Have you ever had one of those weeks where things just seem to go your way? The past week was one such week for me. I made three trades during the week, triggered by a busted thesis and a book. Let me explain.
Trade 1: I purchased shares in a Special Purpose Acquisition Company, Social Capital Hedosophia Holdings Corp VI (NYSE:IPOF.U), more commonly known as SPACs, in February 2021. A SPAC is basically a shell company created by an initial group of investors for the purpose of raising money through an Initial Purchase Offer (IPO) to buy another company. When you purchase shares in the SPAC the target company is not known but the SPAC must acquire a company within two years or return investors’ money. In a sense, I basically gambled that the management team of the SPAC would acquire a good company that would go on to do great things. The attraction of a SPAC is that retail investors, like me, can get in on an investment at a lower share price than if a company went public the traditional route. In 2020 and 2021, SPACs were the next greatest thing and I thought this would be a terrific opportunity.
As with all fads, this one fizzled out. There has been no news of a potential target company for over a year and the share price has only fallen since my investment in the SPAC. As well, for me anyway, the shine has worn off the CEO who seemed to have the Midas touch in 2020. Finally, I cannot recall any SPACs that have gone on to great heights, either the company or the share price. I decided I had a better chance to grow my money by cutting my losses and investing elsewhere while the market was down significantly.
Trade 2: In a serendipitous bit of luck, I was reading a book of Warren Buffet essays he had written over the years. Warren Buffet is the Chief Executive Officer of Berkshire Hathaway (NYSE:BRK.B) and is considered one of the greatest investors of all time. The more I read, the more I liked about him and his company. After looking closer at the company, I discovered it owns many of the top nontechnology, American companies (such as Kraft Heinz and GEICO) and has stakes in many other top American companies (such as Coca-Cola and Mastercard). I felt investing in Berkshire Hathaway would provide diversification (through all the companies it owns or has invested in), and act as a counterbalance to the more volatile technology companies in Portfolio 1 (something I identified during the current market decline and have been meaning to address). I decided being an owner (a tremendously small owner) of Berkshire Hathaway would be a terrific addition to Portfolio 1.
Trade 3: Several big technology companies have been on my radar for some time. I was interested in those companies because I felt they had good growth prospects and would be less volatile than other technology companies. However, after adding Berkshire Hathaway, I decided I could be more aggressive and focus on the two companies I added to my radar last week (add link): Marqeta (NASD:MQ) and Unity Software (NYSE:U). I decide to purchase additional shares in Unity because it already was a dominant player in the growing gaming industry, and it had a good chance of being a leading player in the growing virtual reality and augmented reality industry (think ‘metaverse’).
And there you have it. Three trades in one week, sparked by a broken thesis and the lucky coincidence of reading about one of the greatest investors of all time. For me, this many trades in one week is very unusual, but this time everything seemed to click. Sell a nonperformer to generate cash, happen upon a top company, and take advantage of depressed share prices. Even though I lost money when I sold the SPAC, I feel I have a much better chance of my investments growing with the two purchases I made this week.
It was a good week for me but let us see if it was another good week for the markets ….
Weekly Market Review
Monday: A good day for the American Indexes, the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq), with all three ending in positive territory. I cannot remember the last time all three ended a Monday in the black. While it was not a good day for the Toronto Stock Exchange Composite Index (TSX), it was not a bad either as the TSX ended the day barely in the red.
If the TSX is down and the US Indexes are up, there is a good chance Energy and Materials are down while Technology and Consumer cyclicals are up. Sure enough, that is the case today. In both countries the Energy sector was the worst performer as the price of oil fell on concerns of lower demand in China thanks to a lockdown in Shanghai after a covid-19 outbreak. Meanwhile, the Technology sector was among the top performers thanks to a surge in Tesla (NASD:TSLA) after the company announced it wanted to initiate a stock split.
Tuesday: Progress was made in talks between Russia and Ukraine, leading to lower oil prices which in turn calmed the inflation fears. All this good news led to a good day in the markets as all Indexes registered a gain, with the TSX setting a new high. Investors moved back into the high growth Technology and Consumer Cyclicals sectors. In Canada, Shopify (TSX:SHOP) was the main driver behind the TSX’s upward movement.
