Inflation is reshaping global markets, and Canada may be uniquely positioned to benefit. Veteran value investor Kim Shannon, Founder and Co-Chief Investment Officer of Sionna Investment Managers, believes we’re only five years into an inflationary cycle that could last another 15 years or longer. History suggests Canadian stocks have a significant advantage in this environment.
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FROM AMBER’S DESK
Greetings from Pearson Airport. Producer Jillian and I are headed to Vancouver for an investor conference and to film an episode. It’s a special morning because I’ve just found out – WE’VE WON A SIGNAL AWARD. Thank you to everyone who voted. You have no idea how much it means to the team – and to me who really hates to lose things. I appreciate the time you took and the lifetime of spam you subjected yourselves to just to show your support.
Here are five things to know today
1.
Futures in the red, yields fall, oil rises
I guess my toxic positivity from yesterday failed to land. Markets are slumping after a South Korean data centre IPO flopped. Shares of Elice Inc fell 32% in its debut. That sound you are hearing is every IPO prospectus being put back on the shelf. SpaceX reports tonight after the bell, and we will see if talks of data centres in space is enough to bring life back to the AI trade. We will also get Netflix which has to prove that it isn’t losing out to short-form content.
On the bright side (sorry I can’t help myself) the bond market is calming down. Yields are falling this morning after record demand at a Japanese bond auction – signaling higher yields are enough to entice buyers.
Oil is problematic. US oil prices are now at $106/bl, the highest in a month and a few bucks away from the post-Iran invasion peak. Oil prices are up 20% from the low on October 7th. However, Canadian and US oil producers have lagged the move – perhaps signaling skepticism that prices can continue to stay elevated. Kim Shannon said she is sticking with Cenovus as one of her biggest weightings – having swapped it in for Canadian Natural Resources. You’ll have to listen to the podcast to find out why!
2.
General Motors drops 7% on reduced forecast
The automaker cut the top end of its profit forecast, disappointing investors who were hoping for an increase. Most of the report was actually quite good: it increased the low end of its profit forecast and announced a massive $20 billion buyback, sales and profit in the reported quarter were also better than expected. General Motors has outperformed because its consumers have been surprisingly resilient even in the face of higher interest rates and higher gas prices. The reduced forecast has investors worried those headwinds are finally showing up. External headwinds are “intensifying” according to CEO Mary Barra who called out issues like commodity inflation and softness in international markets ex-China.
“We view the pullback as noise rather than a change in the story,” wrote Dan Ives of Yorkville Ives, “The software and autonomy story, which we believe is central to the GM story, moved forward on every front this quarter.”
3.
3M beats estimates, signs deal with Amazon
The industrial heavyweight raised its forecast for a second quarter in a row as it pushes further into the data centre business. While 3M is known as the maker of Post-it Notes and Scotch Tape, it also makes fibre optic systems which improve the speed and reliability of data centres. To underline that push, the company announced an expanded relationship with a subsidiary of Amazon that gives the tech giant access to optical connectivity and the option to buy up to 3.16 million shares of 3M over 7 years. Yet with all this good news, the stock is only up 1% in the pre-market which is likely a symptom of the AI fatigue and macro concerns in the market right now.
4.
Couche-Tard upgraded at BMO
The convenience store operator should have better organic profit growth in fiscal 2028 results according to Tamy Chen at BMO. While longer-term organic growth is still a show-me story, valuation is compelling with the stock trading below its historical range. Shares pulled back from a record high hit in the summer and are still down about 10% from the peak. Any weakness in the macro environment is priced in, argues Chen in the upgrade. I own shares.
5.
Salesforce to buy AI marketing platform for $5.7 billion
Shares of Salesforce are down 3% in the pre-market after agreeing to buy Braze at a 60% premium to yesterday’s closing price. Braze gathers customer data and uses AI to send personalized messaging and has customers like Instacart, Canva and Equinox. Salesforce has fought hard to recover from SaaS-pocalypse fears with the stock up 60% from the June lows. Braze, meanwhile, has been a mid-level performer despite growing revenue above 20%. It went public in 2021 and has yet to turn a profit.
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