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[music] >> Hello, I'm Anthony Okolie, in for Greg Bonnell, and welcome to MoneyTalk Live, which is brought to you by TD Direct Investing.
Every day, we're joined by guests from across TD, many of whom you'll only see here.
We'll take you through what's moving the markets and answer your questions about investing.
coming up on today show, we will be joined by Damian Fernandes from TD Asset Management to discuss what sectors he's keeping an eye on and why free cash flow is the key to his investment style.
And in today's WebBroker education segment, Hiren Amin will take you through how you can keep track of international markets using WebBroker.
And 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.
And before get our guest of the day, let's get you an update on the markets.
We will start here in Canada with Toronto shares opening higher led by energy in tech stocks.
Energy names are getting in some bids today is oil and gas prices touched a three-month high early Monday. The S&P TSX composite index is up modestly, just about 43 points, to the tune of .2%. It's currently sitting at 20,590.
Looking at some of the big movers today, shares of Cineplex are moving higher. Of course, it was a big weekend the box office as Warner Bros.
Barbie movie and universals Oppenheimer brought in what could be the fourth biggest box office weekend of all time.
The stock is up modestly, called the .9%.
Turning south of the border to the S&P 500, stocks are moving higher after closing out last week in positive territory.
it is up to the tune of 21 points or half a percent.
investors are bracing themselves this week for are the results from many companies and the Fed rate decision.
the NASDAQ open relatively flat.
It's of a modest nine points, nearly .
1%. Investors, course, are waiting for some big cap tech earnings this week, including Meta Platforms, Microsoft andAlphabet. Shares of Haliburton Company are moving up.
Halliburton stock is currently up 3.8%.
Some other big movers, shares of Alphabet are making some moves in early market trading. The tech giant, of course, is said to report second-quarter earnings on Tuesday.
The stock is currently up 1.5%.
And that's your market update.
There are plenty of different ways to analyse a potential investment, and our featured guest today says that one of the items he is most focused on is free cash flow.
Joining us to discuss is Damian Fernandes, port folio manager with TD Asset Management.
Thanks for joining us today.
>> Always a pleasure, Anthony.
>> Explained to us why free cash flow is a key part of your investing strategy.
>> Let's take a step back to consider what we are talking about here. Free cash flow, what that really means is unencumbered cash flow.
when you think about any private us, a private business, a convenience store, a restaurant or Apple, Google, Microsoft in the stock market, what is the value of that business? The value of that business isn't what's happening in AI or whether there in a platform or what the regulations are saying or how fast revenues are going for the value of the business is how much cash that business is generating. That's what key free cash flow is.
that's what's left over after you'vepaid everything else.
That's free cash flow. Historically, companies, whether private businesses, public businesses, the value of those businesses is how much cash flow is being generated today and how much is going to be generated in the future. For us, we'll have this dogmatic religiosity around cash flow generation.
that is what has led to our success over time.
>> Particularly in these times where rates are at historic highs, you have high inflation.
Free cash flow is certainly an important metric to focus on.
>>free cash flow is after you pay your interest payment. As companies are refinancing, they are finding that their interest payments have increased.
But if you focus on free cash flow and companies that are growing in, that provides insulation.
>> Given that backdrop, there are a few it seems you're interested in.
Let's go through a few of them. Let's start with luxury.
>> For us, it's two things. We will start off, we want to find companies that are growing free cash flows but the precursor to thatis you want to be in industries that have these secular growth attributes.
It's one thing to be a great business but if you are in a declining industry, you're almost beholden to the forces of that industry and is gonna be really difficult to generate that free cash flow growth. So for us, let's find industries that are growing.
One industry that's glowing is luxury spend, globally.
The high-end consumer, unlike the low and consumer, isn't feeling the pinch of inflation because they have more disposable income.
Secondly, to be a luxury company, whether it's LVMH or Ferrari or Hermes,these are huge brands that have been developed over 100 years. You and I couldn't replicate that.
We can start a luxury company tomorrow, we wouldn't have that esteem.
These luxury companies have, they almost have, when you think about the terms, there's so much demand for them that they can keep raising prices and the more that they raise prices, the more the demand increases because almost have this cachet, where consumers want to differentiate.
lowering consumers are facing pressure but global you have a rising middle class. The rising middle class wants to differentiate and demonstrate some of that newfound wealth. Luxury is one of the easiest, most iconic ways that's front and centre.
People see phones, watches, how you differentiated that. So we really like luxury companies. We think it's a secular growth theme that continues.
As you mentioned luxury. You're also focusing on some green themes, whether it's a lecture vacation, clean energy or the need for stronger energy grids.
>> When you think about just more recently, what's been in the news? It's been the inflation reduction act that the US pass, which really is a clean energy bill. We heard about Europe which is trying to follow and subsidize clean energy. Globally, we know that the energy transition is full force. So first, this is a very easy way where a lot of dollars are being spent and invested in capital investment to try to move collectively the profile from industry, manufacturing, energy uses two more clean energy sources.
For us, we are trying to do is think about how can we participate in this? And you can try and pick the EV or you can try and pick the solar panels, but for us, and easy way to think about clean energy is thinking about if you need a lecture vacation, you need more wiring. If you need more wiring, the most efficient transmission for electricity is copper.
Think about copper companies. They have a long tail end of demand ahead of them.
For lecture vacation, you probably need to improve your grid infrastructure. If all was plugged in our EVs into the grid today, we'd probably blow up the grid.
There is enough capacity. So retrofitting the grid and improving capacity, so companies tied to that. For us, it's always thinking about what are the secular themes in which companies can identifythat will participate in the growth.
>> I want to move on to healthcare.
Let's talk about that sector.
>> Sadly, the world getting older.
Everyone is getting older.
There is no avoiding it.
As you have increased wealth and globally, their demographic challenges, less children and people living longer, healthcare is… It's counterintuitive but as people grow older and want to prolong and ensure that they have the same lifestyle, they spend more on healthcare.
Everything from drug discovery to actually like pharmaceuticals to companies that help support a healthy lifestyle, that whole healthcare team has a secular growth aspect to it.
For us, that's one of these areas where we think that spending on healthcare going to keep increasing as people want to have the same lifestyle they didn't want to improve their health outcomes and we want to find companies that participate in that.
>> Just before the show, we were talking about and I just recently came back from Italy.
Talk to us about travel because demand seems pretty stronger people to travel, particularly internationally.
>> That continues. Even pre-pandemic, what you found was experiential consumption.
People were moving towards, and I call it the, colloquially, the Instagram generation. Everyone goes to these beautiful places and take pictures and post these pictures on social media. Even pre-pandemic, you had this movement towardsexperiential consumption.
