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The week ending May 20, 2022

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Investing v Gambling

Just when I thought the markets may have bottomed, they prove I have no idea what is going to happen day to day. 😊

Recently I was asked what the difference between investing and gambling is. As an investor, this intuitively seemed obvious but as I thought about it, I realized to non investors they seem the same. Both involve risking your money in hope of making more money; both seek to minimize the risk of losing money; and the outcome is unknown for both. After that, they start to differ. Let us take a closer look at the differences.

Gambling

There are many forms of gambling but for the purpose of this commentary I will limit it the type of gambling you do at a casino, such as card games, and games of chance (slots and roulette for example). By definition, gambling is betting something of value on an uncertain outcome with the intention of winning your wager back, and hopefully more. Here are a few more characteristics of gambling:

  • A lot of gambling is based purely on luck and the odds are not in your favour. The House always has the advantage.
  • Gambling is risk seeking, you know you can lose.
  • The level of risk and probability of failure is high.
  • The result will be known in a few minutes at most. Once the event is over you’ve either won or lost.
  • Limited research has been done, be it a on an opposing card player or a slot machine.
  • No chance for diversification. If you play multiple slot machines you are likely to lose your money faster than lowering your risk (been there, done that).
  • It is in the Houses best interest for you to lose (but not to lose too much or you will not be back to lose again).
  • The longer you gamble, the more likely you are to lose.
  • Both parties (be it opponents or the House) cannot win.
  • You receive nothing in return when you put your money in play.

Investing

As with gambling, there are many forms of investing: real estate, art, bonds, and stocks. Since this site is about growing your wealth through the stock markets, I will only be referring to investing in companies (through shares of a company’s stock). Investing is defined as putting money into businesses, with the expectation that the business will increase in value over time, making your share of the business worth more. Here are additional characteristics of investing:

  • Investments are made with a high level of expectation that your invested capital will be returned, along with a suitable profit. Expectations of losing are much less than gambling.
  • Result may not be known for many years and during that time your investment could swing wildly.
  • You become an owner of a business, albeit a very small stake in the company.
  • You can minimize risk by researching companies, so you understand them before putting your money in.
  • You can further reduce your risk by diversifying, or investing, in companies in different sectors, different countries, varied sizes of companies (also known as market capitalization), and in various stages of their life cycles (commonly known as growth and value stocks).
  • You can always sell your shares, even if they go down in value.
  • Some stocks are riskier than others but in general stocks go up over time since there will always be a demand for goods and services. The longer you leave your money invested, the greater your chance of a positive, if not great, return. To mitigate risk, you can invest in mature, blue-chip companies such as Microsoft, Berkshire Hathaway, Coca – Cola
  • You are putting your money behind companies that have a vested interested in growing the business. From the corporate executives down to the entry level positions, everyone wants that company to succeed to receive bonuses, raises and to keep the company in business to keep their job.
  • When the company wins, you, as a shareholder, win.
  • When you invest in companies that pay a dividend you can take advantage of compounding (increasing an amount over and over by a percentage rate). By re-investing your dividends into the company your money will grow faster and faster.

I am sure there are additional differences between gambling and investing but you get the picture. If this investing thing sounds interesting, talk with an investment advisor to get more information. They should be able to help you set up a long-term investment plan. And the sooner you start, the sooner the magic of compounding can begin and the better chance you have of growing your wealth.

There you have it. Hopefully, this has helped you understand the difference between gambling, where the odds favour the House, and investing where the odds favour the investor over the long run. Now, let’s see what happened in the stock market last week….

Weekly Market Review

Monday: After last Friday’s impressive rally, investors were trying to decide if a low has been reached or was that a speed bump. Unfortunately, there was not much movement either way as the stock markets were a mixed bag today. The Toronto Stock Exchange Composite Index (TSX) and the Dow Jones Industrial Average (DJIA) inched into positive territory, and the S&P 500 Index (S&P), and the Nasdaq Composite Index (Nasdaq) declined. On the resource heavy TSX, losses in Technology and Consumer Cyclicals were offset by gains in the Energy and Basic Materials (includes precious and base metals’ companies and fertilizer companies) sector.

In the US, a slide in mega cap companies. including Tesla (NASD:TSLA), Amazon (NASD:AMZN) and Apple (NASD:AAPL) overwhelmed the gains in the S&P Energy sector, causing the S&P to fall. As for the technology heavy Nasdaq, there is no Energy sector to offset the losses of the largest technology companies.

Tuesday: Based on gains for all four Indexes today, it appears investors are wading back into the stock market thanks to strong retail sales data easing fears of slowing growth. For the TSX it was the third straight day of gains thanks to Canadian technology stocks. In the US, a broad-based rally led by the mega cap technology stocks powered the Nasdaq and the S&P higher.

Wednesday: After a relatively strong few days, the markets tanked on fears of a slowing economy, increasing prices and rising inflation.

In Canada, the inflation rate rose to 6.8% in April, higher than anticipated. Investors now expect another .5% interest rate will be announced at their next two meetings in June and July. The TSX broke a three-day win streak but was still the best of a bad lot, falling ‘only’ 1.9%.

In the US, the DJIA was the ‘best’ Index dropping only 3.57% beating the S&P and Nasdaq which each fell over 4%. It was the worst one-day loss for the S&P and DJIA since June 2020. The S&P fell thanks to a bad day for interest sensitive mega cap technology companies. The DJIA was pulled lower by a sell off in Target (NYSE:TGT) which saw its share price drop 25%. Target reported earnings down 50% because of surging costs, which led to fears surging costs are reducing margins for other retailers.

Thursday: In an interesting twist, the TSX ended higher thanks to the Canadian Technology sector (along with Energy and Basic Materials sectors), while in the US, the S&P Technology sector dragged the S&P and the Nasdaq lower. The DJIA ended the day with a loss to complete the American trifecta. I am surprised technology stocks have a strong day in Canada but a bad day in the US. My guess is the Canadian listed companies is much smaller than the number of US traded companies so a big move by one or two companies can really move the Canadian Technology sector.

Friday: Once again the TSX ended the day higher. This time it was the Utility and Energy sectors which helped the TSX end the day in positive territory. In the US, it was a rollercoaster day that saw the S&P touch bear market territory (down 20+% from its record high) before a late day rally that bumped it into the black. The DJIA also finished in the black thanks to the late market rally, but it was not enough to push the Nasdaq out of the red. Despite a slight rally this week, the S&P and Nasdaq booked their seventh consecutive week of losses, their worst losing streak since the 2001 dotcom bubble burst. The DJIA racked up its eighth week of losses, the worst stretch of declines since the Great Depression in 1932. The primary culprits were fears of inflation and its good friend higher interest rates.

For the week, the TSX was up .5%, the S&P dropped 3%, the DJIA fell 2.9%, and the Nasdaq slipped 3.8%.

Weekly Portfolio Review

Another week I am glad the Portfolios are diversified across countries. It was another rollercoaster ride  for all four major North American Indexes, but only the TSX able to gain ground this week. Unfortunately, all the American Indexes ended the week considerably lower than they started as fears the Bank of Canada and the US Federal Reserve will aggressively raise interest rates to get inflation back down to their 2% – 3% target.

As most of the companies in the three Portfolios are traded on the US stock exchanges, the Portfolios cannot help but decline. Each Portfolio has Canadian companies but not enough to over come the drag of the American high growth companies that are getting beaten down. In hindsight, I should’ve sold some shares in a few companies and taken some money off the table when the markets first began to fall but I did not think the declines would be this much and last this long. At this point, all I can do is ride out the storm.

Weekly Portfolio & Index performance
Weekly Portfolio & Index performance for the week ended May 20, 2022.

Companies on the Radar

A downward trending stock market and tight on cash, leaves me still on the sidelines. The stock market appears to have plenty of stocks available at a steep discount. Lots of companies on sale. If I had surplus cash, these are the higher growth companies I would be looking at:

Or for less volatile companies with reasonable growth:

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended May 20, 2022: DOWN Red Down Arrow

  • Another week, another week of Tesla news.
    • Tesla has delayed returning its Shanghai facility to two shifts a day. In separate news, Tesla has stopped taking orders for its Cybertruck outside North America due to excessive demand for the vehicle. The Cybertruck is scheduled for production in Tesla’s Texas facility. According to CEO Elon Musk, “We have more orders of the first Cybertrucks than we could possibly fulfil for three years after the start of production.” A good problem to have.
    • Tesla was removed from the S&P 500 ESG Index because the did not score high enough on Environmental, Social and Governance tests. For a company doing more to replace conventional vehicles and lower pollution, this seems odd. Digging deeper, Tesla was removed for social concerns – deaths caused by its’ self driving concerns, racial discrimination claims, and poor working condition in its California facility. All of these are serious concerns and from the S&P Global company’s perspective, outweigh the positive environmental impact Tesla is having on the environment. Getting the boot from this Index fund has no impact on Tesla the company but it does mean this Index fund, any funds that track it, will have to get rid of their Tesla shares. This institutional selling will drive the share price lower. ☹
    • I do not know why Tesla was highlighted in a hack that highlights a generic weakness in Bluetooth security that affects every company that utilizes Bluetooth security, but it was. A hack has been created that allows a hacker to unlock and operate Tesla cars and numerous other Bluetooth devices from kilometres away. The same hack can also be used to gain access to laptops and other Bluetooth secured devices.
    • And to complete the week of Tesla news, a report has come out that Mr. Musk’s SpaceX company paid US$ 250,000 to settle a sexual harassment claim in 2018. The claim was made in 2016 by a flight attendant who claimed Mr. Musk exposed himself while they were on a private jet. I do not know if this news was behind Tesla shares falling over 6% today, but it certainly did not help.
  • DIYers continue to rely on Home Depot (NYSE:HD) for their home improvement projects. Despite losing customers, same store sales rose 2.2% for a record first quarter when analysts expected a decline. While the number of transactions at Home Depot fell 8.2% in the first quarter of 2022, the average transaction rose 11.4%.
  • Canada announced a ban on products from Huawei Technologies and ZTE Corp from Canada’s 4G and 5G networks. This decision will have little if any impact on Telus (TSX:T) and Bell (TSX:BCE) as this decision has been long awaited and both would have planned accordingly. Further, Telus has been working with European companies Ericsson and Nokia to build out their 5G infrastructure since 2020.

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) DRIP

US $

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

Quarterly Reports

Voyager Digital Ltd.

All currency listed in thousands of US dollars

Selected highlights from their first quarter 2022 financial results on May 16, 2022

  • Announced a $0.36 loss per share. Analysts had estimated a loss of $0.10 per share. A miss is one thing, but a big miss is another thing. Not good.
  • Revenue for the quarter is $102.7 million, up 70% compared to $60.4 million for the quarter ended March 31, 2021.
  • Net loss of $61,440 compared to a net loss of $68,563 for the quarter ended March 31, 2021.
  • Total verified users on the platform stand at 3.5 million, up 9% from 3.2 million at the quarter ended December 31, 2021.
  • Total funded accounts reached 1,190,000 as of March 31, 2022, up 11% from 1,074,000 at the quarter ended December 31, 2021.

Auxly Cannabis Group Inc.

All currency listed in thousands of CAD dollars

Selected highlights from their first quarter 2022 financial results on May 16, 2022

  • Net revenues of $22.6M for the three months ended March 31, 2022, a 147% increase in net sales compared to first quarter 2021.
  • Net loss of $40,435 compared to $7,166 in the first quarter 2021.

Boston Omaha Corporation

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 13, 2022

  • Revenue of $16,292,947 compared to $13,205,019 in the same period in 2021.
  • Net income of $16,302,593 compared to $84,437,627 in the same period in 2021. One of the big reasons for the drop in income is attributable to Net Other Income which includes other investment income of $2,615,323 in the first quarter of 2022 and $107,308,122 in the first quarter of 2021. These are mainly related to realized and unrealized gains from public securities held by Boston Omaha.
  • Book value per share was $17.27 on March 31, 2022, compared to $16.71 on December 31, 2021.

Global – E Online Ltd.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 16, 2022

  • Revenue in the first quarter of 2022 was $76.3 million, an increase of 65% year over year, of which service fees revenue was $31.9 million and fulfillment services revenue was $44.4 million.
  • Net loss in the first quarter of 2022 was $53.6 million.
  • Established direct to consumer partnership with Adidas, Brooks Brothers, and Ralph Lauren, among others.
  • Established strategic partnerships with Shopify, Australian Post and Klarna.

SE Limited

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 17, 2022

  • Total GAAP revenue was $2.9 billion, up 64.4% year-over-year.
  • Total net loss was $(580.1) million compared to $(422.1) million for the first quarter of 2021, an increase of 37.4%. Total net loss excluding share-based compensation was $(445.1) million compared to $(320.0) million for the first quarter of 2021, an increase of 39.1%.
  • Lowered revenue guidance for e-commerce to be between $8.5 billion and $9.1 billion, representing 71.8% growth from 2021 at the midpoint of the broader guidance, compared to the previous guidance of between $8.9 billion and $9.1 billion.

Greenlane Holdings, Inc.

