Print Transcript
[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we will discuss whether consumer discretionary stocks can continue the run that they've had this year. We've got signs out there the financial strain on household is keeping while it's a little tighter. TD Asset Management Jacky He joined us.
In today's education segment, Jason Hnatyk is going to shows how you can customize your view on Advanced Dashboard.
So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to our Guest of the day, let's get you an update on the markets.
I'm going to start with the TSX Composite Index. We've got the price of American benchmark crude up another percent today, just shy of 75 bucks per barrel. It's been supportive of the energy names in recent sessions.
We've got about 30 points on the table.
Volumes are starting to slow down ahead of the holidays. We are up about a face of a percent in the green. Some stocks making moves today, including Aritzia.
The retailer which was a big winner during the pandemic, it had a bit of a tougher run in 23 but at 2759 today, the stock is up about 6%. Getting a bit of a pause on some of the gold-mining names after a fairly decent run in recent weeks as the price of gold itself has had a pretty good run. Kinross is on a little more than 1%.
South of the border, you got the S&P 500 flirting with new all-time highs.
Approaching the old highs. Today it's a very modest gain, we will call that three points to the upside, just five ticks.
I want to check in on the tech heavy NASDAQ. It's a bit stronger than the broader market. Volumes are coming back.
Of 33 points, up 1/5 of a percent. FedEx said 240 bucks and change, it's down was 11% per share.
That's your market update.
Consumer stocks have had a pretty good run this year, but now we are seeing growing signs that shoppers are feeling the pinch of higher borrowing costs.
So what will the consumer discretionary space look like in 2024? 20 etc. discuss, Jacky He, VP of portfolio research at TD Asset Management. Great to have you on the program.
>> Thank you very much for having me.
>> We are on the cusp of 2024. Let's talk about the year that we've had. What were the drivers?
>> It was very interesting. If you recall, the last year, talking about the sector a look, consumers were really facing the challenge of high inflation.
We were right in the middle of a hiking cycle. You saw the early expectations and he multiples both contracting negatively.
That combination was historically rare, even during a global financial crisis.
Fast forward a year later, we saw the sector deliver a 40% return.
The reason is really because the low expectations allow the companies to beat earnings expectations throughout the year and also important to remember that as you mentioned the customer did feel the prints but they did not stop spending. They simply shifted from one category to another. At the aggregate level, earnings is pretty solid.
>> Defying expectations as we head into 2024, the expectation investors and markets are bringing into the air, is that the Federal Reserve, the BOC, the central banks, they are going to start cutting rates. What does consumer discretionary look like in that environment?
>> It is quite interesting. I think is better to visualize that. The first chart I brought it is quite important. If you look at the shaded area, though show the historical easing cycle and the green line shows performance. You will find that historically the sector tends to underperform leading up to the first rate cut and during the easing cycle, the sector outperformed significantly. Why?
Because this is really a leading sector that has higher labour intensity, higher cost of capital.
So when rates are high, it's really costly to read those businesses. And so the stocks tend to trade at lower earnings and multiples together.
So a reversal of that trajectory can take support on both ends.
If you look inside the sector, there is still about 70% of stocks trading below historical averages. So for long-term investors, I think it's a good place to shop for opportunities next year.
>> Some opportunities there to take a look at. What about the consumer themselves? In the end, the stocks will either make gains or pullback based on consumer behaviour.
We had a pretty interesting let's say, to put it mildly, three or four years now in terms of consumers. Has the behaviour change? Would we expect next year?
>> Yeah, it's interesting. Consumers are no doubt directionally weakening. You hear from companies and you can look at delinquency rates. The problem is almost everyone knows that. And now, the bigger question is whether consumers will fall off a cliff from here in a recession or not. As a consumer, I care less about those economic terms, deflation, disinflation. All I care about is how much this item cost me today versus yesterday and how much I'm making today versus yesterday.
If I tried those two things and see how they've changed since the pandemic, you can see consumers have been through three phases of spending. At the beginning, when inflation was benign and we still received government stimulus checks, a lot of that money went straight to people's bank accounts. Last year, when inflation caught up with income, consumers started to feel that pinch.
They started funding their purchases with savings. And now, as those savings are being depleted, you start seeing consumers buying power starting to recover thanks to a strong labour market, lower commodity costs.
If those things continue in 2024, is probably hard to see consumers collapse.
But I can certainly see consumers remaining selective and continue to be price-sensitive.
>> We were showing the viewers that chart.
It's pretty telling. Structurally, longer-term even beyond next year, what should we be thinking about as investors in taking a look at the consumer space?
>> Yeah, under the surface of solid earnings, I think one thing that hasn't been talked about enough, if we look at one common thing among winners is that they tend to have a stronger digital capability.
What I mean by that is they tend to win more through social media engagement.
Remember during the pandemic, not only the number of people using social media exploded, average users engagement also accelerated. Just look at those influencers like comments or likes, they all increased well above 50%. Meanwhile, the platform has streamlined their operations and simplified though shopping features and those together have structurally changed consumers shopping habits and now even my mom shops online.
But they also have an implication for businesses. I'll give an example. 20 years ago, when we would go to a hotel room, we would look it up on a map, find the front desk number, call and book it.
10 years ago, you can see people start going online and finding those online travel agencies, compare the price and make a reservation.
Today, we see more and more people go straight to social media and look at those short videos and how other people experienced it. Hotels have an advantage there. They own the content and they can give clients those loyalty points so we start seeing more customers start booking those hotels with the hotels themselves directly. So they are gaining share back from those online travel agencies.
>> Social media to seems right for fashion brands. People are taking visual cues as to how they want to spend their money. It must be a place where fashion needs to exert or show itself.
>> I'm sure you know all about fashion.
If you look at social media, I think it has made fashion cycle shorter and shorter.
Probably an influencer in Asia can have an overnight impact on style in Canada.
>> Fast fashion, right?
>> Exactly. Consumers basically just need the same thing at a cheaper price. You talk about fast fashion, traditional fashion would take about, only about two seasons, and they have six months in between to prepare for their design, procurement, manufacturing, distribution.
Fast fashion can condense that in a few weeks and that's why recently if you hear about Shein, an e-commerce player, they can do that in under two weeks.
>> How does that challenge the business?
If fashion cycles are changing that quickly, maybe some people haven't adopted us what they are going to find themselves with coats that are too long when they should be short.
>> Yeah, it is having, it is certainly increasing competition with traditional retailers and not only Shein, we talk about Temu, that's another very popular name this year, not because of its size, they are small, but they are both growing very aggressively.
