platform to round up their purchase total and that difference will be donated to the Brooklyn Community Foundation fund. The fund is used support people who face barriers to building their businesses.

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

Microsoft Corp.

All currency listed in US dollars

Selected highlights from their fourth quarter 2022 financial results on July 26, 2022

Fourth quarter highlights

    • Revenue was $51.9 billion and increased 12% (up 16% in constant currency)
    • Operating income was $20.5 billion and increased 8% (up 14% in constant currency)
    • Net income was $16.7 billion and increased 2% (up 7% in constant currency)
    • Diluted earnings per share was $2.23 and increased 3% (up 8% in constant currency)

Fiscal year highlights

    • Revenue was $198.3 billion and increased 18% (up 19% in constant currency)
    • Operating income was $83.4 billion and increased 19% (up 21% in constant currency)
    • Net income was $72.7 billion GAAP and increased 19%, and $69.4 billion non-GAAP and increased 15% (up 16% in constant currency)
    • Diluted earnings per share was $9.65 GAAP and increased 20%, (up 17% in constant currency)

Shopify Inc.

All currency listed in US dollars

Selected highlights from their second quarter 2022 financial results on July 27, 2022

  • Total revenue in the second quarter grew 16% year over year to $1.3 billion, which represents a three-year compound annual growth rate of 53%.
  • Gross Merchandise Volume for the second quarter was $46.9 billion, which represents a three-year compound annual growth rate of 50% and an increase of $4.7 billion, or 11% over the second quarter of 2021.
  • Monthly Recurring Revenue1 as of June 30, 2022, was $107.2 million. MRR increased 13% year over year, up from $95.1 million as of June 30, 2021.
  • Net loss for the second quarter of 2022 was $1.2 billion, compared with net income of $0.9 billion, for the second quarter of 2021.

Real Matters Inc.

All currency listed in millions of US dollars

Selected highlights from their third quarter 2022 financial results on July 28, 2022

  • Revenues of $78.7 for the three months ended June 30, down 39.2% from the same period last year.
  • Net loss of $1.4 for the three months ended June 30, compared to net income of $5.3 for the same period last year.
  • Revenues of $281.4 for the nine months ended June 30, down 25.6% from the same period last year.
  • Net income of $.7 for the nine months ended June 30, compared to net income of $24.0 for the same period last year.
  • Purchased 6.1 million shares under our normal course issuer bid at a cost of $27.2 million during the nine months ended June 30.

 

The Case For Oil & Gas Investments

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This comment originally appeared in the February 18, 2022 Weekly Update. I thought it would be easier to find if it was its own article.

When I got back into investing in 2018, I thought I would never buy shares of an oil come as the green revolution was underway and I’m very optimistic about renewable energy and electric vehicles. All I knew about oil companies was the price of oil had fallen from over USD$ 100 a barrel in 2013 to a range between USD $40 – $60 a barrel, a price that was profitable for most companies. Add in the push to electric vehicles and renewable energy sources, I saw oil companies as a dying industry. With the onset of the Covid-19 pandemic in 2020, oil briefly fell to under USD $20 a barrel. The oil industry was done, or so I thought.

Fast forward to February 2022 and it turns out the oil industry is still very much alive. Not only is it alive, but I’ve invested in a few oil & gas companies and I’m looking into one or two additional oil & gas related companies. What changed you ask. Well….

The push to renewable energy is in full swing, and I’ve invested in a few of these companies, but the world cannot go cold turkey from its dependence on oil and gas. Long term, the oil & gas industry is in decline. However, until a reliable alternative is found, there is still strong demand for this type of resource in everyday life. Just ask anyone who has to heat their home during a cold winter. I was aware of the necessity of oil for vehicles and heating but there are so many more applications for oil and natural gas.

Check out this interactive infographic from the International Association of Oil & Gas Producers to see how much we rely on this resource. Now, I agree climate change is happening and we should continue the move to renewable energy sources as soon as possible, but in the meantime the world still needs oil.

As an investment, companies in the oil and gas industry are looking more attractive. A year ago, the price of oil was just under USD $60 a barrel and now sits at over USD $90 a barrel. Cold snaps in various locations throughout the world have further increased demand for oil to heat homes. On the supply side, tensions in the Ukraine are causing fears of a restricted supply of oil from the world’s third largest exporter of oil. If Russia were to invade Ukraine, oil could top $100 a barrel for the first time since 2014. So much for lower gas prices.

With huge demands for oil and limited supplies, and an anticipated growth in the demand for oil for at least the next 10 years, oil and natural gas companies are raking in the cash. In previous years these energy companies would re-invest that cash into exploration, development and production projects. However, those in charge of fossil fuel energy companies aren’t blind to what is happening around them. They realize there is a growing move to renewable energy sources and in the long term there will be a decline in the demand for their product so there is not much profit to be made by investing in exploration and the development of new wells. Rather than plowing profits into drilling more wells, they are focused on more short-term projects that can provide a high return on investment. To increase shareholder value and continue to attract investors, they are returning a higher percentage of their money back to shareholders by way of increasing dividends, and/or using some of this money to buy back shares as a way of increasing investor’s earnings per share (the less shares, the more earnings per share). With a small investment in oil and gas companies, I’ve been able to capitalize on rising share prices, and receive a growing dividend. Together, these provide a solid total gain on the investment.

