It was an interesting week to see how global actions impact the stock market. After an initial dip, the stock market headed upward with Energy and Technology stocks leading the way. At the end of the week technology stocks had retreated, and energy stocks, after a mid week lull, headed up at the end of the week. So, what is impacting these two sectors?
On the energy front, Russia is one of the top 5 global oil exporters, probably in the top 2 for Europe. With the increasing demand for oil by European countries, blocking oil exports from Russia to Europe would have an immediate impact on Europe. From an investment perspective, Canadian and American energy/oil companies would stand to benefit from the increased demand for their oil resources to replace the oil currently supplied by Russia. At the start of the week fears of an invasion of Ukraine and the West’s threat to cut off Russian oil exports caused the share prices of North American energy companies to surge. Midweek, tensions eased a bit and the price of energy stocks retreated. Then the US and other western countries withdrew their respective diplomatic staffs from Ukraine and warned of imminent invasion, causing energy prices to resume their march upward. As long as tensions in Ukraine remain, combined with increased demand for oil in the North American market, oil prices should remain high causing the share price of oil companies to continue to rise for the next few months, with the occasional dip along the way.
The technology stocks continue to be volatile on fears of inflation. This leads to increasing interest rates, which in turn leads to lower stock prices as the cost to pay down their debt increases, taking away from capital to re-invest in themselves. The recent US Inflation Report showed inflation running at 7.5%, much higher than the US Federal Reserve would like. In Canada the news wasn’t much better, with a December rate of 4.8% and the January report due next week. The target rate for both countries is around 3%. As a result of high inflation rates, the central banks of both countries (Bank of Canada and US Federal Reserve) have indicated they will raise interest rates in March. The question haunting the markets now is, how much will the rates rise and how often will they raise their respective interest rates. Volatility in this sector, and the market in general, will remain until the number and extent of rate hikes is known.
The uncertainty caused by tensions in Ukraine, inflation and corresponding interest hikes, and to a lesser extent (currently) covid-19 and supply chain issues, continues to weigh on the stock market. Whenever I think the current market correction has bottomed and I’m ready to step back into the market, the market decides to head downward. Inevitably, the cause of the dip is related to the Ukraine or interest rates. At some point I’ll have to make a leap of faith and get back in but for now I’m content to sit on the sideline and let the market continue its descent. Assuming war doesn’t break out in Ukraine, once the market has an idea of the amount of the first interest rate hike, I’m hoping a bottom will be established. That is when I’ll start buying some of the great deals currently in the stock market.
For now, lets take a look at the week that was in the markets…
Weekly Market Review
Monday: On the downside, three of the four major North American Indexes lost ground today. On the positive side, the losses were minimal. Compared to January, a flat start to the week is a good thing.
On the Toronto Stock Exchange Composite Index (TSX), gains in the materials sector were not enough to offset losses in the technology and energy sectors. In the US, Meta (NASD:FB), continued to slide, dragging the Nasdaq Composite Index (Nasdaq) and the S&P 500 Index (S&P). Considering Meta fell 5.1% today, and the Nasdaq and S&P fell .58% and .37, respectively, the rest of the companies in the Index probably had a flat if not OK day to offset the Meta loss. Finally, the Dow Jones Industrial Average (DJIA) ended the day flat.
Monday’s close provided no indication if the markets have bottomed and will start heading upward or if last week was a bear rally. Either way I suspect we are not done with this rollercoaster ride.
Tuesday: The Indexes were all back on the winning track today. On all four Indexes, gains in the Financials and Materials sectors were enough to overcome the drop in the Energy sector. Financial companies, especially banks, outperform when interest rates rise, as they are set to do in March on both sies of the border. Higher prices for gold boosted the Materials sector.
Wednesday: All four Indexes were up for the second day in a row as most sectors all had a good day. On the S&P, all eleven sectors ended the day in positive territory. The Consumer Discretionary sector is benefiting from the unwinding of covid-19 restrictions which would give a boost to the economies of both Canada and the US. As the economy picks up, people start to spend more, which is good for Consumer Discretionary sector companies. Meanwhile, there is a sense there is a ceiling for how high interest rates will be raised. As a result, money is moving back into the Technology sectors of both countries. In Canada, Shopify (TSX:SHOP) rose almost 5%, while in the US, big tech titans Microsoft (NASD:MSFT) and Nvidia (NASD:NVDA) helped drive the Nasdaq and S&P higher.
All eyes turn to Wednesday’s US Inflation rate report. A rate greater than 7% could cause the US Federal Reserve to raise interest rates faster than the market is expecting.
