Futures down, oil falling, Warren Buffett retiring, Parkland takeover, tariffs on movies
If I still worked in an office, I would be excited to come in this Monday and tell the young bucks that I too had a thriving social life this weekend. We went to a live concert, danced our faces off, and got to meet the performers backstage. So what if it was at 2pm on a Saturday, surrounded by one hundred screaming pre-tweens, and our own children commanding us to get more snacks. It counts.
Party like its 2004: The S&P 500 rose for nine sessions in a row which is the longest win streak since 2004. The party looks like it is coming to an end this morning with futures deep in the red. Investors have anxiety on trade once again as US President Donald Trump says he has no plans to talk with China this week though promised trade deals with other partners soon. Tomorrow, Prime Minister Mark Carney goes to Washington so we will see if Canada is one of those deals. Oil is stoking anxieties with prices falling this morning trading at around $57/barrel. OPEC+ announced a larger than expected increase in production starting in June. This could crimp the TSX this morning as energy stocks fall, though the TSX has advanced for four weeks in a row. The rally means the TSX is now in the green for 2025 (+1.23%). Earnings will be in sharp focus with half of the index reporting this week (105 companies) including names like TMX Group (tonight), Suncor & MEG Energy (Tuesday), the lifecos (Great-West Life, Sunlife and Manulife), BCE (Thursday – watch for potential dividend cut), and Shopify (Thursday morning). It also overshadows the 93 companies reporting on the S&P 500 this week as their earning season comes to a close. Palantir will be the name to watch this week as it reports tonight after the bell. If that weren’t enough we also get a rate decision by the Federal Reserve on Wednesday. After the stronger than expected jobs print on Friday, traders cut the odds of a June rate cut. The Fed is expected to keep interest rates where they are for the third meeting in a row. No doubt Trump will come up during the press conference as he continues to say the Fed should be cutting rates.
The last dance: Berkshire Hathaway is down nearly 3% in the pre-market after Warren Buffett surprised the world by announcing he will step down at the end of the year. At 94-years old the retirement of the S&P 500’s longest serving CEO shouldn’t come as a major shock, but few were prepared for the announcement in the final minute of the AGM over the weekend. This year’s annual pilgrimage to Omaha saw 40,000 attendees including Apple CEO Tim Cook and Pershing Square’s Bill Ackman. He leaves Greg Abel as CEO (a Canadian!) and gives the company a massive head start with a record $347 billion cash pile. His retirement also cements Buffett as the greatest investor of all time with shares up 5,490,338% since 1965 according to data from Bloomberg. Buffett’s investing mantra is buying good companies at fair prices. But that value/quality factor alone doesn’t explain Buffett’s success as you can see from the chart below.
Buzzer beater: Parkland says it has agreed to a takeover by Sunoco in a deal that values one of the largest gas station owners in Canada at $9.1 billion. Investors can opt for a mix of cash + stock, all-cash or all-stock. The all-cash deal values the company at $44/share which is a 22% premium to Friday’s close. The company is inking the deal one day before the contested AGM. Recall, Simpson Oil is seeking to overthrow the board and as of Friday says they have the votes to do so. The deal still needs shareholder approval. Waiting for word on what the dissident shareholders think of the offer. Recall last moth, we spoke (50:28) with one of them, Darcy Morris of Ewing Morris, who said the company was worth “north of $40/share”. Two weeks ago we also spoke with Garey Aitken of Franklin Templeton (18:50) who said there was value to be unlocked. Shameless plug for the podcast! You are either In the Money or in the dark!
Horror show: Shares of Netflix (-5%), Warner Brothers (-3%) and Disney (-3%) are taking a hit in the pre-market after Trump called for 100% tariffs on movies that are made overseas. So much for show business being tariff-proof. It would also mark an expansion of tariffs beyond just tangible goods. The stocks may be falling but details were scant on how this might actually be implemented. I’m waiting for good analysis on what % of films are shot outside of the US and shown inside the US before making decisions on these stocks. I’ve been waiting for a good entry point on Netflix.
Merger Monday: Beyond Parkland there are two other stocks on the move on the back of M&A. The Keg Steakhouse has an offer to be acquired by Fairfax this morning. Fairfax has offered to buy the outstanding units it doesn’t already own for $18.60/unit which represents a 31% premium to Friday’s close. South of the border, sneaker maker Skechers is being taken out by private equity player 3G Capital. The stock is jumping 26% on the back of the $63/share offer. While its a big premium to Friday’s close, it is right where the stock was trading just a couple of months ago before tariff anxiety and a consumer slowdown hit. A nice deal for private equity company known for turnarounds and spitting companies back out into the public markets (which is what they did with Tim Horton’s).
