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[music] >> Hello, I'm Anthony Okolie in for Greg Bonnell. Welcome to MoneyTalk Live, which is 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 will discuss why some material stocks may hold up better than others amid weakness in Chinawith TD Asset Management's Evan Chen.
And in today's WebBroker education segment, Hiren Amin will take us through some of the technical analysis tools available in 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.
Before we get our guest today, let's get you an update on the markets. We will start here in Canada where our main stock index openedwith pretty modest gains, driven by strength and material and energy names.
Of course, the TSX is coming off a down day on Wednesday when it closed at its lowest level since June. Currently, the S&P TSX index is up nearly hundred and 50 points or about three quarters of a percentage point.
Turning to some of the big movers in the markets, Nexgen Energy, shares of Nexgen Energy are moving higher today.
But it's been a bumpy week for uranium stocks after uranium prices recently hit 12 year highs. Today, shares of Nexgen Energy are up just over 4%.
Okay, we will turn into south of the border and take a look at the broader read of US stocks, the S&P 500. Also opened relatively flat as rising bond yields are raising worries about a potential recession, keeping investors on edge.
Of course, Wall Street is also keeping an eye on congresses negotiations on US spending bill continues before the October 1 deadline. Currently, the S&P 500 is trading up just about 35 points or .8%.
Taking a look at the tech heavy NASDAQ composite index, it also opened up relatively flat. However, now the NASDAQ is up 113 point sorry nearly .9%.
Taking a look at some of the big movers in the US, shares of CarMax are moving lower today. The used car dealer reported that second-quarter earnings fell from a year ago on weakening demand for used cars.
The company also said about 15% fewer vehicles from consumers and dealers compared to one year ago.
CarMax's stock is currently down just over 9%.
Some other big movers today, Micron Technology's.
Shares of Micron are moving lower in early trade.
The chipmaker, of course, posted a weaker than expected earnings forecast before the opening bell.
Shares of Micron are currently trading down about 1.8%.
And that's your market update.
Economic weakness in China has been a headwind for the material space, but our guest today says that some companies in the sector that you may not think of are better poised to face the challenge than others.
Joining us now to discuss his Evan Chen, associate for portfolio research at TD Asset Management. Heaven, welcome to MoneyTalk Live, your first show.
>> Thank you.
Copper is up today. A good day to come on.
>> Perfect day to come on. For our viewers who may not be aware, what makes of the material space? Let's start there. That's what is a materials company?
It's a lot of different things. This building that we are in has steel beams, that's iron ore, it's cold, this chair we are sitting on has plastics, so that's commodity chemical companies, a cabinet in your home has woods of this paper in forestry. These material companies are very cyclical and commodity driven.
A lot of them don't have full control over their destiny because they don't have full pricing power.
If we look at the MSCI, 50% is commodity driven, 21% in commodity chemicals.
You don't have any pricing power. What I want to talk about today is the other companies in the indexthat may not be commodity driven and might not be as cyclical. So far in the air, materials hasn't done too well enough because of some weakness in China and rising rates.
>> Let's talk about China because we know that China is a major consumer of commodities. How has occurred economic weakness impacted the space?
>> Yeah, so a really good rule of thumb is China consumed about 50% of the world's metals. You can imagine that's a big impact on everything that goes on. The major ones would be copper, iron ore, aluminum. For instance, for copper, if the property market in China is not doing well, there's less need for copper wiring and copper pipes and in goods like refrigerators and AC units.
Those all require copper and there's less economic activity, there is less need for, the price goes down and that hurts the sector as a whole.
>> You also said that not all the material space is as exposed to cyclical trends.
Can expand on that?
> There are some really great companiesin the sector that many people don't think about when you say materials. The biggest one would be Linde.
>> It's a pretty important company.
>> Yes.
>> in the supermarket, you have industrial gases to make your food fresher. And fridges.
Winemaking even.
I could go on and on.
>> Okay. Another stock that you highlight isSika.
What can you tell us about this name?
>> Yeah, Sika is a construction chemical company and it's one of the largest, 50% of the market.
What they do is they sell chemicals for construction sites.
This could be a lot of things. Admixtures, it affects concrete and different properties, it can make it stronger, make it look better. They sell adhesives, so sticking a window together or sticking plastics together. Also, they sell waterproofing so if you have a roof and you want to make it waterproof, they sell that.
Where I think it is less cyclical is because their products are better than the competition. What does this mean?
If you are on a construction site and maybeit takes you for people to hours to do something, so let's say applying adhesives to a roofing solution.
You might need two applications of whatever chemical you have and you need to hold her for two hours. With the Sika product, you could use to people and to be done in one hour and this is just because they spend more in R&D. Because they are so big, they can spread that R&D over a wide base and start cross selling products and to other businesses. Instead of being linked commodity products like oil, seek is more leverage to infrastructure.
infrastructure, global construction and all of that that goes around that we are seeing.
>> Okay, so you talked about some of the benefits of some of these companies. What about the risks to some of these companies?
Why don't you start with Sika.
>> For Sika, it's construction volumes and lower infrastructure spending.
What we are seeing in the US is that housing has been strong. That's close, that's a risk.
In the EU, we are seeing some risk there to construction. Housing is down 23% in various regions. China is also slowing, we talked about the property market in the beginning. So all of those are risk to Sika but I think longer-term, the business is very sound and will continue to grow.
>> Talk about Linde. What are some of the risks you see there?
>> I want to show some strengths first.
Linde, and industrial gases company, what they do is they Place facilities onto their customer sites.
These are necessary for their customers operations.
they are underpinned by long-term contracts.
These contracts have minimum spending agreements plus a built-in cost escalator.