Thursday: All four Indexes were down after two positive days on fears of more aggressive interest rate hikes after the US Inflation report showed inflation at 7.5% for January, the largest annual increase in 40 years. As usual when fears of interest rate hikes arise, the Technology and Consumer Discretionary sectors took a tumble on both sides of the border. The TSX, thanks to its heavier weighting of Financial and Energy stocks than its American counterparts, fell the least at .4%, while the three US Indexes dropped over 1.4% each.
Friday: The TSX inched higher today to help it post gains for a third straight week. Today the TSX was helped by gains in the Energy and the Materials sectors. In the US, all three Indexes ended the day down at least 1%. Big tech companies, Amazon (NASD:AMZN), Apple (NASD:AAPL), Microsoft and Nvidia all lost over 2%, bringing down the S&P and Nasdaq. The primary culprits weighing on the Indexes are the ongoing tensions in the Ukraine, and the concerns about upcoming interest rate hikes following Thursday’s US Inflation report.
For the week, the TSX was up 1.3%, the S&P fell 1.82%, the DJIA was down 1.0%, and leading the pack downward, the Nasdaq dropped 2.18%
Weekly Portfolio Review
The TSX was the only Index to post a win for the week, thanks to its heavier weighting in the Financial and Energy sectors. The S&P and Nasdaq were dragged down by the Technology sector while the DJIA fell the least. As for the Portfolios, Portfolio 2 was the only Portfolio to rack up a win. Portfolio 2 is more balanced than the other two technology heavy Portfolios. Once again, slow and steady Portfolio 2 put up another good week. Considering how technology heavy Portfolio 1 and 3 are, its a bit surprising they didn’t fall further considering the losses of the Nasdaq and the S&P last week. The only thing that comes to mind is the Portfolios each had enough Canadian stocks (banking companies specifically) to cushion the blow of the US based companies in each of the Portfolios. I don’t know if this could have occurred if I had invested in US banks instead of Canadian banks, and it would not have occurred if any of the Portfolios was solely invested in the US market. Another reason to diversify across sectors and across countries.
Companies on the Radar
While reviewing Disney’s (NYSE:DIS) latest earnings report, I came across a line item in Disney’s financial statements indicating Disney has an investment in FuboTV (NYSE:FUBO). Since Fubo has been badly beaten down in 2022, it wasn’t on my radar for further investment, but the Disney earnings report caused me to take a second look. Fubo is a live sports oriented streaming platform that can stream to smartTVs, mobile devices and computers. At this point it sounds like just another streaming service. But what differentiates Fubo from other streaming service and caused me to make an initial investment in Fubo, is its plans to become an interactive sports wagering platform with a live TV streaming experience. This would make it a first mover in the integration of live streaming and a real time betting on events you are watching. While I’m not a gambler, I think gambling is a growing industry (just think of all the ads on TV for online gambling) and it is only a matter of time before real time wagering on events you are watching becomes mainstream. While Fubo has grown its subscriber base and revenues, it has also launched its Sportsbook in 2 states and recently signed a deal with Ceasars Entertainment Inc to provide access in an additional 8 states. Fubo appears to be executing its plan, but I want to see their earnings report due on February 23. For now, I’ll add them to my radar of stocks from last week:
- Microsoft
- Apple
- Home Depot (NYSE:HD)
- Nvidia
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended February 11, 2022: DOWN 
Very good earnings report from Datadog (NASD:DDOG) with increased revenues and an increase of 114% in the number of customers with USD $1 million of annual recurring revenue (ARR), and over 2,000 customers with ARR of $100,000 or more, an increase of 63% from 1,228 in 2020. This indicates their land and expand strategy is working and should continue to increase revenues.
As for the rest of the companies that reported last week, no red flags. I invested in Yellow Pages hoping it would be purchased by another company and I could get a share price bump as a result, so I’m not concerned about their report. However, I’d like to see better earnings to push up the value of the company.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Bank of Nova Scotia DRIP
US $
Apple Inc
Quarterly Reports
TMX Group Ltd
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 7, 2022
Fourth quarter highlights
- Revenue of $252.4 million, up 15% from $219.5 million in Q4/20
- Diluted earnings per share of $1.56, up 24% from $1.26 in Q4/20
- Net Income up 22%
2021 highlights
- Revenue of $980.7 million, up 13% from 2020
- Net income of $338.5 million, up 21% from 2020
- Raised dividend by 8% to $.83 per share.
Telus Corp
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 10, 2022
Fourth quarter highlights
- Revenue up 10%
- Net Income up 16%
- Total Mobile and Fixed customer growth of 272,000, Telus’s best fourth quarter on record and an increase of 19,000 over last year.
