Markets Decelerating inflation data is further fueling the bulls, boosting financial markets again this past week. October PCE inflation data was in line with expectations coming in at 3.5% year over year versus 3.7% in September. The inflation data allowed bond bulls to push treasury yields lower and the equity bulls took charge, the DOW ended the week higher by 2.4%, Nasdaq gained 0.4% and the TSX was higher by 1.7%. The DOW pushed through to a new 52 week high. |
|
Financials The bond bulls are starting to have some fun again as we’ve seen a consistent drop in yields over the past month. US 10 year treasuries are yields are now at fresh 2 month lows and have dropped quite a bit in the past month. |
|
Weaker treasury yields has been driving the US dollar lower with the DXY now hovering around the 103 level. |
|
The Canada 5 year bond yield also keeps dropping which is a welcome sight for those renewing or getting a new mortgage in Canada. The Canada 5 year bond yield is now at its lowest level in 5 ½ months. You can expect to see further drops in fixed mortgage rates in Canada in the coming weeks. |
|
The pressure is coming off the Bank of Canada and we can start to expect a lowering of interest rates from the BOC sooner rather than later. Commodities |
|
For the last few weeks, I’ve been saying that we are in a perfect environment for gold. And sure enough, gold is breaking out big time this past week, to new all time highs in USD. Lower interest rates, a weakening US dollar and geopolitical instability has given gold rocket fuel for lift off. Gold is currently trading above US$2100 and likely gets pretty volatile from here. |
|
WTI Oil prices look somewhat boring compared to the shiny metal. Energy prices continue to be under pressure as weakening economies and higher than expected supply data puts downward pressure on oil. Eyes are glued to OPEC now to see if they can help tighten supplies and firm up prices. |
|
Natural Gas had another rough week with prices now back below $3. It’s all about the weather for the next few months. If North America gets a cold snap we can expect a bump in price if not and weather stays milder than expected we likely see continued weak prices for natural gas. Natural gas trading is not for the faint of heart… |
|
Baker Hughes drill rig data reported 3 additional rigs active in the US and a drop of 5 active rigs in Canada.
Stocks Long suffering biotech investors got a bit of a shot in the arm this past week on news of a major M&A deal. Pharmaceutical company Abbvie is buying ImmunoGen, the maker of blockbuster ovarian cancer drug Elahere. The reported purchase price is $10.1 billion. This helped the life science etf XBI trade to new 2-month highs giving hope perhaps that other deals give some lift to the beaten up sector. |
|
It’s been more of the same in microcap land lately. Good financial results are being rewarded with higher prices
We had a few companies in our portfolios report this past week including 2 companies that where I sit on the board as a director.
Atlas Engineered Products (AEP.V)* reported Q3 numbers this past week. Revenues were lower by 18.5% and earnings were lower by 58.5% over the same quarter last year. "The continued interest rate hikes and their effects on our industry have resulted in a more competitive market for the company's products where some contractors are putting their building projects on pause until there is more certainty around the direction of interest rates.," said Hadi Abassi, the Company's CEO, President and Founder. "Despite the effect of higher interest rates, there is an ongoing need for more housing in Canada and we strive to be the partner of choice for contractors and homeowners during their construction projects."
Shares of AEP.V were down 12.9% for the week. |
|
Total Telcom (TTZ.V)* reported lower revenues in Q1. Revenues dropped by 17.0% and the company suffered a loss of $16,262 versus a gain of $123,475 in the year ago period. "This quarter reflects a cyclical dip in RV manufacturing over the summer months, and combined with the timing of RV controller orders, contributed to a slower than anticipated quarter. However, there continues to be strong commercial interest in our RV products which is demonstrated by a third follow-on order subsequent to the quarter end, which has not yet been accounted for in our quarterly results.”
Shares in TTZ.V closed the week down 11%. |
|
Canadabis Capital (CANB.V) reported year end results. Net revenue increased 90% for the year and net income increased 631% to $4.444,494 from $607,951. Q4 net revenues increased 15.0% while net income increased 159.7%. We expect some raw material and final goods pricing pressure to continue which could slow the revenue growth rate for the company but may actually benefit the company in the long as weaker competitors are forced to shut down and consolidation culls the sector.
Shares of CANB.V were higher by 8.9% this past week. |
|
It seems the list of profitable and growing nanocaps/microcaps keeps growing. Here is this week’s list of portfolio or watchlist companies reaching new 52 week highs.
Noteworthy New 52 week high list: FTG.T, CPH.T, VHI.T, E.T, MCB.T, BEW.V, URL.C |
|
|
|
|
|
|
|
As we enter December we’ll keep watching out for opportunities. We are now in the final month of the year and thoughts turn to year end positioning and tax loss season. It can get quite volatile at this time of year for microcaps as a seasonal drop in volume in conjunction with a portfolio selling can make for wild swings in share price. For many of the stock on our watch list it’s been a pretty good year, so I doubt we see too much in the way of tax loss selling. It’s the weaker performers that tend to see selling at this time of year. Nevertheless it makes sense to keep an eye open for good companies that get sold down to inviting prices.
*Paul Andreola is a director of Atlas Engineered Products and Total Telcom
This Week I’m Reading: Where the Money Is – Value Investing in the Digital Age – Adam Seessel - From a successful investor and a contributor to Barron’s and Fortune comes a once-in-a-lifetime book that gives modern investors what they need most: a fresh guide to making money in a stock market now dominated by tech stocks. Technological change is reshaping the economy in a way not witnessed since Henry Ford introduced the assembly line. A little more than ten years ago, only two of the ten most valuable publicly traded companies in the world were digital enterprises—today, they comprise eight of the top ten. Investors around the world are struggling to understand the Digital Age and how they can use the stock market to profit from it. To your wealth, Paul and Trevor |
