If tech was the best performer for 25 years because it took in all the cash… what do you think happens when all the cash flows into commodities and infrastructure?” That’s the big question driving today’s conversation—and according to Daniel Dreyfus, the answer could define the next decade of investing. In this episode of In the Money with Amber Kanwar, Daniel Dreyfus, Chief Investment Officer at Bornite Capital, lays out his high-conviction thesis that we are in the early stages of the largest capital spending cycle in modern history.
Looking to invest in high-quality companies without high fees? The HAMILTON CHAMPIONS™ suite of ETFs offers exposure to diversified portfolios of equity champions across tech, financials, utilities, and dividend strategies, all with a low 0.19% management fee, designed to help you stay invested with confidence for the long term. For more information on the HAMILTON CHAMPIONS™ suite, visit: www.hamiltonetfs.com/hamilton-
Apparently one of my kids was caught teaching her peers the F word. Obviously embarrassing to be that parent. Now I have to go and pretend like she didn’t learn it from me.
Here are five things to know today:
Spin that record: Stocks are higher after another day of records for the S&P 500 and the NASDAQ. The TSX continued to underperform and hasn’t made a new high since February. Indeed, the TSX is basically flat so far in May while the NASDAQ is up 12%. Is the era of commodity outperformance over? Not according to Dan Dreyfus of Bornite Capital on today’s episode of In the Money with Amber Kanwar. He notes trillions of dollars of spending are all headed one way: to commodity and infrastructure buildout and that sets the sector up for decades of outperformance. Today the vibes are buoyed by the US trip to China which by all accounts is going swimmingly. Investors will look for progress on the trade front. Kevin Warsh was confirmed as the new Fed Chair as Jerome Powell is set to step down from that role Friday. Retail sales in the US decelerated from last month as inflation weighed on pocketbooks, but that was largely expected and not spoiling the risk-on mood. One wrinkle in the rally is that not everyone is participating. “Normally, when the S&P is at record highs as it is now, an average of 73.5% of stocks in the index are above their 50-DMAs. Right now, the reading is at just 51.2%,” said Bespoke Investment Group (from earlier in the week)
Party at the Cisco: Shares of Cisco are ripping 15% to a fresh record high after a record scratching quarter. The networking giant boosted its sales outlook at the same time announced layoffs to help it better face the AI economy. Cisco now expected $9 billion in orders from the hyperscalers, which is bigger than the $5 billion previously expected. The fact that Cisco is raising its forecast without increasing its capital spending is a rare find these days in AI land. “Combined with healthy enterprise investment cycle in AI preparedness, CSCO hitting growth rate not achieved in 15+ yrs,” wrote Meta Marshall at Morgan Stanley. With the stock up 70% over the past year, Marshall says that at 24x foreward earnings the multuple is still “reasonable” especially compared to other AI capex names.
A miss, but: Manulife is down 4.5% in US pre-market trading after underlying earnings fell short of expectations. Weakness in its wealth management division including lower returns and outflows weighed on the bottom line. Earnings quality was weak with a big gap between core and reported earnings because of those market losses. It’s alternative invesment division was a particular sore spot. Profit at the Canadian business also fell because of higher disability claims and rising expenses. There were some bright spots including Asia which grew earnings 22%. Another bright spot (to put it bluntly) is that fewer people died than Manulife expected in the US so they had a gain in their mortality business after experiencing losses which previously weighed on return on equity. The miss and the fact the stock is trading near a record high make it an easy candidate for selling today. I own shares.
Got a flat: Canadian Tire could come under pressure after total sales fell and were weaker than expected. Sales at Canadian Tire banner stores unexpectedly fell 2.3%, the street was looking for 2.3% growth. While Mark’s and SportCheck managed to grow comparable sales, both were less than expected. Canadian Tire blamed it on “selective” consumers “clearly prioritzing value.” Shares are down 9% over the past month. Gardening was a weak spot, maybe because winter is still hanging around Southern Ontario in mid-May. “We remind investors that Q1 is the smallest quarter of the year for CTC, now we need the to-date elusive Canadian spring to arrive, ideally around the upcoming long weekend that traditionally marks the start of gardening season in central/eastern Canada,” wrote RBC’s Irene Nattel.
Glowing: Atkinsrealis may do well at the open after profit and sales beat expectations. The engineering and consulting firm was powered once again by strength in its nuclear business with sales increasing 36.8% from last year. Engineering services was weaker than expected, but largely because of the disruption in the Middle East. “ATRL shares have been under pressure as the rest of the cohort YTD (-8%, still better however) but we believe investors should continue owning the stock ahead of Canadian nuclear announcements,” wrote Maxim Sychtev of National Bank.
Don’t miss our next episode!
