When I got back into investing in 2018, I thought I would never buy shares of an oil come as the green revolution was underway and I’m very optimistic about renewable energy and electric vehicles. All I knew about oil companies was the price of oil had fallen from over USD$ 100 a barrel in 2013 to a range between USD $40 – $60 a barrel, a price that was profitable for most companies. Add in the push to electric vehicles and renewable energy sources, I saw oil companies as a dying industry. With the onset of the Covid-19 pandemic in 2020, oil briefly fell to under USD $20 a barrel. The oil industry was done, or so I thought.
Fast forward to February 2022 and it turns out the oil industry is still very much alive. Not only is it alive, but I’ve invested in a few oil & gas companies and I’m looking into one or two additional oil & gas related companies. What changed you ask. Well….
The push to renewable energy is in full swing, and I’ve invested in a few of these companies, but the world cannot go cold turkey from its dependence on oil and gas. Long term, the oil & gas industry is in decline. However, until a reliable alternative is found, there is still strong demand for this type of resource in everyday life. Just ask anyone who has to heat their home during a cold winter. I was aware of the necessity of oil for vehicles and heating but there are so many more applications for oil and natural gas. Check out this interactive infographic from the International Association of Oil & Gas Producers to see how much we rely on this resource. Now, I agree climate change is happening and we should continue the move to renewable energy sources as soon as possible, but in the meantime the world still needs oil.
As an investment, companies in the oil and gas industry are looking more attractive. A year ago, the price of oil was just under USD $60 a barrel and now sits at over USD $90 a barrel. Cold snaps in various locations throughout the world have further increased demand for oil to heat homes. On the supply side, tensions in the Ukraine are causing fears of a restricted supply of oil from the world’s third largest exporter of oil. If Russia were to invade Ukraine, oil could top $100 a barrel for the first time since 2014. So much for lower gas prices.
With huge demands for oil and limited supplies, and an anticipated growth in the demand for oil for at least the next 10 years, oil and natural gas companies are raking in the cash. In previous years these energy companies would re-invest that cash into exploration, development and production projects. However, those in charge of fossil fuel energy companies aren’t blind to what is happening around them. They realize there is a growing move to renewable energy sources and in the long term there will be a decline in the demand for their product so there is not much profit to be made by investing in exploration and the development of new wells. Rather than plowing profits into drilling more wells, they are focused on more short-term projects that can provide a high return on investment. To increase shareholder value and continue to attract investors, they are returning a higher percentage of their money back to shareholders by way of increasing dividends, and/or using some of this money to buy back shares as a way of increasing investor’s earnings per share (the less shares, the more earnings per share). With a small investment in oil and gas companies, I’ve been able to capitalize on rising share prices, and receive a growing dividend. Together, these provide a solid total gain on the investment.
I’ll continue to invest in alternative energy resources and renewable energy products. However, this seems to be a great opportunity to take advantage of a product that is growing in demand and returning more and more cash to investors. If they are giving it away, I’m happy to receive it. 😊
Now, lets see what happened with oil and the rest of the market last week….
Weekly Market Review
Monday: The week started off on a downer with all four major North American Indexes ending the day in the red. However, all three American Indexes, Nasdaq Composite Index (Nasdaq), the S&P 500 Index (S&P), and the Dow Jones Industrial Average (DJIA), ended the day with a late rally. On the other hand, the Toronto Stock Exchange Composite Index (TSX) fell early and stayed down for the rest of the day. The 1 – 2 punch of interest rate hikes and fears of a Russian invasion of Ukraine continue to dog the market. In Canada, government overreach protests have started to negatively impact the Canadian economy, causing the Canadian government to invoke the Emergencies Act to put an end to the blockades at Canadian land ports of entry. This is the first time the Emergencies Act has been invoked since it replaced the War Measures Act in 1988.