They are the most downloaded e-commerce apps. The reason behind their success is their engagement with social media. They are trying to replicate that success back in China in North America. Each of them spent hundreds of millions of dollars in social media and they try to engage more with customers and understand better what they need and promote their low price advantages. But can they be a more material threat? That would depend on whether they retain those customers.
If you look at Temu, their monthly active users has been declining month over month since the summer. That means customers, after downloading, are not using their platform on a recurring basis.
If that happens, it will make it hard to scale. The advantage for them is the low price. A disadvantage for them is the quality and services.
>> Fascinating stuff and a great start to the program. We are going to get your questions about consumer discretionary stocks for Jacky He in just a moment's time.
A reminder that you get in touch with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Shares of FedEx are in the spotlight today. The global shipping giant is lowering its sales forecast in the face of weaker than expected shipping volumes.
FedEx says it's express unit, which ships parcels by air, saw a 60% drop in income for its most recent quarter as customers apparently were seeking out more economical, ground-based ways to ship their belongings. FedEx pulling back 11%.
Want to take a look at General Mills, they are cutting their sales forecast.
Consumers are pulling back on pricier branding materials and other products that it sells.
The company says that it is seeing a "Stronger than anticipated value seeking behaviours" from shoppers. In short, cash-strapped households are seeking those cheaper, offbrand products.
At 65 bucks and change, the stock is down about 2 1/2%.
Winnebago is handing in an earnings miss for its most recent quarter. The recreational vehicle maker says sales were actually up in terms of volumes but price discounts this year resulted in a lower than average selling price.
Right now, the stock is at 74 bucks and change, down about 1 1/2%. A quick check in on the markets. We will start your own Bay Street with the TSX Composite Index.
We've got some green on the screen.
Trading volumes are starting to come back as we get closer and closer to the holiday weekend and into the holiday week of next week. We do have 33 points to the upside, a little more than 1/10 of a percent.
South of the border, the S&P 500, it flirts with all highs. We are up four points, nothing too dramatic, just a little shy of 1/10 of a percent.
We are back with Jacky He, take your questions about consumer discretionary stocks. Is this a good time to look at Amazon?
>> If you look at the chart, you'd be amazed.
80% returns. 70% is driven by earnings.
It's quite impressive.
The demand has been stable.
People continue to seek for value. That helps e-commerce. On the AWS side, it's been cost optimization. When you've seen company shifting from saving costs to new workflows. What's even more impressive off Amazon is their margin. About a year ago, you start seeing management gain control back on their cost and they delivered that throughout this year by cutting their labour force and really pausing their projects, streamlining their operations.
More recently, they are regional rising in North America. All of that is helping their margins.
The margin expanded a couple hundred basis points, that allowed them to beat earnings quite significantly.
The threat I think people have probably been underestimating is one of that is Temu, competition. They are doing really well and they are disrupting this Amazon in China. If you ask a small merchant in China, they will tell you they can list a lower price on Temo for about the same profit as they see on Amazon. The reason is that they are small.
They end up paying Amazon a lot more money to increase the visibility. So over time, if Temu continued to do that, as certain part of the Amazon market share could be taken away.
>> If Amazon wanted to go head-to-head on price, that would affect the fundamentals of the business.
>> Exactly, that may impact their margins.
>> Interesting stuff on Amazon's potential rewards and risks in 2024. If you are wants to talk about Tesla. What's the outlook?
>> People always talk about Amazon and Tesla, the two largest names.
The price has doubled.
All of that is driven by sentiment. Tesla has decreased about 30%. That's one of the worst performers in the sector but because of that hype, a lot of people believe that Tesla is the leader. You saw a really strong stock performance. But can as Libya sustainable leader? I think the probability is high over the long term, the reason being that they are a first mover. If you look at autonomous driving data, they have accumulated over 500 million miles of autonomous driving data and that number is exponentially growing and also another thing important to AI is their computer power.
So they have their own AI chips and recently they developed a supercomputer called dojo that allowed them to train those data at a faster speed, at a lower cost. If they can keep doing there, that means there will be a strong working factor right there. Their software will be smarter and more people will join that network and make every existing driver experience better. Eventually, that will allow Tesla to go beyond the auto industry.
Meanwhile, there will be challenges for the stock.
>> It sounds like from what you are laying out that investors are saying, this is an AI and automation thesis. At the same time, we heard from Tesla and other automakers that demand for the actual EVs themselves have been softer than expected.
>> That has been a major recent theme across North America. It's not only EVs.
EVs are definitely more expensive but it's just getting more expensive to afford it.
The average auto monthly payments have increased about 30% since the pandemic.
Our income only increased 25%.
There certainly demand issue there. And remember, Tesla's multiples are arguably high so if earnings are not catching up with that expectation, there could be some pressure on the stock.
>> Interesting stuff there on Tesla. Let's switch gears. Cheesy pun. Views on Home Depot? Let's talk about home improvement.
>> It's not bad, double-digit return but it has underperformed the sector.
Consumers have been shifting from goods to services, from home categories to travel.
That affects Home Depot sales.
People need to look for when things will start bottoming. My analysis shows what would drive that demand is three things: PCE, personal consumption and demand and also home prices, lastly affordability has some of the factors that are starting to show signs of recovery so there could be a recovery here next year. What we need to see for Home Depot is whether, how long people will shift from goods to services.
On a volume basis, we have seen that it's largely normalized so next year it could be a more balanced demand.
>> We were talking off the top of another question, if we do enter into a Fed rate cutting cycle, and we see some pickup in the housing environment, maybe people want to get back to home renters. Those big during the pandemic. Stuck at home, we did it to, we built a back patio. As soon as you were back in the world, I'm not going to stay in this house anymore.
>> A lot of challenge for home improvement was because existing home sales really decreased. People are not moving. But at the same time, a lot of people got stuck with their existing home because they can lock in their low rates for 30 years. If they need something like a home office, they need to renovate.
But over time, if you see decreased supply of the housing market is supporting the housing price today. If my house is worth more and more next year, and probably more willing to invest in my home again.
That's why home categories, home computers, home improvement, home furnishings, could see some recovery next year.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
we are going to get back to your questions for Jacky He on consumer discretionary stocks and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to our educational segment of the day.
In today's segment, we are going to take a look at TD's Advanced Dashboard, a PlatForm designed for active traders available through TD Direct Investing.
Jason Hnatyk, Senior client education instructor with TD Direct Investing joins us now.
Take us through some of the customization options available on the platform. Show us how it's done.
>> Yeah, let's absolutely do that.
There are many advanced features and Advanced Dashboard from streaming quotes and to some exclusive tools that are only available in the platform versus web broker. One of the really nice things about Advanced Dashboard is it allows you to customize your experience so you get the information and data you want to really customize that experience. It's really not going to be a one-size-fits-all type of experience. Let's jump in the platform and I will walk you through a quick demonstration.
