Tariffs are dominating the headlines, but they’re not the biggest risk Jean-François Tardif sees for investors. The President of Timelo Investment Management is cautious on the economy, skeptical that the massive AI spending boom can last and actively positioning for downside. He explains why he’s short Canadian banks and semiconductors, using puts on the S&P 500 and Nvidia, and preparing his portfolio for what could happen when AI spending eventually rolls over. At the same time, Tardif remains net long equities through gold and oil, explains why he sees gold stocks as significantly more attractive than copper right now and tells us his top gold stock.
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FROM AMBER’S DESK
25 years ago the world changed forever. I was in Grade 9 and we watched the horrors of 9/11 on a TV screen that was wheeled into the classroom. There is a whole generation that was born after than didn’t experience that day. I pray they never will. These days, I’ve been praying a little harder.
Here are five things to know today
1.
Core inflation hotter than expected in the US – futures pare gains
Stocks fell for a fourth session in a row and while they are in the green this morning – futures pulled back after core inflation in the US increased a little more than anticipated month over month. Core inflation – excluding food and energy – rose 0.3% vs the 0.2% expected and the month prior. Yields are contained trading just below 5% on the US 10-year, which is still elevated. Odds of a rate hike next week are fully baked: 93% chance the Fed increases rates. Oil may be simmering down this morning but still hovering around $100/bl and up 45% since July. Higher inflation, higher interest rates and higher gas prices. What a mess.
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2.
Oracle +6% in pre-market on better profit and cash burn
The cloud software company reported better profit, stronger sales, and higher margins than expected. Importantly, the cash burn wasn’t as bad as feared – the company only burned through $5 billion vs the $10 billion expectations. Their book of business remains robust increasing 42% to $664 billion while cloud infrastructure sales (paying to use Oracle servers to run your workloads) increased 121% driven by data centres. The rub is that the forecast wasn’t materially increased. But investors don’t seem to fussed as the main anxiety point was drunken spending as they pivot from being a database software company to a provider of AI computing power. This quarter the burn was a little less and the return was clear. And the stock is down 22% so far this year – so the bar was low.
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3.
Adobe falls 4% in pre-market on mixed quarterly results
The embattled software stock reported slightly better sales and profit, with total sales advancing 13% while AI annual recurring revenue soared 150%. The trouble is that AI is still a small part of the business. Monthly active users continued to accelerate, up 70% from last year and the company is active on buybacks. The rub here is that the outlook for sales for the upcoming quarter was lighter than expected and work that was booked but not delivered grew less than expected. For a battleground stock that is haunted by the spectre of AI disruption – this quarter didn’t resolve that debate.
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“…We believe shares are likely to be range bound amidst decelerating growth.” — tyler radke, citi (neutral) |
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4.
Descartes higher on record revenue
Descartes is up 3.5% in US pre-market trading after profit and sales came in higher than expected. Margins were also better. The supply-chain software company has been a surprisingly poor performer despite supply chains in disarray globally. While sales growth was a respectable 11% it is a slight deceleration from the previous two quarters. Still, revenue was a record. Descartes CEO, Edward Ryan said tariffs are driving higher demand for their software because they are changing all the time and Descartes helps clients stay on top of it all. It’s a double edged sword because tariffs and geopolitics also depress shipping volumes which is a demand drag for a business like Descartes. But the uncertainty is creating opportunities for M&A, said Ryan on the call. “We see less people showing up in the deals,” he noted.
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5.
Notable calls: Shopify, Talon Metals
Shopify is up 3% pre-market after Bernstein started covering the stock with a buy rating. Analyst Mark Shmulik believes AI is reducing barriers to entry for the next generation of builders, expanding the total addressable market. Shopify shares have been clunky down 12% over the past year on fears that AI could potentially be a disruptor (vibe code your own platform) and concerns about the state of the consumer. Shmulik ultimately believes that the opportunity outweighs the threats.
Talon Metals soared 34% yesterday after positive results out of their Minnesota project. It is a quick win for In the Money listeners who followed the Pro Pick from Rick Rule earlier in the week. Many analysts this morning are all bumping their forecast after their Tamarack nickel-copper-cobalt showed standout drill results. Recall, the play is backed by the Lundin family and Rio Tinto. “We believe Tamarack has the potential to become a significant critical mineral producer in the United States,” wrote TD’s Craig Hutchison.
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