Tuesday: The welcome reports of Russia sending some of its trooped amassed along the Ukraine border back to their bases eased the tension in the area and sent all four Indexes upward. The dialing back of tensions also eased oil supply concerns, causing the price of a barrel of oil to fall to USD$ 92.07. While Energy sector stocks fell, gains in Consumer Discretionary, Technology, and Industrial sectors more than compensated for the drop in Energy stocks.
Wednesday: A report showing Canada’s inflation rate increased in January to 5.1%, a 30 year high, combined with a drop in the Technology sector (primarily Shopify (TSX:SHOP) dropping 17%) was more than enough to offset gains in both the Materials sector and Energy.
South of the border, the three US Indexes fell sharply early but rallied late to end the day essentially flat. The S&P was able to inch into the black while the DJIA and Nasdaq ended the day slightly lower. Fears of interest rates hikes, and geopolitical tensions caused the Indexes to fall, but they reversed themselves when the US Federal Reserve announced they would review interest rates on a meeting-by-meeting basis rather than a fixed amount.
Thursday: A rough day for all 4 Indexes with only the TSX able to limit its decline to less than 1%. While Wednesday’s declines could be blamed on fears of interest rate hikes, today’s fall can be laid at the feet of fears Russia would invade Ukraine when the US said they did not see any evidence of a Russian troop withdrawal. Not only would a war in Ukraine plunge the world into a very dangerous situation, but it would also lead to disruptions in energy supplies (Russia is a top oil producer and supplier) which in turn would raise inflation higher as a shortage of gas would lead to higher prices at the pump.
In Canada, losses on the TSX were mitigated thanks to another strong day for members of the Materials sector (miners and fertilizer companies), which was up 2.3% for the day.
In the USA, investors left the growthier sectors of Technology and Communications Services in favour of the more defensive sectors such as Utilities and Consumer Defensive. The DJIA suffered its largest single day loss (1.78%) since late November.
Friday: All four Indexes were down for the day; however, the Nasdaq was the only one down more than 1%. As on Thursday, the main culprit was ongoing tensions in the Ukraine. Despite strong earnings results, investors continued to move out of the high growth stocks to safer assets as the long weekend approached.
For the week, the TSX broke a three-week winning streak while the three American Indexes declined for a second straight week.
Weekly Portfolio Review
It was a bad week in every sense for the three Portfolios as they all had a worse week than the worst Index. And to top it off, Portfolio 3 was very close to a double-digit loss for the week. ☹ As in previous weeks, the technology sector bias of all three Indexes is not helping when there are fears of upcoming interest rate hikes. Portfolio 1 has several companies that benefitted from the acceleration of the digital transformation caused by the pandemic. As the world reopens, there is a natural slowdown in the demand for these companies’ product. Investors don’t like it when the growth rate of high growth companies slows down as is currently happening. Portfolio 2 once again benefits from being more balanced than the other two portfolios and fell the least. Bringing up the rear, literally, Portfolio 3 was punished for being overexposed to one company – Shopify. It was great riding it up for the last two years but not so great seeing it cut in half in less than four months.
Companies on the Radar
Two new companies have come onto my radar of late, but I have not had a chance to take more than a 2 minute look at either of them. The first is Pulse Seismic (TSX:PSD), the largest provider of seismic data to the energy sector in Canada. The company had a great earnings report on February 17 that has prompted me to take a closer look at the company and its potential.
The other company is Kornit Digital (NASD:KRNT), a “market leader in sustainable, on-demand, digital fashion and textile production technologies”. Their solutions allow for on-demand printing rather than forcing suppliers to carry excess inventory. Sounds interesting, and if they truly are a market leader I will add them to my growing list of companies on my radar, which includes:
In the case of Fubo, a lot depends on their earnings report due on February 23.
