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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today show, we are going to discuss the state of Canada's energy sector after what our feature guest today calls a messy quarter, Michael O'Brien, portfolio manager with TD Asset Management will join us. MoneyTalk's Anthony Okolie is going to have a look at a new small business survey and what it says about the health of the economy.
And in today's WebBroker education segment, Bryan Rogers will show us how you can research certain types of exchange traded funds using the platform. So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get our guest of the day, let's get you an update on the markets. We will start here with the TSX Composite Index, a triple digit loss. It right now down hundred and 13 points, little more than half a percent.
West Texas intermediate crude is just a little north of 71 bucks a barrel, a little bit of downward pressure there.
But we do have some earnings news. Nutrien sales slump in its most recent quarter, although it does say that it expects higher demand. The crop Nutrien company right now at 80 bucks and change, down a little more than 4%.
Linamar had an earnings beat.
Last time I checked, that stock was getting a bit of a bid. Indeed, it's up about 6 1/2% right now.
6948, in the automotive parts manufacturing sector.
The S&P 500, the broader rate of the American market, big disappointment for Disney plus subscribers, they lost 4 million in their most recent quarter. Got the S&P 500 right now down about 1/4 of a percent. It's not all about Disney, there are a few other things going on. There's a careful eye on different reads on inflation, what it could mean for the Fed going forward. I want to check in on the tech heavy NASDAQ right now and I think it might modestly be in positive territory. It's of 13 points, 1/10 of a percent peerless check-in on shares of Disney.
As we said, some disappointments there when it came to the Disney plus service. Right now that stock is down a pretty substantial 8% on the back of its latest earnings report, 90.96 per share. And that's your market update.
Energy stocks areA major component ofthe TSX Composite Index and many of the big players in the space have just reported their latest earnings. Our feature guest today so that was a messy quarter, but there's also some positives. Joining us now with more is Michael O'Brien, poor folio manager at TD Asset Management.
Welcome to the show.
>> Thanks, Greg.
>> We've had our big energy names out.
What do you see?
>> The reality is that these companies are operating some pretty hostile environments.the production numbers in the upstream business were a little bit soft and then you also had some issues with a number of the integrated players like Cenovus and Suncor with downtime in the refineries. Cenovus in particular trade so is just one of those quarters where things weren'tclicking on all cylinders. That said, they were all still very profitable, generated a lot of cash and a decent amount of that come out in dividends and buy back. As you talk about it still being profitable which is interesting because the price of crude oil on average for the first quarter of last year. But they are still profitable at these levels?
>> Yes. After the last five, six years, we went through.
Where oil prices were quite weak for an extended period of time. We can't forget that in Q1, the quarter just past, oil prices kind of bounced around between $70-$80. That doesn't sound as exciting as last year when it was over hundred dollars per barrel.72 A.D.
dollar barrel of oil for Canadian producers, that's a very healthy level. So we have seen all of these companies continue to improve their balance sheets.
They all continue to return cash to shareholders.
If oil were to stay $70-$80, it doesn't sounds exciting, but that's a very, very attractive level.
>> What can shareholders expect going forward? With the year-over-year comparison, you get past those tough winter months when you can have operational challenges, which is the rest of the year look like?
>> It should be a bit smoother. For example, Cenovus, one of the big Canadian players, they were operating with almost one hand tied behind their back and queue 114 of their five refineries were basically out of commission or running at suboptimal rates.
management tells us that by June or July they should all beback up and we should see a nice improvement there.
You think about the weather-related downtime we saw in Q4 and Q1, that should be behind us now. So the outlook for the back half of the year is pretty good and so really what investors are focusing on now is, as they rightly should have, these companies focused initiallyon getting debt to a more sustainable level.
The exciting thing for equityholders now is that by a large, all of these companies are within striking distance of that sort of magic number where they figure the debt levels have gotten where they are comfortable with and beyond that point basically all of the free cash flow that is generated is going to come back to us, either as dividends, buybacks, or special dividends. And so for example, CN Kenya, Canadian Natural Resources, their magic number is $10 billion of net debt.
They are a couple of billion dollars off. They figure by late this year or early next year, they will reach the $10 billion plateau.
Going forward after that, 100% of the free cash flow they generate will come back to shareholders.
Cenovus, their magic number is $4 billion of that debt.
They are at about 6 1/2 billion today.
They figure by the end of this year, they will be there. That's the thing that investors should keep their eye on his barring something really unforeseen in terms of a major, major decline in oil prices, the free cash flow being returned to shareholders by these big players should continue to accelerate as we go into 2024.
> I was going to ask you how much is an investor who is taking a look at the Canadian energy patch have to worry about those external factors?
Whether it's global economic slowdown that depresses demand or even know what OPEC is up to?
>> Absolutely. Oil is a global commodity. The world runs on oil.
And as we have all seen, whether fundamentally justified or not, oil prices will swing quite violently with the macro mood of the day.
So what you are reading about when you get up in the morning is a recession, if you see the R word as a headline in the business section, chances are oil prices are going to respond that negatively.
On the other hand, people are more optimistic about the economic backdrop were focused on things like China reopening, that tends to put a bid under oil.
Those are macro, top-down sentiment driven drivers but they are real for oil.
At the end of the day, it comes down to supply and demand fundamentals and that washes out in inventory trends.
We try to look through the noise. We understand that headlines will buffet the oil price. Like I said, it's been bouncing around between 70 and $80 year to date.
But at the end of the day, if we keep our eyes on the real fundamentals in terms of supply outstripping demand, looking at inventories is gonna tell us where oil prices are going to be 12, 36 months now.
>> Thinking about the Canadian market, energy is a huge part of it. The financials, they haven't reported here they come at the tail end.
But we have heard from some of the miners. It we've got gold above $2000 per ounce.
What's the picture there?
>> Obviously, what's been taken away from oil in terms of the negative sentiment around the economy and obviously gold tends to feed off of liquidity, it tends to feed off of macro fears as well.
So we see people quite concerned about the US regional banks. We hear talk about a banking crisis. Those of the types of things to put a bit into gold.
They are the same things that have been undermining oil and some of the other commodities are today.
Gold has been the beneficiary of the difficulties of some of these other commodities have been weathering.
North of $2000, obviously, that's a very attractive gold price for the minors.
Where they are struggling a little bit though is on not so much on the revenue side but the cost side.
Maintaining efficient operations, a lot of input cost, a lot of the things you need to run a mine have gone up a lot in price over the last a while. And so even though the headline gold being over 2000, you would think that would be free cash flow gushing out of these companies, they are kind of getting a lot of pressure on the cost side that the free cash flow follow-through isn't as great as you might expect.
>> Always interesting stuff with Michael O'Brien. We are going to get your questions for Michael and Canadian stocks in just a moment's time.
A reminder, course, you get in touch with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
We have shares of CI Financial in the spotlight today.
The Toronto-based firm is selling a 20% stake in its US wealth management business to a group of investors, that group including Bain Capital and Abu Dhabi Investment Authority.
The deal means earlier plans to take that US division private have been shelved.
At the moment, you got CI up to the tune of about 26%.
Well, a costly warehouse fire hit the bottom line in Canadian Tire's most recent quarter.