All currency listed in thousands of US dollars

Selected highlights from their first quarter 2022 financial results on May 17, 2022

  • Total revenue for first quarter 2022 increased 37% to $46.5 million, compared to $34.0 million for first quarter 2021.
  • Net loss of $18,749 compared to a loss of $7,714 in the same period in 2021.

The Home Depot

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 17, 2022

  • Revenues of $38.9 billion for the first quarter of fiscal 2022, an increase of $1.4 billion, or 3.8% from the first quarter of fiscal 2021.
  • Net earnings for the first quarter of fiscal 2022 were $4.2 billion, or $4.09 per diluted share, compared with net earnings of $4.1 billion, or $3.86 per diluted share, in the same period of fiscal 2021, representing a 6.0 percent increase in diluted earnings per share.
  • Raised guidance for revenue by 3% and diluted earnings-per-share-percent-growth to be mid-single digits

ZIM Integrated Shipping Services Ltd.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 18, 2022

  • Revenues for the first quarter were $3,716 million, a year-over-year increase of 113%.
  • Net income for the first quarter was $1,711 million (compared to $590 million in the first quarter of 2021), a year-over-year increase of 190%, or $14.19 per diluted share2 (compared to $5.13 in the first quarter of 2021).
  • Declared dividend of approximately $342 million, or $2.85 per share, representing approximately 20% of first quarter net income.

Nano-X Imaging Ltd.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 19, 2022

  • Generated $1.8 million in revenues in the quarter, compared to no revenue in the first quarter of 2021, and a 38% increase from $1.3 million in the fourth quarter of 2021.
  • Net loss of $21.7 million, compared to a net loss of $12.7 million for the three months ended March 31, 2021.

Lightspeed Commerce Inc.

All currency listed in US dollars

Selected highlights from their fourth quarter 2022 financial results on May 19, 2022

Fourth quarter highlights

  • Total revenue of $146.6 million, an increase of 78%.
  • Net Loss of ($114.5) million, as compared to a net loss of ($42.0) million, representing (78.1)% of revenue versus (51.0)%.

Full year highlights

  • Total revenue of $548.4 million, an increase of 147%.
  • Net Loss of ($288.4) million, as compared to a net loss of ($124.3) million in the previous year, representing (52.6)% of revenue versus (56.0)% in the previous year.
  • Customer locations increased to 163,000 from 159,000 in the previous quarter and the monthly Average Revenue Per User (ARPU) of these Locations grew by 35% to approximately $270 compared to just over $200 in the same quarter last year. Subscription ARPU increased to $132 from $113 a year earlier.

Portfolio 2

Portfolio 2 for the week ended May 20, 2022: DOWN Red Down Arrow

  • I have heard of self driving cars being developed by Tesla, Alphabet (NASD:GOOGL), and others but this is the first time I am hearing of self driving cars powered by Microsoft. British self driving car company Wayve said it will use Microsoft supercomputing infrastructure designed for the Wayve to process data as it develops machine learning-based models for its self-driving cars. I am guessing Microsoft’s investment in Wayve earlier in 2022 was their way of getting a piece of the self driving vehicle market. If Wayve self driving cars are successful, this will add another fast-growing revenue stream for Microsoft.
    Alimentation Couche-Tard Inc. (TSX:ATD) activated the first of what it says will be hundreds of electric vehicle fast chargers that will be available at 200 locations across North America. While it is their first charging station in North America, they have been building out charging stations in Norway since 2016 and have more than 1,000 chargers at more than 230 Circle K stores in Norway, Sweden, and Denmark.
  • Canada announced a ban on products from Huawei Technologies and ZTE Corp from Canada’s 4G and 5G networks. I suspect this decision will have little if any impact on Telus as this decision has been long awaited and Telus would have planned accordingly. Further, Telus has been collaborating with European companies Ericsson and Nokia to build out their 5G infrastructure since 2020.

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

No quarterly reports this past week.

Portfolio 3

Portfolio 3 for the week ended May 20, 2022: DOWN Red Down Arrow

  • Enghouse Systems (TSX:ENGH) announced it will renew its normal course issuer bid to buy for cancellation up to 3 million common shares, or 7% of the publicly listed float, pushing its shares almost 3% higher. Another shareholder friendly action, as witnessed by the rise in share price.
  • Shopify (TSX:SHOP) merchants can now receive payment in more than 20 cryptocurrencies thanks to Shopify’s new partnership with Crypto.com.

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

No quarterly reports this past week.

 

The week ending May 13, 2022

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If the markets were Clubber Lang, their prediction for 2022 would have been “Pain!”.

My prediction? Pain!

And so far, pain it has been with the S&P 500 off to its worst start to a year since 1939. Over $10 trillion has been erased from American stocks alone. The Nasdaq Composite Index alone is down 25% in 2022 and well below the official -20% bear market threshold, the S&P 500 index is closing in on the bear market threshold (down 20% or more) and the Dow Jones Industrial Average and Toronto Stock Exchange are both in market corrections (down 10% – 20%). For those with a ten year or more time horizon, however, it is business as usual. Stick with your investment plan (you do have a plan, right?).

Rather than dwelling on the pain of 2022, I am going to talk about the conditions I look to avoid when selecting companies to own. Last week I talked about tailwinds that can accelerate the growth of companies when looking for investment opportunities. Headwinds are the opposite of tailwinds. They are unseen forces that drive down growth and earnings of companies. Obviously, you want to avoid companies with their own unique headwinds, but there are other headwinds you cannot avoid. These headwinds are the ones I am going to talk about today.

Headwinds

Unfortunately for us investors, in 2022 the markets in general have been facing the opposite of tailwinds – headwinds. There has been no shortage of headwinds facing the economy and the stock market for a while now. At the end of 2021, investors were concerned about how COVID-19 and its numerous variants would impact the economy. They were also worried about rising inflation and how it would inevitably lead to higher interest rate which would cut into revenues as companies are forced to pay more to service their debt. More money to pay down debt mean less money to grow the company and earnings. In 2022, another headwind was added to Covid – 19 and inflation concerns – the Russian invasion of Ukraine.

The Covid-19 pandemic continues to impact the global economy. In North America we are learning to live with it but in China many cities are under lockdown. Currently in China, people are forced to stay home, and factories sit idle, unable to produce many of the parts global industries rely on. This leads to ongoing supply chain issues, a phrase we have become all too familiar with over the last two years. In a nutshell, fewer workers lead to higher demand for workers, which leads to higher wages to attract workers. As well, fewer components mean more demand for those components and more demand leads to higher prices for those components. Higher wages and higher materials costs combine for higher prices for the finished products. Leading to inflation.

Both the Bank of Canada (BoC) and the US Federal Reserve (the Fed) aim for an Inflation rate of 2 – 3%. However, the inflation rate in Canada is above 6% and, in the US, its over 8%. In an effort to drive down inflation, the BoC and the Fed have both become aggressive in their respective fights to drive inflation back to the target rate. This leads to our next headwind – rising interest rates.

One of the tools the central banks (the BoC and the Fed) use to fight inflation is to raise interest rates. Already this year we have seen rate hikes of .25% and .5% in both countries, and both central banks have indicated they could keep hiking in .5% increments until interest rates reach 2%. The higher the interest rates, the more money is required to pay down debt and loans. If you have any form of debt, you should already be experiencing higher debt payments. This is the same for companies with high levels of debt. The additional cash to service their debt could have been used to grow the company. In the case of high growth companies like technology companies, this slows their growth. When high growth companies do not create high growth, their share price gets hammered, as we are seeing in 2022 (and as my Portfolios can attest).

If Covid-19, inflation, and higher interest rates are not enough, the Russian invasion of Ukraine further disrupted energy and food supplies, adding to inflationary and supply chain problems. Russia is the third largest producer of oil, second largest producer of natural gas, and third largest wheat producer. Ukraine is the seventh largest producer of wheat. With these two major suppliers removed from the supply system (Russia due to sanctions, Ukraine busy defending itself), we are already experiencing higher food and energy costs. Not only are we seeing higher prices at the gas pumps, but we are also seeing higher prices in almost everything we consume thanks to higher production costs and transportation costs to get those products to market. Higher energy costs and higher food costs only add to inflation.

Finally, a recent headwind we are now seeing is irrational investor psychology. With the markets in a downdraft since the start of 2022, investors are simply selling to get out. They are ignoring companies that are performing well and selling their shares simply because the market is declining. This is irrational. People cannot wait for Boxing Day sales or Black Friday sales, because prices are lower. However, when the stock markets decline, investors unload their shares even though they know that over time the market goes up. This is one of the few times where people do not want to buy when items go on sale.

So, there you have it, five headwinds currently battering the stock market. As with all market declines, these will pass, and the markets will resume their march higher. There is nothing we can do about it but ride out the storm.

For now, lets take a look back at the week that was….

Weekly Market Review

Monday: The week got off to a rocky start with all four major North American Indexes. In Canada, the resource heavy Toronto Stock Exchange Composite Index (TSX), ended at its lowest level since July 2020 as the Canadian Energy and Basic Materials (includes mining and fertilizer companies) sectors fell 7.1% and 5.6%, respectively.

In the US, the S&P 500 Index (S&P) fell 3.2%, the Dow Jones Industrial Average (DJIA) declined 2%, and the Nasdaq Composite Index (Nasdaq) tumbled down 4.3%. Fears of future interest rates caused investors to dump shares in technology companies. The technology heavy Nasdaq closed at its lowest price since November 2020. All the S&P sectors suffered losses today with Technology and Energy sectors leading the way down.

Tuesday: Quite the roller coaster ride for each of the Indexes today – up, down, up, down. In Canada, the TSX fell, ending the day at its lowest level since July 2021 and approaching a drop of 10% since its March all time high.

In the US, the DJIA stumbled while the S&P and the Nasdaq each inched into positive territory. The big technology companies recovered after Tuesday’s selloff, but investors are waiting for the US’s Consumer Price Index (CPI) report, due Wednesday, to see if inflation is slowing down.

Wednesday: The US CPI report indicated inflation growth slowed in April but will stick around for longer than anticipated. The CPI rose .3% in April, bringing the 12 months through April to 8.3%. As a result, the US Fed is likely to remain aggressive in its fight to get inflation under control (between 2 – 3% is the target, definitely not the current 8%). Since the Canadian and US economies are so tightly tied together, its highly likely that Canada will see a similar rise in inflation. As a result, the Bank of Canada (BoC) will continue to raise interest rates as it tries to reign in inflation in Canada.

Thanks to the higher CPI numbers, all four Indexes declined as investors anticipate higher interest rates. The TSX officially joined its American cousins in ‘correction’ territory (down more than 10% since its March 2022 high). The bright spot for the TSX was Energy climbed as the price of oil rose, but it was not wrought to offset the losses of the interest rate sensitive high growth companies.

In the US, the DJIA posted a fifth consecutive loss, the Nasdaq had another 3+% loss for the second time this week, and the S&P slowly moves towards a ‘bear’ market (down over 20 from recent high). As in Canada, the high growth sectors Consumer Discretionary and Technology fell the hardest while a surge in Energy and Basic Materials stocks limited the losses. Next up is the Producer Price Index (PPI).

Thursday: Another day, another ride on the market rollercoaster. The Nasdaq was the only Index to record a gain for the day but on the bright side, all four Indexes were moving higher when the trading day ended. The primary culprit was the Producers Price Index report indicating inflation has topped out but will hang around longer than anticipated. Investors are expecting additional .5% throughout 2022 by the US Fed and BoC.

The TSX notched its sixth consecutive loss and ended the day down 10.8% from its record high on March 29, putting the TSX in a ‘market correction’. Meanwhile, in the US, the S&P is staring down a bear market. In an interesting side note, the Canadian Technology sector gained ground and was best sector on the TSX and the S&P Technology sector declined and was one of the worst performing sectors. Odd, considering they usually move in the same direction.

Friday: The US’s federal Reserve chairman calmed the markets by indicating that bigger rate hikes were off the table for now, sparking a broad rally in beaten-down stocks. But even that was not enough to prevent the S&P and the Nasdaq from a sixth consecutive week of declines, and the TSX and DJIA registered their respective seventh straight losing week. For the S&P, which matched its longest losing streak since 2012, the Nasdaq matched its longest losing streak since 2011, and not to be out done, the DJIA matched its longest weekly losing streak since 2001.

All the Canadian sectors on the TSX, and all the S&P sectors in the US ended the day in the black, led by the Technology, Consumer Discretionary and Energy sector companies in both countries.

The question is, is this another false rally or have the markets bottomed. Only time will tell.

For the week, the TSX was down 2.6%, the S&P fell 2.4%, the DJIA declined 2.1% and the Nasdaq dropped 2.8%.

Weekly Portfolio Review

Another week of declines for all four Indexes but this time the week ended on a positive note with a broad-based rally, led by the Nasdaq’s 3.8% boost on Friday. I am not sure if this is a speed bump on the ongoing journey downward or if a bottom is nearby. Either way, I find myself more optimistic this week than past weeks where a cloud of doom seemed to hang over the marketplace.

