Fractional shares….
This weekend is the one-year anniversary of this blog – 52 weekly updates, plus the occasional commentary post. There have been changes along the way as we try to figure out what information to feature and how to present it. One thing learned has been earnings seasons are a real grind. It seems every company has their own way of releasing the information, as well as what information they want to highlight. I have found the best way is to review the financial statements, ignore the spin, and check out anything that does not look right. It only took nine months to figure that out. 😊
With that being said, another earnings season has come and gone, well, almost gone. With over 90 different companies across the three Portfolios, that is a lot of companies’ earnings to review. And I get to do it every three months. 😊
I hope you found a bit of useful information, even if its “that was dumb, I won’t do that.” Otherwise, thank you for following along.
This past week, the heads of central banks, economists, and others from around the world gathered in Jackson Hole, Wyoming to discuss the global economy. Normally an event like this would cause my eyes to glaze over, but this time I was interested to read what the head of the US Federal Reserve (Fed) had to say about inflation and future interest hikes.
Jerome Powell, the head of the Fed, stated interest rates will keep rising and are not likely to come down any time soon as the Fed fights to knock inflation down to their 2% target. What he did not say was how much they will raise the benchmark US interest rate at their meeting in September. The size of the rate hike depends on upcoming economic data. Analysts and investors are now looking for clues whether a 0.75% or a 0.5% hike is coming in September. Until inflation is under control, Mr. Powell said to expect slower economic growth, and “some pain” for families and businesses alike.
In Canada, it is likely there will be another aggressive interest hike. I am guessing in the 0.75% to 1.0% range as the Bank of Canada wrestles with inflation here in the Great White North. As in America, higher interest rates will have a negative impact on growing the Canadian economy. However, as long as oil prices remain high they should provide a bit of a cushion for the Canadian economy, similar to how the Toronto Stock Exchange Composite Index (TSX) has not fallen as far as its American counterparts – S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq Composite Index – thanks to the multitude of energy companies (oil and natural gas) listed on the TSX.
Last week I asked if the markets were on the verge of a bull market or if this is a bear trap about to be sprung on us investors. Well, after the markets’ reaction to Mr. Powell’s comments on Friday, it is looking more like the later.
While bigger heads debate how much to raise interest rates, and analysts try to read between the lines what the increase will be, lets take a look back at the past week ….
Weekly Market Review
Monday: This week got off to a rough start with all four major North American Indexes ending the day lower. Fears of another round of aggressive interest rate hikes by the Bank of Canada and the US Federal Reserve caused the markets and Indexes to decline. On Canada’s Toronto Stock Exchange Composite Index (TSX), higher oil and commodity prices pushed the Canadian Energy and Basic materials sectors higher, preventing the TSX from falling as far as the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq).
In the US, the S&P Energy sector was the only one of eleven sectors to gain ground today as the S&P posted its worst day in more than two months. The interest sensitive Technology and Consumer Cyclical sectors fell the hardest, falling 2.62% and 2.74%, respectively.
Tuesday: In the US, investors were cautious ahead of a Fed meeting later this week when data showed a slowing economy, as well as concerns about future interest rate hikes. As a result, all three US Indexes ended the day lower, but essentially flat. The question on investors and traders’ minds is whether the Fed will raise rates in September by 0.5% or 0.75%
In Canada, the TSX ended the day higher thanks to gains in oil prices and Energy stocks, offsetting losses in the Financials sector. Canadian investors are watching the Bank of Canda to get a hint of the size of September’s interest rate hike.
Wednesday: The markets were once again flat as all four Indexes ended the day within 0.4% of where they started. In Canada, Canadian listed energy companies lifted the TSX higher thanks to higher oil prices. Financials had another down day when Canada’s largest bank, the Royal Bank of Canada (TSX:RY), missed analysts earnings estimates. Higher interest rates have led to higher mortgage rates which in turn has led to fewer mortgages.
