A year ago, Bob Thompson called commodities the trade of the decade. Since then, silver miners, energy stocks and commodity-focused funds have delivered massive gains. But with gold down sharply from its highs, oil rolling over and investors questioning whether the trade has become too crowded, is it time to take profits—or is this just a correction within a much bigger bull market?
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Trying to teach the kids to sort out their own minor disputes. The youngest came to me to say his sister knocked his knee. I encouraged him to take it up with her now all I can hear is him shouting “Fine! I’m not going to marry you!” (Which is probably a conclusion they needed to come to on their own anyway.)
Here are five things to know:
Sitting on the top of the world: Tech stocks are leading the market after blowout results from Micron and inflation data that wasn’t worse than feared. More on Micron below. This morning we got a read of the Fed’s preferred inflation gauge (PCE) which increased slightly less than expected month over month and was in-line with expectations year over year. The market has decided to ignore inflation anyway as backward looking because things like energy prices have fallen since the gauge was measured. Oil prices continue to lose steam, now below $70/barrel. That is still a couple dollars above the pre-war levels, but a far cry from the “geopolitical premium” many thought would remain in the price. This combined with weaker gold prices was tough for the TSX to navigate yesterday. Although the TSX is outperforming in June thanks to the financial stocks.
Lights out: Micron is soaring 18% after an insanely better than expected quarter and boosted forecast that was higher than consensus estimates. The memory chip maker is demonstrating that AI demand is robust. This quarter sales soared 345% and the bottom lined exploded by 1,300%. Sales in every sales category was better than expected. There was a lot riding on this quarter with the stock trading at a current PE of around 40x yesterday. Today that drops to 23x. In a single day, this became an affordable stock. Peers like Sandisk, Seagate and Western Digital are soaring in the pre-market. Basically, the demand for high-bandwidth memory from hyperscalers is so intense that suppliers are devoting more of their manufacturing capacity to it, leaving less capacity to produce standard memory chips and tightening that supply too. The big question: How long can this go on for? “We now expect supply-demand conditions for both DRAM and NAND to remain tight beyond calendar 2027,” said Micron CEO Sanjay Mehrotra on the call. I own this one – maybe the best investment I’ve ever made.
Back in Black(Berry): Shares of BlackBerry are surging nearly 10% after sales came in higher than expected, profit was 50% better and the company boosted its forecast on the embedded AI opportunity. Total sales grew more than 25% which is the best ex-Covid recovery growth since the company was making smartphones. BlackBerry has gone from a lumpy business with inconsistent sales across all its units, to one that seems to be firing on all cylinders. As I’ve mentioned, it is the best performing stock on the TSX so far this year. QNX has long been the core asset of BlackBerry, but now it is being deployed beyond just the auto sector and sales were up 26% from last year. But the other surprise is that secure communications, which hasn’t been anything to write home about, is also getting a lift thanks to a large deal with the Government of Canada. Sales in that unit were up 24% from last year. The CEO said the business was once viewed as a headwind, but is not a “growing business with meaningful upside” on the conference call this morning.
Tiny: IBM unveiled the world’s tiniest AI chip and the stock is up around 2%. The smaller these chips get – the more powerful as you can put more transistors into a smaller space and run processes faster while reducing consumption. This isn’t a product launch – more of a research blueprint of how this could be done. The market was more enthusiastic about this initially with the stock up as much as 6%. It also shows how rapidly the space is evolving with the “latest and greatest” Nvidia chips bigger than these ones.
Stress test: The Federal Reserve stress test results were revealed yesterday showing the financial sector can withstand over $700 billion in losses in a worst case scenario. This gave banks the greenlight to boost their dividend and we saw increases from Goldman Sachs, Morgan Stanley, JP Morgan and Wells Fargo.
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