As for the three Portfolios, another week another decline. The Portfolios have been falling for so long, it seems like forever, that I have lost track of the weekly declines. However, the strong surge on Friday pulled them back from losses of more than 6% each. Its funny how ‘only’ losing 2 – 3% is now considered a good week but when it good have been worse than 6% I will take the small victory when I can get it. 😊 Thanks to the Friday rally I feel like Ollie the Optimist and am hopeful next week will finally break the losing streak.

Weekly Portfolio & Index performance
Weekly Portfolio & Index performance for the week ended May 13, 2022.

Companies on the Radar

I am currently tight on cash so I remain on the sidelines. If I did have cash, these are the higher growth companies I would be looking:

Or for less volatile companies with reasonable growth:

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended May 13, 2022: DOWN Red Down Arrow

  • Shaw Communications (TSX:SJR.B) planned merger with Rogers Communications (TSX:RCI.B) came to a grinding halt when Canada’s Competition Bureaus announced plans to block the merger. I am of mixed feelings about this. On one hand I agree that Rogers acquisition of Shaw will not help lower mobile charges as Rogers, Bell (TSX:BCE), and Telus (TSX:T) account for almost 90% of mobile phone revenues in Canada. Canada already has some of the highest smartphone bills in the world and the disappearance of a competitor (Shaw) will not help. On the other hand, the share price of Shaw (which is in Portfolio 1) jumped at the initial announcement being essentially flat for a few years. If the merger fails, the share price will likely fall to pre-merger levels, if not lower. So, on a personal level, the acquisition is a good thing, although I would lose the great dividend Shaw has been producing.
  • Rivian (NASD:RIVN) took another hit as Ford (NYSE:F) announced they would be selling their shares in Rivian. Rivian is struggling with supply chain issues limiting their production capacity, which limits their sales, which drags on their ability to generate much needed revenue. However, in their earnings conference call they maintained their target of 25,000 electric pickups and SUVs.
  • Tesla (NASD:TSLA) halted production at its Shanghai plant. It looks like the same supply chain issues which have plagued other vehicle manufacturers has finally caught up with Tesla.

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 $

Bank of Nova Scotia (TSX:BNS) DRIP

US $

Apple Inc. (NASD:AAPL)

Quarterly Reports

GDI Integrated Facility Services Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 10, 2022

  • Revenue for the first quarter of 2022 was $495 million, an increase of $111 million, or 29%, over the first quarter of 2021. Organic revenue growth was 4% and growth from acquisitions was 25%.
  • Net income was $7 million or $0.30 per share compared to $13 million or $0.57 per share in Q1 2021. The decrease in net income is mainly attributable to Canada Emergency Wage Subsidy (CEWS) subsidies recorded in 2021.
  • Board of Directors approved the purchase during the next 12 months up to 500,000 Subordinate Voting Shares, representing approximately 3.6% of the Company’s public float, for the purpose of cancellation.

Copperleaf Technologies Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 10, 2022

  • Revenue of $15.6 million, an increase of 11% over Q1 2021, driven by the increase in new clients and expansion of existing clients.
  • Annual Recurring Revenue as of March 31, 2022, of $38.0 million, a 26% increase from $30.1 million as of March 31, 2021.
  • Net loss of $10.9 million, or $0.16 per share, compared to a net loss of $1.8 million, or $0.11 per share, in Q1 2021.
  • As of March 31, 2022, our Net Revenue Retention Rate was 108%.

Celsius Holdings, Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 10, 2022

  • Revenue of $133.4 million, up 167% from $50 million in the year ago quarter.
  • Gross profit margins of 40.4% compared to 41.1% for the prior year quarter.
  • Net income of $6.2 million compared to $0.392 million in the year ago quarter.
  • Celsius sales growth outpacing the energy drinks category by twenty times.

Nuvei Corporation

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 10, 2022

  • Revenue increased 43% to $214.5 million from $150.5 million.
  • Net income decreased by $23.3 million to $4.5 million compared to net income of $27.8 million, primarily due to a $33.1 million increase in share-based payments to employees who joined the Company as part of acquisitions completed in 2021 and other employee incentive grants.
  • Cash flow from operating activities increased by 23% to $65.7 million from $53.4 million.
  • Anticipating revenues of $217 – $223 million for the second quarter, and revenues of $940 – $980 million for fiscal 2022.

The Trade Desk, Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 10, 2022

  • Revenue of $315 million, up 43% versus the same period last year.
  • Net loss of $15 million compared to a gain of $23 million in the same period last year.
  • Customer retention remained over 95% during the first quarter, as it has for the past eight consecutive years.
  • Anticipating revenues of at least $364 million for the second quarter.

Unity Software Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 10, 2022

  • Record quarter with $320 million in revenue during the first quarter of 2022, up 36% year-over-year.
  • Loss from operations was $171.2 million, or 53% of revenue, compared to loss from operations of $110.9 million, or 47% of revenue, in the first quarter of 2021. These results were impacted by an increase in stock-based compensation expenses.
  • Basic and diluted net loss per share was $0.60, compared to basic and diluted net loss per share of $0.39 in the first quarter of 2021.
  • 1,083 customers each generated more than $100,000 of revenue in the trailing 12 months as of March 31, 2022, compared to 837 as of March 31, 2021.
  • Dollar-based net expansion rate as of March 31, 2022, was 135% as compared to 140% as of March 31, 2021.
  • Revenue outlook of $290 – $295 million for the second quarter; $1,350 – $1,425 million for fiscal 2022.

fuboTV Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 11, 2022

  • Record $236.7 million in total revenue in the first quarter, an increase of 98% year-over-year.
    • Solid year-over-year growth in advertising revenue (up 81% to $22.8 million) and total paid subscribers (up 81% to 1,056,245).
  • Net loss of $140.8 million, up 101% from the same period in 2021.
  • Ended the quarter with over $456 million in cash.
  • North American subscribers up 81% to 1,056 thousand; rest of the world subscribers up 102% to 305 thousand.

Yellow Pages Limited

All currency listed in thousands of CAD dollars

Selected highlights from their first quarter 2022 financial results on May 11, 2022

  • Revenues of $67,789 compared to $73,514 in the same period of 2021.
  • Net income of $14,630 compared to $12,135 in the same period of 2021.
  • The company purchased 448,036 common shares for cash of $6.3 million in the first quarter
  • Declared a dividend of $0.15 per common share, to be paid on June 15, 2022, to shareholders of record as of May 27, 2022.

Rivian Automotive Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 11, 2022

  • Total production for the first quarter 2022 was 2,553 vehicles. We delivered 1,227 vehicles in the first quarter generating $95 million in Revenue.
  • Net loss for Q1 2022 was $(1,593) million as compared to $(414) million for the same period last year.
  • Provide guidance for 25,000 total units of production, $(4,750) million in Adjusted EBITDA, and $2,600 million of Capital Expenditures.

Marqueta, Inc.

All currency listed in thousands of US dollars

Selected highlights from their first quarter 2022 financial results on May 11, 2022

  • Revenue of $166 million in the first quarter of 2022, up 54 percent year-over-year.
  • A 50% increase in gross profit.
  • Net loss of $60,598, up 372% over the same period in 2021. The increase in gross profit was offset by an increase in compensation, benefits, and technology expenses as Marqueta continued its investment in their people and platform.
  • 53% growth in first quarter total processing volume.
  • Provide guidance for revenue growth of 46 – 48%, with a gross margin of 40 – 41%.

Kneat.com, Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 11, 2022

  • Revenues increase 121% year over year to $5.2 million.
  • Annual recurring revenue (ARR) grows 134% to $13.4 million.
  • Gross margin was up 201% to $3.3 million, compared to $1.1 million for the first quarter of 2021. Gross profit margin was 63%, compared to 46% for the first quarter of 2021.
  • Net loss of $3,426,260 compared to a net loss of $4,071,862 for the first quarter of 2021, an improvement of 18%.

Docebo Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 12, 2022

  • Revenue of $32.1 million, an increase of 47% from the comparative period in the prior year.
  • Net loss of $7.0 million, compared to net loss of $5.6 million for the comparative period in the prior year.
  • Grew to 2,947 customers, an increase from 2,333 customers at the end of March 31, 2021.
  • Strong growth in average contract value (“ACV”), increasing from $35,739 as of March 31, 2021, to $43,875 as of March 31, 2022.

AcuityAds Holdings Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 12, 2022

  • Total revenue for the three months ended March 31, 2022, was $23.8 million, a 13.4% decrease year over year. The year over year comparison was primarily affected by an unusually large client campaign in Q1 2021 that was not repeated in Q1 2022.
  • Gross margin for the three months ended March 31, 2022, was 50.0%, compared to 52.3% for the same period in 2021. The decrease was due to mix as self-serve revenues increased as a percentage of overall revenue.
  • Net loss for the three months ended March 31, 2022, was $4.5 million, compared to net income of $1.4 million for the three months ended March 31, 2021. The first quarter loss was mainly due to non-cash charges (depreciation and amortization, share-based compensation, and foreign exchange loss) Operating cash flow for the three months ended March 31, 2022, was $1.8 million, compared to $6.2 million for the same period in 2021.
  • On March 31, 2022, the Company had cash and cash equivalents of $99.5 million, compared to $102.2 million as of December 31, 2021. Most of the decrease was related to foreign exchange movements in the quarter, which, after the quarter, has been reversed.

Algonquin Power & Utilities Corp.

All currency listed in US million dollars

Selected highlights from their first quarter 2022 financial results on May 12, 2022

  • Revenue of $735.7, an increase of 16% compared to the first quarter of 2021.
  • Net earnings attributable to shareholders of $91.0 an increase of 555% compared to the first quarter of 2021.
  • Approved a 6% dividend increase from a total annualized dividend of $0.6824 per common share to a total annualized dividend of $0.7233 per common share.

WELL Health Technologies Corp.

All currency listed in thousands of CAD dollars

Selected highlights from their first quarter 2022 financial results on May 12, 2022

  • Record quarterly revenues of $126.5 million in the first quarter representing a 395% year-over-year (YoY) increase compared to the first quarter in2021, catapulting the Company to over $500 million annualized revenue run-rate. Revenues reflected accelerating organic growth to 15% on a YoY basis.
  • Reported a net loss of $2,310 in the first quarter, compared to a Net Loss) of $4,181 in the same period in 2021.
  • Since March 31, 2022, purchased and subsequently cancelled 50,000 Shares, at an average price of $4.85 on the TSX.
  • Increasing guidance for 2022 annual revenue to exceed $525 million, from the previous guidance of over $500 million in annual revenue.

Portfolio 2

Portfolio 2 for the week ended May 13, 2022: DOWN Red Down Arrow

Kneat.com (TSX:KSI) had a very good first quarter with increased revenues, increased annual recurring revenues, improved gross margin and managed to reduce their net loss by $600,000. They also had a number of wins on the business side in the first quarter, including selection by a European National Health Service to provide their laboratory equipment validation management solution; selected to provide enterprise platform to top ten biopharmaceutical company; signed a leading Canadian generics pharmaceutical manufacturer; and signed the U.S. subsidiary of one of the world’s top 15 consumer-packaged-goods companies.

Disney (NYSE:DIS) had a quietly good earnings report. All eyes were on Disney to see if their streaming service Disney+ would follow in Netflix’s footsteps and report declining subscribers. Not only did Disney report a stronger than expected subscriber count, up 7.9 million subscribers from the previous quarter to bring the total to 138 million subscribers, but they are also increased the average revenue per user. They reported they were on target for their goal of 230 – 260 million subscribers by 2024. However, away from the spotlight was news that Disney theme parks generated more money than pre pandemic levels with fewer guests. After 2 years of shutdowns, people are eager to travel and are opening up their wallets when they visit the House of Mouse. As Covid-19 restrictions are lifted in other parts of the world, expect to see more visitors at Disney’s Hong Kong and Shanghai parks to add to the revenue generated at their North American parks. Overall, I see this as a good earnings report with a lot of promise for the future.

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 $

Bank of Nova Scotia (TSX:BNS) DRIP

Summit Industrial Income REIT (TSX:SMU.UN)

US $

No US$ dividends this past week.

Quarterly Reports

Brookfield Renewable Partners LP

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 6, 2022

  • Revenues of $1,136 million compared to $1,020 million in the same period in 2021.
  • Funds from operations (FFO) of $243 million or $0.38 per unit, an 18% increase on a normalized basis over the same period in 2021.
  • $4 billion of total available liquidity providing significant flexibility to fund growth.
  • View inflation as a tailwind because approximately 70% of their contracts are indexed to inflation and have a largely fixed cost structure with relatively limited exposure to rising labour costs or increasing maintenance capital expenditures.

Zynga Inc.

All currency listed in US dollars

Selected highlights from their third quarter 2022 financial results on May 9, 2022

  • Revenue of $691 million, up 2% year-over-year.
  • Net loss was $25 million, compared to a net loss of $23 million in the year-ago quarter.
  • Online gaming revenue was down 3%, year over year. Advertising revenue was up 24%, year over year.
  • Plans to be acquired by Take Two Interactive (NASD:TTWO) remains on track.

Walt Disney Company

All currency listed millions in US dollars

Selected highlights from their second quarter 2022 financial results on May 11, 2022

  • Revenues for the quarter, $19,249, and six months, 41,068, grew 23% and 29%.
  • Net income for the quarter, $597, and six months, $1,797, down 87% and up 55%, respectively.
  • 7.9 million Disney+ subscribers added in the quarter.

