Cole Smead got Canadian energy right when few investors wanted anything to do with the sector. Now, after some of his biggest stock picks have delivered enormous returns, is there still money to be made? Cole was one of the top-performing stock pickers in our mid-year review, claiming both the number one and number three spots thanks in large part to his winning Canadian energy bets. Now, he returns to explain why he believes the Canadian oil trade is far from over, even after a massive rally.
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FROM AMBER’S DESK
I hope you had an wonderful Thanksgiving. We had a great long weekend – which I fear will become a distant memory. As soon as my eyelids opened this morning I saw message from a mom my daughter had a playdate with saying her daughter woke up at 2am with a violent stomach bug. And so I kick off the week like a sitting duck, waiting for the plague to hit. While there is nothing you can do about that, you cans till vote for us HERE and HERE! Don’t make this the week I got a stomach bug and lost a podcast award.
Here are five things to know today
1.
Tech stocks under pressure as earnings pull focus
Earnings will be front and centre today with JPMorgan, Citi, Wells Fargo and Goldman Sachs reporting as well as Johnson & Johnson and UnitedHealth. “The coming weeks will see a clash between fears of higher (energy-led) inflation and shaky bond markets against what looks to be another strong earnings season,” wrote Ajay Rajadhyaksha of Barclays. He thinks earnings will trump macro and he remains long risk assets. But the usual earnings game is to beat lowered expectations, and with earnings expected to grow a whopping 34% this quarter that might be harder to do. Financials, it should be noted, aren’t expected to grow that much (more on that below).
The overnight tone was sour, with Asian markets plunging after a Chinese-based memory chip maker reportedly made progress on new architecture that would boost memory density. Micron shares fell 4% yesterday and are down again in the pre-market. The KOSPI which is dominated by two semiconductor companies, Samsung and SK Hynix, fell 5.5% overnight. The news is overshadowing developments out of Meta yesterday which said its frontier models are now as good as ChatGPT and Claude. Shares popped yesterday but are down a little in the pre-market. Still, it is one of the biggest validations of AI spending we have seen so far.
2.
Investors lukewarm on bank earnings
Earnings from JPMorgan, Citi, Wells Fargo and Goldman Sachs are all out – here is what is moving each stock:
JPMorgan’s quarter was a mixed bag. Fixed income, currency and commodity trading revenue unexpectedly declined for the first time in two years. However, the bank increased its interest income outlook thanks to higher interest rates. The increased outlook brought the stock back from a 3% drop on what looked like an earnings miss as well. The stock has underperformed the market and is only up about 6% this year on a total return basis.
The weakness in fixed income trading also showed up at Goldman Sachs which posted a nearly 1% drop in revenue in that division. But shares of Goldman are higher +5% in the pre-market as earnings blew past expectations (32% above expectations) and every other division posted better than expected results.
Citi, meanwhile, posted better than expected fixed income trading revenue and higher overall profit than expected but shares are still slipping in the pre-market.
Wells Fargo only just barely beat profit expectations and was hindered by a rise in provisions for credit losses. It also kept its interest income forecast for the year, which could be disappointing to investors given rising interest rates.
Bottom line: JPMorgan, Wells Fargo and Citi are touting a strong consumer and not flagging any major deterioration, but with the sector rolling over since mid-August, it doesn’t appear to be enough to bring investors off the sidelines.
3.
UnitedHealth pops 4.5% in pre-market on turnaround
The US health insurer beat profit expectations and increased its profit forecast as turnaround efforts take hold. The stock was decimated a few years ago following the assassination of the CEO of one of its units which prompted a review of its insurance practices (I know, that is a wild summary to type). It also dealt with rising usage and medical costs. Recovery in the shares have been uneven. It is still well off its 2025 highs but up nearly 60% from the low. In addition to pulling back on unprofitable business lines and cutting costs, the company said that medical costs are also improving. While they are still above pre-Covid levels, they have been trending lower. I own shares.
4.
Notable Calls: Aritzia downgrade, BCE upgrade
Aritzia is catching a downgrade from Jefferies after stellar earnings last week led to a 20% jump in shares. Analyst Corey Tarlowe ‘s downgrade has nothing to do with fundamentals and is just ringing the register on a stock that is up tremendously. He sees risk/reward as balanced and notes investor expectations are high going into its investor day on October 27.
Canaccord is upgrading BCE to outperform after meeting with the management team. Aravinda Galappatthige of Canaccord writes that the AI opportunity could generate $800 million in EBITDA by 2028. While that isn’t meaningful for a company expected to generate $11.4 billion in EBITDA by 2028, it is significantly higher than his previous $550 million estimate. In addition, Galappatthige notes that BCE management said wireless and internet pricing was improving which would be a relief to the entire sector. The stock plunged to a fresh low on Friday, hitting crisis-era levels not seen since 2009 as rising interest rates take a bite out of defensive sectors like telcos.
5.
Bumble finds a mate
The embattled dating app is being taken private by Ithaca Holdings at $6.05/share marking an end to its disappointing run as a public company. Bumble, the site in which women made the first move, was a class of 2021 IPO and is down 92% since its debut. To put its take out offer into context, it went public at $43/share. Ithaca is backed by a Sequoia partner and the former Chief Revenue Officer at Meta and was formed just earlier this year.
Chart caption — click and edit.
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