The market can be a cruel place. Rising interest rates have hammered the stock market this year – tech stocks in particular, which become less attractive when interest rates go higher. The technology heavy Nasdaq Composite Index has fallen nearly 15% so far this year and fallen into a correction, wiping out nearly $3 trillion in value from the Nasdaq 100 Index (a subcategory of the Nasdaq Composite Index). The S&P 500 Index is down over 9%, on track for its worst start to a year, and is flirting with correction territory. Individual companies are taking a beating (of which I’m well aware ☹).

Since the start of the year the Toronto Stock Exchange Composite Index (TSX) has fallen nearly 3%, the S&P 500 Index is down 7%, the Dow Jones Industrial Average (DJIA) is down over 4%, and the Nasdaq Composite Index (Nasdaq) has dropped 12%.

Barring a stunning performance by all the Indexes on Monday, there will not be any January effect this year.

In late 2021, the Covid-19 variant Omicron and rising inflation weighed the market down. Now, while Omicron lurks in the background, it has been replaced in the forefront by tensions between Russia and the NATO countries over fears of a Russian invasion of Ukraine. Still weighing on investors is inflation and the associated interest rate hikes necessary to curb inflation. It is expected both the Bank of Canada (BoC) and the US Federal Reserve (Fed) will increase interest rates in March, but it is not known how many times they will hike interest rates, nor what those hikes will be, as both the BoC and the Fed attempt to wrestle inflation back below their respective 3% target.

But despite all those fears, Friday was a comeback day after a decidedly ugly January. Strong earnings from Apple (NASD:AAPL), Microsoft (NASD:MSFT) and few other large capitalization companies helped get bargain hunters back into the market. The question is, is that another upward feint or has the market found the bottom? As Captain Obvious would say, we’ll only know we’re at the bottom when prices stop going down and start going up. 😊

Now, lets see the week that was and how the portfolios faired…

Weekly Market Review

Monday: The week got off to an ominous start with the Toronto Stock Exchange Composite Index (TSX), S&P 500 Index (S&P), Dow Jones Industrial Average (DJIA) and Nasdaq Composite Index (Nasdaq) each falling sharply in the morning before a bargain hunter rally in the afternoon. The late rally pushed the American Indexes into the black, but the TSX was unable to climb out of the hole it dug itself in the morning. Ongoing tensions between Russia and Ukraine, and the upcoming US Federal Reserve meeting on Wednesday weighed on all four Indexes, with the upcoming Bank of Canada meeting an extra variable for the TSX.

Tuesday: The day started similar to Monday’s volatility with a sharp sell off to start the trading day, followed by an afternoon rally. However, this time it was the TSX that ended the day in the black and the US Indexes that were unable to get out of the red. In the US, the Energy sector was the top performer on fears of future supply issues due to potential conflict between Russia and Ukraine. The Technology sector was the biggest loser thanks to concerns of interest rakes hikes coming out of this weeks Federal Reserve meeting.

In Canada, similar sentiments regarding Ukraine lifted the Basic Materials sector (gold) and Energy sector (oil), pushing the TSX into positive territory. Those two sectors overcame the Technology sectors 3% decline, caused by concerns about an interest rate hike coming out of Wednesday’s Bank of Canada meeting caused.

Wednesday: Today the markets were split with the TSX and Nasdaq eking out gains of .02%, while the S&P and DJIA barely lost ground. The big news was the US Federal Reserve announced it would leave interest rates at their current level. The markets responded positively to this news but retreated when the Fed warned it could raise interest rates as soon as March to cool off the highest inflation in 40 years. Rate hikes will make it more expensive, over time, for consumers and businesses alike to borrow for anything and everything.

In Canada, the Bank of Canada said it would start hiking interest rates ‘soon’. While the TSX ended the day in the black, like its American cousins, it dropped on news the US Federal Reserve planned to raise interest rates in March and ended the day 1.5% below its noon time high. On both sides of the border investors now know interest rates will very likely be going up in March. I’m curious to see how the market responds now that the Fed has removed the uncertainty of an impending rate hike.

Thursday: So much carrying over the momentum from Wednesday afternoon. All four Indexes started moving upward when the market opened, but reversed themselves a few hours later, Declines were fueled by fears the US Federal Reserve would hike interest rates up to five times in 2022, and ongoing geopolitical tensions. The interest rate sensitive technology, and consumer discretionary sectors fell the farthest. In the US, The Russel 2000 Index (a market index of 2,000 companies valued between $300 million – $2 billion) has fallen over 20% since early November, indicating it has been in a ‘bear’ market.

Friday: After a rollercoaster week of trading, it was a good day for all four Indexes. Finally! In a reversal of the last few days, the four Indexes dropped in the morning before zigzagging upward. The TSX’s Technology sector had a strong day, up over 4%, helping the TSX post a slight gain for the week. In the US, after a volatile week, all three Indexes ended the week with a flourish. Both the S&P and the DJIA ended the week higher while the Nasdaq ended the week flat.

For the month of January

Weekly Portfolio Review

Prior to Friday I was expecting an ugly week. Well, it turned out to be an ugly week with Portfolios 1 and 2 suffering double digit falls. Portfolio 2 also was down for the week. Ongoing Inflation and fears of higher interest rates are good for good for the financial stocks in the three portfolios but not so good for their respective Technology sector companies, especially the high growth companies that use debt to fund their growth. The Friday rally was a ray of sunshine, perhaps a bottom is nearby. I look forward to the week when all three portfolios end a week in positive territory. For now, I’ll be happy if one of them can put up a positive week.

