Markets Equity markets have continued their recent winning ways with the DOW breaking out to new all-time highs sparked by the belief that interest rates have stopped increasing for this rate cycle. The Dow finished the week higher by 2.9%, while Nasdaq climbed 2.4% and the TSX gained 1.0%. |
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Financials We are seeing fresh lower lows in bond yields across the board. The 10-year US treasury yield reached new 4-month lows, a significant drop of over 100 basis points in the past 60 days. The Fed commentary has turned significantly more accommodative as slowing inflation and economic data allows the Fed to take its foot off the interest rate gas pedal. |
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In Canada we are seeing similar moves in interest rates. The Canada 5-year bond yield has dropped almost 125 basis points in the past 2 months and fixed mortgage rates and a host of other linked interest rates have been following the bond yields lower. |
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The dovish speak from Fed Chairman Powell along with the weakening US economic data has impacted the US dollar and we are seeing weakness almost across the board. |
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The surprise here is that the Canadian dollar has gained strength versus the US dollar which gives the Bank of Canada more wiggle room if it wants to drop rates faster. |
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Commodities As I’ve noted many times in the past a weaker US dollar is good news for most commodity bulls. Gold has held above the psychological $2000 level and a number of other hard commodities have seen firmer prices. |
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Oil finally had a positive week after trading near the lower end of its yearly range. WTI oil managed to pop back above $70. Energy stocks have been one of the weakest performing sectors in the recent bull market move as ballooning US supply has stymied OPEC’s attempt to tighten supply and maintain higher prices. |
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Baker Hughes drill rig data shows another drop in rig activity. There were 3 less rigs active in the US and a drop of 9 rigs in Canada.
Stocks Who had “DOW hitting all-time highs in 2023” on their bingo card? It’s hard to argue against the current bull market. With the DOW at new all-time highs and Nasdaq nearing its all-time highs. |
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What I find interesting is that while the market has been held up by the “Magnificent 7” stocks over the past year or so it’s not necessarily those stocks that are driving the recent break out in the indexes. WE are seeing some of the smaller, less well known names starting to carry their weight. And tiny bits of that strength also seem to be making it all the way down to Canadian nanocap land. Once again we’ve seen a number of our favorites moving higher and some breaking to new 52 week highs. This week it was ADF Group (DRX.T) which is still feeling the love of investors after announcing strong financial results and a big increase in business backlog. |
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DRX.T has been a monster winner this year and is up 210% since we included it on “Take Over” list almost exactly one year ago. Another long time favorite, BeWhere Holdings (BEW.V) made it onto the new 52-week high list again this week. Shares in BeWhere have rocketed almost 60% in less than 2 months. |
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Recent favorite Thermal Energy International (TMG.V) also broke out to a new 52-week high as the company announced another contract win, this time adding another $3.7 million order to their growing backlog of business. Shares of TMG.V have risen 84% since we highlighted the company a few months back in September at $0.125. |
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Another name that has made it onto our watch list of late is Foraco International (FAR.T). Foraco International is a global leading drilling services company that assist its customers in exploring or managing their deposits throughout the entire cycle, with a special focus on the life of mines extension activity. The company intends to continue developing and growing its services across the world with a focus on stable jurisdictions, high-tech drilling services, optimal commodities mix including battery metals and gold -- with a significant presence in water-related drilling services -- and a gradual implementation of advanced digital applications. Supported by its founding values of integrity, innovation and involvement, Foraco has grown as one of the largest global drilling enterprise with operations in 22 countries across five continents. Shares in FAR.T hit a new 52 week high this past week and looks poised to move higher from here. |
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Immunoprecise Antibodies (IPA.Q) announced Q2 results this past week. The company reported record revenues of $6.2 million for the quarter, an increase of 18.6%. The company managed to lower its losses to $2.6 million for the quarter compared to $7.4 million a year ago and a loss of $3.6 million in Q1. The company ended the quarter with $6.1 million of total cash, cash equivalents and marketable securities, with a reduced cash burn of $0.7 million for FY24 Q2, compared to cash burn of $1.6 million for FY24 Q1. |
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There continues to be a big difference in share price performance between companies that are profitably growing their businesses and those that aren’t. Dilution risk is scaring many investors away from these money losing companies and those forced to do equity raises in this environment are getting punished. With the healthy number of great little growing and profitable businesses there is little need to take on any kind of extra dilution risk when so many of these great little profit generators are still trading at compelling valuations. Trevor and I are currently busy doing our year end review of all the Canadian listed companies and hope to have a few more interesting lists to showcase in the new year. This Week I’m Reading: What I Learned About Investing from Darwin – Pulak Prasad - Pulak Prasad offers a philosophy of patient long-term investing based on an unexpected source: evolutionary biology. He draws key lessons from core Darwinian concepts, mixing vivid examples from the natural world with compelling stories of good and bad investing decisions—including his own. How can bumblebees' survival strategies help us accept that we might miss out on Tesla? What does an experiment in breeding tame foxes reveal about the traits of successful businesses? Why might a small frog's mimicry of the croak of a larger rival shed light on the signs of corporate dishonesty? To your wealth, Paul and Trevor |
