Healthcare takes centre stage as Jeff Elliott, Managing Director and Head of Global Equity at BMO Global Asset Management draws on his deep sector expertise to unpack one of the most politically exposed — and misunderstood — areas of the market. He explains why policy noise can create sharp dislocations without permanently damaging businesses, and how active managers look for mispriced opportunities across pharma, biotech, and med-tech while others retreat from the sector.
Apologies for the absence yesterday. We are on-location for our next episode coming out Thursday. Good thing nothing is happening in markets.
Here are five things to know today:
Here we go again: US futures are higher this morning with the S&P 500 within spitting distance of record highs and back above 7,000. January was a month of rotation: tech and financials lagged while energy, materials and staples outperformed. Small caps beat large. But this morning tech is back in the sun with Palantir results restoring faith in the AI trade (more on that below). Investors are shrugging off the partial government shutdown even though it means we will not get US jobs data on Friday (who needs data anyway?) The release will likely be delayed even if there is a breakthrough with a vote scheduled later today. Gold is recovering this morning bringing the mining stocks along for the ride. Gold is down 8% from its record high. Oil is settling after two sessions of selling pressure as the US looks to negotiate a deal with Iran. We will get Suncor results tonight. Earnings are continuing to roll on in the US with 36 companies reporting on the S&P 500 today. Tonight we will get AMD and SuperMicro which could be key to the tech trade.
Cosmic reward: Palantir is soaring 10% after sales and profit came above expectations and the tech defense contractor forecasted 61% topline growth for the year. The stock had been under pressure going into earnings, down nearly 30% from its November peak. Palantir is a lightening rod both as a stock and as a company. The stock trades at a demanding 135x earnings. The company is engaged with the US government deploying a tech stack that makes it easier to hit targets on missions and has contracts with the US Immigration & Customs Enforcement (ICE) which enables the agency to collect information on individuals. CEO Alex Karp who doesn’t shrink away from controversy said the sales growth was a “cosmic reward” for shareholders. Have you noticed the way some executives talk about AI is the same way people talk about religion? “Q4 was another extraordinary print,” wrote Citi’s Tyler Radke, “Palantir‘s momentum increasingly stands out in a software market where accelerating growth stories are rare.” He’s a buyer here even though his own price target implies the stock should trade at 62x sales ($250/share price target).
Declined: PayPal is plunging 16% and poised to open at a 9-year low. The payment platform reported a real kitchen sink quarter: sales and profit missed expectations, they warned earnings will fall this year, and they will be replacing the CEO. Alex Chriss will be leaving as CEO after only being installed in 2023. Chair of PayPal and CEO of HP Inc, Enrique Lores, will be stepping in as new CEO effective March 1 (and resigning as CEO of HP Inc). PayPal was way too optimistic about customer adoption, the CFO and COO Jamie Miller said this morning on a call with analysts. He called out weakness in US retail and international headwinds coming from Germany. Lores is hardly leaving a triumphant legacy at HP Inc with the stock underperforming the market while he was CEO and currently languishing around a 5-year low. Worries about memory chip prices hurting margins have dented HP Inc. Investors will be looking for clarity on what Lores’ goals are in the role as CEO of PayPal “…While certainly a reputable executive, the big question is whether (Lores) will bring in a formidable payments team to attempt yet another multi-year turnaround or look to start reviewing options for strategic assets.”
Pfizzle: Shares of Pfizer are down 4.5% despite adjusted profit and sales beating expectations. In conjunction with results, Pfizer released data from its once-a-month obesity pill that showed 12.3% weight loss compared to the placebo effect. Analysts don’t think that is enough to outmaneuver the two dominant players in the game: Eli Lilly and Novo Nordisk. Recall, Pfizer ultimately won a takeover battle to buy Metsera late last year for $10 billion. Investors (read: me) are looking for the signs the drugmaker’s spending spree can lead to something that will replace its Covid products. Vaccine sales were down by a third from last year (although came in higher than expected). Sales of its Covid treatment came in well below expectations. “I haven’t liked Pfizer for quite some time,” said Jeff Elliott on the podcast. He has some hard truths about why the stock is difficult to turn around. Worth a listen!
Reality check: Shares of Archer-Daniels Midland are under pressure this morning as the stock rally hits a reality check this morning. Sales were lower than expected and it didn’t boost its forecast for the year as much as anticipated. While there were some green shoots, profit rose for the first time on an annual basis since 2022, investors were expecting better momentum in 2026. Especially considering this is the second best performing consumer staples stock so far this year (+18%). Part of the struggle for ADM is that the US has deferred decisions around how much renewable fuel needs to be part of all fuel sold. As a processor of biofuels, ADM says the lack of clarity is clouding the demand picture. This in turn is weighing on their margins for turning things like soybeans into end products. The company says this is a temporary segment expecting policy clarity this year while an aid package aimed at farmers would also be supportive.
Don’t miss our next episode – double feature with Bill & Cole Smead!
