It’s been a rough ride for Canadian small-cap growth stocks, and investors are looking for answers. Jordan Zinberg of Bedford Park Capital is back on In the Money with Amber Kanwar to break down what’s driving the selloff, where the fear is justified, and where the market is simply mispricing good businesses. Zinberg says it’s not just a selloff — it’s a moment where quality is out of style, sentiment is washed out, and solid businesses are being treated like broken ones. He notes small-cap growth stocks, his corner of the market, have been hurt particularly hard but believes it’s unjustified.
Doing the math on all the teeny tiny things we have to keep track of: gloves, socks, hats, snow pants, coats, green folders, yellow binders. All times three. There aren’t enough Air Tags in the world for the things we discover are missing right before it’s time to go to school.
Here are five things to know:
Exhaustion: There was really no reason for the mid-day selloff yesterday other than investors appear tired (join the club). After an initial surge, markets melted down with Nvidia falling 3% and the S&P 500 closing out the day down 1.5%. The TSX wasn’t spared either falling 1.2%. This morning futures are giving it the old college try again, mildly positive. However, sentiment remains anxious. The CNN Fear/Greed Index registering “Extreme Fear.” The twin anxiety points remain: Is the Fed going to cut rates and is the AI bubble going to blow up? Yesterday’s job data showing more job growth than expected didn’t satisfy investors that a rate cut in December was a done deal. Scotia’s Derek Holt is questioning the validity of the data noting that the Bureau of Labour Statistics went with the highest season adjustment factor on record. “There is never any explanation other than hiding behind an opaque statistical estimation,” wrote Holt this morning, “Yet it was the single reason why payrolls remained positive despite one of the weakest seasonally unadjusted payroll numbers on record for like months of September.” Holt questions whether this was politically motivated. “The number that was revealed was sure to curry favour with Trump. Sure to avoid his criticism had it shown job losses.”
Peace: Ukraine’s President said he would work on a peace plan that was drafted by the US and Russia and would be speaking with US President Trump in the coming days. This is far from a done deal as the deal would give considerable concessions to Russia. This morning Ukraine’s allies in Europe rejected key parts of the deal that includes requirements to give up regions like Crimea, Luhansk, and Donetsk, having elections in 100 days and never joining NATO. This is playing out in the price of oil, which is lower on prospect of peace but off the lows after European allies spoke out against parts of the plan.
Gapping higher: Shares of The Gap are trading up 7% after profit beat expectations, sales grew more than anticipated across most banners, and it increased its forecast for sales and margins. The Gap, Bana Republic and Old Navy all posted stronger sales growth than expected. The only blemish was Athleta which saw sales plunge more than feared (-11% vs -5% expected). Perhaps a weak sign for rival Lululemon as well. The Gap has been repositioning themselves and leaning more into Gen Z with celebrities like Tyla and Troye Sivan (I don’t know who they are either), and Gwyneth Paltrow (who I think Gen Z would call “mother”). “(The Gap’s) brand reinvigoration initiatives are proving successful, with performance becoming increasingly more consistent,” wrote Alex Straton of Morgan Stanley.
A play with many acts: Watch Dye & Durham and get the popcorn out after the former founder came back with an offer of $5.72/share, which would be over 100% premium to where the stock is trading (but look it where it was trading just a few months ago). Plantro, which is backed by founder and former CEO Matt Proud, submitted the offer against a messy backdrop. Three directors resigned, including the activist investor Arnaud Ajdler who was Chair of the board. The legal software company is bringing in Alan Hibben to the board to deal with this mess. Hibben was who Home Capital brought in 8 years ago after short reports and an OSC investigation into the company. He’s no stranger to crisis situations.
Green for life: GFL Environmental could come under some pressure this morning after announcing a stock sale by insiders priced at $45.60US/share. The sellers include the private equity firm BC Partners and Ontario Teachers Pension Fund. They are selling a combined 16 million shares which is about 4.6% of the shares outstanding. The stock hasn’t done much this year but these long time holders are likely sitting on a big gain.
Don’t miss our next interview with the former head of research at Bridgewater! Send your macro questions to questions@inthemoneypod.com