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended February 18, 2022: DOWN 
One of my favourite companies in Portfolio 1, Nvidia, had a strong fourth quarter earnings report (see the highlights in the Quarterly Reports section below). I believe Nvidia will be a top performer, for the next few years at least, because of the company’s optionality. That is, they have a lot of different markets for their products (graphic processor units (GPUs), or chips). Their products can be found in several of the fastest growing trends in the digital world, including gaming, data centers, cloud computing, autonomous vehicles, artificial intelligence and the much talked about ‘metaverse’. In fact, they are market leaders in a number of these fields. Nvidia is a great way to get exposure to a market leader with a number of tailwinds at its back. Despite all that, Nvidia fell 7.5% later in the week when the company predicted gross margins would remain flat in this current quarter. Perhaps this dip is telling me to buy more shares in Nvidia. 😊
In other Portfolio 1 news, on Friday Roku (NASD:ROKU) fell sharply when the company reported fourth quarter earnings with lower-than-expected revenue growth and gloomy prospects for the first quarter thanks to supply chain issues. I suspect Roku is a victim of people getting out and about more and not watching as much TV. The company will continue to grow, just not as fast as during the pandemic when people spent more time at home. Roku continues to be the leading TV operating system in North America and is expanding internationally.
Visa (NYSE:V) and Amazon (NASD:AMZN) UK have made peace, allowing Amazon shoppers to continue using Visa for their online shopping. This is probably better news for Visa than Amazon with the growing number of Amazon shoppers and ensures Visa is “Everywhere you want to be.” 😊
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Automotive Properties Real Estate Investment Trust (TSX:APR.UN) DRIP
US $
BSR Real Estate Investment Trust (TSX:HOM.U)
Quarterly Reports
Voyageur Digital Ltd.
All currency listed in US dollars
Selected highlights from their second quarter 2022 financial results on February 15, 2022
- Revenue for the quarter is $164.8 million, up over 4400% compared to $3.5 million for the quarter ended December 31, 2020.
- Revenue for the calendar year ended December 31, 2021, is $415.8 million vs $6.6 million for the calendar year ended December 31, 2020.
- Total funded accounts exceed 1,074,000 as of December 31, 2021, up 25% from 860,000 at the quarter ended September 30, 2021.
- Total Assets on Platform grew to $5.9 billion from $4.3 billion as of September 30, 2021.
Lattice Semiconductor Corp
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 15, 2022
(In thousands, except per share data)
Fourth quarter highlights
- 4 2021 revenue increases 32.3% compared to Q4 2020 and 7.5% compared to Q3 2021
- Net income of $28,532 compared to $15,989 to Q4 2020
- Net Income Improves to $0.20 Per Diluted Share for Q4 2021 compared to $0.11 for Q4 2020
2021 highlights
- Revenue increases 26.3% for the full year 2021 compared to the full year 2020
- Net income of $$95,922 compared to $47,392 in 2020
- Net Income Improves to $0.67 Per Diluted Share 2021 compared to $0.34 for 2020
Nvidia Corp
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 16, 2022
($ in millions, except earnings per share)
Fourth quarter highlights
- Revenue of $7.64 billion, up 53% from a year earlier and up 8% from the previous quarter
- Net income was $3,003, up 106% from a year earlier
- Earnings per diluted share for the quarter were a record $1.18, up 103% from a year ago and up 22% from the previous quarter
- Set record quarterly revenues in their Gaming, Data Center and Professional Visualization units.
- Revenue in Automotive & Robotics unit was down 14% from a year ago.
2021 highlights
- Revenue of $26.91 billion, up 61 percent
- Net income was $9,752, up 125%
- Earnings per diluted share were a record $3.85, up 123% from $1.73 a year ago
- Gaming revenue rose 61 percent to a record $12.46 billion
- Data center revenue rose 58 percent to a record $10.61 billion.
- Professional Visualization revenue rose 100 percent to a record $2.11 billion.
- Automotive & Robotics revenue up 6%.
Trade Desk Inc
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 16, 2022
($ in millions, except earnings per share)
Fourth quarter highlights
- Revenue of $395.6, up 24% compared to the same period in 2020
- Net income of $8.0, compared to $151.9 in 2020
2021 highlights
- Revenue was $1,196.5, compared to $836 in 2020, up 43%
- Net income was $137.7, compared to $242,317 in 2020
- 2021 gross spend on the platform was approximately $6.2 billion, a 47% increase year-over-year.