Companies on the Radar

While the market has been zigzagging up and down the past few weeks, I haven’t really looked at any specific companies. I don’t expect to be active in the market while the market continues its downward trend unless one of the big ‘blue-chip’, growth-oriented companies in any of the portfolios has a too good to pass up ‘sale’. For me, this includes:

Microsoft (NASD:MSFT)

Apple (NASD:AAPL)

Home Depot (NYSE:HD)

Nvidia (NASD:NVDA)

Visa (NYSE:V)

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended January 28, 2022: DOWN

Combine the loyalty of Apple fans with pent up demand for Apple’s latest products and you get a great first quarter report. Apple was able to navigate the supply chain headwinds and post double digit growth in revenue and earnings. I don’t know how they keep doing it but I’m glad I finally invested in Apple. Better late than never.😊

It turns out that Visa was everywhere people wanted to be in late 2021. Thanks to increased travel and e-commerce spending, Visa posted a strong first quarter report. Highlights include strong results for revenue, net income and EPS, all grew at 24% or more. Better than anticipated cross-border travel, and a record holiday-quarter sales, all contributed to an excellent quarter.

Although Tesla’s (NASD:TSLA) recent earning report beat expectations on the top and bottom line, its’ shares of fell after the company failed to provide guidance for what it expects in 2022. It also announced supply chain issues causing its factories to run below capacity.

Voyager Digital (TSX:VOYG), along with other cryptocurrency platforms, is being investigated by US regulators. With cryptocurrencies currently in a free fall, being under the microscope of regulators does not bode well for Voyager’s share price.

Activity

No significant activity to report this week.

Dividends

Dividends Received this week for the following companies:

Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.

Canadian $

BCE Inc (TSX:BCE) DRIP

Shaw Communications Inc (TSX:SJR.B) DRIP

US $

No US$ dividends this past week.

Quarterly Reports

Canadian National Railway Co

All currency listed in CAD dollars

Selected highlights from their fourth quarter 2021 financial results on January 25, 2022

Fourth Quarter

• Revenues of C$3,753 million, an increase of C$97 million or three per cent
• Record fourth quarter operating income of C$1,566 million, an increase of 11 per cent

Full year 2021

• Revenues of C$14,477 million, an increase of C$658 million or five per cent
• Operating income of C$5,616 million, an increase of 18 per cent
• Record free cash flow for the year ended December 31, 2021, of C$3,296 million compared to C$3,227 million for the same period in 2020.
• Return on invested capital (ROIC) of 16.4 per cent, an increase of 3.7 points.
• 19% increase in the 2022 dividend; approved a plan to re-purchase up to 42 m common shares.

Tesla

All currency listed in US dollars

Selected highlights from their fourth quarter 2021 financial results on January 26, 2022

• delivered over 936,000 vehicles
• $2.3B GAAP net income
• $1.5B increase in cash and cash equivalents in Q4 to $17.6B
• expect to achieve 50% average annual growth in vehicle deliveries

Visa

All currency listed in US dollars

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

• GAAP net income of $4.0B or $1.83 per share
• Net revenues of $7.1B, an increase of 24%
• Returned $4.9B of capital to shareholders in the form of share repurchases and dividends

Apple

All currency listed in US dollars

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

• Posted an all-time revenue record of $123.9 billion, up 11 percent year over year.
• Quarterly earnings per diluted share of $2.10.
• Declared a cash dividend of $0.22 per share of the Company’s common stock.

Portfolio 2

Portfolio 2 for the week ended January 28, 2022: DOWN

A strong earnings report from Mitek Systems (NASD:MITK) which beat analyst’s expectations for earnings per share (USD$ .22 actual v USD$ .14 estimated) and revenues (USD$ 32.5 million actual v USD$ 28.5 million estimated), leading to a nice share price bump on Friday.

Once again, Microsoft had another strong earnings report, beating analysts’ expectations for revenue (USD$ 51.7 billion actual v USD$ 910 million) and earnings per share (USD$ 2.48 per share v USD$ 2.32 estimated). All three segments increased their revenues in an impressive earnings report.

Otherwise, it was a relatively good week for Portfolio 2 with 75% of the companies finishing the week higher than they started.

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

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 second quarter 2022 financial results on January 25, 2022

• Revenue was $51.7 billion and increased 20%
• Operating income was $22.2 billion and increased 24%
• Net income was $18.8 billion and increased 21%

Mitek Systems Inc (NASD:MITK)

All currency listed in US dollars

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

• Total revenue increased 25% year over year to a first quarter record $32.5 million.
• GAAP net income increased 44% year over year to $3.1 million, or $0.07 per diluted share.
• Cash flow from operations was $2.3 million.

Portfolio 3

Portfolio 3 for the week ended January 28, 2022: DOWN

Over half of the companies in Portfolio 3 ended the week higher than they started. It’s been a while since I’ve been able to say that. Prior to Friday, Shopify (TSX:SHOP) was down over 45% since its November high. On Friday, Shopify gained 10% to finish the week at CAD$ 1,113.98. Only $900 more to get back to its November high.

The other notable performers include the family of four Brookfield companies in the portfolio, all finished the week in the black. Microsoft also had a good week after a strong earnings report.

Finally, Real Matters (TSX:REAL) had a disappointing first quarter earnings. Both their revenues and net income were less than the 2021 first quarter numbers. However, during the shareholders’ meeting the CEO said they are confident they will attain their 2025 goals. He also announced they are taking advantage of the current lower share price and buying back shares to return value to shareholders (by increasing the size of each shareholder’s piece of the pie, so to speak). Nevertheless, the share price felt the investors’ wrath.

Activity

No significant activity to report this week.

Dividends

Dividends Received this week for the following companies:

Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.

No dividends this past week.

