In this episode of In the Money with Amber Kanwar, I sit down with Bob Elliott, Co-Founder, CEO & CIO of Unlimited and formerly a member of the Investment Committee at Bridgewater Associates, where he led Ray Dalio’s investment research team. Few people understand hedge funds and macro the way Bob does — and he brings that depth straight into this conversation. Tune in NOW on Apple, Spotify or YouTube
I’d like to pat myself on the back for composure after receiving an email asking me to meet my daughter’s teachers at pickup because she decided to give herself a haircut at recess. I didn’t yell, I didn’t even feel mad. I calmly explained that these are not school activities and when we go home I would have to even out the rest of it. Maybe I am getting the hang of this parenting thing after all. Sure, my left eye has been twitching for a week but I am sure that’s unrelated.
Here are five things to know today:
Battle royale: Futures are dipping after a triumphant start to the week in which the TSX gained 1.5% and the NASDAQ soared more than 2.5%. Alphabet (+4%) is continuing to climb at the expense of Nvidia (-4.6%) on reports that Meta is looking to spend billions using Google’s AI chips. “This is just one additional data point we’ve gotten over the past several months indicating that there is increasing demand for Google’s (chips),” wrote Gil Luria of DA Davidson. Tech futures are subdued as the two battle it out in the pre-market. We did got a strong read of AI from Alibaba’s results. Alibaba is up about 1.5% in the pre-market after cloud sales jumped 34%, more than expected. All the spending on AI came at a price, net income plunged 52% compared to last year. Investors are willing to look past that as the company touts AI demand saying it cannot keep pace with the growth. Shares have been on a tear, up 87% over the past year. We got some delayed economic data out of the US this morning with retail sales from September slowing on the back of lower car sales. Meanwhile, producer prices increased on higher energy prices. Not an ideal combination.
Night owl: Couche-Tard beat profit expectations and US gas station sales grew more than anticipated. Both points should be a relief to investors. “This is only the second time in nine quarters that Couche-Tard reports an adjusted EPS growth (year-over-year),” wrote Stifel’s Martin Landry who believed this quarter could be a turning point if momentum in US sales started to pick up. Sales in the US increased 1.2% which is the best pace of growth in more than two years. Couche-Tard has been promoting meal bundles while sales of Zyn nicotine pouches have also been a boon to sales. Fuel volumes in the US were also better than feared, falling by the least in 9 quarters and doing better than rival (and the one that got away) 7-Eleven. “Overall these results support our thesis that Couche-Tard’s recovery in EPS and U.S. merchandise is ongoing, which should reassure investors. We expect ATD’s shares to be up (today),” concluded Landry.
Retail therapy: Retail stocks are a bright spot this morning. Shares of Kohl’s are soaring a whopping 27% after the retailer increased its forecast for the second straight quarter. Sales are still expected to fall, just not as bad as previously thought. This comes after a period of tumult at the discount retailer with the abrupt departure of the CEO in May when it was discovered he had an undisclosed personal relationship with a vendor. Sales still fell this quarter, but not as bad as expected. There is a big short position, 27% of shares are short which means much of the rally is likely those investors being squeezed and forced to cover. Abercrombie & Fitch is soaring 18% on the back of better results and a boosted forecast. Third quarter net sales were a record powered by strength in its Hollister brand which is up 16% on a strong back-to-school season. Best Buy isn’t getting the same treatment, the stock is down 1% despite raising its outlook for full year sales. Same-store sales and profit also advanced more than anticipated. This is especially interesting because Best Buy has had to raise the price of some of its goods due to tariffs. Raising their sales forecast against this backdrop suggests customers are still willing to upgrade their tech.
Piecemeal: H&R REIT announced the sale of retail and office properties in Canada and the US for $1.5 billion. The company is undergoing a strategic review which many on the podcast hinted would not result in an outright sale in the business. By selling off retail and office properties it will allow the company to become a more concentrated play on residential and industrial assets (making up 83% of total assets vs 35% previously). The company says it will begin to market a number of other properties “aggressively” to accelerate the strategy of becoming more concentrated.
Notable call: Royal Bank and TD are being downgraded ahead of earnings by John Aiken at Jefferies. “After an exceptionally strong run in the fall, the Canadian banks are trading at levels that could charitably be described as fully valued,” wrote Aiken in his preview note. He warns that the growth outlook for the sector remains challenged and credit pressures have yet to dissipate. “While we still believe in the investment theses for RY (well diversified and high quality) and TD (improving sentiment as it progresses through AML remediation), we believe that both their multiples full reflect their upside, and we are downgrading both to HOLD (in spite of increasing their targets heading into Q4),” said Aiken.
