Markets A relatively quiet week for North American equity indexes. The DOW was only very slightly higher +0.0% while Nasdaq led by big tech was lower by 0.7% and the TSX gained 0.5%. Investors will be anxious to see what is said at next week’s US Federal Reserve meeting. |
|
Financials Interest rates were back on the climb last week as US inflation data came in hotter than expected. |
|
With US data trending stronger than expected, it’s keeping Canadian rates a bit elevated even though Canada isn’t seeing the same degree of strength. Canadian treasury yields are lagging US yields as more signs of weakness appear in the Canadian economy. I continue to expect the Bank of Canada to move first when it comes to lowering bank rates. |
|
Commodities Oil and gold seem to be battling for the spotlight lately. Oil markets seem to have taken on a more bullish stance of late and we had WTI oil close back above $80 this past week. A combination of higher than expected demand forecasts and a revision lower in production forecasts has the oil bulls cheering as the trend in prices seems to be higher for now. |
|
Gold was busy consolidating its recent strong move to $2200 per ounce and drifted lower to close at roughly $2160 in US dollars. |
|
|
|
Nasdaq continues to be the driving force of the bull market and big tech (AI) seems to continue to form direction. |
|
One company that has not been a help to this bull market of late has been Tesla (TSLA). Shares in the leading EV maker are near 52 week lows. After peaking in July of last year TSLA, one of 2023’s market darlings, has lost $431 billion in market capitalization. Let’s see what happens to this year’s new market darlings. |
|
In the smaller end of the market we are seeing more of the same as we have throughout the past 12 months. Lots of new 52 week highs and a few more take outs. This week we had 2 Canadian smallcap/microcaps announce they’ve received takeover offers. MDF Commerce (MDF.T) has agreed to be acquired by New York private-equity firm Kohlberg Kravis Roberts & Co. for $5.50 in cash, a 58% premium to the previous day’s closing price. |
|
And on the smaller side, True Context Corp (TCXT.V) (formerly ProntoForms) has agreed to be acquired by Battery Ventures for $1.07 per share, a 39.9% premium to the price the stock was trading at prior to the announcement. |
|
Acquirers continue to find value in the Canadian smallcap sector. We also continue to see a healthy number of our portfolio and watchlist names hitting new 52 week highs. This week shares of BeWhere Holdings (BEW.V) made it back on the 52 week high list closing up 26.7% on the week. |
|
Other notable new highs include Haivision (HAI.T), Tantalus Systems (GRID.T), VitalHub (VHI.T), Data Communications Management (DCM.T) and Zedcor Inc (ZDC.V). |
|
One by one it seems that quality, profitable and growing Canadian microcaps are being recognized for their value and upside. Other Stuff I was travelling this past week, making my way to Mexico City to visit the team at Ola Media. Here’s a few quick takeaways from my trip; Mexico City is a very big city. It’s a dynamic city with lots of great restaurants, activities and events, and the weather this time of year is much better than it is in Vancouver! But this is a city with an unbelievable amount of traffic congestion. Mexico City is the largest city in North America with a population of over 9.2 million, surpassing New York’s 8.6 million. Did I mention the traffic? We managed to get tickets to a soccer game where roughly 75,000 fans attended. We spent over 1 1/2 hours in traffic in an Uber car trying to get to the game. Mexico City has over 180,000 rideshare drivers. Think of how many hours are spent in the back of a rideshare car in Mexico City. Mexico City is Uber's second most important city in the world, Sao Paulo, Brazil is the only busier city for Uber. For those that have never heard of Ola Media, the company provides an infotainment platform (tablets) in the back of rideshare car platforms like Uber, Didi and Vemo. Ola is the dominant player in this market yet has only penetrated less than 1% of the addressable Mexico City market. It has recently launched into Guadalajara, a city of 1.4 million and Monterrey, population 1.1 million. |
|
Ola currently has their infotainment systems in 1800 cars and the driver waiting list is triple that number right now. Drivers want this system in the back of their car because it adds to their monthly paycheck. It’s also been shown to increase driver tips and ratings. And the rideshare platforms want more of these in the back of their drivers cars too. So, Ola has ordered another 600 systems and we were there in the offices when a shipment of 200 units were delivered which will soon be on the roads generating revenue in two new markets surrounding Mexico City. Ola is rapidly growing. |
|
|
|
While the company is still small by most standards its rate of growth is not. Last year the company more than doubled its platform count and more than tripled its revenues. The company continues to grow its list of well-known clients. Names such as Coke, FIFA, Netflix, Heineken, and many others continue to use this novel advertising platform to market to one of the hardest demographics to capture, young and mobile, and banked consumers. It’s estimated that only 40% of the Mexican population has a bank account and or credit card. 100% of ride-share riders have a credit card, making these customers a very sought after demographic to market to. This is one of the reasons big advertisers are coming back to Ola with more, and bigger advertising campaigns. While it was great to see Ola’s product in action it was also helpful to see the potential first hand. Mexico City is a bustling and economically thriving city. Mexico as a country is also booming, and Latin America in general is gaining international investor interest. Ola Media seems extremely well poised to capture a novel and exciting new market opportunity not only in Mexico but throughout Latin America. The company hopes to initiate a public listing sometime before the end of 2024. Anyone interested in learning more about the company can check them out at https://www.olamedia.mx/ or reach out to me or Trevor and we can put you in contact with the company. To your wealth, Paul and Trevor |