Quarterly Reports

Microsoft Corp

All currency listed in US dollars

Selected highlights from their second quarter 2022 financial results on January 25, 2022

• Revenue was $51.7 billion and increased 20%
• Operating income was $22.2 billion and increased 24%
• Net income was $18.8 billion and increased 21%

Real Matters Inc.

All currency listed in CAD dollars

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

• Consolidated revenue of $107.8 million, a 10.4% drop versus the $120.3 million a year earlier
• Net income was $2.6 million, or $0.03 per diluted share, compared with $7.1 million, or $0.08 per diluted share, for the year ago period.
• Continue to buy back shares to return value to shareholders.

One of the things I look for in a company is a loyal customer base. The type of customers that will sing the praises of the company no matter what, that will pay a premium for the product, and will line up for hours to get the latest product from the company. One such company is Apple (NASD:AAPL). From back in the 1990s I remember Apple fanboys. In fact, a colleague at the time was a big Apple fan (not quite a fanboy) and he strongly recommended I invest in Apple. I wish I had listened. But I digress. Apple has such a loyal base of customers that they will pay a premium for anything with the Apple logo on it. This point was reinforced during the week when I saw a headline that Apple was selling polishing clothes for USD $19. And, at the time, they were sold out of the clothes. I don’t know what surprised me more: that someone would pay USD $19 for a cloth that did the same job as a microfibre cloth; or that they were sold out of these clothes. Now, it is a nice-looking cloth, but it does the same job as a CAD $1 microfibre cloth (which I use for all my displays, including iPhones and iPads). On one hand I can’t believe anyone would pay that much for a cloth to clean their various displays, while on the other hand I’m glad they do since I have shares in Apple. 😊

When Apple raises the price for its latest iPhone, customers still line up to be the first to get their hands on Apple’s latest product. You can bet when Apple comes out with its next new product, be it virtual reality glasses, the rumoured Apple electric car, or some other product, there will be plenty of customers lined to buy the item, regardless of price. This type of brand loyalty helps create a sustainable advantage for the company which acts as a moat for the company. The wider the moat the better.

Other companies with a loyal customer base include Tesla (NASD:TSLA) and Ford (NYSE:F), among others. When you are considering companies to invest in, make note of companies that have a loyal customer base because they’ll continue buying the company’s products, and will pay a premium, and the customers will act as free advertising for the company.

Now, lets see how tighter monetary policies, higher inflation, and the pandemic impacted the markets last week.

Weekly Market Review

Monday: Fears of higher interest rates continued to batter the technology sector. On the Toronto Stock Exchange Composite Index (TSX), the technology stocks were down for a sixth straight session, causing the TSX to end the day lower. On the Nasdaq Composite Index (Nasdaq), technology stocks fell early and fell hard, providing a buying opportunity for some of the previously high-flying technology stocks. Later in the day savvy investors swooped in to buy on the dip and pick up stocks that were ‘on sale’. Despite the late day rally, it was not enough to lift the S&P 500 (S&P) and the Dow Jones Industrial Average (DJIA) over the bar.

Tuesday: Investors eased back into the markets with all four Indexes finishing up for the day. Nasdaq was up for a second consecutive day, leading the US Indexes, followed by the S&P, which broke a 5-day losing streak, and the DJIA brought up the rear. With the Nasdaq leading the way, you know the technology sector had to have done well, and it did. However, the biggest gainer by percentage was the energy sector. If energy was a big gainer in the US, it must be a big gainer in Canada, and it was, jumping over 3%. Helping the energy sector lift the TSX were the financial sector and the technology sector, which finally got back on the positive side of the ledger.

Wednesday: A good day for the markets with all four Indexes up. Thanks to rising oil prices and a strong performance from the energy sector the TSX closed at its highest point since late November. In the US, inflation came in higher than it’s been in decades, but it was within the expected range, diminishing fears the US Federal Reserve would move aggressively to curb inflation (with higher interest rates) and easing its bond buying program. Interestingly, copper supposedly has a reputation for indicating turns in economic activity and the price of copper was up nearly 3% today.

Thursday: Just when I thought the January effect was about to kick in, all four Indexes retreat. In the US, Nasdaq’s 3-day rally came to an end as everything from the big technology companies, such as Microsoft (NASD:MSFT) and Apple, all the way down to the smaller technology companies, like Mitek (NASD:MITK) and Marqueta (NASD:MQ), sold off, causing the technology heavy Nasdaq and S&P Indexes to fall the farthest. In Canada, like its American colleagues, the TSX was pulled down by the technology sector. Shopify (TSX:SHOP) itself fell almost 9%. Shopify recently made updates to its platform which negatively impacted and alienated its developer community. Shopify heavily depends on its developers to attract and retain merchants with features that Shopify does not provide.

Friday: Rising energy and financial sectors, plus a modest gain in the technology sector propelled the TSX into positive territory on Friday, allowing the TSX to break a 2-week losing skid. As Shopify dragged down the technology sector on Thursday, so it led the way back up today, gaining almost 4%.

In the US, the Nasdaq and S&P Indexes rallied at the end of the day to lift them both into the black, while the DJIA failed to make it a clean sweep for all four Indexes. For the week, all three American Indexes ended lower despite the midweek rally and the Friday afternoon rally. The technology sector lifted the Nasdaq and S&P while the DJIA was dragged down by two bits of news. First, the big US banks such as JP Morgan (NYSE:JPM) and Citigroup (NYSE:C) reported mixed fourth quarter results causing investors to unload their bank shares. Second, reports showed consumer spending fell during the holiday shopping month, raising fears that inflation is finally taking a toll on the economy.