2021 highlights
- Operating Revenue up 9.8%
- Net Income up 35%
- Record 960,000 net customer additions
- Dividends declared in 2021 up 7.3 per cent; Quarterly dividend declared for April 2022 of $0.3274, up 5.2 per cent over the prior year
Datadog Inc
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 10, 2022
Fourth quarter highlights
- Fourth quarter revenue grew 84% year-over-year to $326 million
- GAAP net income per diluted share was $0.02
2021 highlights
- Revenue was $1.03 billion, an increase of 70% year-over-year.
- GAAP operating loss was $19.2 million
- 216 customers with Annual Recurring Revenue of $1 million or more, an increase of 114% from 101 as of December 31, 2020
Cloudflare Inc
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 10, 2022
Fourth quarter highlights
- Fourth quarter revenue totaled $193.6 million, an increase of 54% over the same period last year
- GAAP net loss was $77.5 million, compared to $34.0 million in the fourth quarter of 2020
- GAAP net loss per basic and diluted share was $0.24 compared to $0.11 in the fourth quarter of 2020
2021 highlights
- 2021 revenue totaled $656.4 million, an increase of 52% year-over-year
- GAAP net loss was $260.3 million compared to $119.4 million for fiscal 2020
- GAAP net loss per share was $0.83, compared to $0.40 for fiscal 2020.
- A 71% year-over-year increase in large customer growth
- Record dollar-based net retention of 125%, representing an increase of 6% year-over-year, driven by continued strength from large enterprise customers
Upwork Inc
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 10, 2022
Fourth quarter highlights
- Total revenue grew 29% year-over-year to $136.9 million in the fourth quarter of 2021
- GAAP net loss was $(22.6) million in the fourth quarter of 2021 compared to GAAP net income of $0.9 million in the fourth quarter of 2020
- GAAP net loss per basic share was $(0.18) in the fourth quarter of 2021 compared to GAAP net income per basic share of $0.01 in the fourth quarter of 2020
2021 highlights
- Full-year 2021 total revenue grew 35% year-over-year to $502.8 million.
- Full-year GAAP net loss was $(56.2) million in 2021 compared to GAAP net loss of $(22.9) million in 2020.
- GAAP net loss per basic share was $(0.44) in 2021 compared to GAAP net loss per basic share of $(0.19) in 2020.
Yellow Pages Ltd
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 10, 2022
Fourth quarter highlights
- Total revenues decreased 10.5% year-over-year to $68.6 million for the fourth quarter, an improvement from the decrease of 11.7% reported last quarter. Due to the decline of higher margin Yellow Pages digital media and print products
- Net earnings of $38.7 million, or $1.46 per diluted share, compared with $16.8 million, or $0.58 per diluted share, for the prior year quarter. This was a result of previously unrecognized tax attributes and temporary differences.
- Quarterly revenue of $68.6 million compared with $76.7 million for Q4 2020
2021 highlights
- Total revenues for the year decreased by 13.8% to $287.6 million, as compared to $333.5 million for the same period last year. As in the fourth quarter, this was due to the decline of higher margin Yellow Pages digital media and print products.
- Net earnings increased to $70.6 million for the year compared to net earnings of $60.3 million, for the same period last year due to higher recognition of previously unrecognized tax attributes and temporary differences.
- Declared a dividend of $0.15 per common share, to be paid on March 15
Trisura Group Ltd
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 11, 2022
Fourth quarter highlights
- Net income of $10.3 million in the quarter fell 6.0% compared to Q4 2020, negatively impacted by novation of a life annuity reinsurance contract and higher claims in the quarter
- EPS of $0.24 in Q4 2021 compared to $0.26 in 2020
- Interest and dividend income rose 25.8% in the quarter compared to Q4 2020
2021 highlights
- Net income for the full year grew by 92.8% to $62.6 million, a result of both growth and strong underwriting in Canada, increasing fee income from the US, and appropriate asset liability matching in our Reinsurance business.
- EPS of $1.49 for the full year compared to $0.82 in 2020
- ROE of 19.0% compared to 13.4% in 2020, exceeding mid-teens target
- Interest and dividend income rose 17.6% for the full year compared to 2020
Portfolio 2
Portfolio 2 for the week ended February 11, 2022: UP 
Disney had a very strong first quarter earnings report thanks to a combination of a considerable increase in both visitors to its properties and Disney+ streaming service subscribers. Considering the various lockdowns in 2020, I’d have been surprised if the number of attendees for 2021 had not been higher. While the increased attendance was predictable, its growing subscriber base for Disney’s streaming services such as Disney+, Hulu and ESPN was not so obvious. Though Disney+ is still well behind streaming service leader Netflix, it continues to add subscribers. Combine that with continued growth in the number of visitors to Disney parks, and the amount visitors spend per visit, Disney appears to be returning to its long-term growth rate.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Bank of Nova Scotia DRIP
US $
No US$ dividends this past week.