Everybody can take a look at the TD shield up in the upper right-hand corner. These are all of the factory default settings or tabs that company launched on the platform.
These are also customizable. We can change around any of the tools, add or remove, make that experience your own. If we want to get to the heart of the matter, we can create our own workspaces from scratch. To do that, we will use either the + on the right next to the existing tabs or we can click on the layout manager in the top right-hand corner and that will bring us to the same place. The first choice here is in the late library.
This is our opportunity to relaunch the factory default tabs but custom layout is really where we get to make the experience our own. There's three different types of choices that you can what I would like to create for myself. I'm going to choose three columns. I'm going to get creative with mites hi a toll. Let's name it MoneyTalk in honour today show.
Now that I've done that, the MoneyTalk label will be at the top of the screen highlighted in blue. We have 3+. This is where we can now add in the tools that we want to customize our experience with.
I'm going to hit the +. We've got all these different components that are going to be available for you.
I recommend the audience get in here and try it on for themselves.
Let's go ahead and choose a board trading put a watchlist on the left-hand side and just choose from the list, pick whatever comes in first.
In the middle I'm going to put a chart. On the right-hand side, let's pick some news for the sake of diversity and choices on the screen.
Taking customization to the next level is my opportunity to link these three tools together.
I will direct your attention to the three rectangles in the top left-hand corner.
This is my configuration many. I want to send my information for my watchlist, I went at my chart as well as my news receive it so what's happening now is anytime a selective symbol for my chart, is going to then be propagated out over to the rest of my experience. There is my chart for my TD symbol that I've just chosen as well as the news coming up. This is just one way to create it. Kind of your imagination is going to be what's going to limit you to this. It's got a really great way to make this your own.
>> You've piqued my interest. He probably piqued the interest of a lot of viewers.
If they want to learn more about customization, where can they go?
>> Yeah, we had the fast-forward button and went through this. Rest assured, there are lots of opportunities to learn more and I will show you how in the platform.
The first thing is, if we notice, there is a learned button at the top of the screen.
If we go into that, we have preloaded many of our kind of how to videos about specific topics within the platform. If you scroll down on the right-hand side, there's a video right here on customizing your Advanced Dashboard experience.
That would be a great place to start.
Alternatively, we do offer master classes on the subject.
We teach a one hour class on customization that can be found in web broker under the learn tab but also just to highlight some of the learning opportunities for Advanced Dashboard, we can also move from within the learn tab, we can filter for Advanced Dashboard on the right-hand side.
Once you've done that, if you're in WebBroker Commey about 12 separate lessons you can choose from with regards to training opportunities as well as customization choices and other wonderful tools on the platform so you're never far from learning more about this really interesting platform.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Jason Hnatyk, Senior client education instructor with 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.
Okay, we're back with Jacky He, taking your questions about consumer discretionary stocks. Let's get to the next one.
What's your view on luxury companies?
>> Luxury is a big topic.
They had a run this year. Initially very strong and later on this year has been through some normalization.
One thing to highlight is luxury has been through, I'm talking about European luxury, they had had some excise growth the last few years and now they are slowing down. Nothing will falling off a cliff but normalizing back to where they were before the pandemic.
If you buy a $100,000 watch, you probably don't need it again.
You probably will.
One thing that's important is as the overall demand is normalizing, it's created a very material brand polarization. You see brand performance would be very different at the lower end luxury brand. You start seeing those aspirational consumers exiting.
They will make the recovery story very hard to materialize. Think about Dior or Burberry. On the other hand, if you look at Hermes, Chanel, even Ferrari. An impact next year could be increase in Chinese demand.
You been seen recently in November that things are sequentially picking up.
Now the Chinese consumption compared to the 2019 level is about 65% of 2019 Level in Europe.
And that was 50% in previous months. So if this continues and we can use new assets as a benchmark, they can go well above 2019 revenue but we have to see what happens to China's bankroll, whether their capacity it will return.
>> I was in Las Vegas last month. Never been there before.
Basically for my understanding of it, every casino had a mall attached to it and the malls had Burberry, coach, the high-end stores. People coming out their big bags. It made me think about the important of travel and tourism to some of these luxury brands. I'm thinking, how much money did you spend in that story?
>> Yeah.
If hotels and flights are expensive, you may have less to buy bags. If you look at travel, that's been a bright spot this year, despite higher ticket prices and all these things.
Remember the demand for travel, we have about 1 to 2/4 of visibility just based on current data and so far, people are still spending and planning for travel this year.
And that has a direct impact on casinos and hotels. We start seeing the travellers really trying to get back to where they were before.
The big risk is how much that will limit the leisure travel which has been so strong for the past one or two years and for that to collapse suddenly next year for whatever reason but there are pent-up demand. For example, international market.
For example, within the US, we haven't gone back large company business travel, group travel.
Those having come back to 2019 level yet.
So we need to see how those shakeout next year.
>> We have a viewer question. You got travelling, you spend a bit more money.
We have of you are wondering about the outlook for global travel companies themselves. They seen a big bounce back but do we think in 2024 they can continue?
>> Yeah, there are a couple of names that can be interesting. If you think about companies that will benefit from travel, will they maintain a resilient business model, I see some opportunities.
Marriott, Hilton, Hyatt. They don't worry too much about the overall micro environment if the consumer doesn't fall off a cliff. Another thing is there growth is based on their unit growth. If they do more rooms, they can collect more fees from the hotel owners. Building those units rely on the financing rate. Your financing rate is coming down. That makes it more visible for them to continue to grow hotel rooms thrown next year. So it can be a tailwind if hotel demand doesn't fall too much and rates coming down, it will be a tailwind.
>> Just for the viewers, full disclosure, I left Las Vegas with less money than I went there with. I am not a high roller.
I had no luck at the tables. Let's take another question from the audience. This one about retail stocks. Someone is wondering why retail stock like lululemon has been moving up recently when everyone seems to say a recession is coming.
>> Lululemon is a unique name. If you think about that name throughout product categories, everything is almost double digit growth. Very strong across the board. The reason being that they keep pumping new products and those products have been resonating really well with consumers. Then the deeper question is can they do this sustainably? I think the probability is high. They are 100% direct consumers, there is no wholesaler or middleman. Coming back to the social media topic, they are really trying to grow more their community within social media.
You search for a sweat life on Instagram, you can find 1.5 million posts there.
The reason they directly connect with customers is so they can better understand them than their peers and they keep bringing out new products that resonate well with these customers.
What we need to watch for lululemon is how much their margin may be diluted as they expand more aggressively internationally because the international market tends to be less productive at the beginning and that could have some impact on the bottom line.