Vacations, new areas, travel. The pandemic hits, what happened?
We are all quarantined at home.
Good's demand really increases, people are retrofitting their homes because they want a better environment.
And then as we move out of the pandemic, the last two years, it's almost like this revenge spending taking hold of people want to say, prices be damned, I want to see what I've missed out on. Whether it's in your case going to Italy or… People are moving towards travel.
So for us, travel theme is actually really important and it's like how do we think about whether it's a hotel in more companies that enable like booking for travel purchases, all of these themes will see lots of free cash flow growth in them.
>> What are some business models creating a free cash flow performance that you're looking for?
>> We talked about this idea about identifying companies and industries that grow cash flow.
I think people sometimes forget that regular businesses, what we are really looking for his leadership. I'll give you an example, in terms of free cash flow generation that might seem counterintuitive. Let's pick two companies.
Apple, which I'm pretty sure many of you have iPhones, and Costco membership.
>> I got a membership at Costco.
>>. The ideal… And you might think, what does my iPhone have in common with Kirkland Brands? Costco's a generic brand.
And both those business models are very profitable and generate a lot of free cash flow.
but interestingly, they have this element… You get annuities every year, you get a payment back from an insurance company if you have an annuity, but you are an annuity for Costco and Apple.
Every year, you renew your membership. You keep using your iPhone or you keep buying a Costco membership. There is a high renewal rate. Every three years, you replace your iPhone or Costco charges you a 10% premium. Think about this. It's almost like a rising annuity and all of that is… Costco and Apple, yes, they provide a wonderful customer utility but despite being a member, the membership model and they keep generating this cash flow year after year like an annuity that grows every three years as they raise fees, as you replace your phone at a 10% premium, these are models that we really like.
They might not have the same sexiness as travel and luxury and healthcare, but they are very conventional business models that are generating prodigious amounts of cash flow and that's how we think, right? The next time you're at Costco, Anthony, and you're using your iPhone, remember, both those companies,… >> I'm an annuity for those companies.
>> Exactly.
>> Great start to the discussion. We will get back to your questions about global stocks for Damian Fernandes in just a moment.
And a reminder that you can 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.
Now here's an update on the top stories in the business world today and a look at how the markets are trading.
Elon Musk has officially replaced Twitter's blue bird logo with an X. Musk made the shock announcement of his plans early Sunday.
The renaming comes as Twitter faces a steep loss and ad revenue since musk bought the company for $44 billion last year.
Twitter also faces stiff competition from Threads, Meta's new app, which launched earlier this month.
Apple is reportedly asking it suppliers to produce about 85 million units of the iPhone 15 this year, that's roughly in line with last year.
The request comes despite an expected decline in the overall smartphone market.
Bloomberg news also reports that Apple is also planning to raise the prices on its pro models.
Apple shares have risen more than 50% this year, making it the world's first $3 trillion company.
Finally, TC Energy is planning to sell 40% interest in Columbia Gas Transmission Systems to Global Infrastructure Partners for $5.
2 billion.
The Calgary-based energy company is selling the assets in a bid to reduce its debt and fund other projects.
TC Energy's joint venture partnership deal is expected to close in the fourth quarter.
And here's how the main benchmark index in Canada is trading.
Currently, the TSX is up to the tune of 51.4.2 percent.
Turning to the US, the broad-based S&P 500, it's up about 22 points or half a percent.
All right, we are back with Damian Fernandes, taking your questions about global stocks. We'll start with the first two were question on, what else, AI, artificial intelligence.
Damian, how are you viewing AI from an investing perspective?
>> I think it is early days. It is early days in AI. That means that right now, it's hard to decipher which business models can succeed.
what we do know is that some companies are primed to benefit from AI growth. Think about Nvidia.
Nvidia's GPU chips are at the leading edge ofAI data processing. You need those chips. There is tremendous demand for them and Nvidia is the only game in town. For companies like those, underestimation of free cash flow growth, and video likely now, if AIcontinues growing in his current growth rate, Nvidia will participate and still grow free cash flow despite the stock being a, free cash flow is still probably headed higher. The estimates for future years free cash flow, unless they have a formidable competitor which we just don't see right now.
But taking a step back, everyone things about AI, Nvidia, which chip company or whether it's AMD or broad calm and switches, for us, I want to think about imagining more. What I mean by this is blessing of a business models that can actually benefit from implementing AI.
Think about United Health, which we know as a health insurance company for private health insurance in the US. United Health understand your prescriptions, knows your medical history, knows how many times you visit the doctors. Imagine we have computational ability that if you've missed your prescription, it sends you an automated thing saying, hey, you have a prescription waiting for you, please go pick it up.
Or can anticipate problems you might have in your medical history by taking all this data and putting it together and saying that you are at risk of this. That would lower healthcare costs. United Health isn't your poster child, you don't think about it as AI, but that's a business model where AI would be quite effective.
Similarly, payment companies.
Visa and MasterCard.
Anticipating fraud or even the banks, thinking about how transactions that are very different from your normal cadence of purchases that may be warning signs for fraudulent activity. That would lower credit costs, improve net income and free cash flow. For us, when we think about AI, Anthony, we are very early stages but which companies and industries will be able to, of course, you have the picks and shovels, the Nvidia's that make the chips, but which companies will benefit from introducing AI as their regular business process to lower costs and increase revenues?
And I thinkwe are in the really early stages and that's where the excitement should be. Away from the tech sector but which companies can use the technology to improve business processing and improve free cash flow.
>> AI seems specific to the tech sector but actually affect others.
The next question is about markets.
Can you please comment on why the US markets have pummelled the TSX?
>> Yeah. Both markets are up but the US market is up significantly more.
The US market is because from the previous comment, AI is on fire and the US market has a much higher proportion of companies in the communication services, so think Meta, think Alphabet, Netflix and technology.
So those two sectors combined contribute almost 40% of the US market.
In Canada, we don't have that degree of AI excitement. The of Shopify, we have few tech companies, but our biggest sectors are financials, energy companies, material companies.
So when you think about what happened year to date, these cyclical sectors like energy, financial, materials, have leg because global growth continues to disappoint.
Whereas the secular growth sectors, technology, communications and services, have seen an explosion in profits and revenue on the back of this AI growth. So it's not that the US markets pummelled, it has, when you look at the numbers on your screen, you're like, wow, the US market is massively a performing, but the reason for it is back to our original comment, free cash flow in the US is growing much faster because of the composition, the pieces of this puzzle that are put together, it has less financials, less energy, more technology, more calm services, more Tesla, one of the best performing stocks you today, those don't exist in Canada.
>> great perspective.
