While everyone’s chasing the next tech trend, Kelsey Dunwoodie is digging where Canada’s real wealth—and entrepreneurial spirit—lies: in the ground. On this episode of In the Money with Amber Kanwar, the Deans Knight Capital Management portfolio manager lays out the bullish case for Canada’s great resource comeback. From gold miners to natural gas producers, she argues the next wave of growth will come from small and mid-cap companies built by hands-on founders who’ve weathered every boom and bust.
Forgive my absence yesterday. I was giving a keynote on why the markets are at record highs. So naturally, the markets are selling off with everyone calling for a correction. After today, I’m abandoning you again. We are going on a five day trip with the kids. I hesitate to tell you we are going to Disney because I know that is a disappointing choice for those boycotting travel to the US. If its any consolation, its a disappointing choice for my ankle which I sprained three weeks ago and is still swollen. Not exactly great conditions for 30,000 steps a day in 28 degree heat while being bankrupted by the kids.
Here are five things to know today:
Short stop: Futures are subdued after a sharp sell-off yesterday driven by concerns about tech valuations, a short position by “Big Short” investor Michael Burry, and a handful of executives calling for a pullback. The US government shutdown has now become the longest in history and with no end in sight it is unlikely we get jobs data on Friday. So this morning we rely on ADP private payroll figures which showed more job creation than anticipated, 42,000 jobs vs 30,000 expected. Still, when you look at the amount of jobs created in the past 9 months (46,000) compared to the same period last year (167,000), there are signs of a significant slowdown in hiring. Earnings are in full swing with 38 companies reporting on the S&P 500 (including McDonald’s flat and Humana -5%) and 35 of the TSX (including Maple Leaf Foods, Sunlife, Great West Life, CGI Group, and Cameco). Watch for headlines from Bank of America which is hosting its first investor day in 14 years. The Federal Budget was released yesterday projecting a deficit of $78.3 billion for 2025/2026 and no path to balance over the next five years. The budget contains measures to cut government spending in certain areas, tax relief and a push for greater private sector investment. “Broadly, this is an economically favourable pivot from the deficit budgets run by the prior government…” wrote BMO’s Robert Kavcic, “…The important takeaway here is that there is indeed a large wave of stimulus hitting the economy.” It comes at a time when the economy is languishing and the Bank of Canada signaled it is done cutting rates having done its part to support the economy.
Energized: Suncor could trade up this morning after earnings smashed expectations. Profit beat, cash flow was 19% higher than expected, and it boosted its dividend by 5%. There were operational records abound: production was higher than expected driven by records at Fort Hills while the refinery also had record high utilization. “We expect (Suncor) to materially outperform vs peers tomorrow and we continue highlighting the stock as a top pick,” wrote Desjardin’s Chris MacCulloch. Watch shares of NuVista after Ovintiv struck a deal to buy the natural gas producer. The cash and stock deal values NuVista at around $3.8 billion and at $18.04/share represents a modest 7% premium. Watch peers in the space as TD’s Aaron Bilkoski says “the metrics of this transaction represent one of the highest valuations” among Canadian small and mid-cap exploration and producer stocks. Paramount Resources is one of Kelsey Dunwoodie’s Pro Picks and you can listen to her rationale on natural gas in our latest episode! Meanwhile, Eric Nuttall of Ninepoint had NuVista as his top idea on the podcast back in May. Rather than celebrating the takeout this morning, he is lamenting the disappearance of Canada’s energy sector. “When your largest holding, for the 3rd time this year, gets acquired for a premium, you should be happy,” wrote Nuttall in a post on X, “I am not. We are losing our best companies at the (near) bottom of the cycle, at a fraction of the true long-term value, solely due to poor sentiment. This must not continue.”
Tech wreck: Pinterest is plunging 18% in the pre-market after growth failed to live up the expectations. On the surface, 17% sales growth and 24% profit growth seems robust. But the forecast for the upcoming quarter suggests a slowdown in ad sales during the crucial holiday season. It also scratches at anxieties that the company is losing out to chatbots. Imagine instead of searching their site for mood boards or outfit ideas, you just ask ChatGPT to generate them based on things you like. The stock isn’t that expensive, but Rosenblatt is warning investors not to get lured in by low valuation. “Our concern is a future where the explosion of chatbot capabilities is meaningfully likely to move directly into Pinterest’s space in coming years, creating a growth/existential risk that weighs on the multiple,” wrote Barton Crockett of Rosenblatt Securities in his note downgrading the stock. AMD is down 2.5% also weighing on the tech trade this morning despite stronger than expected results. The concerns is the quarter over quarter slowdown in their AI business. This has been a common occurrence this earning season, tech stocks with a big run up that deliver on earnings are victims of profit taking despite no huge blemish in results.
Gibby up: Watch shares of CGI Group after reporting better than expected profit but less than hoped organic growth. Recall, the last time the company reported results the market focused on tepid organic growth and the stock is down 10% since then. Shares are now trading at a 2.5-year low with valuation at a 10-year low. Against this backdrop, CGI Group has been aggressively buying back stock deploying nearly $500 million (or 2% of the market cap) in the last quarter and boosted its dividend 13%. Keep an eye on Sprott this morning which reported mixed results. Earnings missed due to higher share-based compensation, but assets under management surged to nearly $50 billion, up 23% from last quarter and 49% from last year. The asset manager also boosted its dividend by 33%. Lyle Stein had this as a Pro Pick a month ago.
GO Mamdani: It is a sad day for New York billionaires with the election of Zohran Mamdani as mayor. The self-professed socialist democrat is now in charge of the city that is the financial capital of the world. I’ll be curious how this shows up in GO Residential, the newly public owner of Manhattan apartments. It has fared poorly down 26% since its IPO on the TSX in July. “While likely negative for sentiment, we believe the risk of Mr. Mamdani’s election should be priced into GO’s units,” wrote Desjardin’s Kyle Stanley. “Further post-election under performance would represent an attractive buying opportunity, in our view.” Stanley argues that while Mamdani campaigned on affordability and everyone is nervous about what that means for rent growth, just 28% of GO’s portfolio is rent stabilized and would be affected by any changes. I bought this one on Jeff Olin’s recommendation a month ago.
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