Market Last week, markets dropped sharply on fears of higher interest rates. This week, markets rallied on the back of more accommodative words from the Atlanta Federal Reserve President. The DOW was higher by 1.7%. |
|
With the bulk of corporate earnings results now behind us investors will turn more to macro data for direction.
Inflation continues to drop although slowly. Job data continues to be very strong and somewhat defies the Fed tightening and certain sectors continue to ignore restrictive financial conditions. Treasury yields are pointing to recession while equity markets are not. If this is a recessionary environment, this isn’t your grandparent’s style of recession. |
Energy WTI oil had a better week and closed just below $80. It continues to trade in a tight trading range and still looking for direction. |
|
Nymex natural gas had its strongest week in months and closed above $3 for the first time in over a month. Prices have rallied over 50% from their lows in 2 weeks. Is the bottom in? |
|
The energy services ETF had a powerful rally this week and broke out to new 52 week highs. |
|
Baker Hughes drill rig data showed another drop, down by 2 rigs, in North American active land drilling rigs.
Commodities US dollar took a pause this week and traded mostly sideways. The question now is this a top or a consolidation of the recent up move before moving higher? |
|
Precious metals have bounced nicely as the US dollar has paused its up move. Gold closed the week at $1862.70. Gold traders will be keeping a close eye on the DXY to help determine direction from here. |
|
I haven’t seen too many people talking about the steel lately. North American steel, when viewed by the US Steel Index has reached new multi year highs. Demand for localized supply has been strong and would be viewed as a positive indicator of economic strength. What kind of recessionary pressures cause steel to be in this kind of demand? |
|
Stocks We’ve seen a small reversal to the upside in equity markets after the recent, near month long selloff in stocks. Smaller stocks have seen some profit taking and consolidation of recent moves and I think we’ll likely see a test of the January highs.
The market continues to reward a number of different “old school” sectors. New highs are heavily weighted in steel, lodging, building materials, home builders, travel, auto manufacturing and industrial machinery and industrial materials (ie chemicals). |
|
Here’s the chart on Canada’s biggest steel producer, Stelco (STLC). |
|
The US Steel index is hitting its highest levels in 12 years. |
|
We are witnessing a renaissance in heavy industrial sectors such as steel, autos, and basic materials. As we’ve been saying for some time now, the extreme undervaluation of these types of industries coupled with growth and global supply constraints are enticing value and growth investors alike.
In Canada larger companies such as Stella Jones, SJ.T, (wood products), AG Growth Intl, AFN.T, (heavy machinery), and Martinrea, MRE.T, (auto parts), have rewarded shareholders with strong share price performance lately, all three hitting new 52-week highs. |
|
Smaller companies such as Atlas Engineered Products (AEP.V), Data Communications Management (DCM.T) both hit new 52 week highs this past week. |
|
Other Stuff I travelled to Toronto this past week on behalf of Atlas Engineered Products (AEP.V). We met with a number of smallcap fund managers and investors. The mere fact that they were interested in sitting down to hear about a $60 million market cap company was telling. Usually anything under $100 million isn’t big enough to get their attention and certainly that was the case for most of 2022. It’s a signal to me that funds are looking a bit further down market than we’ve seen in quite some time. Judging by the volume and price action, they like what they heard.
I was joined by Paul Kozak, and we had the opportunity to visit Alchemy Nanotech at their facilities in Kitchener, Ontario. |
|
We got the opportunity to see a number of their different products including their stealth infra-red cloaking products which are gaining some significant interest from various NATO members. This is what Jean Dumas, DRDC Technical Integrator Department of Defence Canada had to say after the recent successful field trial: “Alchemy has produced the right chemistry to reduce thermal signature by focusing exactly on the requirements and listening to practical advice from military users. Their technology shows strong potential for the Canadian Armed Forces, and I am looking forward to working with them on the next step.”
Alchemy’s multi-spectral camouflage coating outperformed all US/NATO alternatives in Canadian Armed Forces field trials recently held in California, USA. Multi-spectral camouflage is a top NATO/MNNA (Major non NATO Allies) priority with an estimated $5 billion annual addressable market for NATO/MNNA markets.
We were also there for the launch of one of their newest products, Exoshield ULTRA, a do-it-yourself windshield protection film kit designed specifically for Jeep and Bronco owners. |
|
Exoshield ULTRA comes in a convenient DIY kit that can be installed on your windshield in under 30 minutes and includes all the tools necessary.
For more information on this product check it out here: https://www.getexoshield.com/products/ultra-diy-windshield-protection-film
The company has a number of new products in development and the interest from product installers and customers continues to grow. More information on Alchemy Nanotech is available at: https://www.alchemynano.com/
The company is planning for a Q3/Q4 2023 public listing. We will keep you posted. For those interested in learning more about the investment opportunity in Alchemy please reach out to Trevor or myself.
To your wealth, Paul and Trevor |