In the US, all eleven S&P sectors ended higher thanks to the Energy and Technology sectors. Investors remained largely on the sidelines today, waiting for clues from the head of the Fed’s speech this Friday on how aggressive the Fed will be when they next raise the interest rate in the US, and the chances the Fed can execute a ‘soft landing’ for the economy.
Thursday: All four Indexes were solidly in the black today. In Canada, the Healthcare, and Technology sectors had a good day, combined with a bounce back in the Financials sector, pushed the TSX higher. In America, it was another broad-based rally with all eleven S&P sectors ending higher. Leading the way were the Basic Materials (mining and natural resources) and the Technology sectors
Friday: The head of the Fed indicated they are going to continue raising interest rates to control the highest inflation the US has seen in decades. With news of additional interest rate hikes, the stock market acted as one would expect – all four Indexes tanked. In the US, all three American indexes fell more than 3% in a broad-based retreat where all eleven S&P sectors ended lower.
In Canada, the US Fed’s remarks reverberated through the Toronto Stock Exchange, causing the TSX to end the day in the red. All Canadian sectors lost ground with the Technology, Consumer Cyclicals and Basic Materials suffering the worst losses.
For the week, the TSX dropped 1.2%,the S&P 500 slumped 4.0%, the Dow fell 4.2% and the Nasdaq plunged 4.4%.
Weekly Portfolio Review
With another week in the stock markets ending lower, it appears the recent bear market rally is unravelling, as investors fret over higher interest rates and the resulting economic slowdowns. After a relatively flat week, the comments coming from the head of the US Federal Reserve indicating the Fed will continue its aggressive fight against inflation sent the markets tumbling on Friday. Looking at the chart below, the high growth, tech heavy Nasdaq fell the hardest. Coming in a close second was the DJIA which fell more than 1,000 points on Friday (from 33,364.70 to 32,278.22). The TSX was the best performing Index thanks to over weighting in energy and mining companies.
As of this week, both the Nasdaq and S&P are down double digits as we head into the third quarter of 2022. I do not want to look but I am sure the Portfolios are down a similar amount, if not more. However, I am investing for the long term, so time is on my side. I expect all three Portfolios to recover and increase in value. Once again, the high growth, technology heavy Portfolios 1 and 3 dropped in value the most, reflecting the Indexes. The more balanced Portfolio 2 managed to limit losses the best. When I see graphs like this, I am reminded of the benefits of a more balanced, less high growth-oriented portfolio like Portfolio 2. 😊
Companies on the Radar
Amazon (NASD:AMZN) and Ferrari (NYSE:RACE) remain on my Radar, however, I’m waiting for a significant drop in share price of both stocks. I am hoping either fears of a 0.75% interest rate hike, or an actual hike by the Fed in September will lead to a 10+% drop. That would put Amazon shares in the US$ 125 range, and Ferrari in the US$ 180 range.
Brookfield Select Opportunities (TSX:BSO.UN) stays on my radar because of its 10% quarterly dividend. I view BSO as a good option for small pockets of cash in any of the Canadian accounts within the three Portfolios.
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended August 26, 2022: DOWN 
- Tesla (NASD:TSLA) stock split 3 for 1 on August 25. The lower share price should make Tesla shares more attractive to retail (small) investors.
- In other Tesla news, the company is facing several race and sex discrimination cases, mostly at their Fremont , California plant. In one lawsuit, Tesla has asked the judge to throw out the charge on the grounds it is politically motivated. One lawsuit maybe, but according to the report there are several lawsuits working their way through the legal system.
- CrowdStrike (NASD:CRWD) was named a winner in the Best Security Company category for the 2022 SC Awards US. This is their fourth victory in five years, more than any other cybersecurity vendor. The SC Awards are for cybersecurity companies that demonstrate product strength, customer satisfaction and committed investment in research and development.
- To avoid getting caught in covid-19 lockdowns, and political squabbles between the USA and China, Apple (NASD:AAPL) is shifting some its production of the iPhone 14 to India.
- Rogers Communications Inc (TSX:RCI.B) and Shaw Communications Inc (TSX:SJR.B) say the sale of Shaw’s Freedom Mobile wireless division to Quebecor Inc (TSX:QBR) should satisfy Canada’s antitrust watchdog’s concerns about Rogers and Shaw’s planned merger.