Weekly Portfolio Review

The new year is not getting off to strong start for the four major North American Indexes, but more importantly for me, neither is it a strong start for any of the Portfolios. I’m not worried as it is a general downturn in the market rather than a downturn specific to any of the Portfolios. Over time, the markets rise and eventually this downturn will reverse itself and start heading upward. Nevertheless, I wish this dip had happened in early October when I was in buying mode 😊

As there is no need for cash currently, I’ve no need to sell any of the holdings and sell low, possibly locking in a loss. All that being said, since I’m not in buying mode I’d rather the Portfolios being going up than down. 😊

Companies on the Radar

No new companies came on the radar this week. I still like American Tower (NYSE:AMT) for its cell tower properties which should become more valuable as 5G wireless technology, and newer wireless technologies, get rolled out.

I’m not sure how much more invested in the ‘metaverse’ I want to get so Matterport (NASD:MTTR) is on hold.

Finally, Stella Jones (TSX:SJ) is also on hold as I decide if it is better than any of the existing holdings.

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended January 14, 2022: DOWN

Another mixed bag for Portfolio 1 this past week. The big technology stocks in the portfolio had an up, down, up week, while the smaller, less well-known stocks generally had a down week. The financial stocks continued to do well with TD Bank (TSX:TD) and Bank of Nova Scotia (TSX:BNS) hitting all time highs. The two oil stocks had a good week. Of the decliners, Home Depot (NYSE:HD) had a sharp fall on news of the retail sector reported lower sales in December. I don’t know if Home Depot was one of the retailers reporting lower sales or if it simply got caught in the downdraft. I hope it was the later.

Shaw Communications (TSX:SJR.B) reported mixed results for their first quarter earnings for 2022 earlier this week. Of bigger importance to me was Shaw stating they still planned to proceed with the merger with Rogers Communications (TSX:RCI.B). If the deal passes the regulatory bodies, shareholders will receive CAD $40.50 per share.

Activity

No significant activity to report this week.

Dividends

Dividends Received this week for the following companies:

Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.

Canadian $

No C$ dividends this past week.

US $

Innovative Industrial Properties Inc (NYSE:IIPR)

Quarterly Reports

All currency listed in CAD dollars

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

• On a year-over-year basis, consolidated revenue increased by 1.2% to $1.39 billion
• Net income rose from $163 million in the first quarter 2021 to $196 million for the first quarter 2022
• Earnings per share rose from $0.31 in the first quarter 2021 to $0.39 million for the first quarter 2022
• Added approximately 55,600 new Wireless customers

Shaw is still moving forward to merge with Rogers Communication. If the merger proceeds, Shaw shareholders will receive CAD $40.50 per share in cash. The merger is still subject to the approval of Canadian regulators.

Portfolio 2

Portfolio 2 for the week ended January 14, 2022: DOWN

A mixed bag for Portfolio 2 this week. The majority of companies advanced but the advances were mainly a few bucks. The technology sector companies all benefited from Friday afternoon’s rally to finish just above or below where they started the week. Its interesting to see the roller coaster ride a few of the Technology companies went on this past week.

Below is the 5-day graph of MongoDB (NASD:MDB) to illustrate the typical swings experienced by technology companies this week. At the left of the graph MongoDB opened at USD $414.14, at the first red arrow the price has dropped to $394.64 (first red arrow), then up to $448.70 (first green arrow), down to $430.45 (second red arrow), up to $441.95 (second green arrow), down to $402.56 (third red arrow), up to $414.52 (third green arrow), down to $376.01 (fourth red arrow) and finally up to $396.89 (fourth green arrow) to end the week.

The other bit of news for Portfolio 2 was the announcement Zynga (NASD:ZYNG) was to be acquired by Take Two Interactive (NASD:TTWO) for cash and shares. Stockholders are to receive USD $3.30 per share, plus common shares of Take Two valued at USD $6.36 for each Zynga share. Essentially this means 1 share of TTWO for approximately every 25 shares of Zynga.

An interesting part of this acquisition is Zynga a 45-day window where Zynga is allowed to ‘go-shop’ and seek out better offers. With any luck a bidding war will break out. 😊 For now, both companies’ Board of Directors has approved the deal, but it still needs approval from shareholders and regulators. The deal is expected to close in late June.

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

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 January 14, 2022: DOWN

Not much good to say about Portfolio 3 other than at least the majority of holdings finished the week on an upswing. The financial sector companies – TD, Royal Bank (TSX:RY) and goeasy Ltd. (TSX:GSY) – all moved consistently upward during the week. Most of the technology sector companies ended the week breaking even or slightly up thanks to Friday’s late rally. Hopefully, the upward momentum will continue through next week and the Portfolios can finally have a winning week.

Activity

No significant activity to report this week.

Dividends

Dividends Received this week for the following companies:

Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.

Canadian $

goeasy Ltd (TSX:GSY)

US $

No US$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.

January effect: the belief that markets rise more in January than in other months. This belief is likely fuelled by the optimism of a new year, additional cash available thanks to money raised through tax loss harvesting to offset capital gains and the resulting lower share prices, and Christmas/end of the year bonuses. Its hard to know if there is an actual January effect since if everyone knows about it, then it should disappear according to the market efficiency that states all stock prices reflect all pertinent information. I suspect it is a combination of all the above, plus herd mentality where investors see other investors buying and feel they do not want to miss out.

In Canada, I remember going to Boxing Day sales, similar to Black Friday and Cyber Monday sales in the US and Canada, where people would line up well before the stores open. Once people got in the store they often were too late for the best ‘deals’ (there were only a handful of great deals on older models, designed to get people in the door), but were caught up in the buying frenzy atmosphere and ended up buying something they probably didn’t need. I participated in a few of these Boxing Day sales and was able to purchase only the items I wanted, but I know more than one person who ended up asking themselves a few days later, “why did I buy this?”