I’ll continue to invest in alternative energy resources and renewable energy products. However, this seems to be a great opportunity to take advantage of a product that is growing in demand and returning more and more cash to investors. If they are giving it away, I’m happy to receive it. 😊

The week ending July 22, 2022

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Loose change…

This past week Canada’s June inflation rate came in at 8.1%, the highest since 1983. I know I’m feeling the bite of inflation. Higher gasoline prices are driving (pun intended) a lot of that increase, but prices across the board are up – food, housing and transportation are all up. The last time inflation was this high (in 1983), the prime minister was Pierre Trudeau , the father of the current one. A coincidence? 😊

Don’t look now but thanks to a rally in technology companies, the S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq Composite Index have hit their highest levels since June. As an owner of several technology companies (granted, very, very, very small ownership stake), its great to see the American Indexes, led by technology companies, have a sustained upward march, but the question is whether a bottom has been established or is this just a bear rally (which sputters out and resumes the downward momentum).

On the other side of the Atlantic, the European Central Bank followed the path set by the US and Canada and finally raised interest rates. The 0.5% raise was the first interest rate hike in 11 years.

Finally, as a tech heavy investor, next week will be a big week as the big US tech companies report their quarterly earnings. If the big players can at least meet analysts’ expectations, and the Fed delivers a 0.75% interest rate hike as expected, it should be a good week in the stock markets of North America (but, I’ve been wrong before 😊). In the meantime, let’s look at the week ended July 22……

Weekly Market Review

Monday: The markets got off to a mixed start this week with Canada’s Toronto Stock Exchange Composite Index (TSX) ending the day higher, while all three American Indexes – the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) – ended the day slightly lower.

The TSX was pulled higher by a rise in commodity prices that boosted the Basic Material (natural resources) and Energy (oil) sectors. Canadian analysts and investors have their eyes focused on this week’s upcoming consumer price data which is anticipated to indicate inflation is above 8%, a 40-year high.

In the US, all three Indexes spent the morning in positive territory but then fell in late afternoon trading with nine of the eleven S&P sectors falling back into negative territory.

Tuesday: You know it is a good day in the market when the worst performing Index was up almost 2%. And so it was, with the Nasdaq leading the way and the TSX bringing up the rear at 2%. On the TSX, investors seem to have digested last week’s surprise interest rate hike by the Bank of Canada as the Financial sector rebounded from last week’s drop. The Canadian Utilities sector was the only sector not to post a gain for the day.

In the US, earnings are coming in higher than the analysts’ lowered expectations, causing the three American Indexes to have a nice little rally. However, the fact remains earnings estimates are still being adjusted downward and inflation remains high. Next week the US Federal Reserve (Fed) will announce their latest interest rate hike and send signals of future hikes.

Wednesday: Not as good a day as yesterday for the four Indexes, but a good day none the less as all four inched higher. North of the border, the rate of inflation rose to 8.1% for June, up from 7.7% in May. As high as that was, the Canadian market was expecting an even higher number so the report eased fears of another aggressive hike by the Bank of Canada (BoC) later this year. Depending how the rest of the summer plays out, I expect a hike somewhere between 0.5% and 0.75%.

With inflation coming in lower than expected and chances of a smaller interest rate hike on the horizon, the Canadian technology sector had a great day jumping up over 5%. The Healthcare and Consumer Cyclical sectors also rose by over 1%.

In the US, many of the big, high growth companies that are part of the Nasdaq had a good day, helping the Nasdaq lead the way upward as all three American Indexes ended the day in the black. Continued strong earnings was the big catalyst with the main benefactors being the Technology and Consumer Discretionary sectors.

Thursday: Yet another good day to be invested as all four Indexes ended higher, not much but at least its in the right direction. In Canada, the TSX was lifted by gains in the Technology and Industrials sectors that more than offset a decline in the Energy sector.

In the US, continued strong earnings reports led to a late rally, particularly in the big technology growth stocks (including Amazon (NASD:AMZN), Apple (NASD:AAPL) and Tesla (NASD:TSLA)), which helped boost the three American Indexes into the black.

Friday: All good things must come to an end and so it was for all four Indexes as they all ended the day in the red. In Canada, only the defensive sectors (Utilities, Telecommunications, and non-cyclical goods) were able to pull out a minor gain today.

In the US, the string of strong earnings which had propelled the three American Indexes higher this past week lost momentum as lower earnings from social media and ad technology companies failed to impress investors. The lower earnings, in combination with investors preparing for next week’s interest rate hike announcement by the Fed, led to the three Indexes losing ground. Only the S&P defensive sectors (Utilities, and Communications) were able to make it into positive territory.

