…And Why It Can’t Beat Amazon. Question: Do you own or have you ever owned shares in Shopify? John O’Connell was asked countless times the last several years by clients and non-clients whether he owned the stock of the e-commerce company. And when he always answered no, he was asked why not? The questions have stopped. Shopify is down nearly 80 per cent from its peak and could still fall a lot more. O’Connell is not beating his chest or enjoying any schadenfreude at investors’ expense. But he had his reasons for never owning the stock. And he has some definite ideas about why Shopify’s business model is flawed and easily copied. Here are his views on Shopify’s fall from grace and why it will never be able to beat Amazon…
We sat down with John O’Connell to get his experienced views on what’s actually occurring in the stock market at the moment and why it’s happening. John covers: Valuations, Investor sentiment, Strategies he’s deploying, Stocks he’s been adding to, How investors should handle a bear market, and much more. As usual, we humbly suggest it’s a good idea to listen to the opinions of a pro who’s seen it all in his more than 35 years prudently managing other people’s money.
Subscribers who’ve been with us for a while will remember our interview with Chris Mayer, the author of 100-Baggers, and co-founder and Portfolio Manager of Woodlock House Family Capital. One of his essential principles to finding stocks that can increase by 100 times over many years was to not start selling at the first sign of market trouble. In his latest article, Mayer uses two examples – one historical and one current – to illustrate how focusing on certain fundamental financial principles will help investors hold fast with their stock positions in order to be richly rewarded long-term.
The stock market and economy have whipped up a lot more questions than answers these days. Is the market rally sustainable or is this a classic bear market trap? Will so-called animal sprits continue or do we need to see a couple of ugly capitulation days? The economy and corporate profits are slowing but by how much? How much will inflation curtail economic growth? What does all this talk about an inverted yield curve really mean? Can the U.S. Federal Reserve fulfill market expectations and raise interest rates eight times this year or will the stock market revolt? Those are a few of the questions we posed to John O’Connell in the latest of our on-going series of conversations. As always, 37 years managing other people’s money and seeing every market condition imaginable gives the head of Davis Rea Investment Counsel insights and context many others don’t have. So, take advantage of some thoughtful opinions and advice, to enhance your investment knowledge and skills.
May as well stick with the winning jockey until he loses. More than a month ago, Marko Kolanovic, a top-ranked global markets strategist at J.P. Morgan Chase, was advising investors to buy stocks amid the market downturn. That, so far, has turned out to be good advice with the S&P 500 higher by nearly 10 per cent from its lows. Now, Kolanovic says concerns about a recession are overdone. Here are his three reasons why.
Amazon spent around $40 billion on shipping and fulfillment in its last quarter. It’s part of a multi-year expansion plan. The short-term problem for the e-commerce and web services giant is that it has too much warehouse capacity. Longer-term, that could wind up being a good problem to have. Here’s why.
It’s no secret that big tech stocks have been struggling. MANTA, as Jesse Felder likes to call them – Microsoft, Amazon, Nvidia, Tesla, and Apple – are well down from their all-time highs. Most investors with some savvy knew the good times couldn’t continue forever. But there are two major forces at work that may explain the downturn in large tech stocks better than anything else. Felder, Founder, Editor and Publisher of The Felder Report, examines those reasons along wth two charts that tell the story.
In volatile and uncertain times investors continue to flock to the U.S. dollar. That’s despite predictions by some that the greenback will eventually be usurped as the world’s king currency by the yuan or Bitcoin. Fat chance says Daniel Lacalle, a PhD Economist and Fund Manager. In this report, Lacalle explains why the U.S. dollar still reigns supreme and acts as a vacuum for most foreign currency investments.
Electric vehicles (EVs) will inexorably continue to increase their share of the global automobile market in the coming years. But how to profit from that? Buy stocks of EV makers? Buy shares of firms that mine the metals and minerals such as lithium, copper, and cobalt needed to make batteries? Or how about buy stocks of large technology companies that are supplying the EV sector but not solely reliant on it. Here are two ideas.
Nearly a year ago, Bank of America (BofA) Securities quantitative strategist Ohsung Kwon presented a bullish case for Canadian stocks based on rising commodity prices and inexpensive valuations. Now, he’s doubling down on that call saying the catalysts for TSX stocks are even stronger, citing a “New Energy World Order”. Here are the hi-lights of Kwon’s report entitled A New Regime: Buy Canada, followed by 25 of what he believes are the most attractive stocks based on free cash flow to enterprise value (market cap plus debt).
Investors should remain bullish of global stocks the next 12 months and favour small caps over large caps. That’s according to the Chief Global Strategist at BCA Research, Peter Berezin. He believes the shares of public companies are setting up for a “Goldilocks” environment in the second half of this year, and then a “last hurrah” through 2023 before interest rates start rising again. Here are the hi-lights of Berezin’s report.