Quarterly Reports
Zynga Inc
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 9, 2022
Fourth quarter highlights
- Record revenue of $695 million, up 13% compared to the fourth quarter, 2020
- Net loss was up 27% to a loss of $67 million compared to the fourth quarter, 2020
2021 highlights
- The highest-ever annual revenue of $2,801 million, an increase of 42% year-over-year
- A net loss of $104 million, an improvement of $325 million year-over-year
Walt Disney Co
All currency listed in US dollars
Selected highlights from their first quarter 2022 financial results on February 9, 2022
- Diluted earnings per share (EPS) from continuing operations for the quarterincreased to $0.63 from $0.02 in the prior-year quarter
- First quarter revenue of $ 21,819 million versus $16,249 million
- Disney Media and Entertainment Distribution revenue up 15&
- Disney Parks, Experiences and Products revenue up over 100%
- increase in total subscriptions across Disney’s streaming portfolio to 196.4 million, including 11.8 million Disney+ subscribers added in the first quarter
Telus Corp
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 10, 2022
Fourth quarter highlights
- Revenue up 10%
- Net Income up 16%
- Total Mobile and Fixed customer growth of 272,000, Telus’s best fourth quarter on record and an increase of 19,000 over last year.
2021 highlights
- Operating Revenue up 9.8%
- Net Income up 35%
- Record 960,000 net customer additions
- Dividends declared in 2021 up 7.3 per cent; Quarterly dividend declared for April 2022 of $0.3274, up 5.2 per cent over the prior year
Fortis Inc
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 11, 2022
Fourth quarter highlights
- Net Earnings were $328 million, or $0.69 per common share, compared to $331 million or $0.71 per common share for the same period in 2020
2021 highlights
- Reported annual net earnings of $1,231 million, or $2.61 per common share in 2021
Portfolio 3
Portfolio 3 for the week ended February 11, 2022: DOWN
During the Brookfield Asset Management (TSX:BAM.A) fourth quarter report, the company announced it was considering spinning off its management division to ‘open up growth opportunities to us that don’t exist today’. Portfolio 3 currently has three Brookfield companies (Brookfield Asset Management Inc, Brookfield Renewable Partners (TSX:BEP.UN and TSX:BEPC) and Brookfield Renewable Partners (TSX:BAMR). In addition, Brookfield Infrastructure Partners (TSX:BIP.UN and TSX:BIPC) is part of Portfolio 2, Trisura Group (TSX:TSU), completely spun out of the Brookfield orbit, is part of Portfolio 1, and Brookfield Select Opportunities Fund (TSX:BSO.UN) is in both Portfolio 1 and 2. It would be fair to say I like Brookfield run companies. 😊 That being said, I think Brookfield management is very capable, as evidenced by their growing businesses, and I’ve no reason to doubt another Brookfield company would be just as good.
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
Telus International Canada Inc
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 10, 2022
Fourth quarter highlights
- Q4 revenue of $600 million, up 36% year-over year
- Net income of $36 million and diluted EPS of $0.13, compared with $21 million and $0.09 respectively
2021 highlights
- Full-year revenue of $2,194 million, up 39%
- Net income of $78 million and diluted EPS of $0.29, compared with $103 million and $0.46 respectively, in the prior year.
Cloudflare Inc
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 10, 2022
Fourth quarter highlights
- Fourth quarter revenue totaled $193.6 million, an increase of 54% over the same period last year
- GAAP net loss was $77.5 million, compared to $34.0 million in the fourth quarter of 2020
- GAAP net loss per basic and diluted share was $0.24 compared to $0.11 in the fourth quarter of 2020
2021 highlights
- 2021 revenue totaled $656.4 million, an increase of 52% year-over-year
- GAAP net loss was $260.3 million compared to $119.4 million for fiscal 2020
- GAAP net loss per share was $0.83, compared to $0.40 for fiscal 2020.
- A 71% year-over-year increase in large customer growth
- Record dollar-based net retention of 125%, representing an increase of 6% year-over-year, driven by continued strength from large enterprise customers
Brookfield Asset Management
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 10, 2022
Fourth quarter highlights
- 21.7 billion in revenue for the fourth quarter compared to $17 billion in the prior year
- Generated $3.4 billion of net income for the fourth quarter compared to $1.8 billion in the prior year
2021 highlights
- $75 billion in revenue, including $71 billion of capital inflows due to strong performance from principal investments, and significant carried interest and gains generated from $42 billion of asset sales.
- Generated $12.4 billion of net income
- As of December 31, 2021, Brookfield had $92 billion of capital available to deploy into new investments
- Declared an 8% increase in the quarterly dividend to US$0.14 per share