For the week, the TSX grew 3.2%, the S&P gained 2.56%, the DJIA climbed 1.96%, and the Nasdaq rose 3.33%.

Weekly Portfolio Review

Another good week in the North American stock markets as all four Indexes ended at least 2% higher. With the technology sector in the US having another good week I was surprised to see the TSX finish the week as the second-best performing Index, 0.1% behind frontrunner Nasdaq. This week’s rally in the Canadian Technology sector, combined with continued strength in Energy (oil), and Basic Materials (natural resources), must be what gave the TSX that extra boost this past week.

With the Nasdaq turning in another good week, that usually means the Portfolios will be in the black for the week. And they were. Portfolio 3 had an outstanding 6.8% gain, followed by Portfolio 1 with a 3.4% gain. Portfolio 2 was barely edged out of the top three by the Nasdaq but still managed an impressive 3.1%. Another good week for all three Portfolios but it will take considerably more weeks like this to get back to where they were at the start of the year. I’m keeping my fingers crossed. 😊

Weekly Portfolio & Index performance
Weekly Portfolio & Index performance for the week ended July 22, 2022.

Companies on the Radar

Amazon and Ferrari (NYSE:RACE) continue as the only companies on my Radar. However, I may have blown my opportunity with Amazon. Instead of buying it when it was under US$ 105, I thought it would drop further and wanted to get it below US$ 100. Not my best decision as it closed this week at US$ 122.42. ☹ Note to self: don’t get greedy and try to time the market.

The jury is still out on Ferrari. The heart is willing, but the brain is not convinced. 😊

I still need to run both companies through my Multibagger Analysis.

Radar Check of Amazon

Figure : Radar Check of Amazon

  • Ferrari: scored a 9 out of 13 on my Radar Check test.

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended July 22, 2022: UP Green Up Arrow, signifying a positive week

  • Disney (NYSE:DIS) announced that it chose The Trade Desk (NASD:TTD) as its advertising partner. The Trade Desk will be its primary demand-side platform connecting advertisers and agencies with Disney’s ad inventory properties: Disney+, Hulu, ABC, and ESPN.
  • Apple joined the trend of companies that are slowing their hiring pace and reducing their spending growth rate next year in the event of an economic downturn, or worse, a recession, hits the world’s largest economy. The slowdowns will be targeted rather than across the board.
  • Alphabet’s (NASD:GOOGL) Google is going to trial in the United Kingdom over allegations that the company abused its position to charge up to a 30% commission for games sold through its Google Play app store.
    Alphabet executed a 20-for-1 split on July 18. My piece of the pie did not change percentage wise, but I hope the lower share price entices more investors to buy Alphabet shares and push the price higher. 😊

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 $

  • Algonquin Power & Utilities Corp (TSX:AQN) DRIP
  • BCE Inc (TSX:BCE) DRIP
  • Brookfield Select Opportunities Income Fund (TSX:BSO.UN) DRIP

US $

No US$ dividends this past week.

Quarterly Reports

Tesla, Inc.

All currency listed in millions of US dollars

Selected highlights from their second quarter 2022 financial results on July 20, 2022

  • Total revenues of $16,934, up 42% year over year.
  • Net income attributable to common stockholders $2,259.
  • Operating income improved YoY to $2.5B in Q2, resulting in a 14.6% operating margin.
  • Free cash flow of $621.
  • Produced over 258,000 vehicles and delivered over 254,000 vehicles, despite ongoing supply chain challenges and factory shutdowns beyond Tesla’s control.
  • Solar deployments increased by 25% YoY in Q2 to 106 MW, the strongest quarterly result in over four years
  • Energy storage deployments decreased by 11% YoY in Q2 to 1.1 GWh.

Portfolio 2

Portfolio 2 for the week ended July 23, 2022: UP Green Up Arrow, signifying a positive week

Nothing particularly newsworthy for the companies in Portfolio 2 this past week. I am quite happy for these companies to quietly go about their business, increase their earnings and grow the value of the Portfolio 2 by 3% every week. 😊

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 $

  • Alimentation Couche-Tard Inc (TSX:ATD)
  • Dream Industrial Real Estate Investment Trust (TSX:DIR.UN) DRIP
  • Brookfield Select Opportunities Income Fund (TSX:BSO.UN) DRIP

US $

No US$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.

