Caution isn’t stopping Gordon Reid from finding opportunities. The President & Chief Investment Officer of Goodreid Investment Counsel Corp. is getting more defensive as markets contend with higher interest rates, inflation and geopolitical uncertainty—but he’s not taking his chips off the table.
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FROM AMBER’S DESK
The Grade 2 parent group chat was popping off this morning. Math homework was due, and clearly I wasn’t the only one who didn’t understand the assignment: the kids were asked to come up with as many ice cream combinations as they could, and we collectively spiraled about how to teach our 7-year-olds permutations. Turns out we’re just a bunch of overachieving millennials. All they had to do was list some flavours and count the combos. No one was grading the answer. Our kids, meanwhile, were blissfully unbothered because they had no idea they were under any pressure at all.
Here are five things to know today
1.
Markets find their footing after wobbly week
We are still bouncing around record highs, but yields continuing to stretch higher has investors on edge. Strong earnings are holding the index together, at least for now. Even though the S&P 500 was flat yesterday, two-thirds of the index was lower. Oil prices remain volatile ahead of any potential breakthrough between the US and Iran. “The lack of enthusiasm for the deal in the market reflects skepticism, as there have been similar deals attempted in the past, with each side blaming the other for violating the terms. Traders clearly want to see results,” wrote Chris Low, Chief Economist at FHN Financial.
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2.
Costco can’t catch a bid despite better profit and sales
Shares are flat despite the beat which was driven by tariff refunds. When you strip out those refunds the magnitude of the bottom line beat would be less. It is a name investors have struggled to get excited about despite consistent +6% sales growth since 2024 – the stock hasn’t done much all year. But it still trades at 43x forward earnings. Other blemishes in the quarter include lower than expected sales in Canada and subdued membership growth (+3.8%).
“I just see a lot of air under that multiple if something goes wrong,” said Gordon Reid on the podcast this week. He’s never owned Costco because of the multiple. “I look at it and I think: what could go wrong, and if it goes wrong, where am I going to end up with this investment? Time has proven me wrong, but I’m happy to be wrong and feel comfortable. I’d rather do that than take risks and live day-to-day feeling uncomfortable. It’s just not a comfortable stock for me.”
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3.
Akamai soars 18% in pre-market on data centre deal
The digital infrastructure company struck the largest deal in its history to supply $12 billion worth of compute power to Anthropic. The deal also gives Anthropic warrants with the right to buy up to 5% of the company if certain growth targets are hit. Another example of a customer (Anthropic) taking ownership in a supplier (Akamai). Circular financing aside, it represents a big step up in data centre business for Akamai which was primarily focused on content delivery (making websites load fast) and cybersecurity. The initial warrants are for the existing deal, but Anthropic could own more of the company if the value of the contracts increases to as high as $20 billion notes Frank Louthan at Raymond James.
“Notably, this deal is being done with CPUs versus GPUs. Why is this important? CPUs are more power-efficient, cost less to acquire and deploy, and ultimately should drive higher margins, in our view. String enough CPUs together, and they can service AI workloads with no problem,” said Louthan. “…We believe the two companies have been working closely together, and the Anthropic team got comfortable with Akamai’s ability to handle its traffic and the compute workloads required for their applications, and has now expanded the deal.”
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4.
Restaurant Brands International downgraded to hold
Argus Research is downgrading the parent company of Tim Hortons and Burger King on higher commodity prices. Weaker sales at Popeyes and sales deceleration at Tim Hortons are also headwinds, notes analyst John Staszak. Burger King may be on the cusp of a revival, Staszak acknowledges, but even turnarounds take time. Even though the stock trades at a discount to other restaurant chains, Staszak wouldn’t chase it here because of the slowing growth prospects. The stock has been sliding since mid-August as oil prices rose again along with interest rates.
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5.
MGM Resorts reportedly interested in buying Barry Diller’s firm
In a plot twist, the casino operator may take a run at Diller’s People Inc after a reverse deal failed. Recall just yesterday Diller announced People Inc is no longer pursuing a take-private transaction of MGM. Now the Wall Street Journal is reporting that MGM could buy People (which owns People Magazine and Southern Living as well as car sharing company Turo). Diller owns 27% of MGM. The deal doesn’t make obvious sense, but it could be a way to get Diller out as a shareholder while also accumulating its other assets for cheap. People’s market cap is $2.6 billion – about the same value as his holding in MGM.
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