You have a really good visibility on the long-term earnings of Linde and the biggest risk to them would be that these customers go out of business, but it's going to be the last bill that you pay, really, in someone's bill payments because it's needed to run your facility.
>> Great start to the discussion and we will get to your questions about material stocks for Evan Chen in just a moment.
And a reminder that you can get in touch with us 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 to the top stories in the business world today and a look at how the markets are trading.
Former competitors lululemon and Peloton Interactive are now teaming up together.
The fitness companies announced a five-year deal that will see lululemon become the primary athletic clothing partner for Peloton.
The new fitness clothing will be sold on Peloton's website and retail stores starting October 11.
In return, lululemon will stop selling its mirror fitness device by the end of the year and soon end producing its own Peloton -like fitness classes. Oil prices surged to their highest level in over a year, after crude stocks at a key US storage hub fell to their lowest level since July 2022.
Surging global demand coupled with output cuts by Saudi Arabia and Russia have sent crude prices to levels not seen since last August.
the increase is hitting consumers at the pump, challenging central banks who are fighting to tame persistent inflation.
Finally, memory chipmaker Micron Technology forecasted a wider than expected first-quarter loss, despite an expected boost from a supply deal with AI market leader Nvidia. The memory chipmaker also reported that revenue fell 40% during the quarter, in part due to the impact of its security review by China's cyberspace the ministration.
US companies have faced greater scrutiny by Chinese officials amid increasing tensions with the Biden administration.
And here's how the benchmark index in Canada is trading.
Let's take a look at the S&P TSX composite index, it's up hundred 41 point, .7%. In the US, they are seeing some green on the screen. The S&P 500 is up 31 points or three quarters of a percent.
All right, we are back with TD Asset Management Evan Chen, taking your questions about material stocks. We'll start with the first question on EV production.
What is your medium and long-term outlook for lithium given their importance for EV production?
>> If you look at lithium more recently, it has been quite weak and that's because going into this usually seasonally strong.
Of EV's, sales haven't been there, especially in China. Medium-term, I think we are in and under supply of lithium but I want to say that lithium isn't a scarce resource.
The scarce resource is in the processing side of lithium. It is found in rock or Bryan which is a kind of salt in the hard part is converting that resource into a battery great material for EV batteries.
Right now, the battery technology that we have, lithium batteries are the best batteries in terms of both storage capacity and how far the EV can go.
So medium-term, we are undersupplied but I think it's not going to be a straight run out. Why I say that is because we are going to have fluctuations in EV demand like we are seeing now, but at the same time supply will come on in big chunks.
When that happens, the market will become, the supply demand dynamic will change pretty rapidly when the supply comes on.
I would say medium-term is 3 to 5 years.
Longer-term, I think that some of the stocks will be a little bit challenge because right now, they trade at a premium. Supply and demand are not balanced. We have way too much demand for supply butin that five year plus rain, a lot of products are coming on. When these projects come on and supply does meet demand, the price of lithium should trade down to the marginal price of production which means that there is a premium built-in that currently exists and it won't exist anymore.
>> Let's go to the next question. This is on China. China's impact on mining.
What Canadian miners are being hit by the weak Chinese economy?
>> Yeah, I put Canadian miners into two categories, one is gold, and I don't think gold would be hit that hard by any Chinese economic weakness, but the other type is copper, so copper is very, very reliant on China.
50% of the world's metals are consumed by China and that includes copper. The biggest region that uses copper.
With economic weakness in China continues it would be pretty bad for copper, send the price down which, as I said before, the miners are all dependent on the price of copper so it would be a negative for all of them.
>> Is China really the main factor or do you see any other factors impacting the price?
>> Strong US and stronger EU, if that happened, if China went down, it would balance out, but I think on the margin, the really big driver of copper is China economic activity.
>> Next question.
A viewer says aluminum, uses and outlook?
So the uses for aluminum and your outlook on the aluminum.
>> 75% of aluminum uses are in four major categories: transportation, electrical grids,more grids and then cans, so the things you see in the supermarket.
> Pop end.
>> Yes.
The outlook is pretty good for aluminum going forward and this is because of the green tailwind. The first two, transportation and electrical grids, transportation is EVs. EVs use more aluminum than a traditional car and that's because they need to be lighter.
Aluminum is a light metal and strong and as EV production grows, the demand should increase.
If you have a windfarm at the coast and you need to get to the city, you need a grid to transport that energy and you can use copper and you can use aluminum so it's good for both of those.
Longer-term,we have some ESG renewable tailwinds for aluminum.
But I would caution viewers that in the medium term, demand is a big part of it so just general industrial demand as we were talking about totable four, same thing.
General investor demand, property, it can weigh in aluminum. So even though the long-term picture looks okay, short and medium term, you are still beholden to what happens around the world.
>> Is China also a big consumer of aluminum?
>> Yes, also a big consumer of aluminum and they are actually also a big producer of aluminum which is different from coffer. China doesn't produce much copper but aluminum is really heavily produced in China.
This is because what aluminum is is it's basically some kind of sand and use up a lot of power to it and what China has is cheap power. So they are a big producer of aluminum.
>> Would you say that they are the biggest globally or are there other countries that also produce a lot of aluminum?
>> Wherever there is cheap power, really, you can find aluminum. What you are seeing now is some traditional aluminum smelters that have existed are no longer economical because the cost of powering thosein Europe is just too high. So all of the supplies coming out and going to China.
>> Okay.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Evan Chen on material 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 education segment.
Technical analysis is one tool that investors may consider using, and WebBroker can help.
Hiren Amin, Senior client education structure at TD Direct Investing has more.