>> That was lululemon. We have another question here. Still in the retail space.
A different kind of retailer. Can you guess share his thoughts on TJX?
Marshals, winners, home sense.
>> That name has been a pretty good winner of the last year. A lot of people started trading down, customers felt a pinch, you are seeing lower income, middle income, higher income, starting to buy more products from TJX. And not only those people will help their traffic but TJX tends to buy more premium products that help their margin at the end. Another interesting thing we haven't talked about his day of 20% exposure to home categories like home goods, home sense.
Those have outperformed the broader company past quarter. The same-store sales went up I think it's 9% compared to the broader company 6%. So if the overall home category start to recover from here after 6/4 of declining, that could be a tailwind for companies like TJX.
>> For a company like TJX, the reason why they have inventory and I buy a pair of Levi's, I might about these at marshals, is because it was someone else's excess inventory that ended up at marshals. There was a lot of excess inventory from retailers this year. Is that important for them to, that trend of pipeline of goods continues?
>> Absolutely. TJX really benefited from those excess inventories. Today, excess inventory is normalizing but you can take the overall industry another two quarters to fully normalize. But over this period, TJX has developed a really good relationship with those vendors and brands because they are big, their store layout is nicer so they don't feel like they are diluting their brand quality by selling to TJX. That's a tailwind.
You can see the margin has really benefited from that.
Next year, it will be a tailwind but probably less of a challenge than this year.
>> I just admitted I was wearing jeans when I should be wearing a full suit on the program. We are going to get back your questions for Jacky He on tertiary stocks and just moments time. As always, make sure you do your own research before making any investment decisions. And a reminder that you can get in touch with us 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] Okay, let's jump back into Advanced Dashboard, this time we're going to take a look at the heat map function and see what's happening on the markets. Let's start with the TSX 60.
We are screening by price and volume.
Interesting day. Seeing crude prices firm over the last couple of days. There are concerns better tax on oil shipping lanes making shipping companies choose different route so it's been a boost for American benchmarking. It's been a bit of a tailwind for some of the energy names but it's a mixed bag today. You've got Suncor up, Cenovus up about 1%. It's interesting that after the strong year uranium plays had it's giving back in recent sessions, Cameco down about 1% today. Nothing too dramatic. Further afield, we are seeing a pause in the rally and the mining names recently.
Shopify after making moves to the upside is down marginally today.
South of the border, taking on the S&P 500, we are getting closer to the holiday break for a lot of people. Volumes are starting to ease back.
You are seeing a bid into Google today, about 3%, but FedEx is a real standout on the screen today. He got the global shipping giant down to the tune of about 11% in your seeing weakness and volumes persisting on their taking on the sales forecast for next year, clearly the street is not pleased by that information.
You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back with Jacky He from TD Asset Management talking consumer discretionary stocks. Let's get to another name.
Dollarama seems to be benefiting from more frugal shoppers. What's your take on all this?
>> It's kind of similar to TJX. Dollarama has been gaining a lot of that trade down traffic. You see double-digit traffic to a store like that, it's quite impressive.
Another thing is there management has been delivering what they promised and keep beating expectations. Very strong management there. Next year, if you compare Canadian consumers to US consumers, we probably will face more high-risk next year meaning about 20% of our outstanding mortgage will be renewed at higher rates and about 1/3 of mortgages are on variable rates.
Consumers are going to face more pressure on consumption next year. That means their behaviour for trading down will likely continue and Dollarama is a name that will benefit within the sector.
The recent risk that come up is whether they will hold their margin. They start talking about competition picking up and customers starting pushing back on certain consumable products and that's about 40% of their business and the reason they benefit so much for so many quarters this because they keep putting out higher price points. They used to sell from one to four dollars and now they can sell up to five dollars.
If competition picks up, it might mean they need to invest back in the lower end of their price point and what does that mean to their margin next year? That can be a potential risk for a name like this but overall, it's a very high quality option for long-term investors. As I went into a Dollarama the other day, I have been a regular shopper, but heading into the holidays, everyone starting to get a little bit miffed by greeting card inflation. What, halved by five cards, I'm doing the math, and they were all like nine or 10 bucks each for a card? They are not remarkable.
Finally I found my limit, I went into Dollarama and a bunch of greeting cards that would've cost me 40 or 50 bucks somewhere else, it cost me $67. They lured me in.
>> It's funny, people compare that with Walmart or Amazon.
The prices at Dollarama are typically 40 or 50% cheaper than other competitors, so that's what's driving the traffic and no doubt that has been working and previously what was really hurting margins was people by more consumable products, food and cleaning staff, and those are lower margin and now if you are pushing back more on those products and focusing more on general products and merchandise, that can have a higher cost. That may be something you need to watch next year, what happens to their margin trajectory.
>> Interesting name there to keep an eye on next year. Let's switch to coffee.
How is Starbucks? I would assume they are talking about the stock and not just the coffee, if you like the coffee or not.
>> Starbucks has done well this year. The fundamentals have been strong. In the last quarter, we saw 10% topline growth, 30%… Growth, it be across the board. Pretty strong numbers.
And one thing people worry about is China recovery. The CEO recently talked about China is recovering at about half the pace of what you would expect and so that has been a concern that affects Chinese macro.
And and a lot of that has been reflected in valuation. Historically, Starbucks traded at about 50% valuation premium to the broader market. Now, it's 15%.
So it's at about global financial crisis level. The valuation is very low. Another thing that has impacted the traffic recently we know it is engaged in some controversy in the US so that her the traffic in November but we have seen recently the traffic picking up in December so that will be something we need to watch. One thing interesting about Starbucks compared to the other restaurant or other discretionary names as they have their margin initiatives. They are rolling out their system called… System, there are multiple pieces that can help them make coffee or food faster and cheaper. As they rolled better next year, it could be a good tailwind for margin.
>> We are out of time for questions.
Before I let you go, as we head into the new year, if investors are looking at the consumer discretionary names, which is the keep in mind?
>> I think one thing important is you don't want to jump too far ahead before fundamentals turnaround. People may get too excited about valuation and all those things but one thing is consumers are not feeling significantly better yet so probably the area we can find more opportunities in the company is still trading at the risk valuation.
>> Always great to have you on the program. Really enjoyed our chats this year. It looked forward to more in 2024.
>> Thank you very much.
>> Our thanks to Jacky He, VP portfolio research at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show, Nicole Ewing, director of tax and estate planning with TD Wealth will be our guest, taking your questions about tax and estate planning.
These are complicated questions sometimes.
You can get them in ahead of time.
Email moneytalklive@td.com.
That's all the time we have for the show today.