- PayPal (NASD:PYPL) announced a new product called Grant payments. In partnership with National Philanthropic Trust and Vanguard Charitable, donors will be able to send grants to charities through PayPal.
- General Motors (NYSE:GM) announced their Mexican production facility for GMC and Chevrolet trucks will halt production due to supply chain challenges.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Pulse Seismic Inc (TSX:PSD)
TMX Group Ltd (TSX:X)
US $
No US$ dividends this past week.
Quarterly Reports
Enwave Corporation
All currency listed in thousands of Canadian dollars
Selected highlights from their third quarter 2022 financial results on August 22, 2022
- Revenue of $5,554 for the three months ended June 30, compared to $7,351 for the same period in 2021. A decrease of almost 24%.
- Net loss of $2,015 for the three months ended June 30, compared to net income of $670 in the same period in 2021.
- Diluted loss per ordinary share of $0.02 for the three months ended June 30, compared to $0.00 for the same period in 2021.
- Revenue of $18,732 for the nine months ended June 30, compared to $19,570 for the same period in 2021. A decrease of 4%.
- Net loss of $4,654 for the nine months ended June 30, compared to net loss of $2,987 in the same period in 2021.
- Diluted loss per ordinary share of $0.04 for the nine months ended June 30, compared to $0.03 for the same period in 2021.
The Bank of Nova Scotia
All currency listed in millions of Canadian dollars
Selected highlights from their third quarter 2022 financial results on August 23, 2022
- Revenue of $7,799 for the three months ended June 30, compared to $7,757 for the same period in 2021. An increase of almost 0.5%.
- Net income of $2,594 for the three months ended June 30, compared to net income of $2,542 in the same period in 2021.
- Diluted earnings per ordinary share of $2.09 for the three months ended June 30, compared to $1.99 for the same period in 2021.
- Revenue of $23,790 for the nine months ended June 30, compared to $23,565 for the same period in 2021. An increase of over 0.9%.
- Net earnings of $8,081 for the nine months ended June 30, compared to net earnings of $7,396 in the same period in 2021.
- Diluted earnings per ordinary share of $6.39 for the nine months ended June 30, compared to $5.73 for the same period in 2021.
Nvidia Corporation
All currency listed in millions of US dollars
Selected highlights from their second quarter 2023 financial results on August 25, 2022
- Revenue of $6,704 for the three months ended June 30, compared to $6,507 for the same period in 2021. An increase of almost 3%.
- Net income of $656 for the three months ended June 30, compared to net income of $2,374 in the same period in 2021.
- Diluted earnings per ordinary share of $0.26 for the three months ended June 30, compared to $0.94 for the same period in 2021.
- Revenue of $14,992 for the six months ended June 30, compared to $12,168 for the same period in 2021. An increase of over 23%.
- Net earnings of $2,274 for the six months ended June 30, compared to net earnings of $4,285 in the same period in 2021.
- Diluted earnings per ordinary share of $.90 for the six months ended June 30, compared to $1.68 for the same period in 2021.
- Segmented Revenue from: Data Center was up 61% from previous year; Gaming revenue was down 33% from a year ago; professional Visualization was down 4% from a year ago; and, Automotive was up 45% from a year ago.
Toronto Dominion Bank
All currency listed in millions of Canadian dollars
Selected highlights from their third quarter 2022 financial results on August 25, 2022
- Revenue of $10,925 for the three months ended June 30, compared to $10,712 for the same period in 2021. An increase of almost 2%.
- Net income of $3,214 for the three months ended June 30, compared to net income of $3,545 in the same period in 2021.
- Diluted earnings per ordinary share of $1.75 for the three months ended June 30, compared to $1.92 for the same period in 2021.
- Revenue of $33,469 for the nine months ended June 30, compared to $31,752 for the same period in 2021. An increase of over 5%.
- Net earnings of $10,758 for the nine months ended June 30, compared to net earnings of $3,545 in the same period in 2021.