>> Hello and welcome to today's education segment. Today, we are going to continue our series on technical analysis indicatorsand one of the questions traders tend to ask a lot is how do we track volatility when it comes to investing using charts. So one of the indicators we are going to observed today is known as Bollinger Bands.
We will show you how to set it up and kind of how traders use it and interpret volatility with it but as well use it for trading purposes to determine entry and exit signals. So we are going to looking at SPY which is the broad market index that tracks the S&P 500 market.
We are going to set up the Bollinger Bands. To do that we will access the charts over here.
Within the chart space, to get the Bollinger Bands, it is a study or indicator within the price chart itself.
So that is going to be found within the upper indicator section. So we clicked the upper indicators and then is the very first one there, Bollinger Bands.
Now Bollinger Bands actually lends its name from its namesake. John Bollinger created this study back in the 1980s and it is widely used even today to track various market assets such as stocks, Forex, trading's and futures trading as well. It helps us really determine not only volatility but it also tells us about overbought and oversold signals. It helps us identify trends in a market, but it also tells us about potential entry and exit trading points or breakouts from those bands. We are going to look at how you can interpret them. Here's the Bollinger Bands edit. What you will notice in terms of how this study is actually created or calculated, it is composed of three bands, as the name implies. You have the upper band which is at the top, the middle band and the lower band.
Now this middle band is a simple moving average and is actually based off of the the moving average and by default it usually is going to be a 20 day moving average. Now you can actually come in here and click on the Bollinger Bands ready to get some more information on what it is but we are going to adjust it down to 20 days. The default comes out for 25 on WebBroker.
We are going to set up to 20 days over here and update that. Now you will notice that I am looking at the one year and one day chart which means is going to capture 20 days worth of average prices there as the middle band.
It is based off of a statistical measure as well so the upper band in the lower band are populated using two standard deviations above the moving average and below the moving average.
For those of us who didn't take statistics, two standard deviations means that 95% of the time, the prices should be moving or travelling within these bands there. So two ways traders can use this for trading purposes, one is a strategy known as when the prices are either going to break out of those bands, so if you see a price breakout above the upper band, this usually indicates an overbought condition, they may be due for a pullback.
Traders would consider liquidating or coming out of or shorting the stock potentially.
And conversely if the prices touch the lower band, that indicates an oversold condition, so prices have fallen too rapidly and they may be due for a bounce, so traders may consider long positions are exiting out of sorts at this point.
One of the studies or probability theory states that prices are going to be mean reverting, so they tend to go back to their average price.
A lot of traders will look for that and you can see that a lot of them, the prices circulate or move in and out of that moving average.
And finally, we will talk about Bollinger squeezes.
This is another thing the traders is.
You will notice that with these bands, there. The contraction where they narrow in and they expand out and this represents one volatility is contracting and when it's expanding. And whenever there is a volatility expansion, you see the band get wider, we are going to see potentially a breakout in the prices. Now we don't know directionally whether it is up or down but we will see a big breakout in the prices and traders will be ready for that entry was in it. One thing you should never forget when your trading is remember the overall trend.
Always trade with the trend. That's the technical analysis 101, trend is your friend. That will avoid any kind of false signal goals when you are using the Bollinger Bands.
There you have it.
This was a quick rundown on how to use Bollinger Bands.
For more learning or technical analysis content, check out our learning Centre andtechnical analysis videos there.
>> Our thanks to Hiren Amin, Senior client education instructor at TD Direct Investing.
Before you get back to your questions about material stocks for Evan Chen, a reminder of how you can 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.
>> we are back with Evan Chen, taking your questions about material stocks.
Evan, just before the break, we are talking about the ST component. Can you expand a little bit of that?
>>let's talk about Linde first. There's a big clean energy component to Linde. They have a big project pipeline and this is, the products they have been contracted to me, a billion of that is actually in green energy.
So what I mean by green energy, it's in hydrogen, so high-grade hydrogen facilities they have been contracted to make and this could be a potential energy source in the future, and 8 billion is nothing to sneeze at.
For Sika, Sika, there is a lot of different green components to it and the biggest one I would say is in energy efficiency. So for instance, in France, he cannot raise a price of rent in your apartment unless it reaches a certain energy efficiency standard. Sika products are the solution to that.
You put the sealant around the window, make sure the draft can go in and out, it's more energy-efficient.
As well the materials compared to the competitors, that large R&D project, they made them less carbon intensive. A lot of them are made of oil derivatives and carbon heavy and in their research and development, they have made there is less carbon intensive. If you have a job site where it's for the government and they want certain carbon intensity, you would you Sika products for that.
>> Great perspective on the ESG there. We will go to the questions now from our viewers.
Next question is on gold streamers. What is your outlook for gold streamers?
>> Gold streamers are really great and a lower risk way to get exposure to the gold price than minors. Just a reminder, it's an alternative financing method for mine.
A mind exists and a certain percentage of all the millets produce from that goes to the gold streamer.
With a gold streamer has is… More diversification across minds and as well the biggest part is that you don't have exposure to rising costs.
In the past couple of years, we know inflation has been hitting everybody but especially for the gold industry and mining industry in general, inflation has been a big hit to them. So the gold streamers, because you get just a little bit of gold off the top, you're now exposed to that cost inflation like you would be with a gold miner.
>> Okay, so we know that they are not exposed to some of those costs. What are some of the risks of some of these culturist?
>> In order to grow, they need to keep doing deals.
If they miscalculate on the deal, so if they overpay, that would impair Richard's going forward.
Because there is more competition in the space now, we don't know how good of a deal they can get.
>> Okay. Let's go to the next question.
This is on First Quantum. With your take on First Quantum.
>> Yeah, First Quantum, top three by market Miner in Canada, copper miner, and what they are really good at is the building minds and Hydro stations.
They can do stuff that no one else can.