Thanks for watching. See you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we will discuss whether consumer discretionary stocks can continue the run that they've had this year. We've got signs out there the financial strain on household is keeping while it's a little tighter. TD Asset Management Jacky He joined us.
In today's education segment, Jason Hnatyk is going to shows how you can customize your view on Advanced Dashboard.
So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to our Guest of the day, let's get you an update on the markets.
I'm going to start with the TSX Composite Index. We've got the price of American benchmark crude up another percent today, just shy of 75 bucks per barrel. It's been supportive of the energy names in recent sessions.
We've got about 30 points on the table.
Volumes are starting to slow down ahead of the holidays. We are up about a face of a percent in the green. Some stocks making moves today, including Aritzia.
The retailer which was a big winner during the pandemic, it had a bit of a tougher run in 23 but at 2759 today, the stock is up about 6%. Getting a bit of a pause on some of the gold-mining names after a fairly decent run in recent weeks as the price of gold itself has had a pretty good run. Kinross is on a little more than 1%.
South of the border, you got the S&P 500 flirting with new all-time highs.
Approaching the old highs. Today it's a very modest gain, we will call that three points to the upside, just five ticks.
I want to check in on the tech heavy NASDAQ. It's a bit stronger than the broader market. Volumes are coming back.
Of 33 points, up 1/5 of a percent. FedEx said 240 bucks and change, it's down was 11% per share.
That's your market update.
Consumer stocks have had a pretty good run this year, but now we are seeing growing signs that shoppers are feeling the pinch of higher borrowing costs.
So what will the consumer discretionary space look like in 2024? 20 etc. discuss, Jacky He, VP of portfolio research at TD Asset Management. Great to have you on the program.
>> Thank you very much for having me.
>> We are on the cusp of 2024. Let's talk about the year that we've had. What were the drivers?
>> It was very interesting. If you recall, the last year, talking about the sector a look, consumers were really facing the challenge of high inflation.
We were right in the middle of a hiking cycle. You saw the early expectations and he multiples both contracting negatively.
That combination was historically rare, even during a global financial crisis.
Fast forward a year later, we saw the sector deliver a 40% return.
The reason is really because the low expectations allow the companies to beat earnings expectations throughout the year and also important to remember that as you mentioned the customer did feel the prints but they did not stop spending. They simply shifted from one category to another. At the aggregate level, earnings is pretty solid.
>> Defying expectations as we head into 2024, the expectation investors and markets are bringing into the air, is that the Federal Reserve, the BOC, the central banks, they are going to start cutting rates. What does consumer discretionary look like in that environment?
>> It is quite interesting. I think is better to visualize that. The first chart I brought it is quite important. If you look at the shaded area, though show the historical easing cycle and the green line shows performance. You will find that historically the sector tends to underperform leading up to the first rate cut and during the easing cycle, the sector outperformed significantly. Why?
Because this is really a leading sector that has higher labour intensity, higher cost of capital.
So when rates are high, it's really costly to read those businesses. And so the stocks tend to trade at lower earnings and multiples together.
So a reversal of that trajectory can take support on both ends.
If you look inside the sector, there is still about 70% of stocks trading below historical averages. So for long-term investors, I think it's a good place to shop for opportunities next year.
>> Some opportunities there to take a look at. What about the consumer themselves? In the end, the stocks will either make gains or pullback based on consumer behaviour.
We had a pretty interesting let's say, to put it mildly, three or four years now in terms of consumers. Has the behaviour change? Would we expect next year?
>> Yeah, it's interesting. Consumers are no doubt directionally weakening. You hear from companies and you can look at delinquency rates. The problem is almost everyone knows that. And now, the bigger question is whether consumers will fall off a cliff from here in a recession or not. As a consumer, I care less about those economic terms, deflation, disinflation. All I care about is how much this item cost me today versus yesterday and how much I'm making today versus yesterday.
If I tried those two things and see how they've changed since the pandemic, you can see consumers have been through three phases of spending. At the beginning, when inflation was benign and we still received government stimulus checks, a lot of that money went straight to people's bank accounts. Last year, when inflation caught up with income, consumers started to feel that pinch.
They started funding their purchases with savings. And now, as those savings are being depleted, you start seeing consumers buying power starting to recover thanks to a strong labour market, lower commodity costs.
If those things continue in 2024, is probably hard to see consumers collapse.
But I can certainly see consumers remaining selective and continue to be price-sensitive.
>> We were showing the viewers that chart.
It's pretty telling. Structurally, longer-term even beyond next year, what should we be thinking about as investors in taking a look at the consumer space?
>> Yeah, under the surface of solid earnings, I think one thing that hasn't been talked about enough, if we look at one common thing among winners is that they tend to have a stronger digital capability.
What I mean by that is they tend to win more through social media engagement.
Remember during the pandemic, not only the number of people using social media exploded, average users engagement also accelerated. Just look at those influencers like comments or likes, they all increased well above 50%. Meanwhile, the platform has streamlined their operations and simplified though shopping features and those together have structurally changed consumers shopping habits and now even my mom shops online.
But they also have an implication for businesses. I'll give an example. 20 years ago, when we would go to a hotel room, we would look it up on a map, find the front desk number, call and book it.
10 years ago, you can see people start going online and finding those online travel agencies, compare the price and make a reservation.
Today, we see more and more people go straight to social media and look at those short videos and how other people experienced it. Hotels have an advantage there. They own the content and they can give clients those loyalty points so we start seeing more customers start booking those hotels with the hotels themselves directly. So they are gaining share back from those online travel agencies.
>> Social media to seems right for fashion brands. People are taking visual cues as to how they want to spend their money. It must be a place where fashion needs to exert or show itself.
>> I'm sure you know all about fashion.
If you look at social media, I think it has made fashion cycle shorter and shorter.
Probably an influencer in Asia can have an overnight impact on style in Canada.
>> Fast fashion, right?
>> Exactly. Consumers basically just need the same thing at a cheaper price. You talk about fast fashion, traditional fashion would take about, only about two seasons, and they have six months in between to prepare for their design, procurement, manufacturing, distribution.
Fast fashion can condense that in a few weeks and that's why recently if you hear about Shein, an e-commerce player, they can do that in under two weeks.
>> How does that challenge the business?
If fashion cycles are changing that quickly, maybe some people haven't adopted us what they are going to find themselves with coats that are too long when they should be short.
>> Yeah, it is having, it is certainly increasing competition with traditional retailers and not only Shein, we talk about Temu, that's another very popular name this year, not because of its size, they are small, but they are both growing very aggressively.
