Markets Markets were mixed this past week with the DOW suffering a 1.1% loss, the TSX was down by 0.6% while Nasdaq bucked the downward move by gaining 0.6%. A handful of weaker than expected quarterly results from some stalwarts offset signs of weakening inflation data and markets continue to trade in a sideways manner. |
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Financials The US dollar index closed the week with some strength and has now broken back above 102. This is somewhat a surprise move as weakening inflation data points to lower rates and rising rates in Europe. Continued economic weakness in China, however, is bullish for the dollar. |
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Weakening US inflation data has investors pricing treasuries yields slightly lower on the week. |
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The Canada 5 year bond yield closed almost exactly where it did last Friday. Canadian fixed mortgage rates, which trend with the bond rates, have slowly been inching lower. |
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Commodities Gold continues to hold above the $2000 mark. |
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Lumber touched new multi year lows this week as inventory continues to build. |
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WTI oil closed the week at $70.02 with not much news to sway it either way. |
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According to Baker Hughes drill rig data the US saw 17 fewer rigs in operation last week while in Canada 1 more rig was active over the previous week. Stocks Equity markets struggle to find direction. Volatility in the US banking system along with the political back and forth over the US fiscal debt ceiling has investors more or less sitting on their hands. With the US economy showing signs of slowing and inflation dropping below 5% for the first time in over a year, investors are trying to find the right places to allocate capital. It’s hard enough trying to understand the macro environment let alone predict where it’s going. I find it a lot easier to try and pick individual companies with businesses that are easy to understand, and then just try to buy them cheap. I continue to have trouble with many of the valuations I am seeing in the larger names.
We continue to see good strength in simple to understand, basic businesses that fall into the smallcap, microcap and nanocap category. Once again this week we saw a number of good quality microcaps hit new 52 week highs as institutional capital continues to move some money down market. This week we had Firan Technologies (FTG.T), Atlas Engineered Products (AEP.V), and Total Telcom (TTZ.V), hit new 52 week highs. |
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I believe the outlook is good for many basic businesses with healthy balance sheets that can show any kind of growth, more so, companies that can acquire other businesses with their balance sheets or properly priced share currency. It seems solid growing companies that don’t need money are attracting the money from institutional investors. Those that need money seem to be avoided right now. In the (non microcap) Canadian space one just has to look at boring old Boyd Group Service (BYD.T) to see what I mean. Acquiring mom and pop auto body shops can be quite attractive. BYD.T is up over 70% in the past 12 months and trades with a trailing 12 month price to earnings multiple of 89 and an EV/ebitda of 22 (according to Yahoo Finance). |
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Boring is beautiful!
Other Stuff Shares in Immunoprecise Antibodies (IPA) had quite the jump on Friday. Shares closed up 40% on the day on volume of 2.18 million shares, well above the 80,000 average daily volume. The company put out a cryptic tweet: |
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Whether it was because of this tweet or something else, traders saw the action and look to have jumped on board. How long they stick around is anybody’s guess but it certainly looks like it’s back in the spotlight at least for one day. We’ll see what this week brings… |
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Trevor and I made a visit to the Total Telcom (TTZ.V) office in Kelowna. As you recall, Total Telcom through its wholly owned subsidiary ROM Communications Inc. (ROM) is a leading developer and provider of remote asset monitoring and tracking products and services throughout North America. ROM specializes in the development of innovative wireless communications that provide low cost, high tech monitoring, tracking and remote control solutions for commercial, industrial and consumer applications. ROM is uniquely positioned and qualified to deliver complete web to wireless solutions that enable companies and organizations to remotely monitor, track and control their fixed and mobile assets with a web browser from any Internet enabled PC. Products and services are based on ROM’s web to wireless technology and proprietary 2nd generation hardware & software marketed as TextAnywhere, ROM Controllers, ROMTraX, MotoTraX, TraX, DataTraX, WaterTraX, SiteTraX, CamTraX and AlarmTraX. These modules are wireless modems that utilize microcomputers integrated with sensors, GPS engines and various inputs and outputs and interfaced by the user through the Internet. ROM is an authorized airtime reseller and hardware developer for satellite, cellular and wireless IP Networks.
The company has been in business for over 20 years and has had spotty success in the past. The past several years have been somewhat frustrating. They’ve suffered product launch delays due to the pandemic as well as due to the change in Federal administrations in the US. Even still they’ve managed to stay profitable, grow their bank balance and continue to innovate and produce new products. |
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The company has a number of new products that are in various stages of commercialization. They are working with several partners and distributors who have strong share in various sectors. I view many of these sectors as niche markets but still quite material for a company the size of TTZ. It will be vital for investors to watch for any signs of progress in these commercialization efforts. The beauty of operating in niches is that you can command strong margins and strong market share. There are riches in niches! We came away from our meeting impressed with their position and will be watching very closely for any additional signs of progress.
For much more on our visit I recommend you catch our special Free-for-All we did this past Friday. View link here: Free-For-All: May 12, 2023 - Total Telcom Review - YouTube
To your wealth, Paul and Trevor |
