What happens when you strip away the hype and put some of the market’s most beloved stocks under a cold, analytical microscope? In this episode of In the Money with Amber Kanwar, Amber is joined by Sam LaBell, Portfolio Manager at Veritas Asset Management, for a brutally honest reality check on what investors own — and why some of those positions may be riskier than they look. LaBell explains why he is short Shopify, why he sold Fairfax and Constellation Software and why he is still betting on gold stocks despite the historic rally.
Our eldest started the day begging that we have another kid. I could feel my husband seize up at the thought. We’ve seen this show before, the last thing she begged for was a fish named Crowny. She hasn’t looked at it since and keeping Crowny alive has been added to the list of duties for our nanny. We told her we can’t possibly welcome another child while our eldest still needs help brushing her teeth and getting dressed for school. Ever the dealmaker, she says if she does that for one week we are obligated to give her another sibling. I took the deal, I know an unreliable counterparty when I see one.
Here are five things to know this morning:
Play that record: US futures are being led higher once again by tech stocks. Yesterday the S&P 500 closed a record thanks to a resurgence in the Magnificent 7. Gold was also a bright spot coinciding with weakness in the US dollar after US President Trump suggested he had no issues with the weakness in the greenback. The trade-weighted dollar plunged to a near 4-year low following those comments supporting a record high in gold. Oil is catching a bid after Trump warned Iran to come to the table and make a deal or the next attack would be “far worse.” Oil is trading at a 4-month high. Both the Bank of Canada and the Federal Reserve make an interest rate decision today and neither is expected to change rates. Tariffs and trade are key focus for the Bank of Canada’s road forward. The Federal Reserve has already cut rates three times in a row and with strong GDP, a stable labour market and still sticky inflation – it is widely seen as pausing today. The press conference should be interesting not just for the outlook on monetary policy but should also feature questions about Fed independence and whether Fed Chair Jerome Powell will stay on as governor after his term ends. Also, weren’t we supposed to get a new Fed Chair announcement in January? The clock is ticking and the candidates keep changing. Today after the bell the focus will be on Meta, Microsoft and Tesla earnings. Buckle up. Oh yeah, and there could be another US government shutdown this week.
Chips pop: Tech is being powered by a host of semiconductor companies this morning. ASML is soaring 5% to a record high after its backlog blew through expectations. The maker of semiconductor making equipment is benefitting from a surge in demand from AI. This is supporting a rally of peers like LAM Research (+3.5%) and Applied Materials (+3.5%). Elsewhere, shares of Intel and Micron are both popping (I own both). Intel is up 5%, recovering from its brutal post-earnings sell off, thanks to their announcement they will match the Trump administration’s $1,000 payment for children’s accounts. Not sure why that is market moving, but I’m not asking too many questions as a shareholder who just saw a quarter that suggested operationally the chipmaker is still a mess. Intel’s CFO also scooped up $250,000 worth of shares and put out a statement saying the purchase reflects “belief in Intel.” Micron continues to advance up 4% in the pre-market following news that it will expand production of memory chips which are in very short supply these days. Texas Instruments is popping 7% after the analog chipmaker gave a robust first quarter outlook, suggesting it is rebounding from a difficult demand environment for industrial equipment and vehicles.
Venti: Starbucks is surging 7% in the pre-market after comparable sales in the quarter blew past estimates giving investors comfort that the turnaround under Brian Niccol is underway. Profit missed expectations, but investors are willing to look past that as Starbucks gave a rosier outlook than expected. This is the first time Starbucks has given a forecast in a year after suspending it to give time for CEO Brian Niccol to come up with a turnaround plan. The “Back to Starbucks” plan has included streamlining the menu and closing underperforming stores. Niccol said that plan is “ahead of schedule.”
Shutdown woes: CGI Group’s organic growth took a hit thanks to the US government shutdown while its quarterly results came in line with expectations. US Federal revenue for the software seller dropped 13% from last year because of the 43-day shutdown. “…With the US government potentially facing another shutdown by the end of the week, the outlook remains uncertain,” wrote Desjardin’s Jerome Dubreuil, “Depending on the duration, another shutdown could limit CGI’s ability to meaningfully accelerate organic growth next quarter.” Having said that, Dubreuil notes that free cash flow generation was robust and they did their biggest buyback since 2021. CGI Group is down 27% over the past year. “In our view, these results should be taken in the context of CGI’s valuation, which sits near a 10-year low (except for a few days at the beginning of the pandemic),” wrote Dubreuil.
ROE and me: TD is upgrading BMO to buy on a better outlook for return on equity growth. Return on equity is a measure of how much profit can be generated for every dollar invested in the company. TD’s Mario Mendonca that BMO has long lagged peers when it comes to this measure. However, recently BMO set a 15% ROE target that Mendonca thinks can be reasonably achieved even if the macro environment isn’t super supportive. “BMO has been very clear that the ROE objective is not leveraged to a strong macro picture but rather to BMO-specific drivers,” wrote Mendonca in the upgrade. Those include expansion of profit margins in the US, improving loan growth in the US, improving provisions for credit losses, and material share buybacks. The $209/share price target implies 11.5% upside from here.
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