They are the most downloaded e-commerce apps. The reason behind their success is their engagement with social media. They are trying to replicate that success back in China in North America. Each of them spent hundreds of millions of dollars in social media and they try to engage more with customers and understand better what they need and promote their low price advantages. But can they be a more material threat? That would depend on whether they retain those customers.
If you look at Temu, their monthly active users has been declining month over month since the summer. That means customers, after downloading, are not using their platform on a recurring basis.
If that happens, it will make it hard to scale. The advantage for them is the low price. A disadvantage for them is the quality and services.
>> Fascinating stuff and a great start to the program. We are going to get your questions about consumer discretionary stocks for Jacky He in just a moment's time.
A reminder that you get in touch with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Shares of FedEx are in the spotlight today. The global shipping giant is lowering its sales forecast in the face of weaker than expected shipping volumes.
FedEx says it's express unit, which ships parcels by air, saw a 60% drop in income for its most recent quarter as customers apparently were seeking out more economical, ground-based ways to ship their belongings. FedEx pulling back 11%.
Want to take a look at General Mills, they are cutting their sales forecast.
Consumers are pulling back on pricier branding materials and other products that it sells.
The company says that it is seeing a "Stronger than anticipated value seeking behaviours" from shoppers. In short, cash-strapped households are seeking those cheaper, offbrand products.
At 65 bucks and change, the stock is down about 2 1/2%.
Winnebago is handing in an earnings miss for its most recent quarter. The recreational vehicle maker says sales were actually up in terms of volumes but price discounts this year resulted in a lower than average selling price.
Right now, the stock is at 74 bucks and change, down about 1 1/2%. A quick check in on the markets. We will start your own Bay Street with the TSX Composite Index.
We've got some green on the screen.
Trading volumes are starting to come back as we get closer and closer to the holiday weekend and into the holiday week of next week. We do have 33 points to the upside, a little more than 1/10 of a percent.
South of the border, the S&P 500, it flirts with all highs. We are up four points, nothing too dramatic, just a little shy of 1/10 of a percent.
We are back with Jacky He, take your questions about consumer discretionary stocks. Is this a good time to look at Amazon?
>> If you look at the chart, you'd be amazed.
80% returns. 70% is driven by earnings.
It's quite impressive.
The demand has been stable.
People continue to seek for value. That helps e-commerce. On the AWS side, it's been cost optimization. When you've seen company shifting from saving costs to new workflows. What's even more impressive off Amazon is their margin. About a year ago, you start seeing management gain control back on their cost and they delivered that throughout this year by cutting their labour force and really pausing their projects, streamlining their operations.
More recently, they are regional rising in North America. All of that is helping their margins.
The margin expanded a couple hundred basis points, that allowed them to beat earnings quite significantly.
The threat I think people have probably been underestimating is one of that is Temu, competition. They are doing really well and they are disrupting this Amazon in China. If you ask a small merchant in China, they will tell you they can list a lower price on Temo for about the same profit as they see on Amazon. The reason is that they are small.
They end up paying Amazon a lot more money to increase the visibility. So over time, if Temu continued to do that, as certain part of the Amazon market share could be taken away.
>> If Amazon wanted to go head-to-head on price, that would affect the fundamentals of the business.
>> Exactly, that may impact their margins.
>> Interesting stuff on Amazon's potential rewards and risks in 2024. If you are wants to talk about Tesla. What's the outlook?
>> People always talk about Amazon and Tesla, the two largest names.
The price has doubled.
All of that is driven by sentiment. Tesla has decreased about 30%. That's one of the worst performers in the sector but because of that hype, a lot of people believe that Tesla is the leader. You saw a really strong stock performance. But can as Libya sustainable leader? I think the probability is high over the long term, the reason being that they are a first mover. If you look at autonomous driving data, they have accumulated over 500 million miles of autonomous driving data and that number is exponentially growing and also another thing important to AI is their computer power.
So they have their own AI chips and recently they developed a supercomputer called dojo that allowed them to train those data at a faster speed, at a lower cost. If they can keep doing there, that means there will be a strong working factor right there. Their software will be smarter and more people will join that network and make every existing driver experience better. Eventually, that will allow Tesla to go beyond the auto industry.
Meanwhile, there will be challenges for the stock.
>> It sounds like from what you are laying out that investors are saying, this is an AI and automation thesis. At the same time, we heard from Tesla and other automakers that demand for the actual EVs themselves have been softer than expected.
>> That has been a major recent theme across North America. It's not only EVs.
EVs are definitely more expensive but it's just getting more expensive to afford it.
The average auto monthly payments have increased about 30% since the pandemic.
Our income only increased 25%.
There certainly demand issue there. And remember, Tesla's multiples are arguably high so if earnings are not catching up with that expectation, there could be some pressure on the stock.
>> Interesting stuff there on Tesla. Let's switch gears. Cheesy pun. Views on Home Depot? Let's talk about home improvement.
>> It's not bad, double-digit return but it has underperformed the sector.
Consumers have been shifting from goods to services, from home categories to travel.
That affects Home Depot sales.
People need to look for when things will start bottoming. My analysis shows what would drive that demand is three things: PCE, personal consumption and demand and also home prices, lastly affordability has some of the factors that are starting to show signs of recovery so there could be a recovery here next year. What we need to see for Home Depot is whether, how long people will shift from goods to services.
On a volume basis, we have seen that it's largely normalized so next year it could be a more balanced demand.
>> We were talking off the top of another question, if we do enter into a Fed rate cutting cycle, and we see some pickup in the housing environment, maybe people want to get back to home renters. Those big during the pandemic. Stuck at home, we did it to, we built a back patio. As soon as you were back in the world, I'm not going to stay in this house anymore.
>> A lot of challenge for home improvement was because existing home sales really decreased. People are not moving. But at the same time, a lot of people got stuck with their existing home because they can lock in their low rates for 30 years. If they need something like a home office, they need to renovate.
But over time, if you see decreased supply of the housing market is supporting the housing price today. If my house is worth more and more next year, and probably more willing to invest in my home again.
That's why home categories, home computers, home improvement, home furnishings, could see some recovery next year.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
we are going to get back to your questions for Jacky He on consumer discretionary stocks and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to our educational segment of the day.
In today's segment, we are going to take a look at TD's Advanced Dashboard, a PlatForm designed for active traders available through TD Direct Investing.
Jason Hnatyk, Senior client education instructor with TD Direct Investing joins us now.
Take us through some of the customization options available on the platform. Show us how it's done.
>> Yeah, let's absolutely do that.
There are many advanced features and Advanced Dashboard from streaming quotes and to some exclusive tools that are only available in the platform versus web broker. One of the really nice things about Advanced Dashboard is it allows you to customize your experience so you get the information and data you want to really customize that experience. It's really not going to be a one-size-fits-all type of experience. Let's jump in the platform and I will walk you through a quick demonstration.
