Small-cap stocks have significantly outperformed their large-cap peers so far this year but valuations remain at a massive discount, so what names should be on your radar? On this episode of In the Money with Amber Kanwar, Aubrey Hearn, Senior Vice-President, Portfolio Manager & Lead – U.S. & Small Cap Equities at CI Global Asset Management, makes the case that the small-cap opportunity is far from over.
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I can’t believe its already May. Feels like just yesterday we were buried under mountains of snow. Maybe that’s because our Christmas lights are still up.
Here are five things to know today:
May day: Stocks are slightly higher in the first trading day of the month. US markets finished strong in April with the S&P 500 and the NASDAQ hitting record highs yesterday. Before we turn the page on April, it is worth reflecting on what an insane month it was. The S&P 500 came into April at a 7-month low only to finish at a record high. The index had its best monthly showing since November 2022. Within that, the semiconductors were on fire – up 40% for the month. That’s the best performance since February 2000! (Which is the month before the tech bubble started to unwind, notes Jim Reid at Deutsche Bank). Speaking of the bygone era, Blackberry is one of the best performing stocks in April with the stock up 60%! As for the energy trade, it took a U-turn in the middle of the month and is slightly higher vs March. Not bad considering oil prices dropped 25% from peak to trough in April. The TSX energy sector managed to end April at a record high. Now, we stare down the barrel of May – a seasonally weaker period. However, returns have still been historically positive notes Bespoke Investment Group. “Since 1983, the S&P 500 has finished May with an average gain of 1.14%. Over the last ten years, performance has been even stronger, averaging 1.46%.”
Honey crisp: Apple is up 3% after a quarter so good it could go in the Louvre. Apple’s iPhone 17 is now the most popular in the company’s history helping to drive total revenue up 17% which was much better than expected. Services revenue rose 16%, better than expected. China? That headwind a few years ago? Now up 28% from last year. Margins? Higher than they forecast even with input costs going up. Remember this a company that was struggling to grow sales a few years ago. Apple says total sales will increase 14-17% next quarter which is better than the street’s 9% forecast. Margins may be dented by rising memory prices but other than that there were so few blemishes. It’s a perfect handoff from Tim Cook to the incoming CEO John Ternus. Now all attention turns to Apple’s Worldwide Developer Conference in June. The expectation is that a better suite of AI products will be unveiled (Siri will finally get a brain!) And they will do it by spending just a fraction on AI compared to peers.
Hyperscale capex spending for 2026
- Meta capex: $125–145B (midpoint ~$135B)
- Amazon capex: $200B
- Alphabet capex: $180-190B
- Microsoft capex: $190B
- Apple: $12.8B (estimate)
Energized: Exxon Mobil and Chevron both reported better than expected profit thanks to surging energy prices. Exxon took some hits because of outages in the Middle East, but they were able to overcome that thanks to higher oil prices. Chevron, which has less exposure to the Middle East, still had production challenges elsewhere, but profit still came in better. Imperial Oil’s results missed expectations and profit actually fell from last year because Canadian crude prices traded at a bigger discount and Imperial’s realized prices were lower. An unplanned outage and higher costs also weighed on the bottom line. In other energy news, US President Donald Trump signed a presidential permit for the Bridger Pipeline expansion project that would revive parts of the cancelled Keystone XL pipeline. This has implications for South Bow which owns Keystone and is considering the Prairie Connector pipeline which would feed into the Bridger Pipeline. South Bowe’s Prairie Connector would go from Hardisty, AB to the Canadian border and connect into the Bridger pipeline which would then travel into the US. This is all directionally positive, but far from a done deal and none of this is in South Bow’s numbers. That could be changing. “In our view, the Presidential Permit does not make the project inevitable, but we think it is becoming relevant to valuation,” wrote TD’s Aaron MacNeil. “South Bow is unique in that it is the only public Canadian midstream company actively pursuing a credible and sizable new greenfield pipeline project. We also believe that it’s more likely than not that South Bow will obtain enough commercial support in its open season to proceed to next steps.” Meanwhile, South Bow’s former parent company TC Energy reported results this morning that were in line with expectations and announced they are sanctioning a $1.5 billion growth project.
(Source: CTV NEWS)
Forecast cuts: Air Canada may rally despite yanking its full-year forecasts amidst jet fuel volatility stemming from the war in Iran while warning that profit in the upcoming quarter will be weaker than expected on rising costs. Investors may take comfort in the fact that Q1 results were much better than expected and a record for the company. Demand for travel remains robust and the company says it has been successful in passing on price increases with no impact to demand. “Q1 was very strong, and our sense is that the outlook commentary around strong demand and price absorption will be seen as “better-than-feared” by investors,” wrote Daryl Young of Stifel, “We acknowledge that significant risk and uncertainty exists in the current fuel price environment, but we see AC as well positioned to navigate (~$9bn of available liquidity) and the stock is arguably already pricing in significant downside.” Magna trimmed its full year sales outlook but beat expectations in the current quarter and that might carry out the day for investors. “Despite the modest guidance cut, our math implies that consensus EBIT for the remainder of ’26 could move higher,” wrote RBC’s Tom Narayan, “As a result, we would expect a positive, albeit muted reaction to shares given the company did not raise guidance.”
R&R: Reddit & Roblox are trading in different directions this morning. Reddit is soaring 14% in the pre-market on bigger than expected sales and revenue. The front page of the internet saw revenue increase 69% from last year while profit was materially higher. This is the seventh consecutive quarter of sales growth north of 60%. Not only that, its profit and sales outlook was also better than street estimates. The story is still pretty simple – it is an ad driven model and continues to attract advertisers because of their ability to target specific interest groups. I own this one! Roblox, on the other hand, is plunging 24% in the pre-market after the number of daily active users was below expectations and the hours engaged fell. Good for humans, bad for the stock. The gaming company also warned that sales would be lower than expected. Part of the challenge stems from a ban in Russia and new age-check restrictions.
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