The retailer says the fire at a key distributional centre Northwest of Toronto cost all $68 million. Sales were also down compared to the same period last year, with Canadian Tire pointing to a slower start to spring.
You've got Canadian Tire down a little more than 3%.
Maple Leaf Foods handing in a modest earnings beat as meat sales came in stronger than excited for its most recent quarter.
In a note to investors, TD Cowen says it appeared the market was bracing for a miss from the food processor.
Maple leaf shares had been under pressure in recent sessions.
You see them jumping 11% today.
Tyson Foods, I recall several days ago, coming in with disappointing earnings which fed through to some of the food processors but may believe bouncing back from some of those recent losses today. A quick check in on the markets. We will start your Toronto with the TSX Composite Index.
How are we fearing right now? Hundred and 15 points to the downside, little more than half a percent.
South of the border, the S&P 500, the broader read of the US market down 11 points, little more than 1/4 of a percent.
I can read.
Okay, we are back now with Michael O'Brien, taking your questions about Canadian stocks. I see them banging away in the corner of my screen. Let's start with this one. What is your outlook for Shopify?
>> Shopify has had a fantastic start to the year. They are up 80 or 90% year to date.
part of that is investors are a little less concerned around inflation a trend.
Bond yields have come down. That's part of it.
but on the fundamental side, they got off to a very good start.
They reported earnings last week, revenue was up 25% which is a pretty strong showing in this environment.
More importantly than that, and this is something that I think a lot of people have been waiting for for a long time, is they also seem to pivot a bit towards a more focus on costs which is something obviously investors have been looking for for quite some time. A lot of fast-growing nonprofitable technology companies did well in the early stages of the pandemic and had a difficult year last year. It's a bit of a test this year to see how they respond to that.
I think what we saw was Shopify, it's unfortunate for the people who work there but another round of pretty significant layoffs.
Investors tend to applaud those things.
The people at the company maybe not so much.
And another very significant action they announced with their earnings was a couple of years back, they begin building what they called a Shopify fulfilment network which is kind of like a mini Amazon, get your parcels quicker.
The logistics, the infrastructure, the cost of that can be quite enormous and so investors have been quite cautious about what's the scope of the dream here? How much might this cost?
How long will it take?
Will you be successful?
Management, to their credit, took a second look at it this time around and decided, you know what? This isn't for us, so they have sold that to a distribution focused company partnered with them, essentially, which means that the business is going to return to its roots in being a very capital light business, which gives you a much clearer path to sustainable cash flow in the future.
I think investors are excited about that.
it's still a difficult macro background in this country.
>> The economy is slowing, as we are told, and e-commerce, what happens to them?
>> If you think about what Shopify is and what they do, who their customers are, primarily their customers are small and medium-sized businesses who sell discretionary items to consumers.
If we do have a real downturn, right now, unemployment is at 30, 40, 50 or lows in the US and Canada but obviously pressure is building there. So the consumer does come under pressure as we go through the year, those discretionary items and particularly for small and medium businesses, they don't have the staying power of a Walmart or Home Depot. So their core customer could come under some pressure.
So that would be the sobering comment here. But the more forward-looking strategic steps they took this quarter were definitely warmly received by investors.
>> Okay, here's another stock that did quite well during the pandemic. Aritzia. Come get your guest's view on Aritzia?
This is fashion, close.
Lately, there been some questions were in the name.
>> Yeah, well, none of the questions have revolved around whether people like their clothing.
The revenue line has been very, very strong.
Aritzia continues to be very much on points with their fashion choices.
And it is a fashion business.
And so they continue to knock it out of the park in terms of building their follower base. Revenues this quarter I think were up something like 40, 45%.
So it's not an issue about are they able to attract customers, do they have clothing that resonates.
Where the issue has been, and this is kind of a counterpoint to what we saw what Shopify, what Shopify, investors applauded the tightening of the belt for costs, focusing more on reducing the infrastructure spend. Aritzia, we saw this quarter was kind of the complete opposite where they have decided that they want to invest for the future and they are going to spend a lot of money, more money than investors expected, on things like infrastructure, distribution centres. They've also still gotta work down some inventory that they have built up. So I think that the Aritzia management team looked at this as we are going to build for two or three years in the future.
Sometimes markets are supportive of that.
In this environment where people are worried about the economic backdrop being challenged, investors had to reward the belt-tightening that we saw in companies like Shopify or Meta, these types of things. So Aritzia, even though the posted very strong revenue growth, the shares were just hammered that day.
Maybe it management was a bit tone death in reading the market.
>> Interesting name because definitely there was a while there that they couldn't do any wrong.
Let's take a look at another question.
I know the name that been in the headlines.
What about the offer by Glencore to buy Teck Resources.
Is this good for investors?
There's a lot of drama around this one recently.
>> I think at the most simple level, course, this is a good thing for shareholders, not just because it put a bid under the stock but more importantly, what it did was shined a light on the value of tax copper assets.
Tech has a new mine, QB two, which is just in the early stages of ramping up.
Once it is fully ramped up, this will pretty much double or copper production, this at a time when all the big mining majors are looking for copper assets, they are looking for copper growth.
Difficult to build it, it's easier to buy it. I think Glencore's bid, it really shined a light on the strategic value of Teck to these other mining companies. That's not going to go away.
however, if you think about… Is a bidding war going to ensue? Is Glencore really going to be able to buy this company? I'd be much more cautious there.
the reality is, there is a controlling shareholder, the Keevil family, which built Teck.
They don't seem to be in any, Norman Keevil, the founder, doesn't seem to be in any hurry to sell them off. Teck has made it clear in no uncertain terms that Glencore is not the right partner for them.
I think what we have here is investors are now aware of the strategic value of copper assets, but I wouldn't go too far in concluding that it necessarily follows there's going to be a deal that happens.
One other interesting development on that file is if you noticed just the last couple of weeks, the political drums have started beating around this, bit of a protectionist sentiment.
>> Didn't want to be selling off their mining assets.
>> Teck has been the flagship mining company for Canada, and you think back to the last big cycle, back in 2000, 2010, where we lost so much of our, where so many of our mining companies were sold off to foreign buyers, such as Falconbridge, Teck is kind of the last of those larger players and so you saw both the leader of the conservatives and the opposition when he saw a number of the cabinet ministers and eventually the Prime Minister sort of hinting pretty loudly that this is going to have, this is going to be very closely scrutinizedif a deal were to be presented to them. So again, caution aroundthe near term. Put another way, I would be careful about playing those for a near-term take-out.
I would rather look at this as good fundamental support for the underlying strategic value of the assets.
> Interesting stuff. As always, make sure you do your own research before making any investment decisions.
we'll get back to your questions for Michael O'Brien on Canadian stocks in just a moment's time.
a reminder, of course, you can contact with us at any time.
Just email moneytalklive@td.
com.
Now let's get our educational segment of the day.
If you're looking for a specific type of exchange traded fund, WebBroker has tools which can help.
Joining us now with more is Bryan Rogers, Senior client education instructor at TD Asset Management.
Always great to see you, let's talk about specific ETFs and how you would search them out on the platform.