Portfolio 3

Portfolio 3 for the week ended July 23, 2022: UP Green Up Arrow, signifying a positive week

  • Shopify (TSX:SHOP) announced a partnership with Alphabet’s YouTube to allow Shopify creators and merchants to sell their products across YouTube’s various channels. The partnership builds on Shopify’s existing relationship with Google and will allow their merchants to integrate their online stores with YouTube, which reaches over two billion monthly users. For YouTube viewers, they will be able to make a purchase from a Shopify merchant directly from within YouTube. For Shopify’s merchants, they will be able to sell their products through live streams, videos, as well as a store tab.
    I believe this is a good deal for both companies and will help Shopify counter the post-pandemic slowdown in online shopping. Hopefully, the market also views this deal positively for both companies and their respective share prices return to the levels seen in the summer of 2021. That would make me very happy. Very happy indeed! 😊

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 $

  • Brookfield Select Opportunities Income Fund (TSX:BSO.UN) DRIP

US $

No US$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.

 

The week ending July 15, 2022

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Electric Vehicle sales reach tipping point

Electric Vehicles (EV) surpassed the magical 5% mark of the total auto market this past quarter, according to a report from Cox Automotive. Why is 5% important you ask? Well, I will tell you. Historically, once a product reaches 5% of a total market it reaches the tipping point where it goes from niche product to mainstream product. As a result, sales increase rapidly as EVs go from being a novelty to commonplace. Based on my experience, a few years ago there was no EVs on our block. Now there are four EVs across twelve houses (2 Tesla (NASD:TSLA and 2 Hyundai (OTC:HYMTF).

Before you go and invest in EV companies (there are many to choose from), keep in mind that there are two big challenges still facing the EV industry. First, the average cost of an EV is US$ 20,000 more than then average price for new gasoline-based cars. Second, a lack of lack of charging stations, especially outside urban areas.

As productivity and competition increase in the EV market, the first challenge should disappear or at least become less of an issue. The second hurdle is why so many EV companies are planning to build out their own charging networks. Tesla already has a network of Tesla only charging stations, and GM (NYSE:GM) recently announced plans to increase the number of fast charging stations in the US by 20% by 2025. Rivian (NASD:RIVN) also has plans to build out fast charging stations and I imagine other EV, energy, and battery companies have their own plans in the works.

This sounds like a repeat of the build out of gas stations in the early 20th century (that makes it sound so long ago but it was well before my time). It will be interesting to see how the whole EV sector plays out and what comes first: abundant charging stations throughout North America, and globally, to increase sales of EVs, or a critical mass of EVs to entice existing service stations and other companies make fast charger stations as ubiquitous as gas stations. We shall see.

In the meantime, lets take a look at the past and see what happened this past week.

Weekly Market Review

Monday: The excitement of last week ended with a thud today as all four major North American markets – 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. In Canada, the main catalyst for the drop in the TSX was a downdraft in the commodity prices for natural resources (precious and base metals) and oil, the Basic Materials and Energy sectors, respectively.

In the US, the market drifted lower ahead of the release of key inflation related information (consumer prices, retail sales and factory output). The main culprits for the slide were the top growth stocks which pulled all three American Indexes lower. It appears Investors are being cautious ahead of the next meeting of the US Federal Reserve (Fed) in late July. In the event the interest rate hike is 0.75% rather than 0.5%, they would rather be sitting on cash than stocks.

Tuesday: last week’s rally is emphatically in the rear-view mirror as all four Indexes ended lower again. The TSX fell as the price of oil fell, sending Energy companies lower. Anticipation of a 0.75% interest hike by the Bank of Canada (BoC) Wednesday also put a damper on the TSX. It will be interesting to see how the TSX reacts to tomorrow’s announcement.

In the US, the main downforce was fears of a recession as the US Federal Reserve (Fed) attempts to reign in high inflation. The US Consumer Price Index (CPI) report for June will be announced Wednesday. It is hoped the “core CPI” (strip out the volatile food and gas prices) indicates inflation has peaked and its possible the Fed will increase interest rates by only 0.5%. On the other hand, if the CPI and “core CPI” are near 9% or higher, the Fed is most likely to raise the interest rate by 0.75% that they have signalled for the last two months. If the Fed is too aggressive with their interest rate hikes, it could tip the world’s largest economy into a recession which will most likely negatively impact the Canadian economy. Let us hope, the “core CPI” numbers are low, allowing the Fed to limit their hike to 0.5%.

Wednesday: Wednesday got off to the wrong kind of bang with the BoC surprising everyone and raising interest rates by 1%. In the US, the news was just as bad as the CPI came in higher than expected at 9.1%. Since the markets do not like bad news surprises, all four Indexes ended the day lower, although they recovered a bit late in the afternoon.

In Canada, the TSX had its fourth day of losses bringing it to its lowest level since March 2021. South of the border, the Indexes dove early and then slowly recovered as investors digested the news. The inflation rate of 9.1% was the highest since November 1981. If food and energy prices are removed from the CPI report, the core CPI actually fell slightly from 6% in May to 5.9% in June.

Thursday: All three American Indexes fell sharply to start the day and then clawed back to where they started. The Technology sector was the best performer of the eleven S&P sectors, pushing the Nasdaq into positive territory. Meanwhile, the S&P and DJIA ended the day slightly lower.