Let's move to another sector, consumer Staples. What is your guest think of US consumer Staples going forward? Thanks, Jeff.
>> Consumer staples, I'm not that interested in them going forward. It's not that consumer staples are not a place to be for a slowdown, it's because they generated a lot of cash flow and revenue these past couple of years but it's been by raising prices. Consumers have had no choice. But now you are actually seeing cracks. we talked about the lower income consumer looking to shop around, you see these numbers of the dollar stores and and Walmart.
the problem is that consumers are becoming much more careful on pricing decisions and consumer staples companies will have less ability to raise and that for us is the risk. And a lot of the revenue growth these past few years have been the flat volumes and a lot of pricing power, being able to raise prices, that the thingthat if inflation is slowing, if economic growth is weaker, your ability to use price to increase revenues is curtailed and we just don't see that much excitement and volumes.consumer Staples, when you think about that original thing about free cash flow growth, I just don't see growth as much.
>> Great discussion so far. As always, make sure you do your own research before making any investment decisions.
we'll get back to your questions for Damian Fernandes on global stocks in just a moment.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com.
Now, let's get to today's educational segment.
If you're looking to keep tabs on market moves outside of Canada, WebBroker has tools which can help.
Joining us now to discuss is Hiren Amin, Senior client education instructor with TD Direct Investing.
Welcome, Hiren.
how can investors keep track of changesin the international markets on WebBroker?
>> Thank you for having me back on. It's a timely discussion were happening. We are talking about global stocks here today and for many investors that are keeping out of the markets, whatever happens domestically or here North America tends to have downstream effects are sometimes even upstream effects across markets globally.
So that's one reason why investors want to keep tabs on those markets in Europe, Southeast Asia, that might have effect over here to us.
But not only that, a lot of investors are perhaps investing outside of North America and investing in those markets themselves.
To be able to actually keep track of those, we will do on WebBroker's first click on the research tab and in the markets column, second from the top, we have the indices and this will show us the major indexes that you want to trackacross the globe, essentially. So we scrolled in here, you can see there different sections or categories and it's broken down based on the markets you want to look at.
Perhaps you want to check out your, there is Amsterdam, Brussels, the CAC year, the DAX and… You can also look at the Pacific market section as well.
Along with that, maybe you want to do some analysis and see the benchmark against performance. You have a chart tool over here that allows you to do that as well.
For example, let's say I want to measure the BK and a European one, I will check off the one in France and the one from Britain. You can see in this quick chart tool that we have a tool that allows us to benchmark across quick time frames that we want to choose from.
But additionally, what they want to do some detailed analysis.
Clicking on this index, when you open up the menu, it will allow us to go into the detailed chart view which allows you to do those comparisons across different time frames but also add in some different technical components to it there. And let's see if this loads up for us but we will give this a shot.
There goes. So this is the detailed view you can come into.
humans have gone ahead and added some comparisons. You compare against stocks, sector indices or industries as well.
>> Great background. So how can investors get access to stocks that trade on International indices on WebBroker?
>> Yeah, I really love this question because this is one that perhaps a lot of our clients were viewers may not be aware of. But here at TD Direct Investing, you do have direct access to a lot of these foreign markets.
In other words, you can phone up TD Direct Investing and say you've identified a company in Australia or in the UK that you really want to invest in.
You can phone up, talk to our international trade desk and they can buy those stocks for you almost markets across the varied accounts that you have with us.
Just so you know, we cover the major markets in Europe, Southeast Asia as well as Australia there for you.
Now, perhaps you do want to take the direct route but still want to have some exposure to global stocks. How can you do that? We will do that in the form of ETFs and mutual funds. Clicking on our research tab, we will return to that investments column, click on where it says ETFs. Now you can do a broad category search and find them right here. You can see in the top left corner, we have some of the top and bottom performing categories. Latin American stocks, for example, geographic exposure, we can look at those and click on those and thus Twitter shows most of those Latin American based companies that invest in those stocks.
Additionally to that, if we come back to the overview page, we can do a broad search using the category filter.
If we scroll down to the right-hand section over here, right under the quick screen tool, I open up this category section and over here, you can go through and peruse through different geographies.
I did identify one in the United States.
Say I want to look at Japanese companies.
Click on that, you can see the matches and this is going to give me exposure to all of the major Japanese based companies as well. That's how you have it.
That's the way to gain exposure to those international stocks.
>> Great information as always. Thank you.
>> My pleasure.
>> Our thanks to Hiren Amin, 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 I get back to your questions about global stocks for Damian Fernandes, a reminder on how you 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 Damian Fernandes, taking your questions about global stocks. This just in from our viewers on banks.
There was a real concern about banks earlier this year. Is that still a concern or how we moved on?
>> Oh, it's an ongoing concern but the initial volatility from banks and the worse outcomes has been snapped.
What happened? So back in early March, if you remember, Silicon Valley Bank, one of the biggest banks in the US, basically went under over the weekend.
The FDIC repossessed the bank. Along with Signature Bank and a few weeks later, First Republic was sold to J.P. Morgan and then of course, we had across the pond in Europe, we had Credit Suisse, same thing.
So you had all of this banking stress but this time around, it's almost like the regulators understood, because of the financial cracks, they didn't want this to metastasize into something much bigger, so they are very quick in providing targeted responses to ensure, to give depositors confidence.
The big thing was you were seeing depositor flight. All these depositors were leaving the banks because they were unsure about the viability of these banks.
So in the US, the Federal Reserve started guaranteeing even the unsecured deposits, really transformational measures that haven't been done before to try and increase confidence. It's all confidence game.
If depositors feel confident that they can get their money back, they are not going to rush to the bank teller window and pull it out or in our age, digitally just move it to another bank.
So that actually stand the initial panic and the other things that happened was that the Federal Reserve started opening up swap lines with global banks to ensure people have access to dollar funding.
They allowed banks to, the allowed these term facilities where banks could deposit assets and get money back.
Long story short, the initial depositors running from the banks, you helped increase their confidence and you provided banks with liquidity for day-to-day needs.
And both of these things help stem the crisis. Is it still there? Yes. There still questions about the asset. And we think about banks, we talk about this idea of quality companies. In banks in general, I love that question from your viewer, you want to be in the highest quality banks, right?
Look at a company like, I just know this off the top of my head, like J.P. Morgan today is making to your highs. It's a lot off its all-time highs, but it's rallying and J.P. Morgan in this whole crisis actually didn't have to fight for deposits. They just came to them.
The smaller banks which are facing deposit outflows, those deposits had to go somewhere.
They ended up at the J.P. Morgan.
>> They are much safer.