>> Yeah, Greg. Well, our platform has a really huge amount of information on diversifying investment such as mutual funds or exchange traded funds, ETFs. But it can be overwhelming, especially for the new investor even for some season investors to narrow down to a small list or to find a few that you're looking at in a specific category.
fortunately, there is a lot of screeners, a lot of different ways to filter through that. What I want to do is demonstrate, we are going to jump over to WebBroker and if you're going to do this yourself, what you want to do is click on research to get started and then you go to ETFs. So this is the ETF example. You can use this for mutual funds as well. You're gonna scroll down, I'm in a go on the left-hand side of the screen, go in a circle and trace of the things you can do. Up to the top, you can see that in showing you all categories available.
You can narrow it down right off the bat to US stock that's what you're looking for, international stock and so on. That's giving you some broad categories. There is a graph where it'll show you certain ones that you select down at the bottom here. Right now you can see them on a yearly basis.
In showing the performance of certain categories, you got one year performance. There are a lot of filters initially. You can change that as well. You go to three year and so on.
You can see there is European ETFs, Japanese or equity energy.
But any of these ones you can select and then you can drill down even further and see the ETFs available in each of these. I'm going to show you some of the features available.
If you scroll down a bit further, there are some screens available. We want to narrow down and see there is 46 TD exchange traded funds are ETFs available.
There is Canadian equity ETF so I can be those results.
Domestic fixed income, I know that something that's really popular these days with the advent of the interest rates rising so much, people are looking for fixed income products. You can have that filtered right away. And then as you kind of continue across, you can see that you can add a symbol up at the top to compare a few.
You can go buy a bunch of different categories. One of my favourites is down at the bottom right hand side.
This is the one I want to demonstrate because you have the ETF quick screening tool. So if I want to, for example, we get the question all the time in our question, how can I find some index options?
So one of the things you can do is under quick screen, click this, go to index ETFs, you can go by country as well if you want them to be in Canadian dollars instead of US for example. I can go to Canadian only.
That's a lot. That's 1229 ETFs. That's way too much work. But then you could start to narrow down.
You want to have the lowest management expense ratio, MER. That brings it down to 173.
Then he can go with things like trading volume or MorningStar rating. Sometimes you want to look for a higher trading volume with ETFs. Now down to 10.
If you want more, you just go to above average.
Go to MorningStar rating for example, and then I can go to four-star.
There you go Greg, I'm creating a list for you right now. We got 12 matches and there you have it.
I've got 12 index ETFs that are pretty popular that we can see from a volume perspective and just from an actual performance and review it from there.
>> That's how to parse down and find things on the platform. Thanks, Bryan.
>> Thanks, great.
>> Are things to Bryan Rogers, Senior client education instructor at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars. Now before you back to your questions about Canadian stocks for Michael O'Brien, a reminder of how you get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.
com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Michael O'Brien, we are taking your questions about Canadian stocks. Lots coming in, let's get to this one. Outlook for natural gas producers?
>> So natural gas, it's been very volatile.
Obviously six months ago, people were bracing for skyrocketing prices, particularly in Europe.
Lo and behold, we got a warm winter.
We wound up with a bit of a glut of natural gas inventory coming out of the winter.
So you've seen natural gas prices pretty depressed recently. A bit of a surprise. That obviously puts pressure on the producers.
One thing that's important to point out though is that particularly for some of the Western Canadian producers, it really depends on how savvy their marketing has been in terms of where they sell their gas.
So if you're sort of trapped at the hub, which is where the majority of gas would be priced in Western Canada, pretty difficult pricing right now.
On the other hand, there is some more sophisticated marketers that have contracts for example to sell into California which is a very isolated market, where prices have been very strong. So you can see a real divergence among the producers based on where they are selling their product.
Some of the more sophisticated ones, like I said, like Tourmaline, are getting surprisingly good realizations if you just looked at the anchor price. Looking forward to this summer, they are going to be some pretty choppy periods this summer because a lot of the natural gas infrastructure in Alberta and BC, typically what happens is the TransCanada pipeline and Enbridge to a lesser extent are continuing to expand capacity to accommodate LNG growth when it comes on in 2025-ish.
What that means is when they are actually conducting the maintenance in the summers, the market can really get thrown out of whack for a while.
You can see some pretty ugly pricing.
So I would say beware of some potential stickers shock in the summer. The longer-term outlook is quite positive.
By longer-term, I mean if you can bridge to land LNG Canada comes on in 2025-ish, that's going to dramatically change the supply demand fundamentals in Western Canada.
And so I think long-term, there are reasons for quite a bit of optimism around natural gas and short-term pressures on pricing and obviously attends to swing quite wildly with the weather.
>> It could be an interesting summer indeed. Let's get to another one. This is still energy-related.
Brief mention off the top about Suncor. What is your view on the name?
>> So Suncor is at an interesting juncture. If you think back for five years, Suncor was gold standard for the Canadian players.
In recent years, they have had some stumbles. Some of their minds are getting a bit older so not quite as efficient.
And also some issues around operational mishaps, safety incidents, some very unfortunate fatalities among the workforce.
So I guess what I'm saying is the shine kind of came off of Suncor. The premium multiple that investors won't subscribe to Suncor has kind of been priced out of the stock here. It's an interesting juncture now because, not surprisingly, given the difficulties in the operations, there has been a senior management change.
>> That's right.
> A new CEO, Rich Kruger, many of our viewers might remember him from being the CEO at Imperial oil for a time.
He has come out of retirement.
So it's a bof a turnaround project.
But I mean, as far as turnarounds go, your starting with some pretty good assets here so it's really about reworking the culture, getting a little more focused on operations, more focused on safety. I think if he can do those things successfully, there is a really good story here.
It'll just take a little time to prove it.
So I think he made his initial appearance on the latest quarterly earnings call.
Investors are going to be seeing a lot more of him in weeks to come.
I think we'll be doing a lot of marketing and giving his message directly to investors.
And I suspect that a lot of people will be open minded in looking at the opportunity as opposed to just the challenges that they've had.
>> Let's take another question now.
This one about real estate investment trust. What does your guest think of REITs?
This viewer is concerned about H&R being down a lot today, the distribution say?
I off the H&R part of that question and talk about the REIT space in general.
>> I think with REITs, it's fine, we are going to talk about REITs generally, but be careful to generalize.
>> You talking about malls and so many others.
> So much of how the various real estate classes are performing these days gets reflected in these individual operators and so, for example, a REIT with heavy exposure to office, which is a challenge space today,would be in a very different space than an REIT which is exposed to let's say a multi-residential apartment buildings.
So I tend to look at that group of company names like Canadian apartment REITs as quite defensive.
They went through a difficult period of time where because of rent controls,their revenue line essentially was capped but the input costs were rising in the inflationary environment, so that starting to reverse.
You got a positive story around immigration and foreign students returning and so wrench, obviously, the rental markets are quite tight in a number of the big cities.
So I like the fundamentals for the apartment REITs here. I think that's an attractive space and, historically, quite defensive. I would be cautious when he gets the more cyclically exposed lines of business.
like I said, offices is a front burner concern for investors right now. So any REIT that has significant office exposure is going to be under pressure.
and then you sort of go through the other lists like industrial, it had been a golden child but if the economy slows down, and there may be a few more challenges, but that's also preferred spot.
So generally speaking, don't generalize.