So they have an in-house team that's really great at building minds. They don't need to hire external contractors and they've shown it pretty well.
So they have mines in Zambia, Panama and all these different places.
Big project pipeline.
You will get growth with the stock and a good team to do it.
> Okay, so that's kind of the bullish take.
What would be the bearish take her some of the risks to the stock?
>> Yeah, so not only is the geography part of it, just the government and locations.
So they are hard jurisdictions. We have seen Panama starting last year, September to March, there was an argument with the government and it got resolved.
>> There is clear political risk.
>> Yeah, political risk, and I would say the second risk is may have more debt than a lot of the other mining companies.
A lot of the other mining companies have no net debt but First Quantum has a little bit more than usual which constricts their abilities to do things in a higher rate environment like we are in today.
>> Great breakdown of information there.
Let's go to the next question.
This is on Teck Resources which had been in the news for a while. Can we get an update on the takeover battle for Teck Resources?
>> Yeah, I think the basic point for Teck Resources is there net coal division and what investors want to do.
There are two sides here.
The first side is Nicole, what we want to do with it?
Let's just sell it to someone, let sell it to Glencore, let's sell it to the JSW, spin it off and take the cash.
So that's one. The second school of thought is let's been it often takes some cash but keep a publicly listed company that has exposure to net coal.
It really depends on do you want exposure to net coal or do you want the cash?
>> Okay. Do we have another question?
Okay. we are going to get back to your questions for Evan Chen on material stocks in just a moment. 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.
>> Okay, we are having a look at TD's Advanced Dashboard, this is a platform designed for active traders available through TD Direct Investing, and we are looking at the heat map function here which gives you a view of the market moverson the TSX 60 by price and volume and we will take a look at the space here on the energy sector on the right hand side.
We are seeing some green on the screen for names like CNQ, Canadian Natural Resources.
That's one of the more actively traded stocks in the market right now, the TSX.
Cenovus Energy as well as up slightly as well. Taking a look at some of the financial, we are seeing strength in the financials.
TD is that more than 1%, Royal Bank, BMO, Bank of Nova Scotia. Looking at some technology stocks, we are seeing some strength and Shopify. Shopify is up more than 3%.
Let's take a look at the S&P 100, some of the names that are moving right now, that's and technology.
Some green on the screen there, chipmaker AMD is up, taking a lot of space there, up 6%.
Seeing some strength in other chip names, Nvidia is also up, some tech names, Apple, Microsoft which were trading down in earlier trade are now up, seeing some positive moments in there as well, Google is up as well.
Looking at some of the consumer cyclical names, Tesla, of course, is taking a little bit of real estate in the middle there.
It's up more than 2%.
Amazon is also up modestly.
Taking a look at some of the healthcare stocks, a bit of a mixed picture there.
You can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Evan Chen from TD Asset Management. The next viewer question, this is on CCL Industries.
What's your view on CCL Industries?
This is carnival cruise?
>> CCL Industries, a Canadian company, is a packaging company and they do a lot of different things.
labels for companies.
It you go to companies, the shampoo bottle as a fancy label, CCL probably made that.
It's not just that.
They also sell blank bills for central banks, all the money that you have, they still materials for that to the government and they also have Avery Dennison, so back-to-school season, buying binders, nametags, they have that in-house.
As well, they have CCL secure, checkpoint technologies which is when you go to the store, on the sides and the exit you have those big powers there, antitheft, so they sell antitheft technology for retail stores.
What you get in this package is sort of the GDP plus grower, you are geared towards the general economy and as the economy does better, people buy more labels, they go shopping more for school supplies, thereby more closed-end you sort of get a nice GDP plus return from all of that.
>> Okay, so talk to us about some of the risks that you see in this company going forward.
> Yeah, the risk is just if we are going into lower economic activity, people buy less things, the pilots closed-end maybe there is less bargaining power with the larger companies that they contract to do.
As shampoo bottle, they could say they don't want a fancy label but something were simple and then it will go down.
>> Okay.
Let's go to the next your question.
This is on Freeport-McMoRan.
What is your take on this company?
> It is the largest pure play call provided that you can buy which means that they only have copper in their portfolio and it's really interesting.
They have a couple of minds in Indonesia that actually have a negative cost of copper and why this is is there such a large gold deposit there that the gold offsets the cost of buying the copper.
There are some risks to it, of course, and those risks would be political.
There are some agreements with the government for that mine in Asia.
It's almost half of all their copper.
So these agreements, they change on a date of day, month-to-month basis and maybe the government wants a bit more here and there, more control, they want them to build more things, things like that can really affect the valuation of the company.
>> Okay.
before we let you go, what is your overall outlook on the materials sector, given the headwinds we are seeing right now in markets?
>> Yeah, it's in a tough spot right now, and I think there is a lot of pessimism around China with the three D's, debt, disinflation and demographics. I think if they can get around that, the outlook for longer-term tail would look good.
to a lesser extent, iron ore. At the same time, their spaces and materials where you can play where you don't need to be exposed to China that much.
Linde, Sika, these are great examples of companies where they are great similar businesses and they don't need to be tied to the cyclicality.
>> Great perspective. Thank you for joining us today. Hope to have you back.
>> Thank you.
Our thanks to Evan Chen, associate for portfolio research at TD Asset Management.
As always, make sure you do your own research before making any investment decisions. stay tuned. We'll be back tomorrow with an update on the latest Canadian GDP report and on a programming now, there will be no show on Monday, October 2, as we mark truth and reconciliation day.
We'll be back on Tuesday, October 3, when our guests will be Michael Craig, head of asset allocation at TD Asset Management, taking your questions about asset allocation. A reminder that you can get a head start, just email moneytalklive@td.com. That's all for our show today. Take care. Talk to 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 will discuss why some material stocks may hold up better than others amid weakness in Chinawith TD Asset Management's Evan Chen.