>> Than smaller banks, yes. There's and we follow, increased regulation, increased capital control. But the initial panic has been stamped. So the initial, this isn't a financial crisis. This is a hiccup.
this is a much smaller issue and it's actually concentrated in a small corner of fast-growing midmarket banks in the US.
So I don't think there is the same degree of contagion.
>> Great question from our viewer. Another question on Meta. What is your outlook for Meta?
>> Meadow was the first… All these tech companies and social media company started seeing pressure last year in advertising and Meta was the first of the gates to actually really address costs.
They, when you think about the pandemic, all of us were quarantined at home, social media usage went through the roof.
Both for information because you're at home. But as people come out of their pandemic caves and we were talking about experience the whole consumption, travelling, you're not under social media as much.
Engagement starts falling, advertisers start producing spend.
Meta went through significant pain last year but was one of the first companies to address, they write size to the cost structure. They reduced expenses significant. I'll put some numbers. Meta is going to report. The estimates are for Meta to grow revenue about 7% of the earnings to grow 30. How is that possible?
Revenue seven, earnings 30?
it's because they actually cut a significant amount of expenses.
You've heard this in the news, the job cuts.
Meta has this where it's now buying back shares, it's got a hold of expenses. We don't even talk about the Meta verse anymore.
Advertising, because growth has fallen off a cliff. The other thing to those they almost have dysfunctionality with Meta.
In your opening comments, you're talking about how Twitter was facing pressure and they are changing things. For Meta, with the Threads platform, if it even takes off, that's free optimality.
If the US government decides to restrict access or put rules on TikTok, that's free optimality for Meta. So you have these other optimality while the core business is doing quite well because the leadership team there has really focused on expenses and that's why profitability has improved.
>> We will move to the next question. This is on research reports. What do you think of research reports? Do you use them?
>> We use anything we can to try to get an edge but we actually one of the biggest research teams for our team in the company.
That isn't hyperbole.
We have over 18 analysts.
They each cover a sector and industry group.
They actually look at their own and build their own reports. They think about the companies, they meet management teams, they think about the industry, they build their own in-house reports. I actually love the research reports that we use for our decision-making. The research reports vary widely as most investors who are listening to this call, use them because there is a degree of a lot of research reports have a positive bias built into them, right, where it's there's always this positive thing. So just understand that the research reports have a bias in them to try to promote selling the company, where as you probably want to look for more independent research reports, what they do your own research, or whether you look at independent sources that aren't beholden to capital markets activity. The research reports are in general useful but most importantly, do your own research. We have a full team to do that.
>> We'll get back to your questions for Damian Fernandes on global stocks in just a moment. As always, as Damian said, make sure you your own research before making any investment decisions. And a reminder that you 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.
[music] >> Let's get you an update on the markets.
We are having a look right now at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing. We are looking at the heat map function here which gives you a view of the market movers on the TSX 60 by price and value. We are taking a look at the map, as you can see, there's a big red… Left-hand screen, a big red square which is TransCanada pipeline. It is down to the tune of just over 2%.
Seeing some selling there. Also seeing some positive, some green on the screen for energy names like Cenovus.
Cenovus is getting some bids as well.
CN Q is getting some bids. Suncor Energy at the bottom.
Bottom left corner.
getting some bids as well. Taking a look at some financials, we are seeing that for oil and some other names, Bank of Nova Scotia as well. Let's take a look at the S&P 100.
we are seeing some big moves for Tesla, in the middle section of the screen.
a lot of green for GM as well. Some of the big carmakers.
if we look at the left-hand side under technology and the chipmakers like Nvidia, Apple course is seeing some strong bids.
Google.
Of course, we have a big week of tech earnings this week.
And you can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Damian Fernandes from TD Asset Management. Next question on US China relations.
US China relations are strained. How is that impacting companies with exposure in China?
>> Yeah, I think strained is an understatement, right?
Since the Trump election and even following the Joe Biden administration, there has been this almost latent animosity that continues and continues.
So how does that affect companies?
Look, we are very focused on companies that sell into China because you might have retaliatory actions from China because the US has put restrictions on chipmaking in these things, so China might obviously have reactions to affect US companies.
So the animosity, the aggravation in this relationship actually has a real-world impacts on stocks.
I don't want to sound too negative about this because on the other side, there is opportunity. When you think about the US China relationship, what has it lead to?
It lead to companies deciding to move away, whether it's their manufacturing capacity or chipmaking building, you are actually having redundant capacity bill globally as US domiciled companies or Canadian companies look to move their supply chains away from being totally reliant on China.
Given this conflict.
And for us it's like, okay, if you remove your supply chain away from China, who benefits?
I guess the companies that would benefit would be chipmakers, because people have access to chip so it should manufacture, a company like ASML does benefit from antagonism in that relationship because it is leading to parts being built elsewhere.
so for us, it's always like, yes, this is an issue. One of the risks to cash flow?
Where are our estimates for cash flow?
Where is the risk for those?
Conversely, because of this antagonistic relationship, it doesn't look like there's going to be a detente anytime soon, where is the opportunity? Which companies are going to benefit from I don't want to call it a conflict but increasing rivalry , which companies are somewhat insulated and are going to see a cash flow and revenue?
That's how we are thinking about the relationshipand what the investor should be thinking about.
It's not like tomorrow or the next administration. It's gonna be Kumbaya good times again.
Is going to be a challenging thing, challenging relationship for multiple years.
>> Next question.
Can you talk in general termsabout earnings?
>> This might be the low point in earnings for a year on year basis. What I mean by that is earnings might still be negative for the year, negative might be at this quarter versus last quarter. Earning so far, we are at a bottoming process. It doesn't like they're going to get more negative after this quarter.that's a picture.
in terms of actual earnings, they are coming in a bit better-than-expected.
we talked in the conversation about companies like J.P. Morgan.
You are seeing bids in earnings in sectors that people have kind of forgot about.
they don't have the same appeal as AI.
They're just regular, conventional companies like Johnson & Johnson, they are actually having small earnings beats and the stocks are rallying quite nicely. So it's almost like where if you missed earnings it's bad, but if you beat earnings expectations, there's some reward for doing it and more importantly to, there is a line of sight for investors in general who are seeing the end word nearly the end of the earnings decline.
If you are somewhat optimistic and we don't have a significant recession going forward, we can see earnings accelerate and improve from here.
>> Great insights as always, Damian. Thank you.
>> My pleasure.
>> Our thanks to Damian Fernandes, portfolio manager from at TD Asset Management. Always do your own research before making investment decisions. On Tuesday, Hussein Allidina, head of commodities that TD Asset Management will be our guest answering your question about commodities.
And a reminder that you get a head start.