I do not fully believe in the January effect, but I try to ensure I’ve some cash available for January in the event companies I am interested in go on ‘sale’ in January. There was not a January effect this past week as the markets tumbled, but maybe with all these stocks going on ‘sale’ the rest of the month is now primed for a January effect. Let us take a look how the week unfolded…

Weekly Market Review

Monday: The first trading day of 2022 ended with a bang as both the S&P 500 (S&P) and the Dow Jones Industrial Average (DJIA) closed the day at record highs. The Nasdaq Composite Index (Nasdaq) was also up for the day but overshadowed by the other two Indexes. Leading the charge were Apple (NASD:AAPL), which temporarily inched above a USD $3 trillion market capitalization before falling back under $3 trillion, and Tesla (NASD:TSLA) which jumped 13.5% on news their quarterly deliveries of electric vehicles beat analysts’ estimates. As well, energy (on higher oil prices) and financial (anticipation of an earlier than expected interest rate hike) sectors’ stocks had a good day. An overarching market sentiment was Omicron will not be as debilitating as previous covid-19 variants and the economy will not be adversely affected.

The Toronto Stock Exchange Composite Index (TSX) was closed for the New Year’s Day statutory holiday and will re-open Tuesday. Let us hope the TSX follows the American Indexes.

Tuesday: A bit of everything for the US markets today: The DJIA set a record high closing; the S&P was essentially flat (down .06%); and the Nasdaq fell. Energy, financials, and industrial sectors led the way for the DJIA, while yesterday’s big names (Apple and Tesla, among others) weighed down the Nasdaq and prevented the S&P from finishing in the black. It seems people are moving from growth-oriented stocks to defensive stocks and value stocks.

North of the border, on the first day of trading in 2022 for the TSX the Index barely made it into the black. As in the US, the energy and financial sectors led the way. However, much of those gains were wiped out by Shopify’s (TSX:SHOP) biggest fall since November 2020 (10% or almost CAD $190). That does not bode well for Portfolio 3.

In a bit of promising news, Datadog (NASD:DDOG), MongoDB (NASD:MDB) and Unity Software (NYSE:U) were among the companies selected by Goldman Sachs as top picks for 2022 based on rapid growth. Portfolio 1 owns Datadog and Unity Software, while Portfolio 2 owns MongoDB. Goldman Sachs also selected Microsoft (NASD:MSFT) among the companies that provide “quality growth at a reasonable price.” Portfolio 2 and 3 both have shares in Microsoft.

Wednesday: The DJIA hit an all time high before retreating as it joined the other three Indexes (TSX, S&P and Nasdaq) and declined on fears the US Federal Reserve may raise interest rates sooner than anticipated. While a rise in interest rates was expected, it was not expected to happen so quickly which spooked investors. Higher interest rates mean increased borrowing costs for businesses, especially technology companies, which tend to carry a lot of debt.

Thursday: Thanks to the price of oil and energy sector stocks, the TSX was the only Index of the four to finish in the black. The three US Indexes were barely in the red but in the red they were. Financial sector stock propelled the American Indexes higher but not enough to overcome the fall of technology companies as investors continued to move away from high growth companies and into more value-oriented companies in anticipation of higher interest rates.

Friday: The TSX was like a yo-yo today: down, up, back down, before a last rally at the end of the day to end .06% in the black, hardly a banner day. And provided no indication of what is to come next week. In the US, all three Indexes ended the first week of 2022 in the red for both day and the week. For the S&P, it was the worst start of a year since 2016. On both sides of the border, anticipation of higher interest rates propelled bank stocks higher but technology companies, and other sectors which benefited from low interest rates, took it on the chin.

Weekly Portfolio Review

Well, I can say all three portfolios beat all four Indexes at something, with one Portfolio more than doubling the closest Index. Unfortunately, what the Portfolios beat the Indexes at was falling the farthest. Not something to brag about. I cannot say I am surprised when the technology heavy Nasdaq fell the farthest this past week. With investors moving away from high growth technology stocks to value-oriented stocks, I suspect there will be more of this carnage until the higher interest rates are announced and investors move back into growth stocks. I will just have to ride out the current storm and be ready for opportunities should they present themselves.

Companies on the Radar

I reviewed Matterport (NASD:MTTR)’s investor presentation to get a better understanding of their product. I can see the potential. I hope to have a chance to look closer at the company’s management, client base, target market and financials next week.

Stella Jones (TSX:SJ) is a Canadian company that is the leading provider of pressure treated wood products, primarily utility poles, railway ties and timbers, and residential lumber for outdoor uses. I do not see them as high growth stock but neither do I see them as a volatile, high-risk stock. Rather, it is a company that consistently grows its top and bottom lines. A stock I do not need to worry about is not a bad thing considering the more volatile technology companies in all the portfolios.

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended January 7, 2022: DOWN

It was a poor week for Portfolio 1 with the technology sector having a bad week. The fear of interest rates appeared to be the catalyst this week that caused all the technology companies’ share price to fall. Actually, the technology sector started retreating in mid October 2021 and has continued to fall. Initially Omicron was the culprit that started the fall in share prices, but inflation and higher interest rates are now the primary reason the companies with a high amount of debt are seeing their share prices fall.

On a side note, beware of dividend paying companies that are headquartered in a country other than Canada or the US. Portfolio 1 received a special dividend from ZIM Integrated Shipping (NYSE:ZIM) (ZIM) at the end of 2021 and was dinged a 25% Non-Resident Tax (NRT), even though the stock was held inside a registered account. Typically, there are no taxes on dividends from stocks held in a registered account such as a Registered Retirement Savings Plan or Registered Income Fund. This is true for Canadian and American based companies thanks to a tax treaty between the two countries. However, for other countries it depends on tax treaties between Canada and the companies’ home country. In this case, ZIM is based in Israel. I do not know if the 25% NRT was a result of a tax treaty between Canada and Israel or if there is no tax treaty between the two countries and a 25% tax is the default. Either way, the tax hit was a surprise and something I will keep in mind for future investments.