Wednesday: The day ended in the red for all four Indexes today. For the TSX, it was a very light shade of red as the TSX dropped .05%. Gains in the Energy and Materials sectors cushioned the blow from a drop in Technology sector stocks.
In the US, the S&P and the DJIA both snapped a four-day win streak after signs the Russians statements they made earlier this week about withdrawing troops is as sincere as statements they made earlier this year about not invading Ukraine. Investors are also concerned the US Federal Reserve will get more aggressive in attempting to tame rising inflation.
Thursday: For the second consecutive day all four Indexes declined. The price of oil fell on news the US initiated their largest ever release of oil from their emergency oil reserve. As a result of lower oil prices, the Canadian Energy sector dropped. Elsewhere on the TSX, concerns about the ongoing Russian invasion of Ukraine caused all sectors but the defensive sectors (Telecommunications, Utilities and Consumer Staples) to fall.
South of the border, concerns over the Russian invasion and its inflationary effect on already high inflation numbers caused a broad-based pullback with all 11 S&P sectors declining. The price of oil could jump again on Russian threats to freeze contracts for oil supplies to Europe unless the contracts are paid in rubles. So far European countries have resisted but it may not be as easy once the oil tap is turned off and fuel prices start to soar.
Friday: The second quarter of 2022 got off on the right foot with all four Indexes back in black at the end of the day. Despite finishing the day in the black, the TSX end the week in the red after five consecutive winning weeks. Canada’s resource companies have benefited from the embargo of Russian commodities such as energy, mining, and fertilizer companies.
In the US, a strong jobs report pushed the Indexes higher but also led to expectations of a more aggressive interest rate increase at the next meeting of the US Federal Reserve in May.
For the week, the TSX was down .2%, the S&P rose .1%, the DJIA: dell .1% and the NASD gained .7%
After falling for the first two months of the year, US stocks joined their Canadian cousin in the win column for the first time this year. For March, the TSX gained 3.6% (its ninth consecutive month of gains), the S&P gained 3.6%, the DJIA rose 2.3% and the Nasdaq climbed 3.4%. Historically, April has been a good month for the American markets and has the been the best month on average since 1950. Let us hope that continues in 2022.
It was a good start to 2022 for the TSX with an increase of 3.1% for the first quarter. However, the story wasn’t so good in the US. Considering all that was going on in the first quarter of 2022 – inflation, war, supply chain challenges, and a 2 year pandemic – it is no surprise all three American Indexes suffered their first losing quarter in two years. For the quarter, the S&P fell 4.9%, the DJIA declined 4.6% and the Nasdaq is dropped 9.1%.
Weekly Portfolio Review
The past week was essentially a flat week for the Indexes, with three of the Indexes just over or just under the breakeven bar. The exception was the Nasdaq which handily outperformed the other Indexes. It was not big week for the Nasdaq with a .7% increase but compared to the second place S&P at .1% growth, it looks much better. Its nice to see the Nasdaq lead the pack in upward movement after leading the pack in downward movement for most of 2022.
As for the Portfolios, not only did all three post gains for the week but they also beat the last week’s top performing Index. With the Nasdaq the best performing Index I did not expect to see Portfolio 2 leading the way this past week. Portfolio 1 had an OK week and Portfolio 3 performed slightly better. Always good to see all three Portfolios beat the best performing Index. 😊
Companies on the Radar
With the purchase of Berkshire Hathaway shares and additional Unity Software shares, there is not much cash readily available. I would have to sell shares in another company to raise cash. For now, I will be sitting on the sidelines, but the usual suspects remain at the top of my list:
- Nvidia (NYSE:NVDA)
- Microsoft (NASD:MSFT)
- Apple (NASD:AAPL)
- Home Depot (NYSE:HD)
- American Tower (NYSE:AMT)
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended April 1, 2022: UP 
- After expanding into India in October 2021, Shopee, the e-commerce arm of Sea Limited (NYSE:SE), is shutting down its Indian operation after India banned Sea’s gaming app ‘Free Fire.’ This follows Shopee’s decision in late February to exit France. With retreats from France and now India, so much for expanding outside of its southeast Asia base. Hopefully, they will have more success in Latin America.
- Cargojet (TSX:CJT) announced a 5-year deal to provide air transportation services for DHL, with the possibility it could be renewed for an additional 2 years. Part of the deal allows DHL to purchase up to a 9.5% position in Cargojet. Business has soared for Cargojet (pun intended) thanks to the increasing demand to fulfill shipping requirements caused by rise in e-commerce brought on by the pandemic.