Just email moneytalklive@td.com. That's all for our show today. Take care. We will see you tomorrow.
[music]
Every day, we're joined by guests from across TD, many of whom you'll only see here.
We'll take you through what's moving the markets and answer your questions about investing.
coming up on today show, we will be joined by Damian Fernandes from TD Asset Management to discuss what sectors he's keeping an eye on and why free cash flow is the key to his investment style.
And in today's WebBroker education segment, Hiren Amin will take you through how you can keep track of international markets using WebBroker.
And 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.
And before get our guest of the day, let's get you an update on the markets.
We will start here in Canada with Toronto shares opening higher led by energy in tech stocks.
Energy names are getting in some bids today is oil and gas prices touched a three-month high early Monday. The S&P TSX composite index is up modestly, just about 43 points, to the tune of .2%. It's currently sitting at 20,590.
Looking at some of the big movers today, shares of Cineplex are moving higher. Of course, it was a big weekend the box office as Warner Bros.
Barbie movie and universals Oppenheimer brought in what could be the fourth biggest box office weekend of all time.
The stock is up modestly, called the .9%.
Turning south of the border to the S&P 500, stocks are moving higher after closing out last week in positive territory.
it is up to the tune of 21 points or half a percent.
investors are bracing themselves this week for are the results from many companies and the Fed rate decision.
the NASDAQ open relatively flat.
It's of a modest nine points, nearly .
1%. Investors, course, are waiting for some big cap tech earnings this week, including Meta Platforms, Microsoft andAlphabet. Shares of Haliburton Company are moving up.
Halliburton stock is currently up 3.8%.
Some other big movers, shares of Alphabet are making some moves in early market trading. The tech giant, of course, is said to report second-quarter earnings on Tuesday.
The stock is currently up 1.5%.
And that's your market update.
There are plenty of different ways to analyse a potential investment, and our featured guest today says that one of the items he is most focused on is free cash flow.
Joining us to discuss is Damian Fernandes, port folio manager with TD Asset Management.
Thanks for joining us today.
>> Always a pleasure, Anthony.
>> Explained to us why free cash flow is a key part of your investing strategy.
>> Let's take a step back to consider what we are talking about here. Free cash flow, what that really means is unencumbered cash flow.
when you think about any private us, a private business, a convenience store, a restaurant or Apple, Google, Microsoft in the stock market, what is the value of that business? The value of that business isn't what's happening in AI or whether there in a platform or what the regulations are saying or how fast revenues are going for the value of the business is how much cash that business is generating. That's what key free cash flow is.
that's what's left over after you'vepaid everything else.
That's free cash flow. Historically, companies, whether private businesses, public businesses, the value of those businesses is how much cash flow is being generated today and how much is going to be generated in the future. For us, we'll have this dogmatic religiosity around cash flow generation.
that is what has led to our success over time.
>> Particularly in these times where rates are at historic highs, you have high inflation.
Free cash flow is certainly an important metric to focus on.
>>free cash flow is after you pay your interest payment. As companies are refinancing, they are finding that their interest payments have increased.
But if you focus on free cash flow and companies that are growing in, that provides insulation.
>> Given that backdrop, there are a few it seems you're interested in.
Let's go through a few of them. Let's start with luxury.
>> For us, it's two things. We will start off, we want to find companies that are growing free cash flows but the precursor to thatis you want to be in industries that have these secular growth attributes.
It's one thing to be a great business but if you are in a declining industry, you're almost beholden to the forces of that industry and is gonna be really difficult to generate that free cash flow growth. So for us, let's find industries that are growing.
One industry that's glowing is luxury spend, globally.
The high-end consumer, unlike the low and consumer, isn't feeling the pinch of inflation because they have more disposable income.
Secondly, to be a luxury company, whether it's LVMH or Ferrari or Hermes,these are huge brands that have been developed over 100 years. You and I couldn't replicate that.
We can start a luxury company tomorrow, we wouldn't have that esteem.
These luxury companies have, they almost have, when you think about the terms, there's so much demand for them that they can keep raising prices and the more that they raise prices, the more the demand increases because almost have this cachet, where consumers want to differentiate.
lowering consumers are facing pressure but global you have a rising middle class. The rising middle class wants to differentiate and demonstrate some of that newfound wealth. Luxury is one of the easiest, most iconic ways that's front and centre.
People see phones, watches, how you differentiated that. So we really like luxury companies. We think it's a secular growth theme that continues.
As you mentioned luxury. You're also focusing on some green themes, whether it's a lecture vacation, clean energy or the need for stronger energy grids.
>> When you think about just more recently, what's been in the news? It's been the inflation reduction act that the US pass, which really is a clean energy bill. We heard about Europe which is trying to follow and subsidize clean energy. Globally, we know that the energy transition is full force. So first, this is a very easy way where a lot of dollars are being spent and invested in capital investment to try to move collectively the profile from industry, manufacturing, energy uses two more clean energy sources.
For us, we are trying to do is think about how can we participate in this? And you can try and pick the EV or you can try and pick the solar panels, but for us, and easy way to think about clean energy is thinking about if you need a lecture vacation, you need more wiring. If you need more wiring, the most efficient transmission for electricity is copper.
Think about copper companies. They have a long tail end of demand ahead of them.
For lecture vacation, you probably need to improve your grid infrastructure. If all was plugged in our EVs into the grid today, we'd probably blow up the grid.
There is enough capacity. So retrofitting the grid and improving capacity, so companies tied to that. For us, it's always thinking about what are the secular themes in which companies can identifythat will participate in the growth.
>> I want to move on to healthcare.
Let's talk about that sector.
>> Sadly, the world getting older.
Everyone is getting older.
There is no avoiding it.
As you have increased wealth and globally, their demographic challenges, less children and people living longer, healthcare is… It's counterintuitive but as people grow older and want to prolong and ensure that they have the same lifestyle, they spend more on healthcare.
Everything from drug discovery to actually like pharmaceuticals to companies that help support a healthy lifestyle, that whole healthcare team has a secular growth aspect to it.
For us, that's one of these areas where we think that spending on healthcare going to keep increasing as people want to have the same lifestyle they didn't want to improve their health outcomes and we want to find companies that participate in that.
>> Just before the show, we were talking about and I just recently came back from Italy.
Talk to us about travel because demand seems pretty stronger people to travel, particularly internationally.
>> That continues. Even pre-pandemic, what you found was experiential consumption.
People were moving towards, and I call it the, colloquially, the Instagram generation. Everyone goes to these beautiful places and take pictures and post these pictures on social media. Even pre-pandemic, you had this movement towardsexperiential consumption.
Vacations, new areas, travel. The pandemic hits, what happened?