>> That's a good point. We are going to back your questions for Michael O'Brien on Canadian stocks in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and reminder that you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
US small business optimism pulled back in April, with fewer owners expecting better business conditions over the next six months.
Joining us now with more details and TD Economics take on the latest figures is Anthony Okolie.
The pullback in April fell to the lowest level since early 2013.
The index fell just over a point in April and that marks the 16th consecutive month that the index fell below the 49 year average of 98 points. Now when we break down the data, the biggest declines were in business reporting inventory too low. Also earnings trends were down five points. Also expectations for higher real sales were down four points a month over month.
Now another key area highlighted as an area of concern is that more owners are struggling now finding qualified workers support open positions.
job openings rose at 2 Points Respectively in April.
And thenplanning to raise worker compensation friended down, it was down 2 Points in April.
Now interestingly, the number of owners who raise or are planning to raise the average selling prices fell in April, which aligns with the latest US CPI data, which fell more than expected last month. Now of course, this morning, we also got the latest read on US wholesale inflation which came in at lower-than-expected in April.
That continued to fall. Finally, the share of firms saying borrowers needs are satisfied ticked up to 30%.
The share of businesses reporting paying higher interest rates studied at 26%. Again, that's the highest it's been in over 16 years.
Overall, small business owners were not particularly upbeat in April, with little change in optimism since mid-2022. Greg?
>> You look at the headlines, there is no shortage of things to worry about, whether you are an investor or small business owner.
Any insight about what's happening with the banking crisis or inflation?
>> Yeah. So the report says that they are cautioned… The report is cautiously positive. So far, the follow from the US banking crisis doesn't appear to have taken a major toll on overall confidence.
The key take away is a top business problem with inflation slipping to the number two spot for the first time since early last year.
In fact, 24% of early business owners identified this as a top problem.
And now easing inflation concerns and signs of slowing wages are also syncing with expectations for lower inflation ahead.
>> Interesting stuff. Thanks, Anthony. At my pleasure.
>> MoneyTalk Anthony Okolie.
Let's do a quick check in on the markets. We'll start here at home with the TSX Composite Index.
It's off the lows of the session, still down about half a percent but not triple digits anymore. 98 point to the downside.
CI Financial in the news today selling a stake in their US business. That stock up 27%.
Maple Leaf Foods out with its latest earnings, the reader from TD Cowen, they had a note to their investors, the street may have been bracing for a miss.
It was a modest beat and there has been some turmoil lately with Tyson Foods, their latest earnings were reverberating through the sector. There's an almost 11% pop today. The S&P 500, as investors tried to wade through earnings, disappointment from Disney, where's inflation had a, it's down a modest quarter of a percent.
The tech heavy NASDAQ was mostly positive at the start of the show and it still is.
It's up about seven points. And Alphabet, Google is we still know it, one of those names that was getting bit of a bit today, it was up about 5%. Of course, it had that big show off day.
They were showing investors what they had up their sleeves. Talked about integrating artificial intelligence across our products and that seemed to get some people excited there.
We are back with Michael O'Brien who is not a showoff.
He is about quality commentary from TD Asset Management.
Got another question.
Is it a good time to buy Nutrien? Now on this platform, we can't give you buy or sell recommendations but we can talk about Nutrien. They just came out their lives quarter and investors didn't like it too much.
>> Yeah, well, it's one of those interesting things where investors knew and expected that the quarter would be difficult.
They expected a miss, and the miss was a bit bigger then people had thought.
And so you are seeing a little bit of disappointment in the shares today.
My suspicion, and this is been a stock that has been under pressure for quite a while, sentiment is quite negative.
So this could be the washout event in the stock.
I think the thing to keep in mind with Nutrien is that this is a very, very solid company.
They generate lots of cash, their balance sheet is in great shape, they've got world-class assets, a nice balance across their businesses.
So when you think about where Nutrien is at right now, obviously all the key input, all the fertilizer costs went dramatically higher last year in the wake of the Russian invasion of Ukraine. Because obviously Russia and its ally Belarus are large suppliers of potash, for example, a lot of nitrogen concerns. Nitrogen prices off of natural gas and the concerns in Western Europe last year.
So you had abnormally high prices for some of their key fertilizer ingredients.
Farmers are an interesting bunch.
They can be pretty stubborn and so when they see these prices spike, they will put off buying as long as they can.
So even though crop prices are quite attractive, if you look at corn, soybean and wheat, historically, these are very attractive prices for the farmers, they are still being pretty tough and choosy in terms of the fertilizer applications and when and how much they're willing to pay for these, particularly potash. I think the good news is that farmer economic still look very solid, again, looking at the crop prices, and eventually farmers do you and will have to purchase these nutrients. It's just a matter of time.
So I think we are probably at a juncture here where this could be the darkest moment for Nutrien sentiment wise and valuation is certainly demanding. If you think about a midcycle or normalized earnings would be, they look pretty attractive here.
>> Okay, let's take another bank question. Let's take another question about the banks.
Canadian banks have done very well for a long time.
Do you see them continuing on their upward trajectory?
>> So obviously this has been a difficult year for banks.
the Canadian bank stocks haven't been spared from the turmoil we are seeing south of the border, particularly the US regional banks.
And so there are periods of time when the Canadian banks aren't necessarily going to represent leadership in the market. What people are worried about recession, people are worried about businesses going bankrupt or individuals losing their jobs, that some people tend to worry about what kind of loan losses will the banks take. And obviously, when you throw in the regional banking, the pressure in deposits and whatnot, very different system, situation here in Canada. But investors are still going to worry about that.
So what I'm saying is that it shouldn't be surprising that Canadian bank stocks have been under pressure your state.
Going back to I think the more important take away from this question is there is a reason why Canadian bank stocks have performed extremely well over time, and that is because it's a small group of very large, very well-run, very balanced companies. We've got 6 Major Banks in Canada.
I hesitate to use the word oligopoly but it is… An oligopoly that has consistently treated its shareholders very well. Look at the dividend track record for these companies over very long periods of time,a great way to build wealth sustainably for the long term. I don't think any of the conditions created this strong oligopoly of the shareholder focused businesses… I don't think any of those fundamental reasons have changed.
and if anything, the weakness in the regional banks is pointing to some of the strengths and advantages that the Canadian banking system has. So beyond whatever economic headwinds… >> Is this the biggest risk in the short or near year term?
>> The short and near-term risk, if we have a difficult period in the economy, a recession, a hard landing, maybe a little bit more turmoil in the US banking system,that will definitely be a short-term or near-term headwind for the banks.
these are still structurally attractive businesses that investors will continue to find attractive.
>> Michael, always a pleasure having you. I look forward to the next time.
>> Thank you very much.
>> Our thanks Michael O'Brien, portfolio manager at TD Asset Management. As always, make sure you do your own research before making any investment decisions.
we are going to back tomorrow with an update on the markets and some highlights from our best interviews of the week. And then on Monday, Vitali Mossounov, global technology analyst with TD Asset Management will be our guest. We will be talking about technology. It's been a very interesting space so far this year.