And in today's WebBroker education segment, Hiren Amin will take us through some of the technical analysis tools available in 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.
Before we get our guest today, let's get you an update on the markets. We will start here in Canada where our main stock index openedwith pretty modest gains, driven by strength and material and energy names.
Of course, the TSX is coming off a down day on Wednesday when it closed at its lowest level since June. Currently, the S&P TSX index is up nearly hundred and 50 points or about three quarters of a percentage point.
Turning to some of the big movers in the markets, Nexgen Energy, shares of Nexgen Energy are moving higher today.
But it's been a bumpy week for uranium stocks after uranium prices recently hit 12 year highs. Today, shares of Nexgen Energy are up just over 4%.
Okay, we will turn into south of the border and take a look at the broader read of US stocks, the S&P 500. Also opened relatively flat as rising bond yields are raising worries about a potential recession, keeping investors on edge.
Of course, Wall Street is also keeping an eye on congresses negotiations on US spending bill continues before the October 1 deadline. Currently, the S&P 500 is trading up just about 35 points or .8%.
Taking a look at the tech heavy NASDAQ composite index, it also opened up relatively flat. However, now the NASDAQ is up 113 point sorry nearly .9%.
Taking a look at some of the big movers in the US, shares of CarMax are moving lower today. The used car dealer reported that second-quarter earnings fell from a year ago on weakening demand for used cars.
The company also said about 15% fewer vehicles from consumers and dealers compared to one year ago.
CarMax's stock is currently down just over 9%.
Some other big movers today, Micron Technology's.
Shares of Micron are moving lower in early trade.
The chipmaker, of course, posted a weaker than expected earnings forecast before the opening bell.
Shares of Micron are currently trading down about 1.8%.
And that's your market update.
Economic weakness in China has been a headwind for the material space, but our guest today says that some companies in the sector that you may not think of are better poised to face the challenge than others.
Joining us now to discuss his Evan Chen, associate for portfolio research at TD Asset Management. Heaven, welcome to MoneyTalk Live, your first show.
>> Thank you.
Copper is up today. A good day to come on.
>> Perfect day to come on. For our viewers who may not be aware, what makes of the material space? Let's start there. That's what is a materials company?
It's a lot of different things. This building that we are in has steel beams, that's iron ore, it's cold, this chair we are sitting on has plastics, so that's commodity chemical companies, a cabinet in your home has woods of this paper in forestry. These material companies are very cyclical and commodity driven.
A lot of them don't have full control over their destiny because they don't have full pricing power.
If we look at the MSCI, 50% is commodity driven, 21% in commodity chemicals.
You don't have any pricing power. What I want to talk about today is the other companies in the indexthat may not be commodity driven and might not be as cyclical. So far in the air, materials hasn't done too well enough because of some weakness in China and rising rates.
>> Let's talk about China because we know that China is a major consumer of commodities. How has occurred economic weakness impacted the space?
>> Yeah, so a really good rule of thumb is China consumed about 50% of the world's metals. You can imagine that's a big impact on everything that goes on. The major ones would be copper, iron ore, aluminum. For instance, for copper, if the property market in China is not doing well, there's less need for copper wiring and copper pipes and in goods like refrigerators and AC units.
Those all require copper and there's less economic activity, there is less need for, the price goes down and that hurts the sector as a whole.
>> You also said that not all the material space is as exposed to cyclical trends.
Can expand on that?
> There are some really great companiesin the sector that many people don't think about when you say materials. The biggest one would be Linde.
>> It's a pretty important company.
>> Yes.
>> in the supermarket, you have industrial gases to make your food fresher. And fridges.
Winemaking even.
I could go on and on.
>> Okay. Another stock that you highlight isSika.
What can you tell us about this name?
>> Yeah, Sika is a construction chemical company and it's one of the largest, 50% of the market.
What they do is they sell chemicals for construction sites.
This could be a lot of things. Admixtures, it affects concrete and different properties, it can make it stronger, make it look better. They sell adhesives, so sticking a window together or sticking plastics together. Also, they sell waterproofing so if you have a roof and you want to make it waterproof, they sell that.
Where I think it is less cyclical is because their products are better than the competition. What does this mean?
If you are on a construction site and maybeit takes you for people to hours to do something, so let's say applying adhesives to a roofing solution.
You might need two applications of whatever chemical you have and you need to hold her for two hours. With the Sika product, you could use to people and to be done in one hour and this is just because they spend more in R&D. Because they are so big, they can spread that R&D over a wide base and start cross selling products and to other businesses. Instead of being linked commodity products like oil, seek is more leverage to infrastructure.
infrastructure, global construction and all of that that goes around that we are seeing.
>> Okay, so you talked about some of the benefits of some of these companies. What about the risks to some of these companies?
Why don't you start with Sika.
>> For Sika, it's construction volumes and lower infrastructure spending.
What we are seeing in the US is that housing has been strong. That's close, that's a risk.
In the EU, we are seeing some risk there to construction. Housing is down 23% in various regions. China is also slowing, we talked about the property market in the beginning. So all of those are risk to Sika but I think longer-term, the business is very sound and will continue to grow.
>> Talk about Linde. What are some of the risks you see there?
>> I want to show some strengths first.
Linde, and industrial gases company, what they do is they Place facilities onto their customer sites.
These are necessary for their customers operations.
they are underpinned by long-term contracts.
These contracts have minimum spending agreements plus a built-in cost escalator.
You have a really good visibility on the long-term earnings of Linde and the biggest risk to them would be that these customers go out of business, but it's going to be the last bill that you pay, really, in someone's bill payments because it's needed to run your facility.