We are all quarantined at home.
Good's demand really increases, people are retrofitting their homes because they want a better environment.
And then as we move out of the pandemic, the last two years, it's almost like this revenge spending taking hold of people want to say, prices be damned, I want to see what I've missed out on. Whether it's in your case going to Italy or… People are moving towards travel.
So for us, travel theme is actually really important and it's like how do we think about whether it's a hotel in more companies that enable like booking for travel purchases, all of these themes will see lots of free cash flow growth in them.
>> What are some business models creating a free cash flow performance that you're looking for?
>> We talked about this idea about identifying companies and industries that grow cash flow.
I think people sometimes forget that regular businesses, what we are really looking for his leadership. I'll give you an example, in terms of free cash flow generation that might seem counterintuitive. Let's pick two companies.
Apple, which I'm pretty sure many of you have iPhones, and Costco membership.
>> I got a membership at Costco.
>>. The ideal… And you might think, what does my iPhone have in common with Kirkland Brands? Costco's a generic brand.
And both those business models are very profitable and generate a lot of free cash flow.
but interestingly, they have this element… You get annuities every year, you get a payment back from an insurance company if you have an annuity, but you are an annuity for Costco and Apple.
Every year, you renew your membership. You keep using your iPhone or you keep buying a Costco membership. There is a high renewal rate. Every three years, you replace your iPhone or Costco charges you a 10% premium. Think about this. It's almost like a rising annuity and all of that is… Costco and Apple, yes, they provide a wonderful customer utility but despite being a member, the membership model and they keep generating this cash flow year after year like an annuity that grows every three years as they raise fees, as you replace your phone at a 10% premium, these are models that we really like.
They might not have the same sexiness as travel and luxury and healthcare, but they are very conventional business models that are generating prodigious amounts of cash flow and that's how we think, right? The next time you're at Costco, Anthony, and you're using your iPhone, remember, both those companies,… >> I'm an annuity for those companies.
>> Exactly.
>> Great start to the discussion. We will get back to your questions about global stocks for Damian Fernandes in just a moment.
And a reminder that you can 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.
Now here's an update on the top stories in the business world today and a look at how the markets are trading.
Elon Musk has officially replaced Twitter's blue bird logo with an X. Musk made the shock announcement of his plans early Sunday.
The renaming comes as Twitter faces a steep loss and ad revenue since musk bought the company for $44 billion last year.
Twitter also faces stiff competition from Threads, Meta's new app, which launched earlier this month.
Apple is reportedly asking it suppliers to produce about 85 million units of the iPhone 15 this year, that's roughly in line with last year.
The request comes despite an expected decline in the overall smartphone market.
Bloomberg news also reports that Apple is also planning to raise the prices on its pro models.
Apple shares have risen more than 50% this year, making it the world's first $3 trillion company.
Finally, TC Energy is planning to sell 40% interest in Columbia Gas Transmission Systems to Global Infrastructure Partners for $5.
2 billion.
The Calgary-based energy company is selling the assets in a bid to reduce its debt and fund other projects.
TC Energy's joint venture partnership deal is expected to close in the fourth quarter.
And here's how the main benchmark index in Canada is trading.
Currently, the TSX is up to the tune of 51.4.2 percent.
Turning to the US, the broad-based S&P 500, it's up about 22 points or half a percent.
All right, we are back with Damian Fernandes, taking your questions about global stocks. We'll start with the first two were question on, what else, AI, artificial intelligence.
Damian, how are you viewing AI from an investing perspective?
>> I think it is early days. It is early days in AI. That means that right now, it's hard to decipher which business models can succeed.
what we do know is that some companies are primed to benefit from AI growth. Think about Nvidia.
Nvidia's GPU chips are at the leading edge ofAI data processing. You need those chips. There is tremendous demand for them and Nvidia is the only game in town. For companies like those, underestimation of free cash flow growth, and video likely now, if AIcontinues growing in his current growth rate, Nvidia will participate and still grow free cash flow despite the stock being a, free cash flow is still probably headed higher. The estimates for future years free cash flow, unless they have a formidable competitor which we just don't see right now.
But taking a step back, everyone things about AI, Nvidia, which chip company or whether it's AMD or broad calm and switches, for us, I want to think about imagining more. What I mean by this is blessing of a business models that can actually benefit from implementing AI.
Think about United Health, which we know as a health insurance company for private health insurance in the US. United Health understand your prescriptions, knows your medical history, knows how many times you visit the doctors. Imagine we have computational ability that if you've missed your prescription, it sends you an automated thing saying, hey, you have a prescription waiting for you, please go pick it up.
Or can anticipate problems you might have in your medical history by taking all this data and putting it together and saying that you are at risk of this. That would lower healthcare costs. United Health isn't your poster child, you don't think about it as AI, but that's a business model where AI would be quite effective.
Similarly, payment companies.
Visa and MasterCard.
Anticipating fraud or even the banks, thinking about how transactions that are very different from your normal cadence of purchases that may be warning signs for fraudulent activity. That would lower credit costs, improve net income and free cash flow. For us, when we think about AI, Anthony, we are very early stages but which companies and industries will be able to, of course, you have the picks and shovels, the Nvidia's that make the chips, but which companies will benefit from introducing AI as their regular business process to lower costs and increase revenues?
And I thinkwe are in the really early stages and that's where the excitement should be. Away from the tech sector but which companies can use the technology to improve business processing and improve free cash flow.
>> AI seems specific to the tech sector but actually affect others.
The next question is about markets.
Can you please comment on why the US markets have pummelled the TSX?
>> Yeah. Both markets are up but the US market is up significantly more.
The US market is because from the previous comment, AI is on fire and the US market has a much higher proportion of companies in the communication services, so think Meta, think Alphabet, Netflix and technology.
So those two sectors combined contribute almost 40% of the US market.
In Canada, we don't have that degree of AI excitement. The of Shopify, we have few tech companies, but our biggest sectors are financials, energy companies, material companies.
So when you think about what happened year to date, these cyclical sectors like energy, financial, materials, have leg because global growth continues to disappoint.
Whereas the secular growth sectors, technology, communications and services, have seen an explosion in profits and revenue on the back of this AI growth. So it's not that the US markets pummelled, it has, when you look at the numbers on your screen, you're like, wow, the US market is massively a performing, but the reason for it is back to our original comment, free cash flow in the US is growing much faster because of the composition, the pieces of this puzzle that are put together, it has less financials, less energy, more technology, more calm services, more Tesla, one of the best performing stocks you today, those don't exist in Canada.
>> great perspective.
Let's move to another sector, consumer Staples. What is your guest think of US consumer Staples going forward? Thanks, Jeff.