A reminder of course they can get a head start with your questions for Vitali. Just email moneytalklive@td.com. That's all the time have the show today. Thanks for watching. We will see you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today show, we are going to discuss the state of Canada's energy sector after what our feature guest today calls a messy quarter, Michael O'Brien, portfolio manager with TD Asset Management will join us. MoneyTalk's Anthony Okolie is going to have a look at a new small business survey and what it says about the health of the economy.
And in today's WebBroker education segment, Bryan Rogers will show us how you can research certain types of exchange traded funds using the platform. So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get our guest of the day, let's get you an update on the markets. We will start here with the TSX Composite Index, a triple digit loss. It right now down hundred and 13 points, little more than half a percent.
West Texas intermediate crude is just a little north of 71 bucks a barrel, a little bit of downward pressure there.
But we do have some earnings news. Nutrien sales slump in its most recent quarter, although it does say that it expects higher demand. The crop Nutrien company right now at 80 bucks and change, down a little more than 4%.
Linamar had an earnings beat.
Last time I checked, that stock was getting a bit of a bid. Indeed, it's up about 6 1/2% right now.
6948, in the automotive parts manufacturing sector.
The S&P 500, the broader rate of the American market, big disappointment for Disney plus subscribers, they lost 4 million in their most recent quarter. Got the S&P 500 right now down about 1/4 of a percent. It's not all about Disney, there are a few other things going on. There's a careful eye on different reads on inflation, what it could mean for the Fed going forward. I want to check in on the tech heavy NASDAQ right now and I think it might modestly be in positive territory. It's of 13 points, 1/10 of a percent peerless check-in on shares of Disney.
As we said, some disappointments there when it came to the Disney plus service. Right now that stock is down a pretty substantial 8% on the back of its latest earnings report, 90.96 per share. And that's your market update.
Energy stocks areA major component ofthe TSX Composite Index and many of the big players in the space have just reported their latest earnings. Our feature guest today so that was a messy quarter, but there's also some positives. Joining us now with more is Michael O'Brien, poor folio manager at TD Asset Management.
Welcome to the show.
>> Thanks, Greg.
>> We've had our big energy names out.
What do you see?
>> The reality is that these companies are operating some pretty hostile environments.the production numbers in the upstream business were a little bit soft and then you also had some issues with a number of the integrated players like Cenovus and Suncor with downtime in the refineries. Cenovus in particular trade so is just one of those quarters where things weren'tclicking on all cylinders. That said, they were all still very profitable, generated a lot of cash and a decent amount of that come out in dividends and buy back. As you talk about it still being profitable which is interesting because the price of crude oil on average for the first quarter of last year. But they are still profitable at these levels?
>> Yes. After the last five, six years, we went through.
Where oil prices were quite weak for an extended period of time. We can't forget that in Q1, the quarter just past, oil prices kind of bounced around between $70-$80. That doesn't sound as exciting as last year when it was over hundred dollars per barrel.72 A.D.
dollar barrel of oil for Canadian producers, that's a very healthy level. So we have seen all of these companies continue to improve their balance sheets.
They all continue to return cash to shareholders.
If oil were to stay $70-$80, it doesn't sounds exciting, but that's a very, very attractive level.
>> What can shareholders expect going forward? With the year-over-year comparison, you get past those tough winter months when you can have operational challenges, which is the rest of the year look like?
>> It should be a bit smoother. For example, Cenovus, one of the big Canadian players, they were operating with almost one hand tied behind their back and queue 114 of their five refineries were basically out of commission or running at suboptimal rates.
management tells us that by June or July they should all beback up and we should see a nice improvement there.
You think about the weather-related downtime we saw in Q4 and Q1, that should be behind us now. So the outlook for the back half of the year is pretty good and so really what investors are focusing on now is, as they rightly should have, these companies focused initiallyon getting debt to a more sustainable level.
The exciting thing for equityholders now is that by a large, all of these companies are within striking distance of that sort of magic number where they figure the debt levels have gotten where they are comfortable with and beyond that point basically all of the free cash flow that is generated is going to come back to us, either as dividends, buybacks, or special dividends. And so for example, CN Kenya, Canadian Natural Resources, their magic number is $10 billion of net debt.
They are a couple of billion dollars off. They figure by late this year or early next year, they will reach the $10 billion plateau.
Going forward after that, 100% of the free cash flow they generate will come back to shareholders.
Cenovus, their magic number is $4 billion of that debt.
They are at about 6 1/2 billion today.
They figure by the end of this year, they will be there. That's the thing that investors should keep their eye on his barring something really unforeseen in terms of a major, major decline in oil prices, the free cash flow being returned to shareholders by these big players should continue to accelerate as we go into 2024.
> I was going to ask you how much is an investor who is taking a look at the Canadian energy patch have to worry about those external factors?
Whether it's global economic slowdown that depresses demand or even know what OPEC is up to?
>> Absolutely. Oil is a global commodity. The world runs on oil.
And as we have all seen, whether fundamentally justified or not, oil prices will swing quite violently with the macro mood of the day.
So what you are reading about when you get up in the morning is a recession, if you see the R word as a headline in the business section, chances are oil prices are going to respond that negatively.
On the other hand, people are more optimistic about the economic backdrop were focused on things like China reopening, that tends to put a bid under oil.
Those are macro, top-down sentiment driven drivers but they are real for oil.
At the end of the day, it comes down to supply and demand fundamentals and that washes out in inventory trends.
We try to look through the noise. We understand that headlines will buffet the oil price. Like I said, it's been bouncing around between 70 and $80 year to date.
But at the end of the day, if we keep our eyes on the real fundamentals in terms of supply outstripping demand, looking at inventories is gonna tell us where oil prices are going to be 12, 36 months now.
>> Thinking about the Canadian market, energy is a huge part of it. The financials, they haven't reported here they come at the tail end.
But we have heard from some of the miners. It we've got gold above $2000 per ounce.
What's the picture there?
>> Obviously, what's been taken away from oil in terms of the negative sentiment around the economy and obviously gold tends to feed off of liquidity, it tends to feed off of macro fears as well.
So we see people quite concerned about the US regional banks. We hear talk about a banking crisis. Those of the types of things to put a bit into gold.
They are the same things that have been undermining oil and some of the other commodities are today.
Gold has been the beneficiary of the difficulties of some of these other commodities have been weathering.
North of $2000, obviously, that's a very attractive gold price for the minors.
Where they are struggling a little bit though is on not so much on the revenue side but the cost side.
Maintaining efficient operations, a lot of input cost, a lot of the things you need to run a mine have gone up a lot in price over the last a while. And so even though the headline gold being over 2000, you would think that would be free cash flow gushing out of these companies, they are kind of getting a lot of pressure on the cost side that the free cash flow follow-through isn't as great as you might expect.
>> Always interesting stuff with Michael O'Brien. We are going to get your questions for Michael and Canadian stocks in just a moment's time.
A reminder, course, you get in touch with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
We have shares of CI Financial in the spotlight today.
The Toronto-based firm is selling a 20% stake in its US wealth management business to a group of investors, that group including Bain Capital and Abu Dhabi Investment Authority.
The deal means earlier plans to take that US division private have been shelved.
At the moment, you got CI up to the tune of about 26%.
Well, a costly warehouse fire hit the bottom line in Canadian Tire's most recent quarter.