In Canada, the TSX dropped sharply and stayed down for the rest of today’s session. Falling oil prices, weaker metal prices and the higher interest rates announced Wednesday pushed the TSX down to a 16-month low.

Friday: The week ended on a positive note with all four Indexes ending the day higher, but not enough to save the week from ending lower. In Canada, higher oil prices lifted the Canadian Energy sector which in turn pulled the TSX higher.

In America, it was a broad-based rally with the S&P and DJIA each ending 5 day losing streaks, and the Nasdaq getting back in the winning column. Strong earnings by US banks, strong economic data and comments from the Fed indicating the upcoming rate hike will most likely be 0.75% rather than a full one percent, eased fears of a larger interest rate hike later this month.

For the week, the TSX plunged 3.3%, the S&P dropped 0.93%, the DJIA slipped 0.16%, and the Nasdaq dropped 1.57%.

Weekly Portfolio Review

The higher-than-expected interest rate hike in Canada, combined with a high US CPI report for June essentially guaranteed the markets, Indexes and Portfolios would end the week lower than they started. The TSX fell the hardest of the four Indexes as a drop in commodity prices (natural resources and energy) weighed the Index down further. Of the US Indexes, the DJIA faired the best, slumping only 0.2% thanks to its focus on 30 of the biggest blue chip American companies which are much less volatile than growth stocks that inhabit the Nasdaq and the S&P.

After last weeks performance (each Portfolio up over 4%), this week was a downer, literally and figuratively. The Portfolios almost managed a clean sweep of the bottom three positions, saved by Portfolio 1 outperforming the TSX. I am a bit surprised the more balanced Portfolio 2 was not the best performer as it is the least volatile of the three Portfolios. In any event, when all the Indexes and Portfolios are down on the week, I prefer the Portfolios to not drop as far as the Indexes so I can say “at least I didn’t do as bad as the Indexes.” I realize lower is lower but psychologically I feel slightly better with the thought I did ‘better’ than the Indexes. 😊 Here is hoping the markets get back on the winning track next week and take the Portfolios with them.

Weekly Portfolio & Index performance
Weekly Portfolio & Index performance for the week ended July 15, 2022.

Companies on the Radar

Amazon (NASD:AMZN) and Ferrari (NYSE:RACE) remain the only companies on my Radar. I like Amazon because it is a leader in several growth areas, and I see it going higher once this bear market ends. As for Ferrari, this is more of a heart over brain decision so I must think this one through in the event there is a red flag that would make me pass. In a sense I am doing what you should not do and waiting for the bear market to cause the share prices to drop further (trying to time the market). Hopefully, this will not blow up in my face. I hope to run them through my Multibagger Analysis this week.

Radar Check of Amazon

Figure : Radar Check of Amazon

  • Ferrari: scored a 9 out of 13 on my Radar List test.

Figure : Radar Check of Ferrari

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended July 15, 2022: DOWN Red Down Arrow

  • Thanks to the Rogers Communications (TSX:RCI.B) network outage on July 8, the merger with Shaw Communication (TSX:SJR.B) may be in jeopardy. The outage disrupted numerous services including banking services and 911 emergency calls. The Canadian government will likely take a much closer look at the deal that would reduce an already small number of national cellular providers in Canada. That was Rogers second nationwide outage in the last 15 months. So much for Rogers’ claim to be Canada’s most reliable network. 😊
  • As part of the fallout of the Rogers network outage, the Canadian government has demanded three main national telecommunications providers – Rogers, BCE (TSX:BCEv), and Telus (TSX:T) – produce a plan to keep customers better informed in the event of future network outages.
  • Rivian announced plans to let go up 5% of its workforce. I think the most likely areas to feel the brunt of the layoffs are in the non-manufacturing since Rivian cannot afford slippage in production of their electric vehicles.
  • Unity Software (NYSE:U) announced ‌it’s acquiring ironSource (NYSE: IS) in an all-stock deal, worth $4.4 billion. ironSource is a platform that allows mobile game developers to scale their games, and provide mobile app advertising to monetize their games, similar to Unity’s Operate solutions. At the same time, Unity’s board of directors approved a stock buyback program of $2.5 billion, which will likely help reduce the dilution from this new acquisition.
    This sounds like they have given themselves a loan (use shares to acquire ironSource) that they can payback overtime (repurchase shares). Every investors’ piece of the pie is diluted when more shares are issued (not shareholder friendly), while share buybacks increase investors share of the pie (shareholder friendly). The market did not like this deal and punished them with a sharp 17% drop in share price on July 13. That being said, ironSource has recorded net income since 2019, which should improve Unity’s path to profitability.
  • Rivian is expected to unveil the Amazon custom electric delivery vehicle (EDV) on July 21. This is a significant milestone for both companies. For Rivian, it is the start of fulfilling an order for 100,000 EDV to Amazon. For Amazon, its a key step on the road (pardon the pun) to reach their carbon net-zero goal.