- Boston Omaha (NYSE:BOC) reported their 2021 earnings this past week. They could take a lesson from CEO Alex Rozek’s uncle Warren Buffet about annual report presentations. Boston Omaha’s annual report is a bare 10-K report with few if any insights.
- General Motors (NYSE:GM) said it was increasing production of its new electric Hummer trucks and SUVs to meet demand, due to reservations being higher than initial expectations. A good problem to have. 😊
Activity
Sold: Social Capital Hedosophia Holdings Corp VI. This stock was purchased in February 2021 for two reasons: the momentum of Special Purpose Acquisition Company, more commonly known as SPACs; the success of Chamath Palihapitiya, the Chairman of the Board, bringing other SPACs to market.
Fast forward a year, a SPAC has 24 months to bring a company public and I have heard nothing about prospective private companies that the SPAC might purchase. If they have not acquired a company, they must return the money or get an extension to bring a company public. I felt if the SPAC ran out of time to acquire a target company, they might settle for a lesser company just to avoid returning investors money.
Based on the drop in the number of SPAC deals in 2022, it appears SPACs were more of a fad than anything else. SPACs historically numbered in the low double digits up until 2020, when they quadrupled, and are on pace to fall back into the double digits in 2022. Reason number one busted.
With no news of potential acquisition targets, I started to lose confidence in Mr. Palihapitiya. He sold shares in his first SPAC, Virgin Galactic (NYSE:SPCE), in the second half of 2020. Then he stepped down as Chairman of Virgin Galactic earlier this year, 2 years after he brought it public. While this was a different SPAC than the one I invested in, for me, this indicated he was not in it for the long run as he had indicated. Reason number two busted.
This SPAC could still do well, but I felt the money could be put to better use elsewhere.
Lesson learned: Be aware of a rush into new fads and pay attention to the motivations of those pushing the fad.
Note: I bought shares in Virgin Galactic in May 2020 and sold in March 2021 when founder Richard Branson and Chairman of the Board Mr. Palihapitiya sold their shares. I do not take it as a positive sign when the leaders sell their shares. As it was, I did OK on the transaction.
Bought: Berkshire Hathaway Inc. I have heard many people sing the praises of Berkshire Hathaway and its Chairman Warren Buffet and Vice President Charlie Munger. I finally got around to reading a book comprised of excerpts from many of his letters to shareholders – The Essays of Warren Buffett – and came away extremely impressed by him and how he managed Berkshire Hathaway. Reading their latest Annual Report, I saw the many companies Berkshire either owned or had invested in over the years. They were top American companies across a number of sectors.
Over the last few months, I have been concerned about the heavy technology and growth stock bias of this portfolio. I had been looking at nontechnology companies to lower the volatility and risk. I even considered an Index fund. I was impressed by Berkshire Hathaway’s performance over 55 years:
- compounded annual gain of 20% compared to the S&P 500’s 10%,
- an overall gain of 3,641,613% compared to the S&P 500’s 30,209%.
After seeing the companies Berkshire Hathaway owned or invested in, I felt this would be a great way to diversify the portfolio with one of the best companies in the world. I expect Berkshire Hathaway to continue to grow well into the future.
Bought: Unity Software. Of the growth stocks across all three portfolios, I felt this had as good a chance as any of the other growth companies, including the big-name companies on my radar. However, it seems to have tremendous upside in virtual reality/augmented reality market. It is a leader in the gaming industry and is making inroads with architects, manufacturers, engineers, automotive designers, and the film industry. I accept that the share price will be volatile as the company grows but I am confident it will continue to grow revenue and earnings, and the share price will follow those upward.
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 $
Canadian National Railway Co (TSX:CNR)
Shaw Communications Inc (TSX:SJR.B)
Telus Corp (TSX:T)
US $
No US$ dividends this past week.
Quarterly Reports
Boston Omaha Corporation
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on March 28, 2022
2021 full year highlights
- Revenues of $56,971,000 for 2021, up from $45,743,462 in 2020.
- Net loss from operations of $23,766,869, compared to a net loss from operations of $4,994,907 in 2020.