Kneat.com, Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 11, 2022

  • Revenues increase 121% year over year to $5.2 million.
  • Annual recurring revenue (ARR) grows 134% to $13.4 million.
  • Gross margin was up 201% to $3.3 million, compared to $1.1 million for the first quarter of 2021. Gross profit margin was 63%, compared to 46% for the first quarter of 2021.
  • Net loss of $3,426,260 compared to a net loss of $4,071,862 for the first quarter of 2021, an improvement of 18%.

iA Financial Corporation Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 12, 2022

  • Premiums and deposits amounted to $4.4 billion during the quarter, similar to the record achieved for the same period in 2021.
  • Assets under management and administration ended the quarter at $213.9 billion, a year-over-year increase of 6%.
  • Net income attributed to common shareholders of $151 million.
  • Reported diluted earnings per common share of $1.40 compared to $1.61 for the same quarter of 2021.
  • Redeemed and cancelled 108,200 outstanding common shares.

Portfolio 3

Portfolio 3 for the week ended May 13, 2022: DOWN Red Down Arrow

Shopify (TSX:SHOP) went on its own rollercoaster this past week. Continuing its downward journey before reversing course and rebounding 20+% in the last two days. The downward trend of Shopify’s share price continued when Shopify released their first quarter earnings showing a revenue growth rate of 22%, a significant decline from 2021’s stellar first quarter. Shopify announced the purchase of Deliverr, an e-commerce fulfillment company. They also indicated they were prepared to spend up to USD $1 billion over the next three years to build out their fulfillment network.

As for the rest of the companies in Portfolio 3, the week was saved by an end of the week rally from what was shaping up to be one of the worst weeks for Portfolio 3 since I started this blog.

Activity

No significant activity to report this week.

Dividends

Dividends Received this week for the following companies:

No dividends this past week.

Quarterly Reports

Brookfield Renewable Partners LP

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 6, 2022

  • Revenues of $1,136 million compared to $1,020 million in the same period in 2021.
  • Funds from operations (FFO) of $243 million or $0.38 per unit, an 18% increase on a normalized basis over the same period in 2021.
  • $4 billion of total available liquidity providing significant flexibility to fund growth.
  • View inflation as a tailwind because approximately 70% of our contracts are indexed to inflation and have a largely fixed cost structure with relatively limited exposure to rising labour costs or increasing maintenance capital expenditures.

GDI Integrated Facility Services Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 10, 2022

  • Revenue for the first quarter of 2022 was $495 million, an increase of $111 million, or 29%, over the first quarter of 2021. Organic revenue growth was 4% and growth from acquisitions was 25%.
  • Net income was $7 million or $0.30 per share compared to $13 million or $0.57 per share in Q1 2021. The decrease in net income is mainly attributable to Canada Emergency Wage Subsidy (CEWS) subsidies recorded in 2021.
  • Board of Directors approved the purchase during the next 12 months up to 500,000 Subordinate Voting Shares, representing approximately 3.6% of the Company’s public float, for the purpose of cancellation.

Unity Software Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 10, 2022

  • Record quarter with $320 million in revenue during the first quarter of 2022, up 36% year-over-year.
  • Loss from operations was $171.2 million, or 53% of revenue, compared to loss from operations of $110.9 million, or 47% of revenue, in the first quarter of 2021. These results were impacted by an increase in stock-based compensation expenses.
  • Basic and diluted net loss per share was $0.60, compared to basic and diluted net loss per share of $0.39 in the first quarter of 2021.
  • 1,083 customers each generated more than $100,000 of revenue in the trailing 12 months as of March 31, 2022, compared to 837 as of March 31, 2021.
  • Dollar-based net expansion rate as of March 31, 2022, was 135% as compared to 140% as of March 31, 2021.
  • Revenue outlook of $290 – $295 million for the second quarter; $1,350 – $1,425 million for fiscal 2022.

goeasy Ltd.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 11, 2022

  • Revenue of $195 million, up 46%.
  • Net income in the first quarter was $26.1 million, compared to $112 million in the same period of 2021. In the first quarter of the prior year, the Company recorded an after-tax unrealized gain on investments of $75.8 million, while in the current period the Company recorded an after-tax unrealized loss on investments of $15.2 million.
  • After adjusting for these non-recurring and unusual items on an after-tax basis, including $2.4 million in amortization of acquired intangible assets, adjusted net income was $45.8 million, up 25% from $36.7 million in 2021.
  • Return on equity during the quarter was 13.5%, compared to 90.1% in the first quarter of 2021. After adjusting for non-recurring and unusual items, adjusted return on equity was 23.8% in the quarter, compared to 29.5% in the same period of 2021.
  • Total assets were $2.69 billion as of March 31, 2022, an increase of 67% from $1.61 billion as of March 31, 2021.
  • Approved a quarterly dividend of $0.91 per share payable on July 8, 2022, to the holders of common shares of record as at the close of business on June 24, 2022
  • Net customer growth during the quarter of 7,120.

Fortuna Silver Mines Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 11, 2022

  • Sales of $182.3 million, an increase of 55% from the $117.8 million reported in the same period in 2021.
  • Net income of $27.0 million, compared to $26.4 million reported in the first quarter 2021.
  • Gold and silver production of 66,800 ounces and 1,670,128 ounces, respectively. An increase of 93% and a decrease of 13% respectively compared to the first quarter of 2021.

Kneat.com, Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 11, 2022

  • Revenues increase 121% year over year to $5.2 million.
  • Annual recurring revenue (ARR) grows 134% to $13.4 million.
  • Gross margin was up 201% to $3.3 million, compared to $1.1 million for the first quarter of 2021. Gross profit margin was 63%, compared to 46% for the first quarter of 2021.
  • Net loss of $3,426,260 compared to a net loss of $4,071,862 for the first quarter of 2021, an improvement of 18%.

AcuityAds Holdings Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 12, 2022

  • Total revenue for the three months ended March 31, 2022, was $23.8 million, a 13.4% decrease year over year. The year over year comparison was primarily affected by an unusually large client campaign in Q1 2021 that was not repeated in Q1 2022.
  • Gross margin for the three months ended March 31, 2022, was 50.0%, compared to 52.3% for the same period in 2021. The decrease was due to mix as self-serve revenues increased as a percentage of overall revenue.
  • Net loss for the three months ended March 31, 2022, was $4.5 million, compared to net income of $1.4 million for the three months ended March 31, 2021. The first quarter loss was mainly due to non-cash charges (depreciation and amortization, share-based compensation, and foreign exchange loss) Operating cash flow for the three months ended March 31, 2022, was $1.8 million, compared to $6.2 million for the same period in 2021.
  • On March 31, 2022, the Company had cash and cash equivalents of $99.5 million, compared to $102.2 million as of December 31, 2021. Most of the decrease was related to foreign exchange movements in the quarter, which, subsequent to the quarter has been reversed.

 

The week ending May 6, 2022

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With the markets maintaining a downward trajectory its hard to stay engaged in investing and it can be downright depressing. I know I am not following the markets as much as in the past because its discouraging seeing my money disappear. This week, rather than talk about the market, I have decided to talk about what one of the things I look for when searching for companies to own – tailwinds.

Tailwinds

If you have ever flown, you have probably heard the terms headwinds and tailwinds. Tailwinds propel a plane forward faster, helping them burn less fuel and possibly arriving at their destination sooner. Headwinds slow the plane down, causing it to burn more fuel and possibly arriving late at their destination. In investing, tailwinds are conditions or trends that will continue through economic ups and downs and help boost a company’s revenues, profitability, and share price. Headwinds, on the other hand, function as a drag on a company and can slow down or even cause growth to decline. Obviously, you want to invest in companies that are benefiting from one or more tailwinds and avoid headwinds as much as possible. Unfortunately, some headwinds you cannot avoid. Let’s take a look at how these ‘winds’ can impact your wealth generation plans. This week I am going to talk about how I have used tailwinds when selecting companies to invest in.

The tailwind is your friend, an even better friend when you can ride multiple tailwinds.

When I got back into investing in 2018, before I started looking for companies to invest in, I looked for tailwinds, or industries that had trends that could boost a company’s earnings and share price. Once I identified a few tailwinds, I looked for the best companies to take advantage of those tailwinds. If the company was riding more than one tailwind, all the better.

One of the first tailwinds I came across was the demand for chips (of the silicon variety, not the potato kind). Cloud computing was and remains all the rage, artificial intelligence was and continues to improve and expand, the growing demand for electric and autonomous vehicles, the rollout of 5G networks, and the metaverse is supposedly the next big thing (each of these can be seen as a tailwind). Rather than try to pick a top company in each area, I focused on what they had in common – semiconductors, or chips. With that in mind I went looking for semiconductor companies. I ended up investing in Nvidia (NYSE:NVDA), Skyworks Solutions (NASD:SWKS) and Lattice Networks (NASD:LSCC). The tailwinds behind the semiconductor industry are tremendous and all three companies have done very well, and I expect them to continue to ride the numerous tailwinds that drive the demand for semiconductors.

Another industry that has quietly picked up a tailwind is cybersecurity. Cybersecurity was on my radar but not really front and centre. It came to the forefront in mid 2020 when a friend was almost the victim of a computer fraud attack. With increased numbers of people working from home (work from home tailwind) during the Covid-19 pandemic, governments, companies, and individuals suddenly had many more systems to protect. Cyberattacks range from malware to ransomware to state sponsored hacking. The Russian invasion of Ukraine has only heightened the threat of cyberattacks and the need for governments and businesses to up their security game.

After identifying the cybersecurity tailwind, I contacted a friend in the computer security industry to get some insight into the top cybersecurity companies. I decided to become a minority owner 😊 of Crowdstrike (NASD:CRWD) and Cloudflare (NYSE:NET). Crowdstrike has evolved into a cloud-based security platform (there is that cloud trend again, another trend within the cybersecurity trend) with multiple market opportunities. Cloudflare also provides network security solutions, as well as Content Delivery Services (CDN), a geographically distributed group of computer systems which “work together to provide fast delivery of Internet content.” I even started using Cloudflare’s free Virtual Private Network (VPN) client Warp 1.1.1.1 to protect my data when I access the Internet. Both companies continue to ride the tailwind of the need to secure remote workers, within the larger cybersecurity tailwind. So far 2022 has been a rough year for all technology companies, including cybersecurity companies, but the demand for cybersecurity remains.

In summary, I try to identify tailwinds and then find the top companies riding those tailwinds. Great companies will do well in the long run but if they can ride a tailwind or two, they will generate better earnings and their share price will rise higher, faster. Next time I will talk about headwinds which can slow the growth of investments and even cause your portfolio to decline.

Now, let’s see what happened with the markets and the Portfolios this past week …..

Weekly Market Review

Monday: 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), started the day lower before a late afternoon rally by the beaten down big technology companies pushed the three American Indexes into the black, with the TSX ending just under the bar.

Tuesday: All four Indexes went on a bit of a roller coaster ride today, ending the day slightly higher thanks to gains in the Energy, Basic Materials and Financials sectors. In the US, the Federal Reserve (Fed) is in the middle of a two-day meeting where they will set the US interest rates going forward. It is widely expected to be a .5% increase, bringing the rate to 1% (the same as the rate in Canada). What will be of most interest is what the Fed hints at for the rest of the year.

Wednesday: UP! That is the word for the day as all four Indexes ended the day higher. In the US, the big news was the Fed did as expected and increased the interest rate by .5% (the largest raise in 22 years), and similar sized increases are likely to follow throughout the year. Once the fear of a higher-than-expected hike was gone, the US markets rallied at least 2.8% (DJIA). The S&P had its best day since May 18, 2020, with all 11 S&P sectors rising.

In Canada, the TSX joined the rally after the Fed’s interest rate announcement helping all the TSX’s sectors to gaining. In both countries, the Energy sector was the top performer thanks to the European Union announcing plans to phase out imports of Russian oil imports.

Thursday: The bulls that poked their heads out the previous two days got mauled by the bears today. The TSX fell 2.3% and it was the best performer of the four. It was dragged down by Shopify (TSX:SHOP) which fell 14% when it missed its quarterly earnings estimates. The Canadian Utilities and Telecommunications sectors were the only Canadian sectors to scratch out a gain on the day.

In the US, it was abroad selloff as all eleven S&P sectors declined, erasing gains from the previous two days as the three American Indexes fell a minimum 3% with the Nasdaq dropping nearly 5%, and the DJIA lost 1000 points. The fear of additional interest rates hikes investors to head for the hills, regardless of earnings reports.

Friday: Following up on Star Wars’ “May the Fourth be with you,” it was Revenge of the Sixth today. 😊 Each of the four Indexes posted another day of losses. Fears of a .75% interest rate hike by the Fed is causing investors to dump Technology companies. Despite gains in the Energy sector (thanks to higher oil prices), declines in the Technology sectors on both sides of the border dragged down the TSX in Canada and the S&P, DJIA and Nasdaq in the USA. The TSX fell for the sixth straight week, while the Nasdaq and the S&P posted their fifth week of losses. For the S&P it was its longest run of losses since 2011.