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)

Andlauer Healthcare Group Inc (TSX:AND)

US $

BSR Real Estate Investment Trust (TSX:HOM.U)

Innovative Industrial Properties Inc (NYSE:IIPR)

Quarterly Reports

No quarterly reports this past week.

Portfolio 2

Portfolio 2 for the week ended July 15, 2022: DOWN Red Down Arrow

  • Disney (NYSE:DIS) announced plans to raise the monthly subscription fee for its ESPN+ streaming service by US$ 3 per month to US$ 9.99 per month. However, if you get ESPN+ as part of a bundle of Disney streaming service such as Disney+ and Hulu, there will be no price increase for the bundle. Sounds like a ploy to get ESPN+ subscribers to upgrade to a bigger Disney package. No doubt the Disney package will be more than the new ESPN+ price. 😊

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 $

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 July 15, 2022: DOWN Red Down Arrow

  • Microsoft (NASD:MSFT) announced they will partner with Netflix (NASD:NFLX) on Netflix’s upcoming ad-supported subscription offering. Microsoft will supply the technology and help grow sales of this new service.
  • Brookfield Infrastructure Partners LP (TSX:BIP.UN) is partnering with U.S.-based investor DigitalBridge, to buy a majority interest in Deutsche Telekom’s cellphone-tower assets in Germany and Austria. This partnership will add another revenue producing asset to Brookfield.

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 $

Alvopetro Energy Ltd (TSXV:ALV)

US $

No US$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.

Interest Rates Rise

Posted on by

This week the Bank of Canada (BoC) raised the Canadian interest rate by a full 1%, the largest hike since 1998, bringing the interest rate to 2.5%. Analysts and markets were expecting a 0.75% hike, so this is a surprise, and not a welcome surprise. With inflation in Canada hitting 7.7% in May, the BoC stated it went with a 1% hike because “Canadians are getting more worried that high inflation is here to stay. We (BoC) cannot let that happen” and to ”prevent high inflation from becoming entrenched. If it does, it will be more painful for the economy — and for Canadians — to get inflation back down.”

This rate is what Canada’s banks get when they borrow from Canada’s central bank. The rate that you and I pay when borrowing for things like mortgages and lines of credit from those same banks is considerably higher. If you have any variable rate debt, life has gotten more expensive.

Russia’s war in Ukraine and supply chain bottlenecks caused by labour shortages combine to keep the pace of price growth high. Meanwhile, employment still runs high so the BoC will continue to raise interest rates until economic pain (or the government) forces the BoC to back off the interest rates and accept the high inflation levels as the inflation rate drifts its way back down to the desired 2% – 3% range.

In the US, inflation rose 1.3% from May to June leading to US consumer prices jumping 9.1% since the same time last year. Driven by gas, shelter, and food, this is the highest level of inflation in 40 years. The high numbers open the door for the US Fed to be more aggressive in their fight against inflation. With a 1% hike now an option, that .75% that people were hoping to dodge, has started to look rather good considering the alternative.

 

The week ending July 8, 2022

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Ch, ch, changes

After some feedback, I have decided to break the Weekly Update into two separate parts. Going forward, the weekly market and portfolio update will now be a separate post from the opening commentary. The weekly update content will remain the same (unless feedback suggests otherwise) and continue to be posted at the end of the week once all the ‘numbers’ are in. The Weekly Updates will still appear on the home page when initially posted and once a new post is posted, it will move to the Weekly Updates page, under the Weekly Updates menu item (original names, I know 😊).

What was the opening commentary at the start of a Weekly Update will now be separate posts. I found these were getting lost in the Weekly Updates and would be easier to find and better organized if they had their own post. Topics will range from how to open an investment account; how to get started generating wealth through investing; questions I had when I started investing; quarterly updates on the Portfolios; thoughts on recent market events; and other investing topics. At this point there is no set schedule for these posts but with each new post they will appear on the home page and when a new post, be it a comment or Weekly Update, it will be moved to the Commentary Page.

Hopefully, this new format will make it easier to find and focus on the information that interests you. If you are only interested in the Weekly Updates, you can go straight to the update. If you only want to check out the Commentary, or see what topic is been covered, you can go directly to the Commentary section. If you have any topics you are interested in, please drop a note in the Comments section at the bottom of a post. Now, onward, and upward (something I would like the market to do more of) and let’s see what happened in the market this past week….

Weekly Market Review

Monday: July got off to a positive start for Canada’s primary Index, the Toronto Stock Exchange Composite Index (TSX), largely on gains in the Energy and Basic Materials sectors. The price of oil shot up over 2% today thanks to fears of tightening supplies. The Energy and Basic Materials sectors account for 30% of the market capitalization on the TSX, so, as these sectors go, the TSX typically follows.

The US markets were closed as America celebrated its 246th birthday.