- Customer retention remained over 95% during the fourth quarter and throughout fiscal year 2021, as it has for the past 8 consecutive years.
Global-E Online Ltd
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 16, 2022
Fourth quarter highlights
- Revenue in the fourth quarter of 2021 was $82.7 million, an increase of 54% year over year.
- Gross margin in the fourth quarter of 2021 was 39.5%, an increase from 33.5% in the fourth quarter of 2020
- Net loss in the fourth quarter of 2021 was ($22.5) million, compared to a net profit of $4.3 million in the year-ago period.
2021 highlights
- Revenue for the full year was $245.3 million, an increase of 80% year over year
- Gross profit for the full year was $91.4 million, an increase of 110% year over year
- Net loss for the full year was ($74.9) million, compared to a net profit of $3.9 million in the year-ago period.
Roku Inc
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 17, 2022
(In thousands, except per share data)
Fourth quarter highlights
- Net revenue of $865,329 compared to $649,886 in the fourth quarter of 2020, an increase of 33%
- Net income of $23,687 compared to 67,306 in the fourth quarter of 2020, a decline
- Active Accounts reached 60.1 million, a net increase of 8.9 million active accounts from Q4 2020
2021 highlights
- Total net revenue grew 55% year-over-year to $2.765 billion
- Net income of $242,385 compared to a net loss of $17,507 in the previous year
- Gross profit was up 74% year-over-year to $1.409 billion
- Average Revenue Per User (ARPU) grew to $41.03 (trailing 12-month basis), up 43% YoY
- No. 1 TV streaming platform in the U.S., Canada, and Mexico by hours streamed
Portfolio 2
Portfolio 2 for the week ended February 18, 2022: DOWN
Per this week’s introduction, and to paraphrase Mark Twain, reports of oil’s death have been greatly exaggerated. Case in point is TC Energy (TSX:TRP) which beat analysts’ estimates for quarterly profit. Their revenues were boosted by strong demand for its oil and gas transportation services after energy prices hit multi-year highs.
I was glad to finally see Chorus Aviation (TSX:CHR) start to make a comeback this past week. The company’s share price nose dived at the start of the pandemic in March 2020, and then they eliminated their dividend. I’ve been debating whether to sell the shares since I don’t see this airline stock suddenly taking off (pun intended) but when I look at TD Direct Investing’s research tools it shows the company as a Strong Buy with an average target of CAD $5.75, a 32.5% upside. I’ll continue to hold it and hope they reintroduce a dividend. However, if I find a company I like better with more upside it won’t take much for me to decide to move on.
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 $
Summit Industrial Income REIT (TSX:SMU.UN)
US $
No US$ dividends this past week.
Quarterly Reports
TC Energy Corp
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 15, 2022
Fourth quarter highlights
- Net income attributable to common shares of $1.1 billion or $1.14 per common share
- Net income of $1,035 million compared to $1,080 million for the same period in 2020
2021 highlights
- Net income attributable to common shares of $1.8 billion or $1.87 per common share
- Net income of $4,153 million compared to $3,945 million for the same period in 2020
- A 3.4% increase in the quarterly common share dividend to $0.90 per common share for the quarter ending March 31, 2022
Chorus Aviation Inc.
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 16, 2022
(Expressed in thousands of Canadian dollars)
Fourth quarter highlights
- Increased operating revenue to $346,516, up 59% from the same period in 2020
- Net income of $10.2 million, or $0.06 per basic share; a quarter-over-quarter increase of 10%
2021 highlights
- Increased operating revenue to $1,023,275, up 8% from fiscal 2020
- Net loss of $20.5 million, or $0.12 per basic share; a year-over-year decrease in net income of $62.0 million.
iA Financial Corporation
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 16, 2022
(In millions)
Fourth quarter highlights
- Net income of $209, an increase of 22% over the same period in the previous fiscal year
- Reported ROE of 13.2% compared to 12.8% over the same period in the previous fiscal year
- Earnings per common share of $1.94, up 16% over the same period in the previous fiscal year
- Assets under management and administration¤ reached a record $221.2 billion at the end of the fourth quarter, up 12% year over year and up nearly $7 billion during the quarter.