For the week, the TSX was down .6%, the S&P declined .2%, the DJIA dropped .23%, and the Nasdaq fell 1.54%.

Weekly Portfolio Review

The market giveth, the market taketh away. The share prices of companies move up, they move down, often faster than they go up. Even my best companies are not immune from major selloffs and the resulting drop in share price. There is nothing I can do about this. This week was a perfect example with the Indexes rising at the start of the week and then falling sharply to end the week.

As for the Portfolios, another down week. Given the end of the week sell off, my only surprise is Portfolio 2 had the biggest decline. I suspect the main culprit is the 15% drop of MongoDB (NASD:MDB).

Weekly Portfolio & Index performance
Weekly Portfolio & Index performance for the week ended May 6, 2022.

Companies on the Radar

Given the current market conditions, I have decided to sit on the sidelines and do …. nothing. It is hard to get excited about investing when everything is down. It seems the markets are taking one step up and two or three steps back. Its tough enough watching the Indexes fall daily but seeing recent additions to Portfolios fall is adding insult to injury. It feels like I am making money disappear. For me, mentally, its easier to do nothing.

Once the market bottoms and strings together a week or two of upward movement, these are the companies I will be looking at for higher growth potential companies:

  • Crowdstrike
  • Cloudflare
  • The Trade Desk (NASD:TTD)

Or for less volatile companies with reasonable growth:

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended May 6, 2022: DOWN Red Down Arrow

Despite Portfolio 1 being down over 25% in 2022, I have discovered that the bulk of the losses are from the American companies. A year ago, I was wondering if I owned too many Canadian companies. Now I am glad I stayed diversified across the two countries.

Lesson: Maintain a level of diversity suitable for your risk level. I am diversified across sectors, industries, countries, dividend and growth stocks.

  • It was a busy week for the European Union (EU) anti trust regulators. On one front, Apple was charged with restricting third party access to the technology used in the Apple mobile wallets. Apple could receive a fine of up to 10% of its global turnover or USD $35 billion based on revenue in 2021. In a separate case, Alphabet (NASD:GOOGL) has asked the EU to rescind a USD $1.6 billion fine for abusing its dominance in online search to hinder online search rivals.
  • Sea Limited’s (NYSE:SE) shopping app Shopee received official approval from Brazil’s central bank to operate as a payment institution. This should help Shopee further penetrate the Brazilian market where Shopee is one of the most downloaded apps. After backing out of their expansion to France and India, it is great to see the company make some headway outside their southeast Asian home turf.
  • Nvidia has agreed to pay a $5.5 million fine for failure to disclose to investors a sizable portion of 2018 revenue growth for its gaming chips came from crypto miners.
  • Berkshire Hathaway hosted their annual general meeting for the first time since the onset of the Covid-19 pandemic. Over 50,000 people made the pilgrimage to Omaha to hear firsthand from investing legends Warren Buffet and Charlie Munger. Buffett is 91 and Munger is 98 so there may not be many more appearances by them at future Berkshire annual general meetings. Buffet assured shareholders the culture they have established is baked into Berkshire. He also revealed Berkshire had invested more than US $50 billion in the market so far in 2022.

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 $

Toronto-Dominion Bank (TSX:TD) DRIP

US $

No US$ dividends this past week.

Quarterly Reports

CargoJet Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 2, 2022

  • Revenues for the quarter were $233.6 million compared to first quarter 2021 revenues of $160.3 million, up 45.7% compared to the same period in 2021.
  • Net loss for the quarter was $56.4 million (net income of $30.4 million excluding warrant valuation loss) compared to net income of $89.4 million in 2021 (net income of $7.5 million excluding warrant valuation gain).
  • The company is authorized to purchase up to $15,500,000 of its Shares during the twelve-month period commencing May 4, 2022 and ending May 3, 2023.
  • Approved a 10% increase to its quarterly dividend bringing the next quarterly dividend in June 2022 to $0.2860 per share.

TMX Group Limited

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 2, 2022

  • Revenue of $287.1 million, up 14% from $252.0 million in Q1/21, including $33.0 million from acquisition of voting control of BOX on January 3, 20221.
  • Net income attributable to equity holders of TMX Group in Q1/22 was $267.4 million, compared with a net income attributable to equity holders of TMX Group of $96.4 million for Q1/21.
  • Declared a dividend of $0.83, payable on June 3, 2022, to shareholders of record at the close of business on May 20, 2022.

Lattice Semiconductor Corporation

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 3, 2022

  • Revenue increased 30% compared to Q1 2021 and 6% compared to Q4 2021.
  • Gross margin of 67%.
  • A year-over-year increase in net income of 92% on a GAAP basis. Net Income improves to $0.26 per diluted share for Q1 2022, compared to $0.13 for Q1 2021.

Viemed Healthcare Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 3, 2022

  • Net revenues attributable to the Company’s core business for the quarter ended March 31, 2022, were $30.2 million, a new Company record, and an increase of $4.7 million or 18% over the quarter ended March 31, 2021.
  • Total net revenues for the current quarter were $32.3 million, which included approximately $2.1 million for contact and vaccine tracing services related to the COVID-19 pandemic.
  • Net income before taxes for the quarter ended March 31, 2022, totaled approximately $2.5 million, compared to $1.5 million for the quarter ended March 31, 2021.
  • The Company had a cash balance of $29.2 million on March 31, 2022, and an overall working capital balance of $30.1 million. Total long-term debt as of March 31, 2022, was $4.5 million.
  • The Company repurchased and cancelled 389,878 shares under the share repurchase program during the quarter ended March 31, 2022 and has continued its’ repurchase program during the current quarter.
  • Total revenues for the second quarter of 2022 are estimated to be approximately $32.3 million to $33.1 million.

Skyworks Solutions, Inc.

All currency listed in US dollars

Selected highlights from their second quarter 2022 financial results on May 3, 2022

  • Record second quarter revenue of $1.336 Billion, up 14% year over year.
  • Operating income for the second fiscal quarter was $367.3 million.
  • Diluted earnings per share of $1.86.
  • Declared a cash dividend of $0.56 per share.
  • Expects double-digit year-over-year revenue and earnings growth in the June quarter.

Innovated Industrial Properties, Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 4, 2022

  • Generated total revenues of approximately $64.5 million in the quarter, representing a 50% increase from the prior year’s quarter.
  • Net income attributable to common stockholders of approximately $34.7 million for the quarter.
  • Paid a quarterly dividend of $1.75 per common share on April 14, 2022, representing a 17% increase over the fourth quarter 2021 dividend and a 33% increase over the prior year’s first quarter, equal to an annualized dividend of $7.00 per share.
  • 14% debt to total gross assets, with approximately $2.2 billion in total gross assets, representing a total annual fixed cash interest obligation of approximately $16.9 million, with no debt maturing in 2022 or 2023.

Magnite Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 4, 2022

  • Revenue of $118.1 million for Q1 2022, up 94% from Q1 2021.
  • Net loss of $44.6 million in Q1 2022, for a loss per share of $0.34, compared to net loss of $12.9 million, for a loss per share of $0.11 in Q1 of 2021. An increased loss of 246%.

Andlauer Healthcare Group Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 4, 2022

  • Revenue increased 54.9% to $148.4 million, compared to $95.8 million in the three months ended March 31, 2021.
  • Operating income increased 45.0% to $24.2 million, compared to $16.7 million in the first quarter of 2021.
  • Net income increased 41.9% to $16.5 million, compared to $11.6 million in the first quarter of 2021.

Progeny, Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 5, 2022

  • Record revenue of $172.2 million, reflecting 41% growth over the prior year period.
  • Net income was $5.0 million, or $0.05 income per diluted share, a decrease of 67% as compared to $15.2 million, or $0.15 income per diluted share, reported in the first quarter of 2021.
  • 264 clients as of March 31, 2022, as compared to 179 clients as of March 31, 2021.
  • As of March 31, 2022, the company had total working capital of approximately $180.3 million and no debt.

BCE Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 5, 2022

  • Revenues of $5,850 million, up 2.5% over the same period in 2021.
  • Net earnings of $934 million, up 36.0%.
  • Declared a quarterly dividend of $0.92 per common share.
  • Anticipates revenue growth of 1% – 5% for 2022.

Cloudflare, Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 5, 2022

  • Total revenue of $212.2 million, representing an increase of 54% year-over-year.
  • Net loss was $41.4 million, compared to $40.0 million in the first quarter of 2021.
  • Net cash flow from operating activities was negative $35.5 million, compared to $23.5 million for the first quarter of 2021.
  • Cash, cash equivalents, and available-for-sale securities were $1,725.2 million as of March 31, 2022.
  • Anticipate second quarter revenue of $226.5 – $227.5 million, and total revenue of $955.0 to $959.0 million.

fuboTV Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 5, 2022

  • Record $236.7 million in total revenue in the first quarter, an increase of 98% year-over-year.
  • Net loss of $140.8 million, compared to $70.2 million in 2021, an increase of 101% year over year.
  • Total paid subscribers (up 81% to 1,056,245), total revenue (up 98% to $236.7 million), and advertising revenue (up 81% to $22.8 million)

Datadog, Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 5, 2022

  • Revenue was $363.0 million, an increase of 83% year-over-year.
  • Net income of $9,738 thousand compared to a net loss of $13,068 in the same period in 2021.
  • Cash, cash equivalents, restricted cash, and marketable securities were $1.7 billion as of March 31, 2022.
  • As of March 31, 2022, had about 2,250 customers with Annual Recurring Revenue (ARR) of $100,000 or more, an increase of 60% from 1,406 as of March 31, 2021.
  • Estimating revenue for second quarter of $376 – $380 million, and $1.6 – $1.62 billion.

Telus Corporation

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 6, 2022

  • Revenues of $4,282 million, up 6.4% compared to the same period in 2021.
  • Net income of $404 million, up 21.3% compared to the same period in 2021.
  • Free cash flow of $415 million, up 29.3% compared to the same period in 2021.
  • Quarterly dividend increased to $0.3386 per share, up 7.1 per cent over the prior year.

Portfolio 2

Portfolio 2 for the week ended May 6, 2022: DOWN Red Down Arrow

As mentioned last week, the second Tax Free Savings Account (TFSA) account within Portfolio 2 has somehow managed to show a gain of 10%. This week it was nominally flat despite the carnage in the rest of Portfolio 2, as well as the other Portfolios. There might be something to this blue chip, dividend paying strategy. 😊

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

Fortis Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 4, 2022

  • First quarter net earnings of $350 million, or $0.74 per common share, compared to $355 million, or $0.76 per common share in the first quarter of 2021.
  • Fortis expects long-term growth in it is rate base will support earnings and dividend growth of approximately 6% through 2025.

Guardant Health, Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 5, 2022

  • Revenue of $96.1 million for the first quarter of 2022, an increase of 22% over the corresponding period of 2021.
  • Gross profit was $64.1 million for the first quarter of 2022, an increase of $14.2 million from $49.9 million for the corresponding prior year period. Gross margin was 67%, as compared to 63% for the corresponding prior year period.
  • Net loss was $123.2 million for the first quarter of 2022, as compared to $109.7 million for the corresponding prior year period.
  • 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 CAD dollars

Selected highlights from their first quarter 2022 financial results on May 5, 2022

  • Revenues of $342,380 thousand compared to $202,487 thousand in the same period in 2021, an increase of 69.1%.
  • Net income of $22.9 million, or $0.13 per basic share; a quarter-over-quarter increase of $61.0 million primarily due to a decrease in one-time restructuring costs of $81.8 million.

Telus Corporation

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on May 6, 2022

  • Revenues of $4,282 million, up 6.4% compared to the same period in 2021.
  • Net income of $404 million, up 21.3% compared to the same period in 2021.
  • Free cash flow of $415 million, up 29.3% compared to the same period in 2021.
  • Quarterly dividend increased to $0.3386 per share, up 7.1 per cent over the prior year.

Brookfield Renewable Partners L.P.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 6, 2022

  • Revenues of $1,135 million, compared to $1,020 million in the same quarter in 2021.
  • Net income of $26 million, compared to a net loss of $55 million in the same period in 2021.
  • Almost $4 billion of total available liquidity.
  • Quarterly distribution in the amount of $0.32 per LP unit.

Portfolio 3

Portfolio 3 for the week ended May 6, 2022: DOWN Red Down Arrow

Shopify is the largest holding in Portfolio 3. As Shopify goes, so goes Portfolio 3. Last week I saw a report where an analyst at CIBC Capital Markets updated its target price for Shopify to $460 from $850. With shares currently around CAD $600, this made me think maybe I should sell a few shares and then buy them back when they fall to the target price. This would be a clever way to make some easy money. Alas, it turns out that I missed the currency that was being used in the update. Turns out it was USD $460, not CAD $460. Shopify’s share price is around USD $460. I am glad I doublechecked before making an unforced error as I would have lost a few bucks on the transactions (sell and buy back shares) and if the share price had gone up, I would have lost even more.

Lesson: always know the currency with which you are dealing. Just because both Shopify and CIBC are Canadian companies, does not mean they are talking about Canadian dollars.