- Net income of $57,748,177 compared to a net loss of $49,089 in 2020.
Greenlane Holdings Inc
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on March 30, 2022
Fourth Quarter highlights
- Total revenue for Q4 2021 increased 54% to $56.0 million, compared to $36.3 million for Q4 2020.
- Gross profit was $12.5 million, or 22.3% of net sales, compared to $6.2 million, or 17.0% for the same period in 2020.
- Net loss of $11,815,000, an increase of 2.7% compared to a net loss of $10,860,000 for the same period in 2020.
2021 full year highlights
- Total revenue for 2021 increased 20.1% to $166.1 million, compared to $138.3 million for 2020.
- Gross profit was $27.7 million, or 16.7% of net sales in 2021, compared to $22.8 million, or 16.5% of net sales in 2020.
- Net loss of $53,423,000, an increase of 12% compared to a net loss of $47,704,000 in 2020.
WELL Health Technologies Corp
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on March 31, 2022
Fourth Quarter highlights
- Record quarterly revenues of $115.7 million representing a 573% year-over-year (YoY) increase compared to the same period in the previous year
- Delivered 700,359 total omni-channel patient visits in Q4-2021, representing a YoY increase of 123%. When combined with our asynchronous visits, the total number of visits was 972,740.
- Net income of $707,000 compared to net income of $5,772,000 in the same period in 2020.
2021 full year highlights
- Annual revenue for 2021 was $302.3 million, an increase of 502% compared to the prior year.
- Net loss of $30,895,000 compared to a net loss of $3,247,000 in 2020.
- Anticipate revenues more than half a billion in 2022.
Nano-X Imaging Ltd.
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on March 31, 2022
Fourth Quarter highlights
- Revenue for the fourth quarter of 2021 was $1.3M, compared to none for the same period in 2020.
- Net loss of $22.0 million, compared to a net loss of $19.0 million for the three-month period ended December 31, 2020, largely due to expenses related to a merger and acquisitions.
2021 full year highlights
- Revenue of $1.3M, compared to none in 2020.
- Net loss of $61,798,000 compared to a net loss of $43,815,00 in 2020.
Auxly Cannabis Group Inc.
All currency listed in CAD dollars
Selected highlights from their 2021 financial results on March 31, 2022
2021 full year highlights
- Recorded net revenues of $83.8 million in 2021, an increase of 79% compared to 2020.
- Net loss of $33,754,000 compared to $87,431,000 in 2020.
Portfolio 2
Portfolio 2 for the week ended April 1, 2022: UP
The Bank of Nova Scotia (TSX:BNS), Canada’s third-largest bank, increased its stock-buyback program to 36 million shares, approximately three per cent of its outstanding shares as of November 2021. This is good for me and other shareholders as it increases our respective share of the earnings.
Kneat.com (TSX:KSI) shares commenced trading on the US OTCQX under the ticker FBAYF. The OTCQX is the premier tier of the US over the counter (OTC) marketplace. This US listing will increase Kneat’s profile among US investors and make it easier for them to invest in Kneat. While it is easy for Canadians to invest in the US stock markets, it is not as simple for Americans to invest in companies solely listed on Canadian stock exchanges. Hopefully Kneat will continue to grow earnings and American investors will start investing in the company, driving the share price higher.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Brookfield Infrastructure Partners LP (TSX:BIP.UN)
Brookfield Infrastructure Corp (TSX:BIPC)
US $
No US$ dividends this past week.
Quarterly Reports
No quarterly reports this past week.
Portfolio 3
Portfolio 3 for the week ended April 1, 2022: UP
Following up on a previous Microsoft news item, the European Union antitrust chief announced Microsoft, Amazon and Alphabet/Google does not raise competition concerns, at this time.
The Royal Bank of Canada (RBC) (TSX:RY) made a cash offer of 1.6 billion pounds for British wealth manager Brewin Dolphin. This acquisition would make RBC, Canada’s largest bank, the third largest wealth management company in Britain and Ireland.
Ethereum is up to CAD $4,307 as of early evening April 1. That is better than it was in late January but still far from my purchase price of over $6,100 in November 2020. So much for getting rich quick on cryptocurrency. ☹
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 Asset Management Inc (TSX:BAM.A)
US $
No US$ dividends this past week.
Quarterly Reports
No quarterly reports this past week.