2021 highlights
- Net income of $830, an increase of 36% over the previous fiscal year
- Reported ROE of 14.2% for the fiscal year
- Earnings per common share of $7.70, up 35% over the previous fiscal year
- Board of Directors approved a quarterly dividend of $0.6250 per share, the same as in the fourth quarter of 2021.
Portfolio 3
Portfolio 3 for the week ended February 18, 2022: DOWN
Ouch!
How else to describe hearing that after their earnings report on Wednesday, Shopify experienced their largest single day decline of 17%. I thought there would be a bit of a bounce but the share price ended the week down 35% from Tuesday’s closing price. The company is still growing revenue and had net income of over $2 billion. As with Nvidia and Roku mentioned previously, their sin was they predicted a slower pace for revenue growth – “… anticipates revenue growth for the full year 2022 that is lower than the 57% revenue growth achieved in 2021.” Given the growth of online merchants and shopping over the past two years during the pandemic, which lead to the tremendous growth, and the return to in person shopping as the world reopens, its not surprising the growth rate is expected to cool off. If Shopify had not advised of a probable slow down in their revenues for fiscal 2022, they most likely would have missed their expected numbers and the market frowns on companies that miss expectations (remember, Meta (NASD:FB) fell 27% and lost more than $230 billion in their market capitalization).
The other bit of news announced during their earnings report was Shopify was investing in constructing state of the art warehouse fulfillment centres. This infrastructure would allow merchants to easily sell their products anywhere and grow their business quicker. This is all well and good, but this puts Shopify directly in competition with very deep pocketed Amazon. it will be interesting to see how this battle plays out.
Despite being down 62% from its July 2021 peak, as a long-term investment, I still like Shopify and their management team, so I’ll be holding onto the shares as the company goes through this rough patch.
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
Goeasy Ltd.
All currency listed in CAD dollars
Selected highlights from their fourth quarter 2021 financial results on February 16, 2022
Fourth quarter highlights
- Revenue of $234,430,000, up 35% from the same period in 2020
- Net income of $49,961,000, compared to $ 48,911 from the same period in 2020
- Record net customer growth during the quarter of 10,725
2021 highlights
- Revenue of $826,722,000 up 26% from 2020
- Net income of $244,943,000 compared to $136,505,000 from 2020, an increase of almost 80%
- Increased the annual dividend from $2.64 per share to $3.64 per share, an increase of 38%
Shopify Inc
All currency listed in US dollars
Selected highlights from their fourth quarter 2021 financial results on February 16, 2022
Fourth quarter highlights
- Revenue rose 41% to $1.38 billion, compared with analysts’ estimates of $1.33 billion.
- Monthly Recurring Revenue (“MRR”) was $102.0 million, surpassing $100 million for the first time. MRR increased 23% year over year, up from $82.6 million as of December 31, 2020.
- Net loss for the fourth quarter was $371.3 million (includes a $509.7 million net unrealized loss on equity and other investments), or $2.95 per basic and diluted share, compared with net income of $123.9 million, or $0.99 per diluted share.
- From the start of Black Friday in New Zealand, through the end of Cyber Monday in California, sales on Shopify’s platform reached more than $6.3 billion. This compares with more than $5.1 billion for the global Black Friday Cyber Monday period in 2020.
2021 highlights
- Total revenue for the full year 2021 was $4,611.9 million, a 57% increase over 2020.
- Net income for 2021 was $2,914.7 million (includes a $2.9 billion unrealized net gain on our equity investments), or $22.90 per diluted share, compared with net income of $319.5 million, or $2.59 per diluted share, for 2020
- Launched TikTok Shopping, integrated POS retail hardware