>> Consumer staples, I'm not that interested in them going forward. It's not that consumer staples are not a place to be for a slowdown, it's because they generated a lot of cash flow and revenue these past couple of years but it's been by raising prices. Consumers have had no choice. But now you are actually seeing cracks. we talked about the lower income consumer looking to shop around, you see these numbers of the dollar stores and and Walmart.
the problem is that consumers are becoming much more careful on pricing decisions and consumer staples companies will have less ability to raise and that for us is the risk. And a lot of the revenue growth these past few years have been the flat volumes and a lot of pricing power, being able to raise prices, that the thingthat if inflation is slowing, if economic growth is weaker, your ability to use price to increase revenues is curtailed and we just don't see that much excitement and volumes.consumer Staples, when you think about that original thing about free cash flow growth, I just don't see growth as much.
>> Great discussion so far. As always, make sure you do your own research before making any investment decisions.
we'll get back to your questions for Damian Fernandes on global stocks in just a moment.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com.
Now, let's get to today's educational segment.
If you're looking to keep tabs on market moves outside of Canada, WebBroker has tools which can help.
Joining us now to discuss is Hiren Amin, Senior client education instructor with TD Direct Investing.
Welcome, Hiren.
how can investors keep track of changesin the international markets on WebBroker?
>> Thank you for having me back on. It's a timely discussion were happening. We are talking about global stocks here today and for many investors that are keeping out of the markets, whatever happens domestically or here North America tends to have downstream effects are sometimes even upstream effects across markets globally.
So that's one reason why investors want to keep tabs on those markets in Europe, Southeast Asia, that might have effect over here to us.
But not only that, a lot of investors are perhaps investing outside of North America and investing in those markets themselves.
To be able to actually keep track of those, we will do on WebBroker's first click on the research tab and in the markets column, second from the top, we have the indices and this will show us the major indexes that you want to trackacross the globe, essentially. So we scrolled in here, you can see there different sections or categories and it's broken down based on the markets you want to look at.
Perhaps you want to check out your, there is Amsterdam, Brussels, the CAC year, the DAX and… You can also look at the Pacific market section as well.
Along with that, maybe you want to do some analysis and see the benchmark against performance. You have a chart tool over here that allows you to do that as well.
For example, let's say I want to measure the BK and a European one, I will check off the one in France and the one from Britain. You can see in this quick chart tool that we have a tool that allows us to benchmark across quick time frames that we want to choose from.
But additionally, what they want to do some detailed analysis.
Clicking on this index, when you open up the menu, it will allow us to go into the detailed chart view which allows you to do those comparisons across different time frames but also add in some different technical components to it there. And let's see if this loads up for us but we will give this a shot.
There goes. So this is the detailed view you can come into.
humans have gone ahead and added some comparisons. You compare against stocks, sector indices or industries as well.
>> Great background. So how can investors get access to stocks that trade on International indices on WebBroker?
>> Yeah, I really love this question because this is one that perhaps a lot of our clients were viewers may not be aware of. But here at TD Direct Investing, you do have direct access to a lot of these foreign markets.
In other words, you can phone up TD Direct Investing and say you've identified a company in Australia or in the UK that you really want to invest in.
You can phone up, talk to our international trade desk and they can buy those stocks for you almost markets across the varied accounts that you have with us.
Just so you know, we cover the major markets in Europe, Southeast Asia as well as Australia there for you.
Now, perhaps you do want to take the direct route but still want to have some exposure to global stocks. How can you do that? We will do that in the form of ETFs and mutual funds. Clicking on our research tab, we will return to that investments column, click on where it says ETFs. Now you can do a broad category search and find them right here. You can see in the top left corner, we have some of the top and bottom performing categories. Latin American stocks, for example, geographic exposure, we can look at those and click on those and thus Twitter shows most of those Latin American based companies that invest in those stocks.
Additionally to that, if we come back to the overview page, we can do a broad search using the category filter.
If we scroll down to the right-hand section over here, right under the quick screen tool, I open up this category section and over here, you can go through and peruse through different geographies.
I did identify one in the United States.
Say I want to look at Japanese companies.
Click on that, you can see the matches and this is going to give me exposure to all of the major Japanese based companies as well. That's how you have it.
That's the way to gain exposure to those international stocks.
>> Great information as always. Thank you.
>> My pleasure.
>> Our thanks to Hiren Amin, 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 I get back to your questions about global stocks for Damian Fernandes, a reminder on how you 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 Damian Fernandes, taking your questions about global stocks. This just in from our viewers on banks.
There was a real concern about banks earlier this year. Is that still a concern or how we moved on?
>> Oh, it's an ongoing concern but the initial volatility from banks and the worse outcomes has been snapped.
What happened? So back in early March, if you remember, Silicon Valley Bank, one of the biggest banks in the US, basically went under over the weekend.
The FDIC repossessed the bank. Along with Signature Bank and a few weeks later, First Republic was sold to J.P. Morgan and then of course, we had across the pond in Europe, we had Credit Suisse, same thing.
So you had all of this banking stress but this time around, it's almost like the regulators understood, because of the financial cracks, they didn't want this to metastasize into something much bigger, so they are very quick in providing targeted responses to ensure, to give depositors confidence.
The big thing was you were seeing depositor flight. All these depositors were leaving the banks because they were unsure about the viability of these banks.
So in the US, the Federal Reserve started guaranteeing even the unsecured deposits, really transformational measures that haven't been done before to try and increase confidence. It's all confidence game.
If depositors feel confident that they can get their money back, they are not going to rush to the bank teller window and pull it out or in our age, digitally just move it to another bank.
So that actually stand the initial panic and the other things that happened was that the Federal Reserve started opening up swap lines with global banks to ensure people have access to dollar funding.
They allowed banks to, the allowed these term facilities where banks could deposit assets and get money back.
Long story short, the initial depositors running from the banks, you helped increase their confidence and you provided banks with liquidity for day-to-day needs.
And both of these things help stem the crisis. Is it still there? Yes. There still questions about the asset. And we think about banks, we talk about this idea of quality companies. In banks in general, I love that question from your viewer, you want to be in the highest quality banks, right?
Look at a company like, I just know this off the top of my head, like J.P. Morgan today is making to your highs. It's a lot off its all-time highs, but it's rallying and J.P. Morgan in this whole crisis actually didn't have to fight for deposits. They just came to them.
The smaller banks which are facing deposit outflows, those deposits had to go somewhere.
They ended up at the J.P. Morgan.
>> They are much safer.