Following up on Shopify, I wrote the preceding paragraph mid week, when the market had a 2-day rally and Shopify shares were trading in the CAD $600 range. Two days later, Shopify reported their slowest quarterly growth in seven years. Despite revenues of US $1.2 billion, up 22 per cent from the same period last year, analysts were expecting US$1.25 billion. They also indicated slowing revenue growth with rising costs. Not a good combination. As a result, the share price was hammered and at the end of May 6 Shopify traded at less than CAD $490. I am starting to wish I had sold at CAD $600. ☹

I remind myself the business has not changed, only the share price. It was a good business 6 months ago, its still a good company and the share price will rebound. Nonetheless, this is still painful.

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 $

Toronto-Dominion Bank (TSX:TD) DRIP

US $

No US$ dividends this past week.

Quarterly Reports

Viemed Healthcare Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 3, 2022

  • Net revenues attributable to the Company’s core business for the quarter ended March 31, 2022, were $30.2 million, a new Company record, and an increase of $4.7 million or 18% over the quarter ended March 31, 2021.
  • Total net revenues for the current quarter were $32.3 million, which included approximately $2.1 million for contact and vaccine tracing services related to the COVID-19 pandemic.
  • Net income before taxes for the quarter ended March 31, 2022, totaled approximately $2.5 million, compared to $1.5 million for the quarter ended March 31, 2021.
  • The Company had a cash balance of $29.2 million on March 31, 2022, and an overall working capital balance of $30.1 million. Total long-term debt as of March 31, 2022, was $4.5 million.
  • The Company repurchased and cancelled 389,878 shares under the share repurchase program during the quarter ended March 31, 2022 and has continued its’ repurchase program during the current quarter.
  • Total revenues for the second quarter of 2022 are estimated to be approximately $32.3 million to $33.1 million.

Magnite Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 4, 2022

  • Revenue of $118.1 million for the first quarter of 2022, up 94% from Q1 2021.
  • Net loss of $44.6 million in Q1 2022, for a loss per share of $0.34, compared to net loss of $12.9 million, for a loss per share of $0.11 in Q1 of 2021. An increased loss of 246%.

Shopify Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 5, 2022

  • Total revenue in the first quarter grew 22% to $1.2 billion.
  • Net loss for the first quarter of 2022 was $1.5 billion, compared with net income of $1.3 billion, for the first quarter of 2021.
  • On March 31, 2022, Shopify had $7.25 billion in cash, cash equivalents and marketable securities, compared with $7.77 billion on December 31, 2021.
  • Announced a USD $2.1 billion deal to acquire delivery specialist Deliverr to expand its order fulfillment capabilities.
  • Year-over-year revenue growth to be lower in the first half and highest in the fourth quarter of 2022, as the COVID-triggered acceleration of ecommerce in the first half of 2021 from lockdowns and government stimulus is absent from the first half of 2022.

Cloudflare, Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 5, 2022

  • Total revenue of $212.2 million, representing an increase of 54% year-over-year.
  • Net loss was $41.4 million, compared to $40.0 million in the first quarter of 2021.
  • Net cash flow from operating activities was negative $35.5 million, compared to $23.5 million for the first quarter of 2021.
  • Cash, cash equivalents, and available-for-sale securities were $1,725.2 million as of March 31, 2022.
  • Anticipate second quarter revenue of $226.5 – $227.5 million, and total revenue of $955.0 to $959.0 million.

Brookfield Renewable Partners L.P.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on May 6, 2022

  • Revenues of $1,135 million, compared to $1,020 million in the same quarter in 2021.
  • Net income of $26 million, compared to a net loss of $55 million in the same period in 2021.
  • Almost $4 billion of total available liquidity.
  • Quarterly distribution in the amount of $0.32 per LP unit.

Telus International

All currency listed in US dollars

Selected highlights from their first quarter 2022 results on May 6, 2022

  • Revenue of $599 million, up 19% year-over-year.
  • Net income of $34 million, compared with $3 million in the same quarter last year.
  • Diluted earnings per share (EPS) of $0.13, compared with $0.01 in the same quarter last year.
  • Cash provided by operating activities was $124 million, compared with $36 million in the same quarter of the prior year.
  • Full year outlook for 2022 revenue in the range of $2,550 to $2,600 million, representing growth of 16.2% to 18.5% on a reported basis, and 19% to 21% constant currency growth.

 

The week ending April 29, 2022

Posted on by

Atrox mensis

For those not up on their Latin, that is ‘a terrible month’, or so Google tells me. And indeed, it was. Coming into April, I had such high hopes for the markets. So much for history. April has historically been the best performing month for stocks but this year the S&P 500 Index (S&P), Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) all had their worst monthly drop since the financial crisis in 2008. But how did we get here?

The month started off with the Bank of Canada (BoC) raising its interest rate by .5% to 1% and ended with concerns the BoC may raise interest rates by more than .5% at their next session on June 1. During the month inflation hit a 31 year high in Canada. High inflation leads to high interest rates, leads to my growth companies getting stomped on. ☹ In the US, the consensus seems to be the US Federal Reserve (the Fed) will match the Canadian raise with a .5% interest rate hike. And both central banks are talking about additional rate hikes throughout the year.

The other big headwind is supply chain bottlenecks rearing their heads again. Many companies depend on products or components being made in China but with numerous Chinese cities in lockdown to stop the spread of Covid-19 in that country, those parts are not being manufactured. As a result, many North American companies are unable to fill their orders. For example, General Motors (NYSE:GM) has a huge inventory of nearly complete cars but can’t ship them because they can’t get the components needed to complete the vehicles. As a result, GM failed to meet their own projections for the first quarter. Rivian (NASD:RIVN) is facing the same problem, only they don’t have a successful track record going for them like GM so are finding it even harder to get suppliers to set aside components they need to complete their electric vehicles.

Despite strong earnings of the big technology companies, fear seems to have gripped the markets and investors are indiscriminately selling stocks. When investors were “buying the dip” looking for bargains, they were acting as a brake on the selloffs. With investors sitting on the sidelines, those brakes are no longer there to stop the fall as the markets and individual stocks pass through previous support levels (where share prices have previously stopped their downward movement and moved upward).

At this point, whatever tailwinds are available are easily overwhelmed by tailwinds. Market darling growth stocks that rode tailwinds for the last 2 years and were all the rage have been hammered this year by continuing headwinds. The primary headwind is inflation, but it has many offshoots including: aggressive interest rate hikes by the BoC and the Fed to fight inflation; the fear of higher interest rates on future earnings; and the impact of China’s COVID-19 lockdown on already fragile supply chains. And the cherry on top is the ongoing Russian invasion of Ukraine. On top of the humanitarian crisis caused by the war, the supply of oil, energy, and wheat to global markets has been badly squeezed.

Good riddance April 2022! As April showers lead to May flowers, I hope April’s downdraft has cleaned the deck for a strong May. For now, lets look at the week that was….

Weekly Market Review

Monday: The four major North American Indexes (Toronto Stock Exchange Composite Index (TSX), the S&P, the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq)) started lower but a late afternoon rally saw the three American Indexes end in the black while the TSX fell short of the break-even mark. The TSX was dragged down by declines in the Energy and Materials sectors.

In the US, Twitter (NASD:TWTR) agreed to be bought by Elon Musk, jumpstarting the late afternoon rally in technology companies. Many of the mega cap technology companies – Amazon, Apple (NASD:AAPL), Google parent Alphabet (NASD:GOOGL) and Microsoft (NASD:MSFT) – inched upward ahead or their respective quarterly earning reports later this week.

Tuesday: Headwinds took a toll on the Indexes today, with all four ending lower. The ongoing Russian invasion of Ukraine, Covid-19 lockdowns in China and fears of aggressive interest rate hikes continue to hammer away at the markets. In Canada, the lone bright spot was the Energy sector while the growth sectors Technology and Consumer Cyclicals each fell over 3%.

In the US, the situation was worse with each Index falling over 2% and all 11 S&P sectors ending lower. The Nasdaq suffered its biggest one day drop since September 2020, bringing it to 22% off its all time high in November 2021. Definitely in bear market territory (more than 20% off its high). All the big tech companies mentioned previously fell over 3%. If the big tech companies are hitting their numbers but continue to drop, it will not be pretty for other companies.

Wednesday: Led by the Energy and Materials sectors, the TSX got back on the winning side after 5 consecutive losing days. In the US, the S&P and the DJIA ended in the black while the Nasdaq was just under the bar, ending .01% in the red. The Basic Materials (miners, chemicals, and fertilizers) and the Energy sectors were the top S&P performing sectors.

Thursday: A broad rally lifted all four Indexes into the black today. Strong earnings pushed the Technology sector higher in both Canada and the USA, while higher oil prices lifted the Energy sectors in both countries.

Friday: All four declined today and said goodbye and good riddance to April. For the TSX, it was the biggest monthly decline since March 2020. The difference was the nature of the fall. In 2020, it was steep decline thanks to the onset of Covid-19. This year it keeps slipping lower and lower thanks to higher interest rates in general and in today’s case, unimpressive earnings by Apple and Amazon.

In the US, it was not much better as the US experienced its largest monthly inflation growth since 2005, with the US federal Reserve scheduled to meet next week with a .05% rate increase looming large. The S&P had its largest single day drop since June 2020. The Nasdaq experienced its biggest single day decline since September 2020 and worst month since 2008.

For the week: TSX down 2.0%; the S&P fell 3.3%; DJIA dropped 2.5%; and the Nasdaq declined 3.9%.

For the month: TSX down 5.2%; S&P lost 8.80%; the DJIA declined 4.90%; and the Nasdaq fell 13.26%. Ouch! ☹

Weekly Portfolio Review

Another poor week for the Indexes this past week as fears of aggressive interest rate hike next week and a mixed bag of earning reports from some of the big US companies. The reports in general were OK, it was more the guidance for lower sales growth that caused share prices to fall which in turn led to the Indexes falling.

As for the Portfolios, as I have had the misfortune of saying before, when the Indexes fall the Portfolios are sure to follow. Its frustrating seeing them fall week after week but there is nothing, I can do about it.

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

Companies on the Radar

Given the jittery markets, at this time I am not looking to increase ownership or add new companies to a Portfolio. Once the markets bottom out and start rising these are the companies I am interested in. The first-tier companies have higher growth prospects, while those on the second tier are safer and less volatile.

First tier companies:

Second tier companies:

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended April 29, 2022: DOWN Red Down Arrow

  • Economic impact of the war in Ukraine, grinding supply-chain disruptions, inflation and rising U.S. interest rates all led GM falling short of their own projections made in January. GM also announced an e-Corvette.
  • Apple reported record quarterly revenue of and record profits of . What should have been a strong earnings report, was eclipsed by a disappointing forecast for the rest of 2022.
  • Alphabet reported first-quarter revenue below expectations thanks to slowing growth in its core advertising business. While revenues rose 23% to USD$ 68 billion for the quarter, the growth rate is down from 34% in the same period of 2021.
  • The share price of Pinterest (NYSE:PINS) rose following an earning report that showed a 9% drop in users offset by an 18% increase in revenue and a 28% increase in average revenue per user.
  • Teladoc (NASD:TDOC) Joined the group of companies that benefitted from the Covid-19 pandemic but have so far struggled to maintain upward momentum. In fact, their latest earnings report was an eye opener but for the wrong reason – a write-down of $6.6 billion on their acquisition of Livongo Health in 2020, and increased competition in the telehealth industry. The share price dropped 40%, leaving the share price down 90% from their February 2021 high.
    A few months into the pandemic, I deliberately avoided companies like Peloton (NASD:PTON). I figured the company would decline once the world returned to normal, much like a fitness centre has a surge in January (new year’s resolutions to lose weight) but falls back to normal for the rest of the year. Unfortunately, I did not use the same rationale for telehealth. If I had, I would have realized remote visits would decline as the world adapted and overcame Covid-19. I still think telehealth will increasingly play a role in the medical industry, just not as much as it did during the pandemic. I need to lower my expectations and accept that Teladoc will not grow as fast as it did when it rode the pandemic tailwinds.

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)

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

US $

No US$ dividends this past week.

Quarterly Reports

CN Rail Company

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on April 26, 2022

  • Revenues of C$3,708 million, an increase of C$173 million or 5%, despite lower volumes
  • Operating income of C$1,227 million, a decrease of 8%, and adjusted operating income of C$1,237 million, an increase of 4%.
  • Diluted EPS of C$1.31, a decrease of 4%, and adjusted diluted EPS of C$1.32, an increase of 7%.

Visa Inc.

All currency listed in US dollars

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

  • Net Revenues up 25% to $7.2 billion
  • Net Income up 21% to $3.6 billion
  • Free cash flow of $7,281 million, second quarter year to date

General Motors Company.

All currency listed in US dollars

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

  • Revenue up 10% YoY
  • Net income down to $2.9 billion from $3 billion in the same period in 2021
  • Net income margin down to 8.2% from 9.3% in the same period in 2021

Alphabet Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on April 26, 2022

  • Revenues up 23% to $68 billion
  • Net income down 8% to $16.4 billion
  • Earnings per share fell to $24.62 compared to $26.29 in the same period in 2021
  • Robust growth in Search and Cloud services, up 24% and 43%, respectively
  • Repurchase up to an additional $70.0 billion of its Class A and Class C shares

Upwork Inc.