Everybody can take a look at the TD shield up in the upper right-hand corner. These are all of the factory default settings or tabs that company launched on the platform.
These are also customizable. We can change around any of the tools, add or remove, make that experience your own. If we want to get to the heart of the matter, we can create our own workspaces from scratch. To do that, we will use either the + on the right next to the existing tabs or we can click on the layout manager in the top right-hand corner and that will bring us to the same place. The first choice here is in the late library.
This is our opportunity to relaunch the factory default tabs but custom layout is really where we get to make the experience our own. There's three different types of choices that you can what I would like to create for myself. I'm going to choose three columns. I'm going to get creative with mites hi a toll. Let's name it MoneyTalk in honour today show.
Now that I've done that, the MoneyTalk label will be at the top of the screen highlighted in blue. We have 3+. This is where we can now add in the tools that we want to customize our experience with.
I'm going to hit the +. We've got all these different components that are going to be available for you.
I recommend the audience get in here and try it on for themselves.
Let's go ahead and choose a board trading put a watchlist on the left-hand side and just choose from the list, pick whatever comes in first.
In the middle I'm going to put a chart. On the right-hand side, let's pick some news for the sake of diversity and choices on the screen.
Taking customization to the next level is my opportunity to link these three tools together.
I will direct your attention to the three rectangles in the top left-hand corner.
This is my configuration many. I want to send my information for my watchlist, I went at my chart as well as my news receive it so what's happening now is anytime a selective symbol for my chart, is going to then be propagated out over to the rest of my experience. There is my chart for my TD symbol that I've just chosen as well as the news coming up. This is just one way to create it. Kind of your imagination is going to be what's going to limit you to this. It's got a really great way to make this your own.
>> You've piqued my interest. He probably piqued the interest of a lot of viewers.
If they want to learn more about customization, where can they go?
>> Yeah, we had the fast-forward button and went through this. Rest assured, there are lots of opportunities to learn more and I will show you how in the platform.
The first thing is, if we notice, there is a learned button at the top of the screen.
If we go into that, we have preloaded many of our kind of how to videos about specific topics within the platform. If you scroll down on the right-hand side, there's a video right here on customizing your Advanced Dashboard experience.
That would be a great place to start.
Alternatively, we do offer master classes on the subject.
We teach a one hour class on customization that can be found in web broker under the learn tab but also just to highlight some of the learning opportunities for Advanced Dashboard, we can also move from within the learn tab, we can filter for Advanced Dashboard on the right-hand side.
Once you've done that, if you're in WebBroker Commey about 12 separate lessons you can choose from with regards to training opportunities as well as customization choices and other wonderful tools on the platform so you're never far from learning more about this really interesting platform.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Jason Hnatyk, Senior client education instructor with 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.
Okay, we're back with Jacky He, taking your questions about consumer discretionary stocks. Let's get to the next one.
What's your view on luxury companies?
>> Luxury is a big topic.
They had a run this year. Initially very strong and later on this year has been through some normalization.
One thing to highlight is luxury has been through, I'm talking about European luxury, they had had some excise growth the last few years and now they are slowing down. Nothing will falling off a cliff but normalizing back to where they were before the pandemic.
If you buy a $100,000 watch, you probably don't need it again.
You probably will.
One thing that's important is as the overall demand is normalizing, it's created a very material brand polarization. You see brand performance would be very different at the lower end luxury brand. You start seeing those aspirational consumers exiting.
They will make the recovery story very hard to materialize. Think about Dior or Burberry. On the other hand, if you look at Hermes, Chanel, even Ferrari. An impact next year could be increase in Chinese demand.
You been seen recently in November that things are sequentially picking up.
Now the Chinese consumption compared to the 2019 level is about 65% of 2019 Level in Europe.
And that was 50% in previous months. So if this continues and we can use new assets as a benchmark, they can go well above 2019 revenue but we have to see what happens to China's bankroll, whether their capacity it will return.
>> I was in Las Vegas last month. Never been there before.
Basically for my understanding of it, every casino had a mall attached to it and the malls had Burberry, coach, the high-end stores. People coming out their big bags. It made me think about the important of travel and tourism to some of these luxury brands. I'm thinking, how much money did you spend in that story?
>> Yeah.
If hotels and flights are expensive, you may have less to buy bags. If you look at travel, that's been a bright spot this year, despite higher ticket prices and all these things.
Remember the demand for travel, we have about 1 to 2/4 of visibility just based on current data and so far, people are still spending and planning for travel this year.
And that has a direct impact on casinos and hotels. We start seeing the travellers really trying to get back to where they were before.
The big risk is how much that will limit the leisure travel which has been so strong for the past one or two years and for that to collapse suddenly next year for whatever reason but there are pent-up demand. For example, international market.
For example, within the US, we haven't gone back large company business travel, group travel.
Those having come back to 2019 level yet.
So we need to see how those shakeout next year.
>> We have a viewer question. You got travelling, you spend a bit more money.
We have of you are wondering about the outlook for global travel companies themselves. They seen a big bounce back but do we think in 2024 they can continue?
>> Yeah, there are a couple of names that can be interesting. If you think about companies that will benefit from travel, will they maintain a resilient business model, I see some opportunities.
Marriott, Hilton, Hyatt. They don't worry too much about the overall micro environment if the consumer doesn't fall off a cliff. Another thing is there growth is based on their unit growth. If they do more rooms, they can collect more fees from the hotel owners. Building those units rely on the financing rate. Your financing rate is coming down. That makes it more visible for them to continue to grow hotel rooms thrown next year. So it can be a tailwind if hotel demand doesn't fall too much and rates coming down, it will be a tailwind.
>> Just for the viewers, full disclosure, I left Las Vegas with less money than I went there with. I am not a high roller.
I had no luck at the tables. Let's take another question from the audience. This one about retail stocks. Someone is wondering why retail stock like lululemon has been moving up recently when everyone seems to say a recession is coming.
>> Lululemon is a unique name. If you think about that name throughout product categories, everything is almost double digit growth. Very strong across the board. The reason being that they keep pumping new products and those products have been resonating really well with consumers. Then the deeper question is can they do this sustainably? I think the probability is high. They are 100% direct consumers, there is no wholesaler or middleman. Coming back to the social media topic, they are really trying to grow more their community within social media.
You search for a sweat life on Instagram, you can find 1.5 million posts there.
The reason they directly connect with customers is so they can better understand them than their peers and they keep bringing out new products that resonate well with these customers.
What we need to watch for lululemon is how much their margin may be diluted as they expand more aggressively internationally because the international market tends to be less productive at the beginning and that could have some impact on the bottom line.