Activity

No significant activity to report this week.

Dividends

Dividends Received this week for the following companies:

Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.

Canadian $

Cargojet Inc. (TSX:CJT)

Telus Corp. (TSX:T)

US $

No US$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.

Portfolio 2

Portfolio 2 for the week ended January 7, 2022: DOWN

As with the other two portfolios, the technology sector bias dragged Portfolio 2 down this week. Most of the stocks declined this past week except for Bank of Nova Scotia (TSX:BNS), Disney (NYSE:DIS) and Chorus Aviation (TSX:CHR). Considering that Disney has been drifting down for the last week it was a pleasant surprise to see it in positive territory for the week. More surprising was Chorus having a positive week. It was not much (CAD $.15) but its better than being down.

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 Renewable Partners LP (TSX:BEP.UN)

US $

No US$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.

Portfolio 3

Portfolio 3 for the week ended January 7, 2022: DOWN

When the largest stock in the portfolio drops more than 10% in one day, smashing through its 200-day moving average, I knew it was not going to be a good week for Portfolio 3. Over the last month Shopify has decreased its share price by almost 25%, or CAD $500, highlighted by the 10% drop on the first day of trading in Canada. Each day it dropped a bit more to finally close out the week at its lowest price since June 2022.

The only companies to finish the week in the black were the bank stocks, as banks tend to make more money higher when interest rates rise. As for the rest of the holdings, the only positive spin is they did not have as bad a week as Shopify.

Activity

Sold TD US Index mutual fund (TSX:TDB661). This fund was purchased a few years ago as part of a TD Bank promotion and one could only invest in TD Bank mutual funds. While looking at the holdings of this fund I noticed its largest holding was the TD US Equity Index ETF (nearly 27%). Comparing the holdings of the mutual fund and the ETF I saw they were holding the same companies in the same allocation percentages. I also saw the management expense ratio (MER) for the fund was .5% while the MER for the ETF was .06%. I decided since they were holding the same companies why should I pay 8X as much in management fees. I sold the mutual fund and with the proceeds purchased shares in the ETF.

Bought TD US Equity Index ETF (TSX:TPU). Essentially a swap of the mutual fund for the ETF and its lower MER. I like that both the mutual fund, and now the ETF, provide broad and diverse exposure to large market capitalization US companies. While the ETF does not explicitly state it mirrors the S&P 500 Index (S&P), when I compared the share price chart of the ETF against the S&P, they were almost identical.

This ETF provides access to the largest publicly traded US corporations without being encumbered by many small and obscure companies. As long as the US economy is running smoothly this stock should perform well with much less risk than trying to pick individual companies.

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 Asset Management Inc (TSX:BAM.A)

Brookfield Renewable Partners LP (TSX:BEP.UN)

US $

No US$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.

Many of the institutions and brokerage houses took the holiday week off. With most of the professionals taking the week off, the markets were let to retail investors, also known as us amateur investors. As a result, the trading volume was considerably less than normal causing share prices to be more erratic. While December was not a great month for the markets there was some good news. There was confirmation the interest rates in the US will rise in 2022, although we don’t know by how much. As well, the Omicron virus is more contagious than its Covid-19 predecessors, but it does not appear to be as deadly. Another bit of good news to usher out 2021 was all four indexes had a great year, the third in a row, with the 3 American Indexes up over 20% for 2021 and the TSX up over 21% for the year. On that note, let end on a positive and optimistic note. May the markets continue their strong growth through 2022 and beyond, and hopefully inflation and Omicron, and its siblings, will not hang over us throughout 2022.

Weekly Market Review

Monday: A banner day for the US markets with all three Indexes – S&P 500 (S&P), Dow Jones Industrial Average (DJIA) and Nasdaq Composite Index (Nasdaq) – all seeing a strong boost thanks to an 8.5% year over year boost in retail sales this holiday season. The S&P ended the day at a record high and has increased 4.9% during since the start of four straight positive sessions. Despite the recent run up in the Indexes, Omicron still lurks in the shadows weighing on travel stocks as airlines cancelled hundreds of flights over the holidays, and cruise lines reported Omicron outbreaks.
The Toronto Stock Exchange Composite Index (TSX) was closed and will resume trading Wednesday. Let us hope it follows the lead of the American markets and Indexes.

Tuesday: Despite reaching a record intraday high, the S&P finished the day lower which ended its four-session rally. The Nasdaq also ended the day down while the DJIA was the lone bright spot ending the day in positive territory. Trading volume was well below average as investors enjoy the holiday season.

Wednesday: Despite a surge in Omicron infections, investors’ concerns appear to be eased by reports of reduced risk of hospitalizations from the virus as they pushed the markets higher today. The DJIA rose for the sixth straight day to close at an all time high. This is the DJIA’s longest winning streak since early March 2021. The S&P got back on the winning track, after snapping its winning streak yesterday, to close the day at a new record high. The TSX was up for the fifth straight day on the strength of the financial and energy sectors. Meanwhile, the Nasdaq was the only Index to finish down for the day.

Thursday: During today’s trading session, the DJIA and S&P briefly reached record highs before joining the TSX and Nasdaq in negative territory to close out the day on another light trading day. Once regular trading volumes return next week it will be interesting to see how much of a shadow Omicron casts on investor sentiment.