- Diluted earnings per ordinary share of $5.85 for the nine months ended June 30, compared to $5.68 for the same period in 2021.
Portfolio 2
Portfolio 2 for the week ended August 26, 2022: DOWN
- Brookfield Infrastructure (TSX:BIP.UN), signed an agreement with Intel Corporation (NASD:INTC) to jointly fund Intel’s new Arizona semiconductor fabrication facility. As part of the agreement, Brookfield Infrastructure will invest nearly US$15 billion for a 49% interest, with Intel investing an additional US$15 billion and retaining majority control.
- TC Energy (TSX:TRP) had work stopped at one of their sites in Alberta by a federal regulator after a non fatal injury occurred. The affected pipeline provides natural gas from northern Alberta and northern BC to TC Energy’s main pipeline system that transports natural gas to locations in Canada and the US.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Dream Industrial Real Estate Investment Trust (TSX:DIR.UN) DRIP
US $
No US$ dividends this past week.
Quarterly Reports
The Bank of Nova Scotia
All currency listed in millions of Canadian dollars
Selected highlights from their third quarter 2022 financial results on August 23, 2022
- Revenue of $7,799 for the three months ended June 30, compared to $7,757 for the same period in 2021. An increase of almost 0.5%.
- Net income of $2,594 for the three months ended June 30, compared to net income of $2,542 in the same period in 2021.
- Diluted earnings per ordinary share of $2.09 for the three months ended June 30, compared to $1.99 for the same period in 2021.
- Revenue of $23,790 for the nine months ended June 30, compared to $23,565 for the same period in 2021. An increase of over 0.9%.
- Net earnings of $8,081 for the nine months ended June 30, compared to net earnings of $7,396 in the same period in 2021.
- Diluted earnings per ordinary share of $6.39 for the nine months ended June 30, compared to $5.73 for the same period in 2021.
Portfolio 3
Portfolio 3 for the week ended August 26, 2022: DOWN
Fairly quiet week for the companies in Portfolio 3. Most of the stocks’ share prices were essentially flat (within a dollar or two), including Shopify (TSX:SHOP), which accounts for the bulk of the value of the portfolio. The biggest contributor to Portfolio 3’s loss for the week was mega cap technology company Microsoft (NASD:MSFT) which fell 5%.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
No dividends this past week.
Quarterly Reports
Royal Bank of Canada
All currency listed in millions of Canadian dollars
Selected highlights from their third quarter 2022 financial results on August 24, 2022
- Revenue of $12,132 for the three months ended June 30, compared to $12,756 for the same period in 2021. A decrease of almost 5%.
- Net income of $3,577 for the three months ended June 30, compared to net income of $4,296 in the same period in 2021.
- Diluted earnings per ordinary share of $2.51 for the three months ended June 30, compared to $2.97 for the same period in 2021.
- Revenue of $36,418 for the nine months ended June 30, compared to $37,317 for the same period in 2021. A decrease of over 2.5%.
- Net earnings of $11,925 for the nine months ended June 30, compared to net earnings of $12,158 in the same period in 2021.
- Diluted earnings per ordinary share of $8.31 for the nine months ended June 30, compared to $8.39 for the same period in 2021.
Toronto Dominion Bank
All currency listed in millions of Canadian dollars
Selected highlights from their third quarter 2022 financial results on August 25, 2022
- Revenue of $10,925 for the three months ended June 30, compared to $10,712 for the same period in 2021. An increase of almost 2%.
- Net income of $3,214 for the three months ended June 30, compared to net income of $3,545 in the same period in 2021.
- Diluted earnings per ordinary share of $1.75 for the three months ended June 30, compared to $1.92 for the same period in 2021.
- Revenue of $33,469 for the nine months ended June 30, compared to $31,752 for the same period in 2021. An increase of over 5%.
- Net earnings of $10,758 for the nine months ended June 30, compared to net earnings of $3,545 in the same period in 2021.
- Diluted earnings per ordinary share of $5.85 for the nine months ended June 30, compared to $5.68 for the same period in 2021.