>> Great start to the discussion and we will get to your questions about material stocks for Evan Chen in just a moment.
And a reminder that you can get in touch with us 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 to the top stories in the business world today and a look at how the markets are trading.
Former competitors lululemon and Peloton Interactive are now teaming up together.
The fitness companies announced a five-year deal that will see lululemon become the primary athletic clothing partner for Peloton.
The new fitness clothing will be sold on Peloton's website and retail stores starting October 11.
In return, lululemon will stop selling its mirror fitness device by the end of the year and soon end producing its own Peloton -like fitness classes. Oil prices surged to their highest level in over a year, after crude stocks at a key US storage hub fell to their lowest level since July 2022.
Surging global demand coupled with output cuts by Saudi Arabia and Russia have sent crude prices to levels not seen since last August.
the increase is hitting consumers at the pump, challenging central banks who are fighting to tame persistent inflation.
Finally, memory chipmaker Micron Technology forecasted a wider than expected first-quarter loss, despite an expected boost from a supply deal with AI market leader Nvidia. The memory chipmaker also reported that revenue fell 40% during the quarter, in part due to the impact of its security review by China's cyberspace the ministration.
US companies have faced greater scrutiny by Chinese officials amid increasing tensions with the Biden administration.
And here's how the benchmark index in Canada is trading.
Let's take a look at the S&P TSX composite index, it's up hundred 41 point, .7%. In the US, they are seeing some green on the screen. The S&P 500 is up 31 points or three quarters of a percent.
All right, we are back with TD Asset Management Evan Chen, taking your questions about material stocks. We'll start with the first question on EV production.
What is your medium and long-term outlook for lithium given their importance for EV production?
>> If you look at lithium more recently, it has been quite weak and that's because going into this usually seasonally strong.
Of EV's, sales haven't been there, especially in China. Medium-term, I think we are in and under supply of lithium but I want to say that lithium isn't a scarce resource.
The scarce resource is in the processing side of lithium. It is found in rock or Bryan which is a kind of salt in the hard part is converting that resource into a battery great material for EV batteries.
Right now, the battery technology that we have, lithium batteries are the best batteries in terms of both storage capacity and how far the EV can go.
So medium-term, we are undersupplied but I think it's not going to be a straight run out. Why I say that is because we are going to have fluctuations in EV demand like we are seeing now, but at the same time supply will come on in big chunks.
When that happens, the market will become, the supply demand dynamic will change pretty rapidly when the supply comes on.
I would say medium-term is 3 to 5 years.
Longer-term, I think that some of the stocks will be a little bit challenge because right now, they trade at a premium. Supply and demand are not balanced. We have way too much demand for supply butin that five year plus rain, a lot of products are coming on. When these projects come on and supply does meet demand, the price of lithium should trade down to the marginal price of production which means that there is a premium built-in that currently exists and it won't exist anymore.
>> Let's go to the next question. This is on China. China's impact on mining.
What Canadian miners are being hit by the weak Chinese economy?
>> Yeah, I put Canadian miners into two categories, one is gold, and I don't think gold would be hit that hard by any Chinese economic weakness, but the other type is copper, so copper is very, very reliant on China.
50% of the world's metals are consumed by China and that includes copper. The biggest region that uses copper.
With economic weakness in China continues it would be pretty bad for copper, send the price down which, as I said before, the miners are all dependent on the price of copper so it would be a negative for all of them.
>> Is China really the main factor or do you see any other factors impacting the price?
>> Strong US and stronger EU, if that happened, if China went down, it would balance out, but I think on the margin, the really big driver of copper is China economic activity.
>> Next question.
A viewer says aluminum, uses and outlook?
So the uses for aluminum and your outlook on the aluminum.
>> 75% of aluminum uses are in four major categories: transportation, electrical grids,more grids and then cans, so the things you see in the supermarket.
> Pop end.
>> Yes.
The outlook is pretty good for aluminum going forward and this is because of the green tailwind. The first two, transportation and electrical grids, transportation is EVs. EVs use more aluminum than a traditional car and that's because they need to be lighter.
Aluminum is a light metal and strong and as EV production grows, the demand should increase.
If you have a windfarm at the coast and you need to get to the city, you need a grid to transport that energy and you can use copper and you can use aluminum so it's good for both of those.
Longer-term,we have some ESG renewable tailwinds for aluminum.
But I would caution viewers that in the medium term, demand is a big part of it so just general industrial demand as we were talking about totable four, same thing.
General investor demand, property, it can weigh in aluminum. So even though the long-term picture looks okay, short and medium term, you are still beholden to what happens around the world.
>> Is China also a big consumer of aluminum?
>> Yes, also a big consumer of aluminum and they are actually also a big producer of aluminum which is different from coffer. China doesn't produce much copper but aluminum is really heavily produced in China.
This is because what aluminum is is it's basically some kind of sand and use up a lot of power to it and what China has is cheap power. So they are a big producer of aluminum.
>> Would you say that they are the biggest globally or are there other countries that also produce a lot of aluminum?
>> Wherever there is cheap power, really, you can find aluminum. What you are seeing now is some traditional aluminum smelters that have existed are no longer economical because the cost of powering thosein Europe is just too high. So all of the supplies coming out and going to China.
>> Okay.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Evan Chen on material 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 education segment.
Technical analysis is one tool that investors may consider using, and WebBroker can help.
Hiren Amin, Senior client education structure at TD Direct Investing has more.
>> Hello and welcome to today's education segment. Today, we are going to continue our series on technical analysis indicatorsand one of the questions traders tend to ask a lot is how do we track volatility when it comes to investing using charts. So one of the indicators we are going to observed today is known as Bollinger Bands.