Friday: On a light day of trading to end 2021, all four Indexes ended the day in negative territory.

All four Indexes ended December higher than they started but it was not a straight line by any means. The Indexes were up and down like a yoyo, buffeted by concerns about interest rates, and fears of how Omicron would impact the economy. The Santa Claus rally finally started in late December, when worries about Omicron eased, and continued through until the end of the month before tapering off at the end of the month.

Weekly Portfolio Review

After last week’s strong showing by all three Portfolios, I was surprised to see all the Portfolios were down when two of the four Indexes were up for the week (rounding caused the TSX to appear breaking even). I guess since the technology heavy Nasdaq Index was down for the week it does not bode well for technology biased portfolios. Some weeks you are the hammer, some weeks you are the nail. This week I was the nail. ☹

For the month

Not the best month for Portfolios 1 and 3 down nearly 5%, respectively. I admit I was a bit surprised to see them down that much when all four of the Indexes gained ground for the month. On the bright side, Portfolio 2 had a strong month up nearly 8%, beating all 4 Indexes handily. It still has a technology bias but not as much as the other Portfolios. Something to keep in mind when reviewing the Portfolios for 2022.

Companies on the Radar

No new companies appeared on the radar this past week. I am hoping to have some time in the coming weeks to finally be able to take a closer look at:

• American Tower (NYSE:AMT)
• Matterport (NASD:MTTR)
• Stella Jones (TSX:SJ)

After December’s performance I am leaning toward solid, proven companies like American Tower and Stella Jones. Matterport still interests me as a play on the growing Metaverse theme but the whole metaverse thing could be a year or two away and it will be a bumpy ride.

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended December 31, 2021: DOWN

Looking at Portfolio 1, the numbers would have looked a lot better if the week ended on Thursday with most of the stocks drifting down on Friday. Other than Tesla (NASD:TSLA) (down over USD $50), there was no company that had a sizable fall last week. Nearly all of the companies trended up throughout the week and gave back their gains and a bit more on Friday.

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.

Canadian $

Canadian National Railway Co (TSX:CNR)

Shaw Communications Inc (TSX:SJR.B)

US $

ZIM Integrated Shipping (NYSE:ZIM)

Earnings Reports

No quarterly earnings reports this past week.

Portfolio 2

Portfolio 2 for the week ended December 31, 2021: DOWN

As with Portfolio 1, the numbers would be much better if investors stopped trading on Thursday. The only thing I can think of is investors were taking some money off the table on Friday as 2021 came to a close.

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.

Canadian $

Brookfield Infrastructure Corp (TSX:BIPC)

Brookfield Infrastructure Corp LP (TSX:BIP.UN)

US $

No US$ dividends this past week.

Earnings Reports

No quarterly earnings reports this past week.

Portfolio 3

Portfolio 3 for the week ended December 31, 2021: DOWN

On the TD WebBroker home page, once you login, there is a section highlighting the top movers in the portfolio. Ideally you want to see all five companies listed with a green up arrow. Often, you will see a mix of green up arrows and red down arrows. What you do not want is five red down arrows. On Friday, Portfolio 3 had five red down arrows, led by Shopify (TSX:SHOP) down 2.24%, or nearly CAD $40, on the day. Sigh!

Crypto update: Ethereum bought at CAD $6,137.23 per coin. On January 1, 2022, it was trading at CAD $4,747.09. I definitely picked the wrong time to get back in the cryptocurrency market.

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 Renewable Corp (TSX:BEPC)

Brookfield Asset Management Reinsurance Partners Ltd (TSX:BAMR)

US $

No US$ dividends this past week.

Earnings Reports

No quarterly earnings reports this past week.

The Grinch attempted to stop the Santa Claus Rally at the start of the week, but investors were having none of that. Not only did the Grinch fail to steal the Santa Claus Rally but as his heart swelled with Christmas spirit, he managed to quell fears of the Covid-19 Omicron variant and the potentially negative impact it could have on the economy. With renewed optimism, investors rushed back into the market, with thoughts of high returns dancing in their heads. Merry Christmas To All, And To All good investing!

Weekly Market Review

Monday: Omicron continued to weigh on the markets, sending all four major North American Indexes – Toronto Stock Exchange Composite Index (TSX), S&P 500 (S&P), Dow Jones Industrial Average (DJIA) and Nasdaq Composite Index (Nasdaq) – lower to start the week. Of the four Indexes, The TSX had the ‘best’ day as it was down only .97%, whereas the 3 American Indexes were down over 1%, respectively. Other factors weighing on the markets today include the setback to US President Biden’s ‘Build Back Better’ domestic investment bill, and the annual selling of poorly performing stocks to reduce capital gains taxes has begun.

Tuesday: Optimism returned to the markets today with all four Indexes moving strongly upward. For today, investors felt confident Omicron would not impact the economy as much as originally thought. Some strong earnings reports from the retail sector led investors to believe the supply chain issues were slowly starting to be resolved. We shall see what the markets think on Wednesday.
In Canada, the TSX had its biggest single day gain since February with all 11 sectors in the TSX higher, led by the technology and energy sectors. In the US, technology, energy, and travel stocks all rebounded strongly from Monday’s beat down, helping all three indexes advance.
There was a bit of good cheer for shareholders of Apple when Moody’s Investor Services raised their credit rating on Apple to AAA, their highest possible rating. Apple joined Microsoft and Johnson & Johnson as the only US corporations with this rating.

Wednesday: Reports from South Africa suggests Omicron is not as serious as the previous Delta variant of Covid – 19. As fears of Omicron began to dissipate, investors headed back into the markets to snap up stocks they had previously beaten down. Helping stocks rise was news US consumer confidence continued to rise, and Pfizer’s covid-19 pill has been authorized by the US government. All this good news caused all four Indexes to continue Tuesday’s broad-based rally.