The retailer says the fire at a key distributional centre Northwest of Toronto cost all $68 million. Sales were also down compared to the same period last year, with Canadian Tire pointing to a slower start to spring.
You've got Canadian Tire down a little more than 3%.
Maple Leaf Foods handing in a modest earnings beat as meat sales came in stronger than excited for its most recent quarter.
In a note to investors, TD Cowen says it appeared the market was bracing for a miss from the food processor.
Maple leaf shares had been under pressure in recent sessions.
You see them jumping 11% today.
Tyson Foods, I recall several days ago, coming in with disappointing earnings which fed through to some of the food processors but may believe bouncing back from some of those recent losses today. A quick check in on the markets. We will start your Toronto with the TSX Composite Index.
How are we fearing right now? Hundred and 15 points to the downside, little more than half a percent.
South of the border, the S&P 500, the broader read of the US market down 11 points, little more than 1/4 of a percent.
I can read.
Okay, we are back now with Michael O'Brien, taking your questions about Canadian stocks. I see them banging away in the corner of my screen. Let's start with this one. What is your outlook for Shopify?
>> Shopify has had a fantastic start to the year. They are up 80 or 90% year to date.
part of that is investors are a little less concerned around inflation a trend.
Bond yields have come down. That's part of it.
but on the fundamental side, they got off to a very good start.
They reported earnings last week, revenue was up 25% which is a pretty strong showing in this environment.
More importantly than that, and this is something that I think a lot of people have been waiting for for a long time, is they also seem to pivot a bit towards a more focus on costs which is something obviously investors have been looking for for quite some time. A lot of fast-growing nonprofitable technology companies did well in the early stages of the pandemic and had a difficult year last year. It's a bit of a test this year to see how they respond to that.
I think what we saw was Shopify, it's unfortunate for the people who work there but another round of pretty significant layoffs.
Investors tend to applaud those things.
The people at the company maybe not so much.
And another very significant action they announced with their earnings was a couple of years back, they begin building what they called a Shopify fulfilment network which is kind of like a mini Amazon, get your parcels quicker.
The logistics, the infrastructure, the cost of that can be quite enormous and so investors have been quite cautious about what's the scope of the dream here? How much might this cost?
How long will it take?
Will you be successful?
Management, to their credit, took a second look at it this time around and decided, you know what? This isn't for us, so they have sold that to a distribution focused company partnered with them, essentially, which means that the business is going to return to its roots in being a very capital light business, which gives you a much clearer path to sustainable cash flow in the future.
I think investors are excited about that.
it's still a difficult macro background in this country.
>> The economy is slowing, as we are told, and e-commerce, what happens to them?
>> If you think about what Shopify is and what they do, who their customers are, primarily their customers are small and medium-sized businesses who sell discretionary items to consumers.
If we do have a real downturn, right now, unemployment is at 30, 40, 50 or lows in the US and Canada but obviously pressure is building there. So the consumer does come under pressure as we go through the year, those discretionary items and particularly for small and medium businesses, they don't have the staying power of a Walmart or Home Depot. So their core customer could come under some pressure.
So that would be the sobering comment here. But the more forward-looking strategic steps they took this quarter were definitely warmly received by investors.
>> Okay, here's another stock that did quite well during the pandemic. Aritzia. Come get your guest's view on Aritzia?
This is fashion, close.
Lately, there been some questions were in the name.
>> Yeah, well, none of the questions have revolved around whether people like their clothing.
The revenue line has been very, very strong.
Aritzia continues to be very much on points with their fashion choices.
And it is a fashion business.
And so they continue to knock it out of the park in terms of building their follower base. Revenues this quarter I think were up something like 40, 45%.
So it's not an issue about are they able to attract customers, do they have clothing that resonates.
Where the issue has been, and this is kind of a counterpoint to what we saw what Shopify, what Shopify, investors applauded the tightening of the belt for costs, focusing more on reducing the infrastructure spend. Aritzia, we saw this quarter was kind of the complete opposite where they have decided that they want to invest for the future and they are going to spend a lot of money, more money than investors expected, on things like infrastructure, distribution centres. They've also still gotta work down some inventory that they have built up. So I think that the Aritzia management team looked at this as we are going to build for two or three years in the future.
Sometimes markets are supportive of that.
In this environment where people are worried about the economic backdrop being challenged, investors had to reward the belt-tightening that we saw in companies like Shopify or Meta, these types of things. So Aritzia, even though the posted very strong revenue growth, the shares were just hammered that day.
Maybe it management was a bit tone death in reading the market.
>> Interesting name because definitely there was a while there that they couldn't do any wrong.
Let's take a look at another question.
I know the name that been in the headlines.
What about the offer by Glencore to buy Teck Resources.
Is this good for investors?
There's a lot of drama around this one recently.
>> I think at the most simple level, course, this is a good thing for shareholders, not just because it put a bid under the stock but more importantly, what it did was shined a light on the value of tax copper assets.
Tech has a new mine, QB two, which is just in the early stages of ramping up.
Once it is fully ramped up, this will pretty much double or copper production, this at a time when all the big mining majors are looking for copper assets, they are looking for copper growth.
Difficult to build it, it's easier to buy it. I think Glencore's bid, it really shined a light on the strategic value of Teck to these other mining companies. That's not going to go away.
however, if you think about… Is a bidding war going to ensue? Is Glencore really going to be able to buy this company? I'd be much more cautious there.
the reality is, there is a controlling shareholder, the Keevil family, which built Teck.
They don't seem to be in any, Norman Keevil, the founder, doesn't seem to be in any hurry to sell them off. Teck has made it clear in no uncertain terms that Glencore is not the right partner for them.
I think what we have here is investors are now aware of the strategic value of copper assets, but I wouldn't go too far in concluding that it necessarily follows there's going to be a deal that happens.
One other interesting development on that file is if you noticed just the last couple of weeks, the political drums have started beating around this, bit of a protectionist sentiment.
>> Didn't want to be selling off their mining assets.
>> Teck has been the flagship mining company for Canada, and you think back to the last big cycle, back in 2000, 2010, where we lost so much of our, where so many of our mining companies were sold off to foreign buyers, such as Falconbridge, Teck is kind of the last of those larger players and so you saw both the leader of the conservatives and the opposition when he saw a number of the cabinet ministers and eventually the Prime Minister sort of hinting pretty loudly that this is going to have, this is going to be very closely scrutinizedif a deal were to be presented to them. So again, caution aroundthe near term. Put another way, I would be careful about playing those for a near-term take-out.
I would rather look at this as good fundamental support for the underlying strategic value of the assets.
> Interesting stuff. As always, make sure you do your own research before making any investment decisions.
we'll get back to your questions for Michael O'Brien on Canadian stocks in just a moment's time.
a reminder, of course, you can contact with us at any time.
Just email moneytalklive@td.
com.
Now let's get our educational segment of the day.
If you're looking for a specific type of exchange traded fund, WebBroker has tools which can help.
Joining us now with more is Bryan Rogers, Senior client education instructor at TD Asset Management.
Always great to see you, let's talk about specific ETFs and how you would search them out on the platform.