We will show you how to set it up and kind of how traders use it and interpret volatility with it but as well use it for trading purposes to determine entry and exit signals. So we are going to looking at SPY which is the broad market index that tracks the S&P 500 market.
We are going to set up the Bollinger Bands. To do that we will access the charts over here.
Within the chart space, to get the Bollinger Bands, it is a study or indicator within the price chart itself.
So that is going to be found within the upper indicator section. So we clicked the upper indicators and then is the very first one there, Bollinger Bands.
Now Bollinger Bands actually lends its name from its namesake. John Bollinger created this study back in the 1980s and it is widely used even today to track various market assets such as stocks, Forex, trading's and futures trading as well. It helps us really determine not only volatility but it also tells us about overbought and oversold signals. It helps us identify trends in a market, but it also tells us about potential entry and exit trading points or breakouts from those bands. We are going to look at how you can interpret them. Here's the Bollinger Bands edit. What you will notice in terms of how this study is actually created or calculated, it is composed of three bands, as the name implies. You have the upper band which is at the top, the middle band and the lower band.
Now this middle band is a simple moving average and is actually based off of the the moving average and by default it usually is going to be a 20 day moving average. Now you can actually come in here and click on the Bollinger Bands ready to get some more information on what it is but we are going to adjust it down to 20 days. The default comes out for 25 on WebBroker.
We are going to set up to 20 days over here and update that. Now you will notice that I am looking at the one year and one day chart which means is going to capture 20 days worth of average prices there as the middle band.
It is based off of a statistical measure as well so the upper band in the lower band are populated using two standard deviations above the moving average and below the moving average.
For those of us who didn't take statistics, two standard deviations means that 95% of the time, the prices should be moving or travelling within these bands there. So two ways traders can use this for trading purposes, one is a strategy known as when the prices are either going to break out of those bands, so if you see a price breakout above the upper band, this usually indicates an overbought condition, they may be due for a pullback.
Traders would consider liquidating or coming out of or shorting the stock potentially.
And conversely if the prices touch the lower band, that indicates an oversold condition, so prices have fallen too rapidly and they may be due for a bounce, so traders may consider long positions are exiting out of sorts at this point.
One of the studies or probability theory states that prices are going to be mean reverting, so they tend to go back to their average price.
A lot of traders will look for that and you can see that a lot of them, the prices circulate or move in and out of that moving average.
And finally, we will talk about Bollinger squeezes.
This is another thing the traders is.
You will notice that with these bands, there. The contraction where they narrow in and they expand out and this represents one volatility is contracting and when it's expanding. And whenever there is a volatility expansion, you see the band get wider, we are going to see potentially a breakout in the prices. Now we don't know directionally whether it is up or down but we will see a big breakout in the prices and traders will be ready for that entry was in it. One thing you should never forget when your trading is remember the overall trend.
Always trade with the trend. That's the technical analysis 101, trend is your friend. That will avoid any kind of false signal goals when you are using the Bollinger Bands.
There you have it.
This was a quick rundown on how to use Bollinger Bands.
For more learning or technical analysis content, check out our learning Centre andtechnical analysis videos there.
>> Our thanks to Hiren Amin, Senior client education instructor at TD Direct Investing.
Before you get back to your questions about material stocks for Evan Chen, a reminder of how you can 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.
>> we are back with Evan Chen, taking your questions about material stocks.
Evan, just before the break, we are talking about the ST component. Can you expand a little bit of that?
>>let's talk about Linde first. There's a big clean energy component to Linde. They have a big project pipeline and this is, the products they have been contracted to me, a billion of that is actually in green energy.
So what I mean by green energy, it's in hydrogen, so high-grade hydrogen facilities they have been contracted to make and this could be a potential energy source in the future, and 8 billion is nothing to sneeze at.
For Sika, Sika, there is a lot of different green components to it and the biggest one I would say is in energy efficiency. So for instance, in France, he cannot raise a price of rent in your apartment unless it reaches a certain energy efficiency standard. Sika products are the solution to that.
You put the sealant around the window, make sure the draft can go in and out, it's more energy-efficient.
As well the materials compared to the competitors, that large R&D project, they made them less carbon intensive. A lot of them are made of oil derivatives and carbon heavy and in their research and development, they have made there is less carbon intensive. If you have a job site where it's for the government and they want certain carbon intensity, you would you Sika products for that.
>> Great perspective on the ESG there. We will go to the questions now from our viewers.
Next question is on gold streamers. What is your outlook for gold streamers?
>> Gold streamers are really great and a lower risk way to get exposure to the gold price than minors. Just a reminder, it's an alternative financing method for mine.
A mind exists and a certain percentage of all the millets produce from that goes to the gold streamer.
With a gold streamer has is… More diversification across minds and as well the biggest part is that you don't have exposure to rising costs.
In the past couple of years, we know inflation has been hitting everybody but especially for the gold industry and mining industry in general, inflation has been a big hit to them. So the gold streamers, because you get just a little bit of gold off the top, you're now exposed to that cost inflation like you would be with a gold miner.
>> Okay, so we know that they are not exposed to some of those costs. What are some of the risks of some of these culturist?
>> In order to grow, they need to keep doing deals.
If they miscalculate on the deal, so if they overpay, that would impair Richard's going forward.
Because there is more competition in the space now, we don't know how good of a deal they can get.
>> Okay. Let's go to the next question.
This is on First Quantum. With your take on First Quantum.
>> Yeah, First Quantum, top three by market Miner in Canada, copper miner, and what they are really good at is the building minds and Hydro stations.
They can do stuff that no one else can.
So they have an in-house team that's really great at building minds. They don't need to hire external contractors and they've shown it pretty well.
