Markets are volatile again but is this sell-off creating the next generation of multi-bagger stocks? In this episode of In the Money with Amber Kanwar, Optimist Fund’s Jordan McNamee breaks down why he’s staying aggressively bullish despite market panic driven by AI disruption fears, geopolitical tension with Iran, and rising interest rate uncertainty.
Forgive my absence yesterday. I came back from vacation ready to dive right in, but a stomach bug in my middle child had other plans. Chronic vomiting aside, it really was a magical vacation with the kiddos. We splashed in the ocean, went snorkeling with all of them, and lounged on the beach. If the price is a few little pukes here and there I’ll take it!
Here are five things to know today:
Beware the Ides of March: Crude is back above $90/barrel and stocks are down as investors grapple with the reality of the Iran war. Yesterday markets got a big boost after US President Donald Trump said peace talks were underway with Iran and thus he was backtracking on his threat made Saturday to bomb power plants in Iran if the Strait of Hormuz wasn’t re-opened within 48 hours. Never mind that Iranian officials denied these talks were taking place and Iran has been launching missiles at Israel overnight. Still, the market rally was a tell. It stands ready to rip higher if this war ever goes away. That was certainly the bet made by one trader who went long the S&P 500 and short oil 15 minutes before Trump said he was going to halt the strikes. That kind of prescience may warrant a call from the SEC although their head of enforcement just resigned abruptly last week. Anyway, I digress. We are now in the fourth week of the war, markets are struggling. The S&P 500 has been down four weeks in a row and usual havens are turning investors out. Gold, defensive stocks and bonds have all been pressured. The market tends to move on from war after about two weeks (shown in the chart before) but the spike in energy prices may prove hard to ignore.
Pinching pennies: Watch Dollarama at the open after comparable sales missed expectations and it’s outlook for full year sales growth fell short. Profit and total sales were higher than expected, but sales at stores open longer than 12-months only grew 1.5% which was below the 2.8% expected. The dollar store operator’s outlook for full year sales was also below consensus. The culprit is fewer customers coming through the stores. While the customers who did brave winter to shop spent more on average, overall traffic decline 1.6%. Having said this, the stock is down 12% from its December peak and that might cushion the disappointment.
Difficult go: Goeasy announced it will delay its earnings report and amended its financing arrangements with its lenders amidst material weakness in its auto-lending business. Goeasy will now report results on March 31st instead of tomorrow afternoon. The subprime lender said it has obtained covenant waivers that will allow it to remain in compliance despite $330 million in charge-offs and writedowns. It’s ongoing line of credit remains available, however the interest rate has increased. Shares of Goeasy are down 75% over the past year after it stunned investors with big losses in its auto-lending business. Investors make take comfort that it still has access to financing, albeit on worse terms, despite the material downgrade to its credit profile.
Private credit files: Shares of Jefferies are popping 9% on reports of potential takeover interest by Japan’s Sumitomo Mitsui Financial Group. This comes as Jefferies shares have been walloped with the stock down 35% over the past year and trading around a 2-year low. The investment bank and capital markets company has been marred by the private credit concerns and had direct exposure to First Brands which went bankrupt amid high debt levels and accounting issues. Sumitomo already has a minority stake in Jefferies and the report by Financial Times suggests they’ve told their teams to be ready to act if Jefferies’s falling share price presents an opportunity. Apollo is under pressure after capping redemptions in one of its largest private credit funds aimed at retail investors. Clients sought to redeem 11.2% of the fund, which is above the 5% cap. This comes as investors have been racing to pull their money out of these funds amidst concerns about loans to software companies. This follows similar moves from Blackrock and Morgan Stanley. KKR is also under pressure this morning after releasing an early update on monetizations in their portfolio. So far this year monetizations are lagging market expectations, says TD’s Bill Katz. “Though the stock is down YTD, we expect the stock to trade mixed…reflecting miss vs. Street (and) view the update as unlikely to shift investor sentiment,” he said.
Notable calls: TransAlta is catching an upgrade at National Bank after its investor day. Shares of the power producer have been under pressure but National Bank’s Patrick Kenny says that makes now an attractive entry point. Kenny says higher power prices and upside from providing power to data centres are all catalysts. First Majestic is getting upgraded at BMO following a 40% drop in the stock this month. The valuation is attractive, argues BMO’s Kevin O’Halloran, and the silver miner has many catalysts including expanded processing capacity at one of its key mines and restarting at another one. Ralph Lauren was upgraded at Citi on managements efforts to elevate the brand. ” We have increased confidence that the momentum in the brand can continue, helped by the company’s key city mktg and sponsorships of key sporting events (ie Olympics),” wrote Citi’s Paul Lejuez, “We believe the YTD stock decline (and market uncertainty) presents an attractive buying opportunity for this best-in-class winner in the retail apparel landscape.”
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