>> Yeah, Greg. Well, our platform has a really huge amount of information on diversifying investment such as mutual funds or exchange traded funds, ETFs. But it can be overwhelming, especially for the new investor even for some season investors to narrow down to a small list or to find a few that you're looking at in a specific category.
fortunately, there is a lot of screeners, a lot of different ways to filter through that. What I want to do is demonstrate, we are going to jump over to WebBroker and if you're going to do this yourself, what you want to do is click on research to get started and then you go to ETFs. So this is the ETF example. You can use this for mutual funds as well. You're gonna scroll down, I'm in a go on the left-hand side of the screen, go in a circle and trace of the things you can do. Up to the top, you can see that in showing you all categories available.
You can narrow it down right off the bat to US stock that's what you're looking for, international stock and so on. That's giving you some broad categories. There is a graph where it'll show you certain ones that you select down at the bottom here. Right now you can see them on a yearly basis.
In showing the performance of certain categories, you got one year performance. There are a lot of filters initially. You can change that as well. You go to three year and so on.
You can see there is European ETFs, Japanese or equity energy.
But any of these ones you can select and then you can drill down even further and see the ETFs available in each of these. I'm going to show you some of the features available.
If you scroll down a bit further, there are some screens available. We want to narrow down and see there is 46 TD exchange traded funds are ETFs available.
There is Canadian equity ETF so I can be those results.
Domestic fixed income, I know that something that's really popular these days with the advent of the interest rates rising so much, people are looking for fixed income products. You can have that filtered right away. And then as you kind of continue across, you can see that you can add a symbol up at the top to compare a few.
You can go buy a bunch of different categories. One of my favourites is down at the bottom right hand side.
This is the one I want to demonstrate because you have the ETF quick screening tool. So if I want to, for example, we get the question all the time in our question, how can I find some index options?
So one of the things you can do is under quick screen, click this, go to index ETFs, you can go by country as well if you want them to be in Canadian dollars instead of US for example. I can go to Canadian only.
That's a lot. That's 1229 ETFs. That's way too much work. But then you could start to narrow down.
You want to have the lowest management expense ratio, MER. That brings it down to 173.
Then he can go with things like trading volume or MorningStar rating. Sometimes you want to look for a higher trading volume with ETFs. Now down to 10.
If you want more, you just go to above average.
Go to MorningStar rating for example, and then I can go to four-star.
There you go Greg, I'm creating a list for you right now. We got 12 matches and there you have it.
I've got 12 index ETFs that are pretty popular that we can see from a volume perspective and just from an actual performance and review it from there.
>> That's how to parse down and find things on the platform. Thanks, Bryan.
>> Thanks, great.
>> Are things to Bryan Rogers, Senior client education instructor at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars. Now before you back to your questions about Canadian stocks for Michael O'Brien, a reminder of how you get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.
com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Michael O'Brien, we are taking your questions about Canadian stocks. Lots coming in, let's get to this one. Outlook for natural gas producers?
>> So natural gas, it's been very volatile.
Obviously six months ago, people were bracing for skyrocketing prices, particularly in Europe.
Lo and behold, we got a warm winter.
We wound up with a bit of a glut of natural gas inventory coming out of the winter.
So you've seen natural gas prices pretty depressed recently. A bit of a surprise. That obviously puts pressure on the producers.
One thing that's important to point out though is that particularly for some of the Western Canadian producers, it really depends on how savvy their marketing has been in terms of where they sell their gas.
So if you're sort of trapped at the hub, which is where the majority of gas would be priced in Western Canada, pretty difficult pricing right now.
On the other hand, there is some more sophisticated marketers that have contracts for example to sell into California which is a very isolated market, where prices have been very strong. So you can see a real divergence among the producers based on where they are selling their product.
Some of the more sophisticated ones, like I said, like Tourmaline, are getting surprisingly good realizations if you just looked at the anchor price. Looking forward to this summer, they are going to be some pretty choppy periods this summer because a lot of the natural gas infrastructure in Alberta and BC, typically what happens is the TransCanada pipeline and Enbridge to a lesser extent are continuing to expand capacity to accommodate LNG growth when it comes on in 2025-ish.
What that means is when they are actually conducting the maintenance in the summers, the market can really get thrown out of whack for a while.
You can see some pretty ugly pricing.
So I would say beware of some potential stickers shock in the summer. The longer-term outlook is quite positive.
By longer-term, I mean if you can bridge to land LNG Canada comes on in 2025-ish, that's going to dramatically change the supply demand fundamentals in Western Canada.
And so I think long-term, there are reasons for quite a bit of optimism around natural gas and short-term pressures on pricing and obviously attends to swing quite wildly with the weather.
>> It could be an interesting summer indeed. Let's get to another one. This is still energy-related.
Brief mention off the top about Suncor. What is your view on the name?
>> So Suncor is at an interesting juncture. If you think back for five years, Suncor was gold standard for the Canadian players.
In recent years, they have had some stumbles. Some of their minds are getting a bit older so not quite as efficient.
And also some issues around operational mishaps, safety incidents, some very unfortunate fatalities among the workforce.
So I guess what I'm saying is the shine kind of came off of Suncor. The premium multiple that investors won't subscribe to Suncor has kind of been priced out of the stock here. It's an interesting juncture now because, not surprisingly, given the difficulties in the operations, there has been a senior management change.
>> That's right.
> A new CEO, Rich Kruger, many of our viewers might remember him from being the CEO at Imperial oil for a time.
He has come out of retirement.
So it's a bof a turnaround project.
But I mean, as far as turnarounds go, your starting with some pretty good assets here so it's really about reworking the culture, getting a little more focused on operations, more focused on safety. I think if he can do those things successfully, there is a really good story here.
It'll just take a little time to prove it.
So I think he made his initial appearance on the latest quarterly earnings call.
Investors are going to be seeing a lot more of him in weeks to come.
I think we'll be doing a lot of marketing and giving his message directly to investors.
And I suspect that a lot of people will be open minded in looking at the opportunity as opposed to just the challenges that they've had.
>> Let's take another question now.
This one about real estate investment trust. What does your guest think of REITs?
This viewer is concerned about H&R being down a lot today, the distribution say?
I off the H&R part of that question and talk about the REIT space in general.
>> I think with REITs, it's fine, we are going to talk about REITs generally, but be careful to generalize.
>> You talking about malls and so many others.
> So much of how the various real estate classes are performing these days gets reflected in these individual operators and so, for example, a REIT with heavy exposure to office, which is a challenge space today,would be in a very different space than an REIT which is exposed to let's say a multi-residential apartment buildings.
So I tend to look at that group of company names like Canadian apartment REITs as quite defensive.
They went through a difficult period of time where because of rent controls,their revenue line essentially was capped but the input costs were rising in the inflationary environment, so that starting to reverse.
You got a positive story around immigration and foreign students returning and so wrench, obviously, the rental markets are quite tight in a number of the big cities.
So I like the fundamentals for the apartment REITs here. I think that's an attractive space and, historically, quite defensive. I would be cautious when he gets the more cyclically exposed lines of business.
like I said, offices is a front burner concern for investors right now. So any REIT that has significant office exposure is going to be under pressure.
and then you sort of go through the other lists like industrial, it had been a golden child but if the economy slows down, and there may be a few more challenges, but that's also preferred spot.
So generally speaking, don't generalize.