All currency listed in US dollars

Selected highlights from their third quarter 2022 financial results on April 27, 2022

  • Total revenue grew 24% year-over-year to $141.3 million in the first quarter of 2022.
  • GAAP gross profit was $103.4 million for the first quarter of 2022, or 73% of revenue, which was flat with 73% of revenue in the prior period.
  • GAAP net loss was $(24.7) million in the first quarter of 2022 compared with GAAP net loss of $(7.8) million in the first quarter of 2021.
  • Guiding second-quarter 2022 revenue to be between $147 million and $151 million, which is 20% year-over-year growth at the midpoint. Also providing updated full-year 2022 revenue guidance of between $590 million and $610 million.

PayPal Holdings Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on April 27, 2022

  • Net revenues of $6.5 billion, up 8% over the same period in 2021.
  • GAAP EPS of $0.43 compared to $0.92 in the same period in 2021.
  • Net income of $509 million, down 54% compared to the same period in 2021.
  • Net revenues expected to grow ~9% in second quarter, and 11 – 13% for fiscal 2022.

Pinterest Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on April 27, 2022

  • Revenue grew 18% year over year to $575 million.
  • Net loss was $5 million for the first quarter compared to a net loss of $21.6 million in the same period in 2021. An improvement of 76%.
  • Current expectation is that second quarter revenue will grow around 11% year over year.

Teladoc Health Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on April 27, 2022

  • Revenue increased 25% to $565.4 million, from $453.7 million in the first quarter of 2021.
  • Net loss totaled $6,674.5 million, or $(41.58) per share, compared to $199.6 million, or $(1.31) per share, in the first quarter of 2021. The net loss primarily driven by non-cash goodwill impairment charge of $6.6 billion or $41.11 per share.
  • Guidance for second quarter: revenue $580 – $600 million; net loss per share of $.72 – $.60.
  • Guidance for fiscal 2022: revenue $2,400 – $2,500 million; net loss per share of $43.50 – $43.00.

Roku, Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on April 28, 2022

  • Total net revenue grew 28% year-over-year (YoY) to $734 million.
  • Gross profit was up 12% YoY to $365 million.
  • Net loss was $23.5 million, down 131% YoY.
  • Guidance for second quarter: Revenue of $805 million; Net loss of $109 million.
  • Continue to expect total net revenue growth to be 35% year-over-year

Apple Inc.

All currency listed in US dollars

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

  • March quarter revenue record of $97.3 billion, up 9 percent year over year.
  • Net income for the second quarter of $25 billion compared to $23 billion year over year.
  • Quarterly earnings per diluted share of $1.52.
  • Declared a cash dividend of $0.23 per share of common stock, an increase of 5 percent.

Portfolio 2

Portfolio 2 for the week ended April 29, 2022: DOWN Red Down Arrow

  • While performing the weekly review of Portfolio 2 I noticed the second TFSA account was up 10% since the account was opened in August 2021. This account was created for the purpose of paying off taxes upon sale of an asset a few years down the road. I chose three relatively conservative companies that each generated a dividend and offered varying levels of potential growth. These companies are Brookfield Select Opportunities Income Fund (TSX:BSO.UN) for its 10% dividend (at the time) with limited growth potential but with a 10% dividend (I just want it to not drop); Telus (TSX:T) for its 4.72% dividend (at the time) and decent growth prospects over the long term; and finally, Brookfield Renewable Partners (TSX:BEP.UN) for its 3.00% dividend (at the time) and growth potential over the long term. So far, this account is growing with minimum risk and is much better than having left the cash in a bank account with a .05% interest rate.
  • Increased demand for oil helped TC Energy (TSX:TRP) post a C$ 272 million profit for the first quarter. Much better than the C$ 2.5 billion loss the company posted for the same period in 2021. Surging oil prices resulting from the Russian invasion of Ukraine has caused Canada and the US to increase the volume of oil through TC Energy’s pipelines as both countries look to increase their energy security and provide an alternative energy supply to the European Union.

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

Microsoft Corp.

All currency listed in US dollars

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

  • Revenue was $49.4 billion and increased 18%
  • Net income was $16.7 billion and increased 8% GAAP (up 13% non-GAAP)
  • Diluted earnings per share was $2.22 and increased 9% GAAP (up 14% non-GAAP)
  • The revenue for the business units Productivity and Business Processes, Intelligent Cloud and More Personal Computing were up 17%, 26% and 11%, respectively
  • Returned $12.4 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2022, an increase of 25% compared to the third quarter of fiscal year 2021.

Mitek Systems Inc.

All currency listed in US dollars

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

  • Revenue increased 21% year over year to $34.7 million in a record second quarter.
  • Net income increased 88% year over year to $1.9 million, or $0.04 per diluted share.
  • Cash flow from operations was $7.4 million.

TC Energy Corporation

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on April 29, 2022

  • Net income attributable to common shares of $0.4 billion or $0.36 per common share compared to a net loss of $1.1 billion or a loss of $1.11 per common share in 2021.
  • Declared a quarterly dividend of $0.90 per common share for the quarter ending June 30, 2022.
  • TC Energy remains opportunity-rich and intends to continue expanding, extending, and modernizing their existing natural gas pipeline network.

Portfolio 3

Portfolio 3 for the week ended April 29, 2022: DOWN Red Down Arrow

  • Enghouse Systems Ltd. (TSX:ENGH) announced it will renew its normal course issuer bid to buy up to 3 million common shares, or 7% of the publicly listed float. This is s shareholder friendly move as it reduces the number of people who get a piece of the proverbial pie.
  • Microsoft’s bid to acquire Activision Blizzard (NASD:ATVI) passed another hurdle when Activision Blizzard shareholders approved Microsoft’s bid to buy the video game developer.

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)

US $

No US$ dividends this past week.

Quarterly Reports

Microsoft Corp.

All currency listed in US dollars

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

  • Revenue was $49.4 billion and increased 18%
  • Net income was $16.7 billion and increased 8% GAAP (up 13% non-GAAP)
  • Diluted earnings per share was $2.22 and increased 9% GAAP (up 14% non-GAAP)
  • The revenue for the business units Productivity and Business Processes, Intelligent Cloud and More Personal Computing were up 17%, 26% and 11%, respectively
  • Returned $12.4 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2022, an increase of 25% compared to the third quarter of fiscal year 2021.

Real Matters Inc.

All currency listed in US dollars

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

  • Consolidated revenues of $95.0 million, down 26.3% compared to the same period in 2021.
  • Consolidated Net Revenue of $24.2 million, down 48.2% compared to the same period in 2021.
  • Purchased 0.3 million shares under our normal course issuer bid at a cost of $1.5 million.

 

The week ending April 22, 2022

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Where do you learn about investing?

If you like rollercoasters, especially those with plenty of ups and downs and the occasional big drop, the stock markets performance this past week should be right up your alley. Lots of ups and downs throughout the week, with a steep plunge to end this week’s thrill ride.

After two strong years of growth and all-time highs in numerous stocks and the four major North American stock exchanges (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)), 2022 has given it all back. All three of my Portfolios are down, ranging from 10% to 40%. It is not fun to see the Portfolios shrinking on a weekly basis. It was much more enjoyable in 2020 and 2021 when growth stocks were all the rage. You could hardly pick a bad technology company. Each morning I would check to see how the markets were doing and more often than not, the markets were up. More importantly, the share prices of the companies I owned were climbing higher. Selecting companies was fun and investing was easy. Life was good. 😊

Well, at the start of 2022 the Stock Market gods decided it was time to see who was serious about investing and could take the bad with the good. The fun and easy part of investing that was so plentiful previously has disappeared. I’ve noticed several people on Twitter (NYSE:TWTR) who had been tweeting daily about how well they were doing have gone silent. Of course, they may have abandoned Titter but more likely they are experiencing the ‘hard’ part of investing – the losses. A silver lining of the market correction has been finding out which Twitter accounts are worth following because those that are still tweeting regularly share their experiences and help you make sense of the market. For me, the net result has been that Twitter has become a much more informative resource.

Definitely more luck than brilliant foresight, in 2020 I created my own process for evaluating companies thanks to both Motley Fool Canada and Motley Fool USA presenters. In 2021, I was able to tweak it further thanks to numerous resources including Motley Fool, Twitter, and numerous investing books (for a list of these resources, click here). By running companies through my process before investing and having the mindset that I will become an owner of every company I invest in, I am much more confident that these companies will come through this market correction and be fine. More importantly, despite the current pain, the Portfolios will be start growing again once the correction is over. That being said, I am sure some companies will take longer than others to recover the lost ground and some may not recover.

While I wait for this current downturn to run its course before the markets resume their historic upward march, I am focusing on learning more about investing and how to identify the companies I want own. This correction has brought to light some weaknesses in my process, so I am adjusting my process accordingly. What worked great in 2020 – 2021, is not working in 2022. I am also tweaking the process to better reflect the companies I want to own.

Rather than worry about what I cannot control (the stock market), I am focused on what I can control – growing my knowledge of investing. What about you? What resources do you lean on to improve your investing knowledge and skills? What are you doing during this market correction?

Now let’s look at the roller coaster ride that was last week’s stock markets….

Weekly Market Review

Monday: Another week has gotten off to a rocky start. This time the commodity (Energy and Materials sectors) heavy TSX was able to post a gain for the third straight session. The TSX is one of the few Indexes globally that has done well in 2022 thanks to surging commodity prices.

Meanwhile in the US, the S&P, the DJIA, and the Nasdaq, all ended in the red, despite a late day rally. The S&P Energy and Materials sectors have done well, like their Canadian cousins, but the American Indexes are much more heavily weighted towards growth sectors like Technology and Consumer Cyclicals. Unfortunately, they are also the sectors most impacted by higher interest rates which eat into their future earnings.

Tuesday: A good day in the stock market with all four Indexes ending the day higher. In Canada, investors went bargain hunting in the Consumer Cyclical and Technology sectors, propelling the TSX higher. Pullbacks in the Energy and materials sectors were the only sectors not to finish in the black today.

In the US, all three Indexes had their best days in a few weeks thanks to a broad-based rally. The Energy sector was the only American sector to fall back today. Many of the S&P companies that have recently reported quarterly earnings have beat estimates causing investors push the Indexes higher.

Wednesday: A mixed bag for the Indexes with the DJIA the only Index to end the day higher. In Canada, the TSX was dragged down by the interest sensitive, high growth Technology and Consumer Cyclical sectors. The Canadian inflation rate for March came in at 6.7%, the highest in 31 years, all but confirming future interest rate hikes.

In America, the Nasdaq was the biggest loser thanks to Netflix’s (NASD:NFLX) 35% drop. While Netflix reported higher revenues for the first quarter, it also reported a surprise drop of over 200,000 of subscribers (remember, the market does not like surprises) and expected deeper losses going forward. Other streaming companies and stay at home companies got caught in the Netflix downdraft and saw their share prices fall between 5.5% and 11.3%. Netflix is a perfect example of what happens to high growth companies when they lose their growth slows down or declines. Many of these companies are part of the Nasdaq and S&P Indexes, hence their declines today.

Thursday: Anticipation of aggressive interest hikes on both sides of the border led to investors taking some money off the table, resulting all four Indexes losing ground for the day.

In the US, the US Federal Reserve indicated a .5% interest rate hike is ‘on the table’. Canada has already increased interest rates.25% and another .5% hike in April.

Friday: Fears of aggressive rate hikes hammered the markets today, knocking each Index down at least 2%. The TSX had its largest single day decline since November 2021 and closed at its lowest since March 1, 2022. Every sector on the TSX fell today.

The scene was not much better in the US as the DJIA racked up its biggest one-day loss since October 2020, an extending its weekly losing streak to four. The S&P and Nasdaq were not much better, posting their third straight weekly loss. As in Canada, every sector lost ground today. Next week the biggest American companies by market capitalization report their first quarter earnings. Let us hope there are no negative surprises from Amazon (NASD:AMZN), Apple (NASD:AAPL) , Google parent Alphabet (NASD:GOOGL) and Microsoft (NASD:MSFT) or it could be an ugly week.

For the week ended April 22, 2022, the TSX fell 3.1%, the S&P lost 2.8%, the DJIA declined 1.9% and the Nasdaq dropped 3.8%.

Weekly Portfolio Review

The fear of aggressive interest rate hikes by the Bank of Canada and the US Federal Reserve to cool off high inflation led to a very bad week for the Indexes, which in turn led to a bad week for the Portfolios. What else can I say?

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

Companies on the Radar

After investing in Berkshire Hathaway (NYSE:BRK.B), I have had a bit of an epiphany when it comes to the companies I am interested in. Previously I was focused on adding to large, relatively ‘safe’ companies with strong growth prospects and a bit of a dividend like Nvidia (NYSE:NVDA), Microsoft and Home Depot (NYSE:HD). I was concerned I had too few nontechnology companies that could weather the storm when growth companies were experiencing strong headwinds, such as the current high interest rate environment.

The addition of Berkshire, with its numerous leading American companies, addressed my concern of too few nontechnology companies and added a value-oriented conglomerate to diversify Portfolio 1. With that concern addressed, I am looking at increasing ownership in growth-oriented companies. I am looking at Crowdstrike (NASD:CRWD) and Cloudflare (NYSE:NET) in the cybersecurity field, and The Trade Desk (NASD:TTD) in the digital advertising industry. All have been beaten down this year, are leaders in their respective fields, and should do well once the market recovers.

