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.