>> Than smaller banks, yes. There's and we follow, increased regulation, increased capital control. But the initial panic has been stamped. So the initial, this isn't a financial crisis. This is a hiccup.
this is a much smaller issue and it's actually concentrated in a small corner of fast-growing midmarket banks in the US.
So I don't think there is the same degree of contagion.
>> Great question from our viewer. Another question on Meta. What is your outlook for Meta?
>> Meadow was the first… All these tech companies and social media company started seeing pressure last year in advertising and Meta was the first of the gates to actually really address costs.
They, when you think about the pandemic, all of us were quarantined at home, social media usage went through the roof.
Both for information because you're at home. But as people come out of their pandemic caves and we were talking about experience the whole consumption, travelling, you're not under social media as much.
Engagement starts falling, advertisers start producing spend.
Meta went through significant pain last year but was one of the first companies to address, they write size to the cost structure. They reduced expenses significant. I'll put some numbers. Meta is going to report. The estimates are for Meta to grow revenue about 7% of the earnings to grow 30. How is that possible?
Revenue seven, earnings 30?
it's because they actually cut a significant amount of expenses.
You've heard this in the news, the job cuts.
Meta has this where it's now buying back shares, it's got a hold of expenses. We don't even talk about the Meta verse anymore.
Advertising, because growth has fallen off a cliff. The other thing to those they almost have dysfunctionality with Meta.
In your opening comments, you're talking about how Twitter was facing pressure and they are changing things. For Meta, with the Threads platform, if it even takes off, that's free optimality.
If the US government decides to restrict access or put rules on TikTok, that's free optimality for Meta. So you have these other optimality while the core business is doing quite well because the leadership team there has really focused on expenses and that's why profitability has improved.
>> We will move to the next question. This is on research reports. What do you think of research reports? Do you use them?
>> We use anything we can to try to get an edge but we actually one of the biggest research teams for our team in the company.
That isn't hyperbole.
We have over 18 analysts.
They each cover a sector and industry group.
They actually look at their own and build their own reports. They think about the companies, they meet management teams, they think about the industry, they build their own in-house reports. I actually love the research reports that we use for our decision-making. The research reports vary widely as most investors who are listening to this call, use them because there is a degree of a lot of research reports have a positive bias built into them, right, where it's there's always this positive thing. So just understand that the research reports have a bias in them to try to promote selling the company, where as you probably want to look for more independent research reports, what they do your own research, or whether you look at independent sources that aren't beholden to capital markets activity. The research reports are in general useful but most importantly, do your own research. We have a full team to do that.
>> We'll get back to your questions for Damian Fernandes on global stocks in just a moment. As always, as Damian said, make sure you your own research before making any investment decisions. And a reminder that you 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.
[music] >> Let's get you an update on the markets.
We are having a look right now at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing. We are looking at the heat map function here which gives you a view of the market movers on the TSX 60 by price and value. We are taking a look at the map, as you can see, there's a big red… Left-hand screen, a big red square which is TransCanada pipeline. It is down to the tune of just over 2%.
Seeing some selling there. Also seeing some positive, some green on the screen for energy names like Cenovus.
Cenovus is getting some bids as well.
CN Q is getting some bids. Suncor Energy at the bottom.
Bottom left corner.
getting some bids as well. Taking a look at some financials, we are seeing that for oil and some other names, Bank of Nova Scotia as well. Let's take a look at the S&P 100.
we are seeing some big moves for Tesla, in the middle section of the screen.
a lot of green for GM as well. Some of the big carmakers.
if we look at the left-hand side under technology and the chipmakers like Nvidia, Apple course is seeing some strong bids.
Google.
Of course, we have a big week of tech earnings this week.
And you can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Damian Fernandes from TD Asset Management. Next question on US China relations.
US China relations are strained. How is that impacting companies with exposure in China?
>> Yeah, I think strained is an understatement, right?
Since the Trump election and even following the Joe Biden administration, there has been this almost latent animosity that continues and continues.
So how does that affect companies?
Look, we are very focused on companies that sell into China because you might have retaliatory actions from China because the US has put restrictions on chipmaking in these things, so China might obviously have reactions to affect US companies.
So the animosity, the aggravation in this relationship actually has a real-world impacts on stocks.
I don't want to sound too negative about this because on the other side, there is opportunity. When you think about the US China relationship, what has it lead to?
It lead to companies deciding to move away, whether it's their manufacturing capacity or chipmaking building, you are actually having redundant capacity bill globally as US domiciled companies or Canadian companies look to move their supply chains away from being totally reliant on China.
Given this conflict.
And for us it's like, okay, if you remove your supply chain away from China, who benefits?
I guess the companies that would benefit would be chipmakers, because people have access to chip so it should manufacture, a company like ASML does benefit from antagonism in that relationship because it is leading to parts being built elsewhere.
so for us, it's always like, yes, this is an issue. One of the risks to cash flow?
Where are our estimates for cash flow?
Where is the risk for those?
Conversely, because of this antagonistic relationship, it doesn't look like there's going to be a detente anytime soon, where is the opportunity? Which companies are going to benefit from I don't want to call it a conflict but increasing rivalry , which companies are somewhat insulated and are going to see a cash flow and revenue?
That's how we are thinking about the relationshipand what the investor should be thinking about.
It's not like tomorrow or the next administration. It's gonna be Kumbaya good times again.
Is going to be a challenging thing, challenging relationship for multiple years.
>> Next question.
Can you talk in general termsabout earnings?
>> This might be the low point in earnings for a year on year basis. What I mean by that is earnings might still be negative for the year, negative might be at this quarter versus last quarter. Earning so far, we are at a bottoming process. It doesn't like they're going to get more negative after this quarter.that's a picture.
in terms of actual earnings, they are coming in a bit better-than-expected.
we talked in the conversation about companies like J.P. Morgan.
You are seeing bids in earnings in sectors that people have kind of forgot about.
they don't have the same appeal as AI.
They're just regular, conventional companies like Johnson & Johnson, they are actually having small earnings beats and the stocks are rallying quite nicely. So it's almost like where if you missed earnings it's bad, but if you beat earnings expectations, there's some reward for doing it and more importantly to, there is a line of sight for investors in general who are seeing the end word nearly the end of the earnings decline.
If you are somewhat optimistic and we don't have a significant recession going forward, we can see earnings accelerate and improve from here.
>> Great insights as always, Damian. Thank you.
>> My pleasure.
>> Our thanks to Damian Fernandes, portfolio manager from at TD Asset Management. Always do your own research before making investment decisions. On Tuesday, Hussein Allidina, head of commodities that TD Asset Management will be our guest answering your question about commodities.
And a reminder that you get a head start.
Just email moneytalklive@td.com. That's all for our show today. Take care. We will see you tomorrow.
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