>> That was lululemon. We have another question here. Still in the retail space.
A different kind of retailer. Can you guess share his thoughts on TJX?
Marshals, winners, home sense.
>> That name has been a pretty good winner of the last year. A lot of people started trading down, customers felt a pinch, you are seeing lower income, middle income, higher income, starting to buy more products from TJX. And not only those people will help their traffic but TJX tends to buy more premium products that help their margin at the end. Another interesting thing we haven't talked about his day of 20% exposure to home categories like home goods, home sense.
Those have outperformed the broader company past quarter. The same-store sales went up I think it's 9% compared to the broader company 6%. So if the overall home category start to recover from here after 6/4 of declining, that could be a tailwind for companies like TJX.
>> For a company like TJX, the reason why they have inventory and I buy a pair of Levi's, I might about these at marshals, is because it was someone else's excess inventory that ended up at marshals. There was a lot of excess inventory from retailers this year. Is that important for them to, that trend of pipeline of goods continues?
>> Absolutely. TJX really benefited from those excess inventories. Today, excess inventory is normalizing but you can take the overall industry another two quarters to fully normalize. But over this period, TJX has developed a really good relationship with those vendors and brands because they are big, their store layout is nicer so they don't feel like they are diluting their brand quality by selling to TJX. That's a tailwind.
You can see the margin has really benefited from that.
Next year, it will be a tailwind but probably less of a challenge than this year.
>> I just admitted I was wearing jeans when I should be wearing a full suit on the program. We are going to get back your questions for Jacky He on tertiary stocks and just moments time. As always, make sure you do your own research before making any investment decisions. And a reminder that you can get in touch with us 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] Okay, let's jump back into Advanced Dashboard, this time we're going to take a look at the heat map function and see what's happening on the markets. Let's start with the TSX 60.
We are screening by price and volume.
Interesting day. Seeing crude prices firm over the last couple of days. There are concerns better tax on oil shipping lanes making shipping companies choose different route so it's been a boost for American benchmarking. It's been a bit of a tailwind for some of the energy names but it's a mixed bag today. You've got Suncor up, Cenovus up about 1%. It's interesting that after the strong year uranium plays had it's giving back in recent sessions, Cameco down about 1% today. Nothing too dramatic. Further afield, we are seeing a pause in the rally and the mining names recently.
Shopify after making moves to the upside is down marginally today.
South of the border, taking on the S&P 500, we are getting closer to the holiday break for a lot of people. Volumes are starting to ease back.
You are seeing a bid into Google today, about 3%, but FedEx is a real standout on the screen today. He got the global shipping giant down to the tune of about 11% in your seeing weakness and volumes persisting on their taking on the sales forecast for next year, clearly the street is not pleased by that information.
You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back with Jacky He from TD Asset Management talking consumer discretionary stocks. Let's get to another name.
Dollarama seems to be benefiting from more frugal shoppers. What's your take on all this?
>> It's kind of similar to TJX. Dollarama has been gaining a lot of that trade down traffic. You see double-digit traffic to a store like that, it's quite impressive.
Another thing is there management has been delivering what they promised and keep beating expectations. Very strong management there. Next year, if you compare Canadian consumers to US consumers, we probably will face more high-risk next year meaning about 20% of our outstanding mortgage will be renewed at higher rates and about 1/3 of mortgages are on variable rates.
Consumers are going to face more pressure on consumption next year. That means their behaviour for trading down will likely continue and Dollarama is a name that will benefit within the sector.
The recent risk that come up is whether they will hold their margin. They start talking about competition picking up and customers starting pushing back on certain consumable products and that's about 40% of their business and the reason they benefit so much for so many quarters this because they keep putting out higher price points. They used to sell from one to four dollars and now they can sell up to five dollars.
If competition picks up, it might mean they need to invest back in the lower end of their price point and what does that mean to their margin next year? That can be a potential risk for a name like this but overall, it's a very high quality option for long-term investors. As I went into a Dollarama the other day, I have been a regular shopper, but heading into the holidays, everyone starting to get a little bit miffed by greeting card inflation. What, halved by five cards, I'm doing the math, and they were all like nine or 10 bucks each for a card? They are not remarkable.
Finally I found my limit, I went into Dollarama and a bunch of greeting cards that would've cost me 40 or 50 bucks somewhere else, it cost me $67. They lured me in.
>> It's funny, people compare that with Walmart or Amazon.
The prices at Dollarama are typically 40 or 50% cheaper than other competitors, so that's what's driving the traffic and no doubt that has been working and previously what was really hurting margins was people by more consumable products, food and cleaning staff, and those are lower margin and now if you are pushing back more on those products and focusing more on general products and merchandise, that can have a higher cost. That may be something you need to watch next year, what happens to their margin trajectory.
>> Interesting name there to keep an eye on next year. Let's switch to coffee.
How is Starbucks? I would assume they are talking about the stock and not just the coffee, if you like the coffee or not.
>> Starbucks has done well this year. The fundamentals have been strong. In the last quarter, we saw 10% topline growth, 30%… Growth, it be across the board. Pretty strong numbers.
And one thing people worry about is China recovery. The CEO recently talked about China is recovering at about half the pace of what you would expect and so that has been a concern that affects Chinese macro.
And and a lot of that has been reflected in valuation. Historically, Starbucks traded at about 50% valuation premium to the broader market. Now, it's 15%.
So it's at about global financial crisis level. The valuation is very low. Another thing that has impacted the traffic recently we know it is engaged in some controversy in the US so that her the traffic in November but we have seen recently the traffic picking up in December so that will be something we need to watch. One thing interesting about Starbucks compared to the other restaurant or other discretionary names as they have their margin initiatives. They are rolling out their system called… System, there are multiple pieces that can help them make coffee or food faster and cheaper. As they rolled better next year, it could be a good tailwind for margin.
>> We are out of time for questions.
Before I let you go, as we head into the new year, if investors are looking at the consumer discretionary names, which is the keep in mind?
>> I think one thing important is you don't want to jump too far ahead before fundamentals turnaround. People may get too excited about valuation and all those things but one thing is consumers are not feeling significantly better yet so probably the area we can find more opportunities in the company is still trading at the risk valuation.
>> Always great to have you on the program. Really enjoyed our chats this year. It looked forward to more in 2024.
>> Thank you very much.
>> Our thanks to Jacky He, VP portfolio research at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show, Nicole Ewing, director of tax and estate planning with TD Wealth will be our guest, taking your questions about tax and estate planning.
These are complicated questions sometimes.
You can get them in ahead of time.
Email moneytalklive@td.com.
That's all the time we have for the show today.
Thanks for watching. See you tomorrow.
[music]