So they have mines in Zambia, Panama and all these different places.
Big project pipeline.
You will get growth with the stock and a good team to do it.
> Okay, so that's kind of the bullish take.
What would be the bearish take her some of the risks to the stock?
>> Yeah, so not only is the geography part of it, just the government and locations.
So they are hard jurisdictions. We have seen Panama starting last year, September to March, there was an argument with the government and it got resolved.
>> There is clear political risk.
>> Yeah, political risk, and I would say the second risk is may have more debt than a lot of the other mining companies.
A lot of the other mining companies have no net debt but First Quantum has a little bit more than usual which constricts their abilities to do things in a higher rate environment like we are in today.
>> Great breakdown of information there.
Let's go to the next question.
This is on Teck Resources which had been in the news for a while. Can we get an update on the takeover battle for Teck Resources?
>> Yeah, I think the basic point for Teck Resources is there net coal division and what investors want to do.
There are two sides here.
The first side is Nicole, what we want to do with it?
Let's just sell it to someone, let sell it to Glencore, let's sell it to the JSW, spin it off and take the cash.
So that's one. The second school of thought is let's been it often takes some cash but keep a publicly listed company that has exposure to net coal.
It really depends on do you want exposure to net coal or do you want the cash?
>> Okay. Do we have another question?
Okay. we are going to get back to your questions for Evan Chen on material stocks in just a moment. 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.
>> Okay, we are having a look at TD's Advanced Dashboard, this is a platform designed for active traders available through TD Direct Investing, and we are looking at the heat map function here which gives you a view of the market moverson the TSX 60 by price and volume and we will take a look at the space here on the energy sector on the right hand side.
We are seeing some green on the screen for names like CNQ, Canadian Natural Resources.
That's one of the more actively traded stocks in the market right now, the TSX.
Cenovus Energy as well as up slightly as well. Taking a look at some of the financial, we are seeing strength in the financials.
TD is that more than 1%, Royal Bank, BMO, Bank of Nova Scotia. Looking at some technology stocks, we are seeing some strength and Shopify. Shopify is up more than 3%.
Let's take a look at the S&P 100, some of the names that are moving right now, that's and technology.
Some green on the screen there, chipmaker AMD is up, taking a lot of space there, up 6%.
Seeing some strength in other chip names, Nvidia is also up, some tech names, Apple, Microsoft which were trading down in earlier trade are now up, seeing some positive moments in there as well, Google is up as well.
Looking at some of the consumer cyclical names, Tesla, of course, is taking a little bit of real estate in the middle there.
It's up more than 2%.
Amazon is also up modestly.
Taking a look at some of the healthcare stocks, a bit of a mixed picture there.
You can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Evan Chen from TD Asset Management. The next viewer question, this is on CCL Industries.
What's your view on CCL Industries?
This is carnival cruise?
>> CCL Industries, a Canadian company, is a packaging company and they do a lot of different things.
labels for companies.
It you go to companies, the shampoo bottle as a fancy label, CCL probably made that.
It's not just that.
They also sell blank bills for central banks, all the money that you have, they still materials for that to the government and they also have Avery Dennison, so back-to-school season, buying binders, nametags, they have that in-house.
As well, they have CCL secure, checkpoint technologies which is when you go to the store, on the sides and the exit you have those big powers there, antitheft, so they sell antitheft technology for retail stores.
What you get in this package is sort of the GDP plus grower, you are geared towards the general economy and as the economy does better, people buy more labels, they go shopping more for school supplies, thereby more closed-end you sort of get a nice GDP plus return from all of that.
>> Okay, so talk to us about some of the risks that you see in this company going forward.
> Yeah, the risk is just if we are going into lower economic activity, people buy less things, the pilots closed-end maybe there is less bargaining power with the larger companies that they contract to do.
As shampoo bottle, they could say they don't want a fancy label but something were simple and then it will go down.
>> Okay.
Let's go to the next your question.
This is on Freeport-McMoRan.
What is your take on this company?
> It is the largest pure play call provided that you can buy which means that they only have copper in their portfolio and it's really interesting.
They have a couple of minds in Indonesia that actually have a negative cost of copper and why this is is there such a large gold deposit there that the gold offsets the cost of buying the copper.
There are some risks to it, of course, and those risks would be political.
There are some agreements with the government for that mine in Asia.
It's almost half of all their copper.
So these agreements, they change on a date of day, month-to-month basis and maybe the government wants a bit more here and there, more control, they want them to build more things, things like that can really affect the valuation of the company.
>> Okay.
before we let you go, what is your overall outlook on the materials sector, given the headwinds we are seeing right now in markets?
>> Yeah, it's in a tough spot right now, and I think there is a lot of pessimism around China with the three D's, debt, disinflation and demographics. I think if they can get around that, the outlook for longer-term tail would look good.
to a lesser extent, iron ore. At the same time, their spaces and materials where you can play where you don't need to be exposed to China that much.
Linde, Sika, these are great examples of companies where they are great similar businesses and they don't need to be tied to the cyclicality.
>> Great perspective. Thank you for joining us today. Hope to have you back.
>> Thank you.
Our thanks to Evan Chen, associate for portfolio research at TD Asset Management.
As always, make sure you do your own research before making any investment decisions. stay tuned. We'll be back tomorrow with an update on the latest Canadian GDP report and on a programming now, there will be no show on Monday, October 2, as we mark truth and reconciliation day.
We'll be back on Tuesday, October 3, when our guests will be Michael Craig, head of asset allocation at TD Asset Management, taking your questions about asset allocation. A reminder that you can get a head start, just email moneytalklive@td.com. That's all for our show today. Take care. Talk to you tomorrow.
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