Tuesday: The price of oil dropped over 8% causing the Canadian Energy sector to take a dive today, down almost 7%. The price of gold and copper, part of the Basic Materials sector, each fell over 4%. The losses in the Canadian Energy and Basic Materials more than offset what was a good day in the Canadian Technology sector.

The fall in oil prices was also a drag on the American markets but thanks to a rally in the S&P Technology and Communication Services sectors, the S&P 500 Index (S&P), the and the Nasdaq Composite Index (Nasdaq) were able to end the day in the black. The Dow Jones Industrial Average (DJIA), which is comprised of 30 prominent and well-known companies joined the TSX in the red at the end of today.

Wednesday: The Energy (read Oil companies) and Basic Materials sectors continued to slide, causing the TSX to approach its lowest point in 15 months. In other Canadian news, the Bank of Canada appears set to raise interest rates by 0.75% later this month, with another 0.50% raise in September. Ouch!

In the US, the day was better as all three American Indexes gained ground with eight of the eleven S&P sectors ending in positive territory. The big news out of the US was the minutes from the last session of the US Federal Reserve (Fed). The minutes showed the Fed was considering both a 0.5% and a 0.75% interest rate hike at their next meeting in late July. Investors took the 0.5% rate hike option as an indicator the Fed realized the impact rising rates could have on the economy. The 0.5% hike would suggest an interest rate target of 3% while a 0.75% hike would suggest a target of 3.25% – 3.5% rate. Why is that important? If the interest rate hits 3.5% the likelihood of a recession is around 50%. We do not want a recession so the Fed acknowledging the potential for unintended consequences is a good thing, in my opinion. And apparently the market agrees with me. 😊 We shall see if the market still agrees tomorrow. As an aside, while we think 3+% is high, in Peru the central bank is expected to raise the interest rate to 6% in an effort to control inflation in that country.

Thursday: The TSX finally gets back on the winning side, joining its American cousins in what was an all-around good day. On the TSX, Energy (oil companies), Basic Materials (resource companies), and Canadian technology companies each rose more than 2% as investors stepped in to snap up beaten down companies in a broad-based rally.

In the US, do not look now but the S&P and Nasdaq have quietly put together 4-day winning streaks. Investors continued to be buoyed by the news the US Fed is not completely sold on a 0.75% interest rate hike. So far, July has been a good month for the stock markets, but the true test will come as the next Fed meetings get closer and if inflation numbers indicate the economy is starting to slow down. A high inflation report will likely force the Fed to go with the larger rate hike. But that is still a few weeks away.

Friday: It was a relatively flat day on the stock markets. The TSX, S&P and DJIA all sagged slightly into the red, while the Nasdaq had inched into positive territory. In Canada, labour data showed low unemployment and rising wages, reinforcing the perception that the Bank of Canada will raise interest rates by a 0.75% increase later this month.

In the US, the Nasdaq is on a mini roll, notching its fifth consecutive day of gains, the longest since November 2021. Thoughts that the US Fed might only raise interest rates by 0.5% has caused investors to think if a bottom has not formed, it may be nearby. The markets are bouncing up and down as investors try to ensure they are not caught on the outside looking in if the markets go on a sustained upward movement.

For the week, the TSX was up 0.9%, the S&P gained 1.9%, the DJIA rose 0.8%, and the Nasdaq jumped 4.5%.

Weekly Portfolio Review

Text Description automatically generated

After too many weeks of all four major North American Indexes declining, I feel like Oliver Twist and want some more of what was served this week. A lot more!

Its good to see another winning week, making two of the last three weeks where the stock markets, the Indexes, and the Portfolios all gained ground. As you can see on the chart below, the Nasdaq was the top performer of the Indexes, easily beating the next closest Index (the S&P).

What is even better (for me) is Portfolios 3 and 1 beat the Nasdaq, and Portfolio 2 was only a half percentage behind the Nasdaq. All three Portfolios quadrupled the Canada’s TSX. It has been rare in 2022 that the technology company bias of each of the Portfolios has been beneficial but as I have said before, as the Nasdaq goes, so goes the Portfolios. Unfortunately, I think we are in for more pain this year but hopefully the worst of the market corrections and bear markets are behind us. But any time you end the week farther ahead with your investments, is a good week! 😊

Weekly Portfolio & Index performance
Weekly Portfolio & Index performance for the week ended July 8, 2022.

Companies on the Radar

Currently, there are only two companies on the Radar List:

  • Amazon (NASD:AMZN): The leader in e-commerce sales, the leader in cloud services (Amazon Web Services), one of the top providers of streaming services through their Prime service; and they quietly have their finger in a number of other pies.

Radar Check of Amazon

Figure : Radar Check of Amazon

I still must perform the Multibagger Analysis deep dive on Amazon but the share price has been beaten down so much its hard to ignore this opportunity.

Figure : Radar Check of Ferrari

Because there is a better chance I could own a piece of the Ferrari than one of their cars, I will run the company through the Multibagger Analysis.