Thursday: The Indexes continued to rise for a third straight day thanks to continued optimism that the Omicron variant wasn’t as severe as its predecessor, the Delta variant. In related news, Merck’s covid-19 pill received US government approval. The TSX briefly touched its highest closing level since late November. In the US, stocks ended a short week of trading on an upbeat note with all three American Indexes posting gains for the day and for the 4-day week.

Friday: It was a slow day in the market today as only the Toronto Exchange was open and even that was a shortened day, closing at 10:00 PT/1:00 ET for the Christmas holiday. The TSX was up slightly for the day, capping off the TSX’s strongest week since October. Healthcare stocks led the way up while the technology sector was one of only three sectors that fell on the day. The American exchanges were closed for the Christmas holiday.

The weekly Index chart, below, clearly shows the dip on Monday for all four Indexes followed by a resurgence throughout the week. The Nasdaq was the biggest gainer for the week, followed by the TSX, the S&P with the DJIA rounding out the pack. The American exchanges had a short four-day week for the Christmas break and return to regular hours on December 26. In Canada, the TSX was open on December 24 but will get their four-day week next week as it will be closed December 28.

Weekly Portfolio Review

When I saw the Nasdaq had a good week, I knew it would be a good week for the Portfolios since a rising tide lifts all boats. It definitely lifted all three Portfolios last week. Portfolio 1 and Portfolio 2 had good weeks. Ordinarily a 3% gain would be enough to lead the Portfolios and beat a few of the Indexes. However, Portfolio 3 gained over 4% for the week to easily beat the other two Portfolios as well as the four Indexes.

Companies on the Radar

This past week I removed Alphabet (NASD:GOOGL) from the radar list and into Portfolio 1, leaving American Tower (NYSE:AMT) and Matterport (NASD:MTTR) on the radar. I’m trying to decide between a steadily growing dividend payer in American Tower versus the higher growth potential, higher risk Matterport.

A new company on the radar is Stella Jones (TSX:SJ). They are a Canadian company that is a leader, if not the leader, in the production of pressure treated wood products for commercial use, such as utility poles and railways ties, as well as lumber for residential builders. They’ve grown revenue and net income for the last three years. They also have a small dividend (less than 2%) but they look to be a low risk, steady grower without a lot of competition. Definitely worth a closer look.

Portfolio Update

Portfolio 1

Portfolio 1 for the week ended December 24, 2021: UP

This week Portfolio 1 dropped a disappointing healthcare company and replaced it with one of the biggest technology companies that has been on an upward trajectory for over a year (see the Activity section, below). With the addition of Alphabet, that brings to a total of four of the five largest companies (by market capitalization) in any of the Indexes. The other three are Apple (NASD:AAPL), Nvidia, (NASD:NVDA) and Tesla (NASD:TSLA). Portfolio 1 is now well positioned for broad rallies when share prices from companies from all sectors are rising, and for narrow rallies when investors tend to primarily invest in the bigger companies.

Activity

No significant activity to report this week.

Bought: Alphabet: In 2015, Google restructured, creating a new holding company called Alphabet, and making Google one of a collection of companies under the Alphabet umbrella. I’ve known of Google since the late 1990s when it emerged as the dominant search engine over alternatives like Yahoo!, AltaVista, and Bing. Now, Alphabet’s Google is the market leader in: online search with 95% of the market; streaming video (YouTube) with approximately 60% of the market; and mobile OS (Android) with 70% of the market. I don’t see them be knocked off any of those perches for a while. In addition, they have more than $1B in cash on their Balance Sheet. While most technology companies are not looking forward to rising interest rates, when the rates do go up Alphabet will earn even more on the cash they have in the bank. Finally, they have a number of irons in the fires with their Other Bets side of Alphabet. Other Bets are early-stage companies such as Waymo, the self driving car company. If/when any of these ‘Other Bets’ are successful it is very likely that Alphabet will benefit from their success.

Sold: Invitae Corp (NYSE:NVTA) I originally invested in this company as it was doing good work in the fight against cancer. After strong share price growth in 2020 it started to fall in 2021 and has been beneath its falling 200 day moving average since March 2021. I kept waiting for Invitae’s share price to resume the upward trajectory but the only thing that seemed to be going up was their cash burning rate. I’d been considering selling shares since early September and finally pulled the trigger.

Dividends

Dividends Received this week for the following companies:

Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.

Canadian $

No CAD$ dividends this past week.

US $

Nvidia Corp. (NASD:NVDA)

Quarterly Reports

No quarterly reports this past week.

Portfolio 2

Portfolio 2 for the week ended December 24, 2021: UP

Alimentation Couche-Tard acquired an additional 19 convenience stores in New Mexico as they continue to expand their presence in the US and grow their “mission of making our customers’ lives a little easier every day”. As far as what drove Portfolio 2 last week, once again Microsoft and MongoDB led the way but almost every stock ended up ahead for the week and the few that were down for the week were not down by much. Another solid week from Portfolio 2.

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 USD$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.

Portfolio 3

Portfolio 3 for the week ended December 24, 2021: UP

Last week most of the technology stocks were down so naturally the portfolio was down. Thanks to this week’s Santa Claus Rally, almost all of the technology stocks are up. Shopify alone was up nearly 10%, and when Shopify has a good week, Portfolio 3 has a good week.

Crypto update: Ethereum bought at CAD $6,137.23 per coin. On December 24, it was trading at CAD $5,265.13.

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 $

TD Asset Management Inc. TDB661 DRIP

US $

No USD$ dividends this past week.

Quarterly Reports

No quarterly reports this past week.