Tempted to buy Netflix after the collapse of the company’s stock to a four-year low? Don’t be. The heady days of growth for the media streamer’s business and shares appear to be over. Stay subscribed or sign up for Netflix’s content, sure, but before thinking about buying the stock, consider the well-informed comments by technology expert Ben Thomson, Publisher of Stratechery, on why the company’s strategy seems unusually haphazard and desperate.
This year hasn’t turned out as expected so far for a lot of investors. The most significant war in Europe in 70 years and surging inflation have a way of ruining the best-laid plans. But that doesn’t mean there aren’t ways to profit for the rest of the year and beyond. Kiplinger has assembled a list of 22 stocks to consider for the rest of 2022. We’ve culled five of them from a cross-section of sectors based on name recognition, growth potential, defensive characteristics, and dividends.
There is still no alternative to stocks.
That’s according to these hi-lights from a Bloomberg news story that outlines five reasons why calmer sailing may be soon at hand after a rocky journey for equities so far this year.
Set it and forget it. Buy great companies and leave them alone. Or go to sleep for several years like Rip Van Winkle, the character in the short story, and wake up years later to find that everything has changed except, and this is where we use artistic license, your three favourite stocks have rewarded you handsomely. That’s the premise behind this segment in which I ask John O’Connell for three names that he believes in so strongly that he’s comfortable recommending them as long-term buy and holds.
Two of these companies are large caps and one is a lesser know small cap with multiple tailwinds that could result in a quadruple for the stock over time.
Click here to get these ideas.
A pain trade occurs when a popular asset class or widely followed investing strategy takes an unexpected turn that catches most investors flat-footed, according to Investopedia. There’s an on-going pain trade right now that is up nearly 45 per cent in the last six month that many investors have missed. Find out three reasons why this particular trade can keep moving higher.
Earnings season kicks off next week in the U.S., and then Canadian companies will start unveiling their numbers with the usual lag of a few weeks. We discussed the fact that the rate of change decline for U.S. earnings and revenue will be dramatic because the fiscal and monetary-induced boom last year at this time is impossible to replicate. What follows, courtesy of Morgan Stanley, is a visual representation of that with some excellent charts detailing quarterly and year-over-year earnings per share and revenue estimates, and a breakdown by sector. Find out what’s expected on the earnings front over the next few weeks because it will go a long way in determining how well stocks hold up as the Fed raises interest rates and reduces its balance sheet.
A stock generally moves on investors’ expectations of future earnings. And those earnings during this reporting season will show significant deceleration across most sectors. That’s because last year during the first quarter, and especially during the second quarter, saw a free-for-all of fiscal and monetary stimulus, and consumer demand that pushed corporate profit growth to stratospheric levels that we may never see again in our lifetimes. But those days are gone and the question becomes how well will investors tolerate their favourite companies saying that growth has meaningfully slowed. And pity the company that misses its numbers and issues a weak forecast. In this conversation with John O’Connell, we examine that dynamic and how things may play out.
Picking up on our theme that there are many economic and financial market questions right now, we turn to Ed Yardeni and his look at uncertainty. Nine Know Unknowns is how the President of Yardeni Research is framing it, to borrow from the late U.S. Secretary of Defence, Donald Rumsfeld. We’ve culled a few salient excerpts from Yardeni’s report to give you some flavour on what the respected market watcher is thinking about.
Gary Friedman is a highly-regarded retail executive. The Founder, Chairman & CEO of RH (Restoration Hardware) is also unusual in that, unlike most CEOs, he can be very blunt in his assessment of the economy and his company’s prospects. Friedman is making waves for his commentary after RH delivered record financial results for the fiscal year ending in January. He’s very candid about the impact of inflation, freight rates, the war in Ukraine, and many other factors affecting RH’s consumer reliant business. Friedman, who’s run RH for more than 20 years, says he’s never been as excited and as uncertain. Get a bird’s eye view into the inner workings of this multi-pronged luxury brand, which touches many aspects of the economy. And why RH’s stock, which rose more than 1,600 per cent over five years, can still triple from here.
Do you have the stomach to handle some volatility in your stocks? That is shares of companies that bounce around more than the market. If not, and you’re a long-term buy and hold investor, there may not be much for you to see here. But if you’re a more active investor or even have the audacity to be a trader, adding some high quality, high volatility stocks could provide some zip to your holdings.
Bill Miller famously beat the S&P 500 for 15 straight years as co-founder and portfolio manager at Legg Mason Capital Management. His returns lately have not been as stellar but his insights into investing are always keenly received. Miller’s latest missive is a case in point as he advises investors to embrace the uncertainty of the moment, and details the sectors and types of stocks that have the highest probability of success right now. Here are the hi-lights.