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended July 8, 2022: UP Green Up Arrow, signifying a positive week

  • Tesla (NASD:TSLA) reported a decline in deliveries for the first time in two years thanks to supply problems. Tesla had dodged the supply chain issue that had dogged other traditional and electric car manufacturers since 2020, but they finally got caught up with the same challenges that other manufacturers face. Now we shall see if Tesla has the same muscle as a few of the big, traditional car manufacturers to alleviate supply problems or if they have the same challenges as the other new electric vehicle manufacturers.
    That being said, Tesla announced they sold 78,000 vehicles made in China in June, up 142% over May’s sales number and up over 135% from the same period in 2021. Not bad for a company with supply issues.
  • Rivian Automotive (NASD:RIVN) announced they almost quadrupled their first quarter deliveries in the second quarter. That sounds great but when the number is low to begin with its not so impressive. Nonetheless, the delivered 4,467 electric vehicles in the April – June window thanks to improved production and continuing strong demand. I will be much happier when the start delivering Tesla like numbers.
  • Voyager Digital (TSX:VOYG) filed for bankruptcy on July 6 and was halt traded by the Investment Industry Regulatory Organization of Canada (IIROC). This effectively locks in a complete loss of my original investment in Voyager. The cryptocurrency markets have been hammered the last few weeks and Voyager has become another casualty of the fall of the once soaring cryptocurrency industry.
  • Talks between Rogers Communications (TSX:RCI.B), Shaw Communications (TSX:SJR.B) and the Canadian Competition Tribunal failed to reach a resolution to allow the proposed merger to go ahead. All three parties will continue to negotiate to see if a solution can be reached.
    As well, the Attorney-General of Alberta, Shaw’s home province, announced they will intervene in the proceedings because the deal will impact Alberta consumers and the province’s economy.
  • Lattice Semiconductor (NASD:LSCC) has won an award for the third week in a row. This time it won NEC’s 2021 Partner of the Year Award. This award is for the company that provides “extraordinary operational and customer support that helps NEC deliver technologies that solve a wide range of IT and networking 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 $

Cargojet Inc (TSX:CJT)

Telus Corp (TSX:T)

US $

NVIDIA Corp (NASD:NVDA)

Quarterly Reports

No quarterly reports this past week.

Portfolio 2

Portfolio 2 for the week ended July 8, 2022: UP Green Up Arrow, signifying a positive week

  • TC Energy Corp (TSX:TRP) announced they have agreed with Mexico’s state-owned power company CFE to build a $5 billion gas pipeline in the Mexican state of Veracruz, connecting the ports of Tuxpan and Coatzacoalcos.
  • Guardant Health (NASD:GH) announced a partnership with Adicon Holdings, a China based independent clinical laboratory company. Guardant will license its genomic profiling tests to Adicon to enable them to conduct clinical trials to identify which patients fit the profile for researchers’ clinical programs.

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 $

Telus Corp (TSX:T) DRIP

US $

No US$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.

Portfolio 3

Portfolio 3 for the week ended July 8, 2022: UP Green Up Arrow, signifying a positive week

  • Toronto-Dominion Bank (TSX:TD) is considering a deal for U.S. brokerage Cowen, as the company looks to expand in the United States. I seem to recall a few years ago TD sold several US assets and now they are back on a buying spree. Hmmm.
  • Microsoft’s (NASD:MSFT) acquisition of Activision (NASD:ATVI) will be reviewed by the United Kingdom’s Competition and Market authority to ensure the acquisition does not cause a “substantial lessening of competition” in the UK.
  • Magnite (NASD: MGNI), released an Australian study that found people who watched sports via streaming were “more responsive to advertising than traditional TV watchers, with many stating they often remember the ads seen (39%) and discuss the ads with someone (32%) after the fact.” Since there are three digital advertising companies across the three portfolios, this is good news as advertisers should start increasing their streaming advertising budgets.
  • Enghouse Systems (TSX:ENGH) announced the purchase of NTW Software GmbH of Austria. NTW provides products focused on the Cisco (NASD:CSCO) products market.
  • Alvopetro Energy Ltd. (TSX:ALV) announced a multizone discovery on one of their Brazilian exploration properties. Very fortuitous the I picked up some shares when I did. Not only did I buy in time to be eligible for the latest dividend, but this discovery gave the shares a nice 10% bump. More please! 😊
  • Shopify (TSX:SHOP) announced the closing of their acquisition of Deliverr, an end-to-end logistics platform solution. This deal provides Shopify merchants with a one stop solution for their logistical needs, from receipt of inventory, to distribution, to managing returns. Sounds like Shopify is stepping into the same ring as Amazon. Generally, I avoid companies that go head-to-head with market giants like Amazon, but since I already own Shopify, I will let this play out.

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 $

goeasy Ltd (TSX:GSY)

TD U.S. Equity Index ETF (TSX:TPU)

US $

No US$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.