>> That's a good point. We are going to back your questions for Michael O'Brien on Canadian stocks in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and reminder that you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
US small business optimism pulled back in April, with fewer owners expecting better business conditions over the next six months.
Joining us now with more details and TD Economics take on the latest figures is Anthony Okolie.
The pullback in April fell to the lowest level since early 2013.
The index fell just over a point in April and that marks the 16th consecutive month that the index fell below the 49 year average of 98 points. Now when we break down the data, the biggest declines were in business reporting inventory too low. Also earnings trends were down five points. Also expectations for higher real sales were down four points a month over month.
Now another key area highlighted as an area of concern is that more owners are struggling now finding qualified workers support open positions.
job openings rose at 2 Points Respectively in April.
And thenplanning to raise worker compensation friended down, it was down 2 Points in April.
Now interestingly, the number of owners who raise or are planning to raise the average selling prices fell in April, which aligns with the latest US CPI data, which fell more than expected last month. Now of course, this morning, we also got the latest read on US wholesale inflation which came in at lower-than-expected in April.
That continued to fall. Finally, the share of firms saying borrowers needs are satisfied ticked up to 30%.
The share of businesses reporting paying higher interest rates studied at 26%. Again, that's the highest it's been in over 16 years.
Overall, small business owners were not particularly upbeat in April, with little change in optimism since mid-2022. Greg?
>> You look at the headlines, there is no shortage of things to worry about, whether you are an investor or small business owner.
Any insight about what's happening with the banking crisis or inflation?
>> Yeah. So the report says that they are cautioned… The report is cautiously positive. So far, the follow from the US banking crisis doesn't appear to have taken a major toll on overall confidence.
The key take away is a top business problem with inflation slipping to the number two spot for the first time since early last year.
In fact, 24% of early business owners identified this as a top problem.
And now easing inflation concerns and signs of slowing wages are also syncing with expectations for lower inflation ahead.
>> Interesting stuff. Thanks, Anthony. At my pleasure.
>> MoneyTalk Anthony Okolie.
Let's do a quick check in on the markets. We'll start here at home with the TSX Composite Index.
It's off the lows of the session, still down about half a percent but not triple digits anymore. 98 point to the downside.
CI Financial in the news today selling a stake in their US business. That stock up 27%.
Maple Leaf Foods out with its latest earnings, the reader from TD Cowen, they had a note to their investors, the street may have been bracing for a miss.
It was a modest beat and there has been some turmoil lately with Tyson Foods, their latest earnings were reverberating through the sector. There's an almost 11% pop today. The S&P 500, as investors tried to wade through earnings, disappointment from Disney, where's inflation had a, it's down a modest quarter of a percent.
The tech heavy NASDAQ was mostly positive at the start of the show and it still is.
It's up about seven points. And Alphabet, Google is we still know it, one of those names that was getting bit of a bit today, it was up about 5%. Of course, it had that big show off day.
They were showing investors what they had up their sleeves. Talked about integrating artificial intelligence across our products and that seemed to get some people excited there.
We are back with Michael O'Brien who is not a showoff.
He is about quality commentary from TD Asset Management.
Got another question.
Is it a good time to buy Nutrien? Now on this platform, we can't give you buy or sell recommendations but we can talk about Nutrien. They just came out their lives quarter and investors didn't like it too much.
>> Yeah, well, it's one of those interesting things where investors knew and expected that the quarter would be difficult.
They expected a miss, and the miss was a bit bigger then people had thought.
And so you are seeing a little bit of disappointment in the shares today.
My suspicion, and this is been a stock that has been under pressure for quite a while, sentiment is quite negative.
So this could be the washout event in the stock.
I think the thing to keep in mind with Nutrien is that this is a very, very solid company.
They generate lots of cash, their balance sheet is in great shape, they've got world-class assets, a nice balance across their businesses.
So when you think about where Nutrien is at right now, obviously all the key input, all the fertilizer costs went dramatically higher last year in the wake of the Russian invasion of Ukraine. Because obviously Russia and its ally Belarus are large suppliers of potash, for example, a lot of nitrogen concerns. Nitrogen prices off of natural gas and the concerns in Western Europe last year.
So you had abnormally high prices for some of their key fertilizer ingredients.
Farmers are an interesting bunch.
They can be pretty stubborn and so when they see these prices spike, they will put off buying as long as they can.
So even though crop prices are quite attractive, if you look at corn, soybean and wheat, historically, these are very attractive prices for the farmers, they are still being pretty tough and choosy in terms of the fertilizer applications and when and how much they're willing to pay for these, particularly potash. I think the good news is that farmer economic still look very solid, again, looking at the crop prices, and eventually farmers do you and will have to purchase these nutrients. It's just a matter of time.
So I think we are probably at a juncture here where this could be the darkest moment for Nutrien sentiment wise and valuation is certainly demanding. If you think about a midcycle or normalized earnings would be, they look pretty attractive here.
>> Okay, let's take another bank question. Let's take another question about the banks.
Canadian banks have done very well for a long time.
Do you see them continuing on their upward trajectory?
>> So obviously this has been a difficult year for banks.
the Canadian bank stocks haven't been spared from the turmoil we are seeing south of the border, particularly the US regional banks.
And so there are periods of time when the Canadian banks aren't necessarily going to represent leadership in the market. What people are worried about recession, people are worried about businesses going bankrupt or individuals losing their jobs, that some people tend to worry about what kind of loan losses will the banks take. And obviously, when you throw in the regional banking, the pressure in deposits and whatnot, very different system, situation here in Canada. But investors are still going to worry about that.
So what I'm saying is that it shouldn't be surprising that Canadian bank stocks have been under pressure your state.
Going back to I think the more important take away from this question is there is a reason why Canadian bank stocks have performed extremely well over time, and that is because it's a small group of very large, very well-run, very balanced companies. We've got 6 Major Banks in Canada.
I hesitate to use the word oligopoly but it is… An oligopoly that has consistently treated its shareholders very well. Look at the dividend track record for these companies over very long periods of time,a great way to build wealth sustainably for the long term. I don't think any of the conditions created this strong oligopoly of the shareholder focused businesses… I don't think any of those fundamental reasons have changed.
and if anything, the weakness in the regional banks is pointing to some of the strengths and advantages that the Canadian banking system has. So beyond whatever economic headwinds… >> Is this the biggest risk in the short or near year term?
>> The short and near-term risk, if we have a difficult period in the economy, a recession, a hard landing, maybe a little bit more turmoil in the US banking system,that will definitely be a short-term or near-term headwind for the banks.
these are still structurally attractive businesses that investors will continue to find attractive.
>> Michael, always a pleasure having you. I look forward to the next time.
>> Thank you very much.
>> Our thanks Michael O'Brien, portfolio manager at TD Asset Management. As always, make sure you do your own research before making any investment decisions.
we are going to back tomorrow with an update on the markets and some highlights from our best interviews of the week. And then on Monday, Vitali Mossounov, global technology analyst with TD Asset Management will be our guest. We will be talking about technology. It's been a very interesting space so far this year.
A reminder of course they can get a head start with your questions for Vitali. Just email moneytalklive@td.com. That's all the time have the show today. Thanks for watching. We will see you tomorrow.
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