The usual suspects remain on my radar but are now on periphery in the event of a major event that presents a buying opportunity.

  • Microsoft
  • Apple
  • Home Depot
  • American Tower (NYSE:AMT)
  • Berkshire Hathaway

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended April 22, 2022: DOWNRed Down Arrow

Rivian (NASD:RIVN) is running into major supply issues as suppliers of semiconductors elect to allocate chips to the proven customers rather than new companies like Rivian. Chip manufacturers are concerned new companies like Rivian will not be able to meet their production numbers, causing chips to go to waste, or able to pay their bills.

Tesla (NASD:TSLA) had a great first quarter earnings report, highlighted by a nearly 33% margin. Despite supply chain woes that are dogging other vehicle manufacturers, Tesla seems to be able to secure the components necessary to produce their electric vehicles. Tesla delivered more than 310,000 vehicles in the first quarter, growing revenue 81% compared to the first quarter in 2021. Not bad for a manufacturer! 😊

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) DRIP

Andlauer Healthcare Group Inc. (TSX:AND)

Algonquin Power & Utilities Corp (TSX:AQN) DRIP

BCE Inc (TSX:BCE) DRIP

US $

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

Innovative Industrial Properties Inc (NYSE:IIPR)

Quarterly Reports

Tesla Inc.

All currency listed in US dollars

Selected highlights from their first quarter 2022 financial results on April 20, 2022

  • Quarterly revenues of $18,756 million versus $10,389 million the previous year.
  • $3.3 billion net income compared to $438 million the previous year
  • Earnings per share of $2.86 compared to $.39 for the same period in the previous year.

Pulse Seismic Inc.

All currency listed in CAD dollars

Selected highlights from their first quarter 2022 financial results on April 20, 2022

  • Total revenue was $1.9 million compared to $4.8 million for the three months ended March 31, 2021.
  • Net loss was $2.5 million ($0.05 per share basic and diluted) compared to net earnings of $33,000 ($0.00 per share basic and diluted) in the first quarter of 2021.
  • On March 31, 2022, Pulse was debt-free and held cash of $5.3 million.
  • Approved a quarterly dividend of $0.0125 per share.

Portfolio 2

Portfolio 2 for the week ended April 22, 2022: DOWNRed Down Arrow

Disney (NYSE:DIS) announced Hong Kong Disneyland will reopen on April 21. Another revenue stream comes back online for the Mouse. Meanwhile, in Florida Disneyworld is about to lose its ‘special tax’ status that provided it with a great deal of autonomy. Currently, Disneyworld provides its own firefighting, power, water, and roads services in exchange for relief from state taxes and fees. I do not see a winner in this as Disney will lose its autonomy and Florida state will be responsible for all these services and any other outstanding debt on the district’s books. I am sure Disney will fight this, so the outcome is far from certain. But I am positive of one thing, the lawyers will get paid.

Microsoft and Kraft Heinz (NASD:KHC) signed a deal to help Kraft Heinz migrate to Microsoft’s Azure cloud to accelerate their digital transformation.

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

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 April 22, 2022: DOWNRed Down Arrow

This week Shopify’s (TSX:SHOP) share price dropped over 17% on news Shopify is in talks to buy the start-up shipper Deliverr, and Amazon announced it will allow online sellers to use the Fulfillment by Amazon service on their own websites as well as on Amazon. Typically, vendors’ websites do not provide purchases and shipping from Amazon. If the website is built by Shopify, the vendor would often provide shipping through Shopify’s fulfillment network. If shoppers now have the option on how they want their order fulfilled, this could lead to lower revenues for Shopify. Finally, the overall bearish sentiment of the market (thank you Netflix) is not helping high growth technology companies like Shopify.

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

No quarterly reports this past week.

 

The short week ending April 14, 2022

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Tax double whammy

On April 7, the Canadian government introduced the latest federal budget. Once again, rather than living within its means or taking advantage of natural strengths to fund their pet projects, the government committed to spending more taxpayer money than they take in. Rather than debate the pros and cons of the various components in the budget that will leave less money in your wallet now and in the future, let us look at one short sighted item that impacts us as consumers and as investors.

As part of the budget, the Canadian government announced a retroactive 15% tax on financial and insurance companies that had revenues of more than CAD $1 billion in 2021. Imagine if the government decided to retroactively impose a tax of any amount on your past income. I suspect you would not be too happy. But wait, it gets better. The government also plans to permanently increase the tax rate for banks and insurance companies to 16.5% on income greater than 100 million.

While this makes a good sound bite – make the big companies pay more – in reality it hits us both as consumers of financial services and as investors. A couple of questions immediately come to mind.

First, what are the chances this government will eliminate a tax when it needs money? Governments in general, but this current one especially, likes to tax everything they can get away with. Have you ever known a government to completely drop a tax? As long as this government needs money, I think we will see some variation of this tax on top of the annual 16.5% tax banks and insurance companies must pay going forward.

Second, what are the chances the banks absorb this tax rather than pass it through to us consumers? Canada’s big five banks did not get big by absorbing costs. This tax will be passed through by raising existing bank charges or introducing new fees. In a sense, this new bank tax will be paid by us, not the banks,

Now, lets look at how these taxes will impact us as investors. Banks and insurance companies are mainstays of many portfolios and pensions because of their stability and their ability to pay and grow their dividends. These dividends come from the revenues these companies generate. The more revenues, the greater the dividends. When banks do well, shareholders benefit in the form of increasing dividends. With these new taxes, money that would normally be used to pay and increase dividends will now go to the government instead of shareholders. I do not see banks decreasing their dividends, but I also suspect dividends will not grow at the same rate they grew in the past.

At the end of the day, these new bank taxes will impact us as consumers in the form of higher bank fees as banks ‘pass through’ this tax. As investors, money that would have gone to shareholders, in the form of increased dividends, will now go to the government. In other words, this tax on big banks sounds good but it is us who will pay the tax, not the banks.

Enough about taxes, lets see what happened in the markets this past week…..

Weekly Market Review

Monday: The short week started with a decline as all four major North American Indexes opened with losses. On the Toronto Stock Exchange Composite Index (TSX), Financial and Materials sectors gains were not enough to overcome the drop in the price of oil and the resultant drop in Energy companies. Oil fell on concerns of slowing demand in China thanks to lockdowns caused by the spread of the latest covid-19 variant.

In the US, the Dow Jones Industrial Average (DJIA) had the ‘best’ day of the American Indexes, only falling 1.2%. On the S&P 500 Index (S&P), all 11 sectors in ended in the red, with the US Energy sector the biggest loser thanks to the fall in the price of a barrel of oil. Bringing up the rear or leading the charge downward depending on your point of view, the Nasdaq Composite Index (Nasdaq) had the biggest decline, led downward by the numerous Technology sector and interest rate sensitive growth stocks on the Exchange.

Tuesday: Despite morning advances, the Indexes extended their respective losing streaks for another day. It was the second day in a row for the TSX. Gains in the Energy and Materials sectors were not enough to overcome declines in all the other Canadian sectors. In America, Energy, Materials and Utilities were the only US sectors to post an increase.

The primary catalyst for the declines was a higher-than-expected US Consumer Price Index (CPI) which rose 8.5% in March, the highest in 40 years. Much of the CPI increase was a result of higher prices at the gas pumps which forced the cost of just about everything else higher. In Canada, on top of the high CPI in the US, the Bank of Canada is expected to announce a .5% interest rate hike tomorrow.

Wednesday: The losing streaks ended abruptly today with all four Indexes advancing. Is this a hiccup in a downward trend or the start of a move upward? We will see tomorrow.

The TSX continues to be driven by the Energy and Materials sectors. In the US, the Consumer Discretionary and Technology sectors led today’s rally. The big US banks kicked off first quarter earnings today, with JP Morgan leading off. The bank reported a 42% drop in quarterly profits and lower profits going forward. I am guessing a significant cause was tied to the Russian invasion of Ukraine.

In Canada, the Bank of Canada raised its interest rate by 50 basis points, or .5%, on Wednesday in an attempt to reverse soaring inflation. Another half dozen or so hikes are expected throughout the next year, with increases ranging from .25% – .5%. Canada has not seen inflation this high since the early 1990s. Following on that announcement, Canada’s big five banks will raise their prime lending rate to 3.2%, the highest it has been in two years, effective Thursday.

Thursday: In Canada, a good day for the Energy and Materials sectors pushed the TSX into the black, overcoming a decline in the Technology sector that was the result of higher interest rates announced Wednesday. Cash used to pay interest is cash that cannot be used to fund growth.

It is looking like Wednesday gain was a hiccup as all three American Indexes declined, led downward by the technology heavy Nasdaq. Thanks, to higher oil prices, the Energy sector was the only sector to end up on the positive side of the ledger.

The Energy sectors in both countries were driven higher on rumours the European Union might initiate a ban on Russian oil imports.

For the week, the TSX was down .1%, the S&P declined 2.1%, the DJIA fell .8% and the Nasdaq fell 2.6%.

Weekly Portfolio Review

Down, down, down, down. That is the direction for each of the Indexes this past week. Once again, the invasion of Ukraine and its impact on global supplies of oil and wheat; the continuing fluctuation in the demand for oil and the resulting price swings; the impact of higher oil prices on fuel and food leading to surging inflation in both countries; and the likelihood of higher and more interest rate hikes. All these issues put downward pressure on the Indexes.

With the Indexes falling, there was only one likely outcome for the Portfolios – down. There is nothing I can do to change the direction of the Indexes, so I must walk the walk of patience and discipline. Not particularly exciting but the alternative will increase costs and probably cause more damage to the portfolios than doing nothing.

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

Companies on the Radar

All quiet on the radar front. With limited cash, patience is the key in these falling markets. The usual suspects remain at the top of my list:

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended April 15, 2022: DOWNRed Down Arrow

  • Tales of Elon: No, its not a movie. For Tesla (NASD:TSLA) CEO and founder Elon Musk it has been a busy few weeks dealing with Twitter (NASD:TWTR). After announcing a 9.2% stake in Twitter the previous week, he was offered and accepted a seat on Twitter’s Board of Directors as an activist investor. Early this past week, he abruptly declined the seat on the Board (I suspect as a Director, his fiduciary responsibilities would prevent him saying/tweeting things that could run afoul of the Securities Exchange Commission). Late this past week, Musk announced a hostile takeover bid of Twitter for USD $41.4 billion, or $54.20 per share. On Friday, Twitter adopted a ‘poison pill’ to prevent this and any other hostile takeover bids. Good to see the CEO of Tesla spending so much time on another company that will not add value to Tesla. I expect we will hear more from Mr. Musk in the coming days.
  • PayPal (NASD:PYPL) announced its Chief Financial Officer John Rainey will be stepping down. Walmart (NYSE:WMT) subsequently announced that Mr. Rainey will become its CFO effective June 6, 2022. This is a big move for Rainey, considering that he has been with PayPal for almost 7 years, and leaving a high growth technology company for a more traditional company (although Walmart does utilize a lot of cutting edge technology).
  • Alphabet (NASD:GOOGL) is investing USD $9 billion in data centres and office space for its flagship company Google.

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

Shaw Communications Inc.

All currency listed in CAD dollars

Selected highlights from their second quarter 2022 financial results on April 13, 2022

  • Consolidated revenue decreased by 2.0% to $1.36 billion, compared to the prior year
  • On a year over year basis, net income decreased 9.7% to $196 million
  • Free cash flow for the quarter of $217 million decreased 12.5% compared to the prior year.

Portfolio 2

Portfolio 2 for the week ended April 15, 2022: DOWNRed Down Arrow

Noting to report for Portfolio 2 other than Brookfield Infrastructure Corp (TSX:BIPC) was the only company to post a gain this past week. Of the other companies in the portfolio, 14 were down and another 5 were essentially flat.

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 April 15, 2022: DOWNRed Down Arrow

Two announcements from Shopify (TSX:SHOP) to start the past week. The first announcement was a 10 for 1 share split, upon approval by shareholders. This will not change the value of the company (share price x shares outstanding) although it will make shares seem cheaper which will appeal to retail investors. While this does not change my ownership stake in the company, it does make it mentally easier for me to sell a few shares for diversification purposes. For example, selling 5 shares when I own 20 shares feels worse than selling 50 shares if I had 200 shares. In the first situation, I would have ‘only’ 15 shares remaining, while in the second case, I would have 150 shares left. I know it is a mental thing, but I would rather have 150 shares than 15 shares, even though the dollar value is the same.

The other announcement was a new class of shares – “Founder shares” – for founder and CEO Toby Lutke. The ‘founder shares’ will have a variable number of votes that when combined with Mr. Lutke’s other shares will ensure he has 40% of the total voting power. The new voting structure will ensure Lutke maintains control of Shopify as long as he is a Director or executive officer. The founder share is not transferable and should he leave Shopify, the founder share will expire. I have no problem with this as Shopify has done OK since he founded the company. 😊

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

No quarterly reports this past week.